<PAGE>
Annual Report
March 31, 2000
Legg Mason
Value Trust, Inc.
Special Investment
Trust, Inc.
Total Return Trust, Inc.
Primary Class
[LEGG MASON FUNDS LOGO]
The Art of Investing/SM/
<PAGE>
To Our Shareholders,
The following table summarizes key statistics for the Primary Class of shares
of the Legg Mason Value Trust, Special Investment Trust and Total Return Trust,
as of March 31, 2000:
<TABLE>
<CAPTION>
Total Return/1/
----------------------
3-Months 12-Months
-------- ---------
<S> <C> <C>
Value Trust -.01% +6.74%
Lipper Large-Cap Growth Funds/2/ +8.49% +38.08%
Standard & Poor's 500 Composite Index +2.29% +17.94%
Special Investment Trust +.32% +28.55%
Lipper Mid-Cap Core Funds/2/ +15.18% +60.23%
Russell 2000 Index +7.08% +37.29%
Total Return Trust -2.61% -6.62%
Lipper Multi-Cap Value Funds/2/ +1.05% +7.92%
</TABLE>
After exceptional performance in the prior twelve-month period, Value Trust
and Special Investment Trust underperformed the average of funds in their Lipper
categories and relevant stock market indices during the twelve months ended
March 31, 2000. Total Return Trust's performance also trailed that of the
average fund in its Lipper category during the period. Detailed comments on each
Fund appear in the portfolio managers' comments on the following pages.
Long-term investment results for each of the Funds are shown in the
Performance Information section of this report. We are pleased that Value Trust,
our original equity fund, has earned an annual compounded return for
shareholders of 21.33% since its inception in 1982.
PricewaterhouseCoopers LLP, independent accountants for each of the Funds, has
completed its annual examination, and audited financial statements for the
fiscal year ended March 31, 2000, are included in this report.
Sincerely,
/s/ John F. Curley, Jr.
-----------------------
John F. Curley, Jr.
President
May 5, 2000
- --------------
/1/ Total return measures investment performance in terms of appreciation or
depreciation in 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.
/2/ Value Trust is now included in Lipper Analytical Services' "Large-Cap Growth
Fund" category (funds which normally invest in larger capitalization issues
with earnings expected to grow significantly faster than earnings of stocks
included in Standard & Poor's 500 Composite Index). Special Investment Trust
is included in the "Mid-Cap Core Fund" category (funds which normally invest
in mid-sized capitalization issues, with wide latitude in the companies in
which they invest). Total Return Trust is included in the "Multi-Cap Value
Fund" category (funds which normally invest in issues, with a variety of
market capitalization sizes, which are considered to be undervalued relative
to stocks in the Standard & Poor's 500 Composite Index).
<PAGE>
Portfolio Managers' Comments
Value Trust: Review of Fiscal Year 2000 Market Conditions and Strategies
Affecting Results
"When we think about the future of the world, we always have in mind its
being at the place where it would be if it continued to move as we see it
moving now. We do not realize that it moves not in a straight line ... and
that its direction changes constantly."
Wittgenstein
The cumulative results for your Fund at March 31, 2000, for the past three
months, one year, and longer periods are shown in the table below:
<TABLE>
<CAPTION>
First Since
Quarter 1 Year 3 Years 5 Years 10 Years 15 Years Inception*
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Value Trust -.01% +6.74% +148.60% +371.88% +629.05% +1,208.17% +3,128.91%
S&P 500 Composite Index +2.29% +17.94% +106.77% +227.29% +461.89% +1,160.99% +2,144.05%
Dow Jones Industrial Average -4.65% +13.39% +74.60% +189.61% +419.20% +1,244.38% +2,252.79%
Lipper Diversified Equity Funds +7.04% +35.64% +102.48% +182.61% +382.36% +851.20% +1,469.37%
Lipper Large-Cap Growth Funds +8.49% +38.08% +157.62% +270.26% +540.66% +1,130.17% +1,679.30%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Value Trust, S&P 500 Composite Index, and Dow Jones returns are for the
period April 16, 1982 (inception of the Fund) to March 31, 2000. The Lipper
Diversified Equity Funds and Lipper Large-Cap Growth Funds returns are for the
period April 30, 1982 to March 31, 2000.
As you can see, during our fiscal year ended March 31, our results lagged
those of the popular indices and those of most funds with similar objectives.
This is, in part, an accident of the calendar. Move back three months, for
example, and the relative results are dramatically better. The problem is known
as sensitive dependence on initial conditions, and it afflicts any complex
adaptive system such as the stock market.
We have written extensively about the obsessive focus on and attempts to
dissect short-term performance data and won't repeat our remarks here. As
numerous academic studies have shown, past performance is not much help in
predicting future results. The data above show what we have done, not what we
will be able to do.
The best way to understand the twelve months ended March 31 is to put that
period in a broader context. As a result of the global financial crisis that
began with the collapse of fixed exchange rates in most Asian developing
countries and culminated in the collapse of hedge fund Long-Term Capital
Management in September 1998, the Federal Reserve Board cut short-term interest
rates three times that fall. As we entered calendar 1999, most observers fretted
that the Fed had not done enough and that the world faced slow growth at best, a
long workout in emerging countries, and a real risk of a global deflationary
collapse. Oil was at $12 a barrel; other commodities were similarly depressed.
No one predicted what actually happened: exceptionally strong U.S. growth,
solid international growth that was accelerating into 2000, oil prices more than
doubling, and emerging stock markets the world's best performers. As is often
the case in financial markets, when the opinions are all on one side, the
opportunities are usually on the other.
We can also describe the same period in terms of the ebb and flow of risk
preferences. Prior to the financial crisis, years of high returns made investors
risk-seeking. Large losses in stocks from the
2
<PAGE>
summer of 1998 into the autumn led to a flight to quality. Interest rates fell
as money fled to risk-free treasuries. As 1999 progressed, investors gradually
began reallocating assets back into riskier assets as they observed that those
assets were gaining in value and treasuries were falling. Last year (1999) was
among the worst bear markets in history for fixed income securities as interest
rates rose steadily throughout the year and investors increasingly sought
riskier assets.
Stock prices meandered through most of 1999; the S&P 500 gained only about 4%
through September. Then, in the fourth quarter, technology stocks exploded,
propelling the S&P to a gain of over 20% and the NASDAQ, over three-fourths of
whose capitalization is technology, to a yearly gain of over 85%.
Over the past four years technology stocks have been star performers. The S&P
500 gained about 26% per year compounded from the beginning of 1996 through
1999, while the NASDAQ gained over 40% per year during the same period.
Investors, both individuals and professionals, absorbed the lesson that if you
were overweight in technology you outperformed the market, and if you were
underweight, you underperformed.
Consensus expectations entering 2000 were for more of the same (what else?).
Most people tend to expect a continuation of observed trends. Since growth had
been strong, it was (and is) expected to remain so. Since technology had
consistently been the source of high returns, it was expected to remain so.
Since investing in the so-called "old economy" had been a sure path to
underperformance, it was expected to remain so.
As the first quarter got underway, technology stocks had a sharp correction,
but quickly recovered and began their expected strong advance. "Old economy"
names fell, as expected. The long drought in "value stocks," the concomitant
underperformance of funds that invested in them, and the apparent inability of
investors, the press, and fund boards to understand that all investment styles
and managers have periods of underperformance, led to the firings or
resignations of many outstanding investors, all of the value persuasion.
On March 10, the clamor for "new economy" technology reached its peak, with
the NASDAQ up 24% year-to-date, while the Dow was down 14%. For the 12 months
ending that day, the Dow was up 3.16% with dividends reinvested, versus 110% for
the NASDAQ. The frenzy has been such that more than 100% of the net flows into
equity funds this year have gone into technology-sensitive growth funds; value-
oriented funds have experienced redemptions.
One month later, the picture is much different. The NASDAQ is down 14% for the
year, and is down 31% from the peak reached on March 10. The Dow is down 7% for
the year, but is up 10%, including dividends, since March 10.
During the first quarter, your Fund was flat, the result of a tug of war
between our financial and our technology holdings. Several of our major
technology holdings fell during the quarter after posting strong fourth quarter
1999 performance. These include AOL and Gateway. Other large tech holdings did
well, such as Nextel and Nokia. Our financials have performed well since early
March, but not well enough to have them outperform as a group this quarter.
3
<PAGE>
Portfolio Managers' Comments -- Continued
Our one-year results are also skewed by the very strong first calendar quarter
of last year, when we were up 18.69%. Our calendar 1999 results, which were well
ahead of the indices, were obtained by strong results in the first and fourth
quarters, and comparatively weaker numbers in the second and third. Rolling
forward one quarter to get fiscal year results gives a different comparative
picture since a strong, above market quarter is being replaced by a below market
one.
We believe that some clues to future market developments can be gleaned from
the first quarter performance statistics. As the table shows, the average
general equity fund gained over 7% in the quarter, while the Dow was down almost
5% and the S&P was up over 2%. The NASDAQ was up 12.4% in the quarter. You
probably see the picture. After years of underperformance, the average fund
manager decided to get overweighted in technology and underweighted not-
technology. The stampede to tech was no doubt exacerbated by the high profile
firings or resignations of several prominent value investors. Just how
overweighted most funds are in tech can be glimpsed when one realizes that only
two of the eleven S&P sectors beat the index in the quarter: technology and
utilities. Utilities make up only 2% of the market, whereas technology was 33%
of the S&P 500 at quarter end. The funds that were buying Cisco, EMC, and Sun
were not likely loaded with Duke Power or Potomac Electric.
Perhaps more telling is the following: the technology weightings in the
roughly 5,000 general equity funds averaged 42% for large company growth funds,
48% for mid-cap, and 45% for small-cap. In the value category, the comparable
numbers hover in the 14% range. The data are from the March 31 database of fund
tracking service Morningstar, but since most funds have not filed their March 31
portfolios yet, the weightings probably represent end of year holdings. It is
reasonable to surmise that such weightings actually rose during the quarter.
We believe the correction in the NASDAQ, and especially in the more
speculative hot spots, was long overdue. Valuations had reached levels that made
it highly unlikely that one could earn a competitive return no matter how
brilliant the future turned out to be for those businesses.
We also believe that what is going on is more than just a correction in the
technology arena. Much of the excess returns earned by Value Trust shareholders
in the past several years has been due to our being early in investing in great
businesses such as AOL, Dell, and Nokia. The prospects for these and most other
prominent technology companies are now well recognized and well discounted by
the market. The returns earned by shareholders in these and other great
companies such as Microsoft and Cisco have led investors to bid up the shares of
large numbers of technology companies to unrealistic levels in the hope of
uncovering the next big thing.
The losses now being experienced will, we think, reintroduce the notion of
risk to people, and will, after the excess emotion has been wrung from the
market, set the stage for returns more in line with the growth of long-term
business value. As we have previously said, we believe the long-term returns of
equities going forward will approximate what it has in the past: about 10%.
As for technology, it will no doubt present considerable opportunity. But we
think that investors, who figured out in the middle of last year that the way to
win the game was to overweight tech, will have to learn a new game.
4
<PAGE>
In a wonderful example of irony, the New York Times reported on the
dissolution of Julian Robertson's Tiger Management on March 31, the end of the
quarter. Once commanding over $20 billion under management, Tiger had to be
dissolved after disastrous bets in favor of old economy "value" stocks and
against technology. The Times headline read "The End of the Game," referring to
the demise of the most prominent value hedge fund, a casualty of the new,
technology-based investment game. The game the Times thought had ended was the
old economy value game. The game we believe ended was the new economy technology
game.
We have no idea what the new game will be. By "game," we mean the simple-
minded rule that will explain, after the fact, what you should have done to beat
the market during the period in question.
We are, though, optimistic about the ability of patient, disciplined investing
to produce satisfactory long-term returns. Most stocks have been declining for
two years, declines that have been masked by the sharp rise in large
capitalization "growth" and technology shares. The median price earnings ratio
of all companies with earnings peaked in April 1998 at 19.7; it is now about 13.
In 1987, after the Crash, the median P/E was 10.6. But in late 1987 the long
bond yielded 9% and inflation was 4.5%. Today bond yields are under 6% and
inflation is half what it was 13 years ago. Adjusted for inflation and interest
rates, and for today's much higher levels of productivity, today's budget
surpluses, and the prospects for continued peace and prosperity since the fall
of communism, we think the average stock in the market is as attractive is it
was post-Crash in 1987.
We believe that investments made at today's levels of the market or lower, and
made on the basis of a rational assessment of long-term business value, will
provide attractive rates of return to the long-term investor.
Bill Miller, CFA
April 14, 2000
DJIA 10305.80
------------------------
Special Investment Trust: Strategies Affecting Results
Our cumulative results for the periods ended March 31, 2000, were as follows:
<TABLE>
<CAPTION>
First Quarter 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Special Investment Trust +.32% +28.55% +114.63% +207.66% +465.11%
Lipper Mid-Cap Core Funds +15.18% +60.23% +117.57% +197.36% +428.76%
Russell 2000 Index +7.08% +37.29% +63.28% +121.47% +285.19%
S&P 500 Composite Index +2.29% +17.94% +106.77% +227.29% +461.89%
- --------------------------------------------------------------------------------------------------
</TABLE>
Our results for the fiscal year were above the S&P 500, although we
underperformed the other relevant indices. In the first quarter of 2000, we
underperformed all these measures. If we look longer term, however, our results
remain strong, showing results ahead of the S&P 500 and Russell 2000 for
5
<PAGE>
Portfolio Managers' Comments -- Continued
the three-year period, ahead of the Mid-Cap Core and Russell 2000 for the five-
year period, and ahead of all these indices for the ten-year period.
The calendar causes us to draw lines in time to measure performance, though
the quarter- and year-end dates are really no more valid than any other randomly
chosen dates. Our results would look far different if we chose other dates.
Unfortunately, the March 31 cut-off is not a particularly flattering point at
which to draw conclusions about your Fund's performance. This is due to the weak
first quarter we posted for March 2000, versus the stronger relative performance
we posted in the March 1999 period.
For the purposes of discussing the fiscal year, we would like to talk about
two important factors that influenced our performance: our technology weighting
and our position in America Online.
It is useful to think about the period up to March 10, 2000, and the period
after. Until March 10, our technology weighting was helping our performance
nicely. From March 10 to March 31, it was a handicap. Even with the quarter end
sell-off, six of our top ten performers for the twelve-month period were
technology (or biotechnology) names: Symantec up 344%, Cell Genesys up 332%,
Cabletron up 258%, Sybase up 156%, Hadco up 105%, and Gateway up 55%. As we have
written in the past, our view on technology is that it is too important as a
driver of economic growth and value creation to ignore. We have been able to
find companies trading well below intrinsic value in the technology space and
this has differentiated our portfolio, and our performance, from traditional
"value" funds that have shunned technology. As we wrote last quarter, many of
the technology companies we own were purchased when they had valuation measures
like P/E or Price to Sales that were well within a value investor's traditional
parameters.
By the March 10 peak in the NASDAQ, many technology companies' stocks had
reached valuation levels that were clearly discounting a tremendous amount of
future growth. One of the reasons that tech investing has been such a successful
strategy over the last three years is that the market and investors have been
willing to look further into the future, discounting optimistic results for
years to come. A result of this forward-looking bias was an increased risk
profile for these stocks looking so far ahead. A theoretical example might be
the following:
XYZ Company, an optical network provider, was trading at a 25x P/E. Taking
into account the capital needs and cash flow characteristics of the company,
let's say that this 25 multiple discounts 25% growth for three years,
followed by a return to a normalized growth rate of 12%. Optical networks,
however, are experiencing explosive demand. It becomes clear to investors
that the company can grow at, say, 35% for five years, before falling back to
the 12% normalized rate, so the P/E expands to discount that future, and now
it trades at 50x. This would be a reasonable valuation if in fact the company
can turn in this growth over this period. However, let's say that the stock
continues to climb and now trades at a P/E multiple of 150x. In order for
investors to make an acceptable return buying the stock at this price, the
company would have to grow the faster rate for an even longer period, say 10
years. Thus, investors have brought the excess return expected years down the
road into the present. If investors begin to think that the growth prospects
for the company are no longer so long-lived, and begin again thinking the
higher rate is only going to last for three years, the P/E could easily drop
back down to 50-60x, even without any change to the earnings estimates for
the next twelve months. This is what is often happening when stocks go down
50% or more, and yet, looking at the earnings the company is reporting today,
it appears that "nothing has changed."
6
<PAGE>
Much of this forward-looking bias had simply gone too far as we reached the
peak in the NASDAQ on March 10. In looking through our technology holdings,
which comprised 34.9% of the Fund (before our 8.3% position in America Online,
which we think is a media company), we believed we were modestly overweight
relative to the 33.3% S&P 500 weighting and the 27.4% Russell 2000 weighting in
technology. More importantly, we tend to think of our portfolio on a company-by-
company basis instead of versus an index, and we believed our individual
companies were not excessively priced.
Even as we continued to have a high level of conviction in our technology
names, the market was presenting opportunities in nontechnology valuations that
were extremely compelling. Accordingly, in the first quarter we began to
modestly reduce our holdings in some technology names in order to take advantage
of these opportunities. We sold some Symantec and AOL, taking both positions
from over 10% to about 8%. We put the cash to work in names like TJX Companies,
owner of the TJ Maxx and Marshall's retail chains, in business service names
like Ceridian and Equifax, and in the waste management company Republic
Services.
Despite this modest repositioning, we remain heavily invested in technology,
and the post March 10 period hit our names quite hard. Regardless of the
reasonable valuations, tech is tech, and investors wanted out. We believe that
our reasonably cheap names will weather the storm much more valiantly than many
of the high flying names, but in the short term we are experiencing the same
downward pressure.
Our position in America Online continues to be an important influence on the
Fund, but for this twelve-month period it was not a positive influence. The
stock was down 8.9% for the fiscal year, and given that it was a 22.5% position
beginning the year, this has been a tremendous headwind. You may recall in our
fiscal year end last year, we were extremely well rewarded by our AOL position,
up 750%. The stock price continued to outperform the market until the merger
with Time Warner was announced on January 10, 2000. While we believe this is an
important strategic deal, the overhang of such a large amount of capital being
allocated to such an ambitious endeavor will likely keep the stock "in the
penalty box" for several quarters. The downward draft in price for AOL began
with the deal announcement, well before the more broad technology sell-off, so
our entire first quarter was penalized by our AOL holding. Our outlook for AOL
continues to be positive, although we did reduce our position slightly as
mentioned above, and we ended the fiscal year with an 8.3% weighting.
Other negative contributors were companies we believed would turn around after
some fundamental difficulties, but which failed to execute well on their plans.
The companies meeting this description were PhyCor, CKE Restaurants,
Consolidated Stores, Hollywood Entertainment and Storage Technology. We have
since eliminated our positions in CKE and PhyCor.
Bill Miller, CFA
Lisa O. Rapuano, CFA
April 14, 2000
DJIA 10305.80
7
<PAGE>
Portfolio Managers' Comments -- Continued
Total Return Trust: Strategies Affecting Results
<TABLE>
<CAPTION>
Cumulative Results
Periods Ending March 31, 2000
First --------------------------------
Quarter 1 Year 3 Years 5 Years
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Return Trust -2.61% -6.62% +22.20% +102.42%
Lipper Multi-Cap Value Funds +1.05% +7.92% +45.21% +115.29%
S&P 500 Composite Index +2.29% +17.94% +106.77% +227.29%
Dow Jones Industrial Average -4.65% +13.39% +74.60% +189.61%
- ---------------------------------------------------------------------------------------
</TABLE>
The key to outperformance over the last twelve months was simple: to be
overweight in technology. To focus on yield was to underperform. To be
overweight in securities with above-market yields and underweight in technology
was a recipe for underperformance, as shown in the Fund's results for the last
twelve months.
The first quarter 2000 numbers mask the volatility that occurred during those
three months. On March 10, the clamor for "new economy" technology stocks that
has been widely written about reached its peak, with the NASDAQ (heavily
weighted toward technology) up 24% year-to-date, while the Dow Jones Industrial
Average (DJIA) was down 14%. For the twelve months ending that day, the DJIA was
up 3.16% with dividends reinvested, versus 110% for the NASDAQ.
One month later, the picture is very different. The NASDAQ is down 14% for the
year, and down 31% from its all-time high reached March 10. The DJIA is down 7%
for the year, but up 10%, including dividends, since March 10. The Fund, while
still down for the year, had its best month ever in March, advancing 11%.
The losses now being experienced by investors will, we believe, reintroduce
the notion of risk to people, and will, after the excess emotion has been wrung
from the market, set the stage for returns more in line with the growth of long-
term business values. As we have previously written, we believe the long-term
returns of equities going forward will be more in line with their historical
averages of around 10%.
The Fund's peer group/1/ of multi-cap value funds has focused less on yield
than has the Fund itself. The average pre-expense dividend yield of the multi-
cap value funds is 2.17%, compared to the 3.50% pre-expense dividend yield of
the Fund./2/
The inverse correlation between yield and stock price performance over the
last year was remarkable. For the 12 months ended March 31, 2000, the 102 stocks
in the S&P 500 that pay no dividends were up an average of 82.7%. The 398 stocks
that pay dividends were up only 1.1% on average. In
- --------------
/1/ Morningstar and Lipper changed their fund classification system last year.
The Total Return was previously classified as a growth and income fund.
/2/ The average after-expense dividend yield of the multi-cap value funds is
0.78%, compared to 1.65% for the Fund. This yield is computed by dividing
income dividends distributed during the prior year by the current period's
ending NAV adjusted for capital gains distributions, and is based on the
twelve-month period ended March 31, 2000.
8
<PAGE>
even starker contrast, the 196 companies in the S&P 500 with a yield of 1% or
less were up 63.4% on average, while those companies with a yield of more than
1% were down 11.7%.
Certain structural facts have made yield less effective as a source of
performance over the last couple of years. First, tax law changes have reduced
the relative attractiveness of dividends compared to capital gains. Investors
generally prefer paying capital gains tax rather than receiving dividends that
are taxed at ordinary income tax rates. Secondly, management philosophies have
changed over the last several years. Managements increasingly prefer the
flexibility to use their free cash flow generation to buy back stock rather than
raise their dividends. The universe of relatively high yielding stocks used to
include many high quality names with strong growth potential. The universe is
now more oriented toward companies with generally slower growth prospects.
I began implementing several changes in the third calendar quarter of 1999 to
reduce the volatility of the Fund relative to its peer group. The first change
involved expanding the universe of companies from those with high current yields
to those returning excess capital generation to shareholders through dividends
and actual or anticipated share repurchases. The second change has been to
expand the number of holdings in the Fund to between 50 and 70, and to expand
the industry representations to reduce the volatility of the Fund relative to
its peer group.
The investment strategy of the Fund remains the same: to invest in a portfolio
of securities that we believe are being priced by the market at significant
discounts to their intrinsic value, consistent with the Fund's low risk profile.
As always, we appreciate your support, and welcome your comments.
Nancy Dennin, CFA
April 14, 2000
DJIA 10305.80
9
<PAGE>
Performance Information
Total Returns for One, Five, Ten Years and Life of Class, as of March 31, 2000
The returns shown on these pages are based on historical results and are
not intended to indicate future performance. The investment return and
principal value of an investment in any of these Funds 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. Total
returns as of March 31, 2000, for the Value Line Geometric Average ("Value
Line") and S&P 500 Composite indices are shown in the table below (additional
individual Fund performance is shown with its respective graph).
Each Fund has two classes of shares: Primary Class and Navigator Class.
Information about the Navigator Class, offered only to certain institutional
investors, is contained in a separate report to its shareholders.
Average annual total returns as of March 31, 2000, were as follows:
<TABLE>
<CAPTION>
S&P 500
Value Special Investment Total Return Value Line Composite
Trust Trust Trust Index Index
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average Annual Total Return
Primary Class:
One Year +6.74% +28.55% -6.62% +4.74% +17.94%
Five Years +36.38 +25.20 +15.15 +7.98 +26.76
Ten Years +21.98 +18.91 +12.23 +5.80 +18.84
Life of Class--Value Trust/A/ +21.33 +10.24 +18.91
Life of Class--Special Investment/B/ +16.25 +7.85 +17.83
Life of Class--Total Return/C/ +10.19 +8.04 +18.16
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
/A/ Inception of Value Trust--April 16, 1982.
/B/ Inception of Special Investment Trust--December 30, 1985.
/C/ Inception of Total Return Trust--November 21, 1985.
Performance Comparison of a $10,000 Investment as of March 31, 2000
The following graphs compare each Fund's total returns to the Value Line
and S&P 500 Composite indices. The graphs illustrate the cumulative total
return of an initial $10,000 investment for the periods indicated. The line
for each Fund represents the total return after deducting all Fund investment
management and other administrative expenses and the transaction costs of
buying and selling portfolio securities. The line representing each
securities market index does not include any transaction costs associated
with buying and selling securities in the index or other administrative
expenses. Both the Legg Mason Funds' results and the indices' results assume
reinvestment of all dividends and distributions.
10
<PAGE>
Value Trust -- Primary Class
Cumulative Average Annual
Total Return Total Return
- --------------------------------------------------------
One Year +6.74% +6.74%
Five Years +371.88 +36.38
Ten Years +629.05 +21.98
- --------------------------------------------------------
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Standard & Poor's 500
Years ended March 31, Value Trust Primary Class Value line index/2/ Composite Index/1/
<S> <C> <C> <C>
1990 10,000 10,000 10,000
10,328 10,086 10,629
8,130 7,781 9,168
8,594 8,037 9,990
1991 9,712 9,740 11,441
9,791 9,610 11,415
10,922 9,930 12,025
11,579 10,224 13,034
1992 11,609 10,549 12,704
11,600 10,102 12,946
11,830 10,123 13,354
12,903 10,935 14,027
1993 13,322 11,482 14,639
13,219 11,411 14,711
13,640 11,801 15,091
14,356 12,108 15,440
1994 14,075 11,680 14,855
13,862 11,272 14,917
14,708 11,805 15,647
14,555 11,380 15,644
1995 15,450 11,974 17,168
17,686 12,756 18,806
19,585 13,572 20,301
20,488 13,574 21,523
1996 21,952 14,145 22,678
22,752 14,527 23,696
24,761 14,610 24,429
28,363 15,390 26,465
1997 29,326 15,204 27,174
34,619 17,217 31,921
40,329 19,161 34,309
38,871 18,631 35,295
1998 45,555 20,499 40,218
47,940 19,547 41,546
42,358 15,715 37,413
57,545 17,926 45,381
1999 68,301 16,782 47,644
67,906 19,099 51,006
61,319 17,126 47,816
72,914 17,675 54,930
2000 72,905 17,577 56,189
</TABLE>
/1/ An unmanaged index of widely held common stocks.
/2/ An unmanaged index of approximately 1,700 common stocks.
------------------------
Selected Portfolio Performance*
Best performers for the year ended March 31, 2000
--------------------------------------------------------------------------
1. Nextel Communications, Inc. +304.8%
2. Nokia Oyj +179.0%
3. Telefonos de Mexico S.A. ADR +103.0%
4. Koninklijke (Royal) Philips
Electronics N.V. +101.2%
5. WPP Group plc +100.2%
6. Metro-Goldwyn-Mayer, Inc. +93.8%
7. Gateway, Inc. +54.6%
8. MGM Grand, Inc. +42.8%
9. Citigroup Inc. +39.3%
10. International Business Machines
Corporation +33.1%
* Securities held for the entire year.
Weak performers for the year ended March 31, 2000
--------------------------------------------------------------------------
1. Storage Technology Corporation -42.8%
2. The Kroger Co. -41.3%
3. Bank One Corporation -37.6%
4. Washington Mutual, Inc. -35.2%
5. Foundation Health Systems, Inc. -34.4%
6. Lloyds TSB Group plc -30.1%
7. Bank of America Corporation -25.8%
8. MCI WorldCom, Inc. -23.3%
9. Freddie Mac -22.6%
10. Toys "R" Us, Inc. -21.3%
Portfolio Changes
Securities added during the 1st quarter 2000
--------------------------------------------------------------------------
No securities were added during the quarter.
Securities sold during the 1st quarter 2000
--------------------------------------------------------------------------
Amgen Inc.
First Data Corporation
11
<PAGE>
Performance Information -- Continued
Special Investment Trust -- Primary Class
Cumulative Average Annual
Total Return Total Return
- ------------------------------------------------------------
One Year +28.55% +28.55%
Five Years +207.66 +25.20
Ten Years +465.11 +18.91
- ------------------------------------------------------------
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Special Investment Trust Standard & Poor's 500
Years ended March 31, Primary Class Value Line Index/2/ Composite Index/1/
<S> <C> <C> <C>
1990 10,000 10,000 10,000
10,714 10,086 10,629
9,372 7,781 9,168
10,089 8,037 9,990
1991 12,146 9,740 11,441
12,254 9,610 11,415
13,474 9,930 12,025
14,136 10,224 13,034
1992 14,630 10,549 12,704
13,766 10,102 12,946
13,793 10,123 13,354
16,230 10,935 14,027
1993 16,167 11,482 14,639
17,306 11,411 14,711
19,196 11,801 15,091
20,146 12,108 15,440
1994 19,618 11,680 14,855
18,166 11,272 14,917
19,077 11,805 15,647
17,512 11,380 15,644
1995 18,368 11,974 17,168
19,774 12,756 18,806
21,488 13,572 20,301
21,453 13,574 21,523
1996 23,597 14,145 22,678
24,894 14,527 23,696
25,498 14,610 24,429
27,599 15,390 26,465
1997 26,329 15,204 27,174
30,500 17,217 31,921
35,113 19,161 34,309
33,704 18,631 35,295
1998 37,621 20,499 40,218
37,299 19,547 41,546
29,658 15,715 37,413
41,560 17,926 45,381
1999 43,965 16,782 47,644
47,435 19,099 51,006
48,589 17,126 47,816
56,328 17,675 54,930
2000 56,511 17,577 56,189
</TABLE>
/1/ An unmanaged index of widely held common stocks.
/2/ An unmanaged index of approximately 1,700 common stocks.
------------------------
Selected Portfolio Performance*
Best performers for the year ended March 31, 2000
--------------------------------------------------------------------------
1. Symantec Corporation +343.5%
2. Cell Genesys, Inc. +331.6%
3. Cabletron Systems, Inc. +258.0%
4. Sybase, Inc. +155.9%
5. Cott Corporation +130.8%
6. Hadco Corp. +105.2%
7. WPP Group plc +100.2%
8. Pinnacle Entertainment, Inc. +97.0%
9. ICG Communications +80.6%
10. Gateway, Inc. +54.6%
* Securities held for the entire year.
Weak performers for the year ended March 31, 2000
--------------------------------------------------------------------------
1. PhyCor, Inc. -78.3%
2. CKE Restaurants, Inc. -67.7%
3. Consolidated Stores Corporation -62.5%
4. Hollywood Entertainment Corp. -56.7%
5. Storage Technology Corporation -42.8%
6. Enhance Financial Services Group, Inc. -37.9%
7. United Asset Management
Corporation -23.5%
8. Amazon.com, Inc., 4.75%, due 2/1/09 -21.6%
9. Peoples Heritage Financial Group, Inc. -16.7%
10. America Online, Inc. -8.5%
Portfolio Changes
Securities added during the 1st quarter 2000
--------------------------------------------------------------------------
Ceridian Corporation
Equifax Inc.
The TJX Companies, Inc.
UnumProvident Corporation
Viad Corp
Securities sold during the 1st quarter 2000
--------------------------------------------------------------------------
Magellan Health Services, Inc.
12
<PAGE>
Total Return Trust -- Primary Class
Cumulative Average Annual
Total Return Total Return
- --------------------------------------------------------
One Year -6.62% -6.62%
Five Years +102.42 +15.15
Ten Years +216.93 +12.23
- --------------------------------------------------------
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Total Return Trust Standard & Poor's 500
Years ended March 31, Primary Class Value Line Index/2/ Composite Index/1/
<S> <C> <C> <C>
1990 10,000 10,000 10,000
10,070 10,086 10,629
8,167 7,781 9,168
8,741 8,037 9,990
1991 9,995 9,740 11,441
10,317 9,610 11,415
11,435 9,930 12,025
12,279 10,224 13,034
1992 12,354 10,549 12,704
12,905 10,102 12,946
13,226 10,123 13,354
14,037 10,935 14,027
1993 14,810 11,482 14,639
14,797 11,411 14,711
15,426 11,801 15,091
16,014 12,108 15,440
1994 15,488 11,680 14,855
15,491 11,272 14,917
16,266 11,805 15,647
14,874 11,380 15,644
1995 15,657 11,974 17,168
17,324 12,756 18,806
18,901 13,572 20,301
19,340 13,574 21,523
1996 20,861 14,145 22,678
21,357 14,527 23,696
22,606 14,610 24,429
25,428 15,390 26,465
1997 25,936 15,204 27,174
29,503 17,217 31,921
33,583 19,161 34,309
34,964 18,631 35,295
1998 36,944 20,499 40,218
36,380 19,547 41,546
30,616 15,715 37,413
34,827 17,926 45,381
1999 33,942 16,782 47,644
37,634 19,099 51,006
33,454 17,126 47,816
32,544 17,675 54,930
2000 31,693 17,577 56,189
</TABLE>
/1/ An unmanaged index of widely held common stocks.
/2/ An unmanaged index of approximately 1,700 common stocks.
------------------------
Selected Portfolio Performance*
Best performers for the year ended March 31, 2000
--------------------------------------------------------------------------
1. Citigroup Inc. +39.3%
2. International Business Machines
Corporation +33.1%
3. General Motors Corporation +15.2%
4. The Chase Manhattan Corporation +7.2%
5. The Bear Stearns Companies, Inc. +7.2%
6. Mid-America Apartment
Communities, Inc. +5.3%
7. Brunswick Corporation -0.7%
8. National Golf Properties, Inc. -4.3%
9. Northrop Grumman Corporation -11.6%
10. Tupperware Corporation -12.2%
* Securities held for the entire year.
Weak performers for the year ended March 31, 2000
--------------------------------------------------------------------------
1. Nationwide Health Properties, Inc. -45.1%
2. IPC Holdings Limited -39.6%
3. Enhance Financial Services
Group, Inc. -37.9%
4. Bank One Corporation -37.6%
5. Washington Mutual, Inc. -35.2%
6. Lloyds TSB Group plc -30.1%
7. Bank of America Corporation -25.8%
8. Edison International -25.6%
9. Toys "R" Us, Inc. -21.3%
10. Ford Motor Company -19.1%
13
<PAGE>
Performance Information -- Continued
Total Return Trust -- Primary Class -- Continued
Portfolio Changes
Securities added during the 1st quarter 2000
--------------------------------------------------------------------------
Dell Computer Corporation
FleetBoston Financial Corporation
Gateway, Inc.
General Electric Company
Household International, Inc.
Johnson & Johnson
Mandalay Resort Group
MCI WorldCom, Inc.
MGIC Investment Corporation
The Black & Decker Corporation
The Hartford Financial Services Group, Inc.
The Kroger Co.
The May Department Stores Company
The TJX Companies, Inc.
Time Warner Inc.
Tommy Hilfiger Corporation
Securities sold during the 1st quarter 2000
--------------------------------------------------------------------------
Aetna Inc.
Boston Scientific Corporation
Delphi Automotive Systems Corporation
Exxon Mobil Corporation
First Union Corporation
Mutual Risk Management Ltd.
J.C. Penney Company, Inc.
Raytheon Company
Regency Realty Corporation
Sears, Roebuck &Co.
Shared Medical Systems Corpration
Tanger Factory Outlet Centers, Inc.
United Asset Management Corporation
Washington Federal, Inc.
14
<PAGE>
Statement of Net Assets
March 31, 2000
(Amounts in Thousands)
Legg Mason Value Trust, Inc.
<TABLE>
<CAPTION>
Shares/Par Value
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks and Equity Interests -- 96.6%
Capital Goods -- 5.8%
Electrical Equipment -- 2.2%
Koninklijke (Royal) Philips Electronics N.V. 1,744 $ 298,769
----------
Manufacturing (Diversified) -- 0.9%
Danaher Corporation 2,400 122,400
----------
Waste Management -- 2.7%
Waste Managment Inc. 26,020 356,149
----------
Communication Services -- 9.6%
Telecommunications (Cellular/Wireless) -- 4.6%
Nextel Communications, Inc. 4,128 611,902/A/
----------
Telecommunications (Long Distance) -- 5.0%
MCI WorldCom, Inc. 10,000 453,125/A/
Telefonos de Mexico S.A. ADR 3,200 214,400
----------
667,525
----------
Consumer Cyclicals -- 13.1%
Automobiles -- 1.9%
General Motors Corporation 3,000 248,438
----------
Gaming, Lottery and Parimutuel Companies -- 1.5%
Mandalay Resort Group 7,000 118,125/A,B/
MGM Grand, Inc. 3,155 75,716
----------
193,841
----------
Leisure Time (Products) -- 0.8%
Mattel, Inc. 10,000 104,375
----------
Lodging/Hotels -- 1.8%
Starwood Hotels & Resorts Worldwide, Inc. 9,000 236,250
----------
Retail (Speciality) -- 1.7%
Toys "R" Us, Inc. 15,700 232,556/A,B/
----------
Retail (Home Shopping) -- 1.6%
Amazon.com, Inc. 3,200 214,400/A/
----------
Services (Advertising/Marketing) -- 3.9%
WPP Group plc 29,808 517,279
----------
</TABLE>
15
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Value Trust, Inc. -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer Staples -- 5.2%
Distributors (Food and Health) -- 1.3%
McKesson HBOC, Inc. 8,051 $ 169,073
----------
Entertainment -- 0.7%
Metro-Goldwyn-Mayer, Inc. 3,705 94,233/A/
----------
Retail Stores (Food Chains) -- 3.2%
Albertson's, Inc. 9,447 292,845
The Kroger Co. 7,323 128,608/A/
----------
421,453
----------
Financials -- 27.7%
Banks (International) -- 2.2%
Lloyds TSB Group plc 28,160 297,695
----------
Banks (Major Regional) -- 5.3%
Bank One Corporation 11,000 378,125
FleetBoston Financial Corporation 9,000 328,500
----------
706,625
----------
Banks (Money Center) -- 4.6%
Bank of America Corporation 4,000 209,750
The Chase Manhattan Corporation 4,600 401,062
----------
610,812
----------
Consumer Finance -- 1.2%
MBNA Corporation 6,425 163,837
----------
Financial (Diversified) -- 6.4%
Citigroup Inc. 7,100 421,119
Fannie Mae 5,600 316,050
Freddie Mac 2,600 114,888
----------
852,057
----------
Insurance (Property/Casualty) -- 4.3%
Berkshire Hathaway Inc. - Class A 4 240,240/A/
MGIC Investment Corporation 7,575 330,459/B/
----------
570,699
----------
Investment Banking/Brokerage -- 1.1%
The Bear Stearns Companies, Inc. 3,308 150,905
----------
Savings and Loan Companies -- 2.6%
Washington Mutual, Inc. 12,900 341,850
----------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Health Care -- 6.3%
Health Care (Managed Care) -- 6.3%
Aetna Inc. 6,000 $ 334,125
Foundation Health Systems, Inc. 11,100 88,800/A,B/
United HealthCare Corporation 6,900 411,413
-----------
834,338
-----------
Technology -- 28.9%
Communications Equipment -- 3.1%
Nokia Oyj 1,900 412,775
-----------
Computers (Hardware) -- 12.4%
Dell Computer Corporation 12,500 674,219/A/
Gateway, Inc. 12,250 649,250/A/
International Business Machines Corporation 2,800 330,400
-----------
1,653,869
-----------
Computers (Peripherals) -- 1.0%
Storage Technology Corporation 8,000 127,500/A,B/
-----------
Computers Software/Services -- 12.4%
America Online, Inc. 24,590 1,653,677/A/
-----------
Total Common Stocks and Equity Interests (Identified Cost -- $7,968,995) 12,865,282
--------------------------------------------------------------------------------------------------------------------
Repurchase Agreements -- 2.7%
Bank of America
6.15%, dated 3/31/00, to be repurchased at $181,491
on 4/3/00 (Collateral: $190,706 Freddie Mac mortgage-
backed securities, 7-7.50%, due 1/1/30-4/1/30,
value $186,432) $181,398 181,398
Goldman, Sachs & Company
6.15%, dated 3/31/00, to be repurchased at $181,491
on 4/3/00 (Collateral: $198,880 Fannie Mae mortgage-
backed securities, 6%, due 2/1/14, value $188,003) 181,397 181,397
-----------
Total Repurchase Agreements (Identified Cost -- $362,795) 362,795
--------------------------------------------------------------------------------------------------------------------
Total investments -- 99.3% (Identified cost -- $8,331,790) 13,228,077
Other assets less liabilities -- 0.7% 99,467
-----------
Net assets -- 100.0% $13,327,544
===========
</TABLE>
17
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Value Trust, Inc. -- Continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net assets consisting of:
Accumulated paid-in capital applicable to:
161,012 Primary Class shares outstanding $ 6,432,833
15,618 Navigator Class shares outstanding 826,032
accumulated net investment income/(loss) (124)
Accumulated net realized gain/(loss) on investments
and foreign currency transactions 1,172,530
Unrealized appreciation/(depreciation) of investments
and foreign currency translations 4,896,273
-----------
Net assets -- 100.0% $13,327,544
===========
Net asset value per share:
Primary Class $75.25
======
Navigator Class $77.52
======
- -------------------------------------------------------------------------------------------------------------------------
</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 March 31, 2000, the total
market value of Affiliated Companies was $897,440 and the identified cost
was $1,149,600.
See notes to financial statements.
18
<PAGE>
Statement of Net Assets
March 31, 2000
(Amounts in Thousands)
Legg Mason Special Investment Trust, Inc.
<TABLE>
<CAPTION>
Shares/Par Value
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks and Equity Interests -- 96.3%
Capital Goods -- 6.3%
Electrical Equipment -- 2.9%
Hadco Corp. 1,265 $ 81,751/A,B/
----------
Waste Management -- 3.4%
Republic Services, Inc. 8,500 92,969/A/
----------
Communication Services -- 7.8%
Telecommunications (Long Distance) -- 7.8%
ICG Communications 3,550 128,244/A,B/
TALK.com, Inc. 5,500 88,000/A,B/
----------
216,244
----------
Consumer Cyclicals -- 18.6%
Gaming, Lottery and Parimutuel Companies -- 3.4%
Mandalay Resort Group 2,500 42,187/A/
Pinnacle Entertainment, Inc. 2,515 51,086/A,B/
----------
93,273
----------
Retail (Discounters) -- 1.4%
Consolidated Stores Corporation 3,486 39,650/A/
----------
Retail (Specialty-Apparel) -- 2.7%
The TJX Companies, Inc. 3,400 75,437
----------
Services (Advertising/Marketing) -- 7.0%
WPP Group plc 11,103 192,672
----------
Services (Commercial and Consumer) -- 2.0%
Viad Corp 2,400 54,900
----------
Textile (Apparel) -- 2.1%
Liz Claiborne, Inc. 1,288 58,983
----------
Consumer Staples -- 9.1%
Beverages (Non-Alcoholic) -- 1.2%
Cott Corporation 6,000 33,750
----------
Entertainment -- 1.1%
Hollywood Entertainment Corp. 3,800 30,638/A,B/
----------
Restaurants -- 0.9%
CKE Restaurants, Inc. 4,000 25,500/B/
----------
</TABLE>
19
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Special Investment Trust, Inc. -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer Staples (continued)
Retail Stores (Drug Stores) -- 1.4%
Caremark Rx, Inc. 9,000 $ 37,687/A/
----------
Services (Employment) -- 4.5%
Manpower Inc. 1,805 64,060
Modis Professional Services, Inc. 4,800 59,400/A/
----------
123,460
----------
Financials -- 10.2%
Banks (Major Regional) -- 0.9%
Peoples Heritage Financial Group, Inc. 1,600 24,000
----------
Financial (Diversified) -- 1.5%
The Finova Group Inc. 2,500 42,031
----------
Insurance (Life / Health) -- 2.1%
UnumProvident Corporation 3,500 59,500
----------
Insurance (Property/Casualty) -- 4.5%
Enhance Financial Services Group, Inc. 3,000 42,375/B/
Radian Group Inc. 1,737 82,722/B/
----------
125,097
----------
Investment Management -- 1.2%
United Asset Management Corporation 2,000 34,625
----------
Health Care -- 2.7%
Biotechnology -- 0.9%
Cell Genesys, Inc. 1,215 25,895/A/
----------
Health Care (Managed Care) -- 1.8%
PhyCor, Inc. 1,221 1,259/A/
Wellpoint Health Networks Inc. 700 48,912/A/
----------
50,171
----------
Miscellaneous -- 0.0%
Olsen & Associates AG 30 0/A,C/
----------
Technology -- 41.6%
Computers (Hardware) -- 7.7%
Gateway, Inc. 3,600 190,800/A/
Micron Electronics, Inc. 1,635 22,884/A/
----------
213,684
----------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Technology (continued)
Computers (Networking) -- 3.7%
Cabletron Systems, Inc. 3,500 $ 102,594/A/
----------
Computers (Peripherals) -- 1.3%
Storage Technology Corporation 2,200 35,063/A/
----------
Computers (Software/Services) -- 21.4%
America Online, Inc. 3,300 221,925/A/
Bell & Howell Company 1,221 38,150/A,B/
Cadence Design Systems, Inc. 2,200 45,650/A/
Sybase, Inc. 3,700 75,156/A/
Symantec Corporation 2,815 211,477/A/
----------
592,358
----------
Services (Computer Systems) -- 3.2%
SunGard Data Systems Inc. 2,365 89,279/A/
----------
Services (Data Processing) -- 4.3%
Ceridian Corporation 3,000 57,562/A/
Equifax Inc. 2,400 60,600
----------
118,162
----------
Total Common Stocks and Equity Interests (Identified Cost -- $1,744,926) 2,669,373
---------------------------------------------------------------------------------------------------------------------
Corporate and Other Bonds -- 0.7%
Amazon.com, Inc., 4.75%, due 2/1/09 $20,000 19,725/D/
----------
Total Corporate and Other Bonds (Identified Cost -- $20,000) 19,725
---------------------------------------------------------------------------------------------------------------------
Repurchase Agreements -- 2.3%
Bank of America
6.15%, dated 3/31/00, to be repurchased at $31,809
on 4/3/00 (Collateral: $35,711 Freddie Mac mortgage-
backed securities, 6%, due 9/1/28, value $32,676) $31,792 31,792
Goldman, Sachs & Company
6.15%, dated 3/31/00, to be repurchased at $31,809
on 4/3/00 (Collateral: $36,030 Fannie Mae mortgage-
backed securities, 6%, due 10/1/29, value $32,956) 31,793 31,793
----------
Total Repurchase Agreements (Identified Cost -- $63,585) 63,585
---------------------------------------------------------------------------------------------------------------------
Total investments -- 99.3% (Identified cost -- $1,828,511) 2,752,683
Other assets less liabilities -- 0.7% 19,255
----------
Net assets -- 100.0% $2,771,938
==========
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Special Investment Trust, Inc. -- Continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net assets consisting of:
Accumulated paid-in capital applicable to:
65,791 Primary Class shares outstanding $1,666,679
2,845 Navigator Class shares outstanding 76,743
Accumulated net realized gain/(loss) on investments
and foreign currency transactions 104,344
Unrealized appreciation/(depreciation) on investments
and foreign currency translations 924,172
----------
Net assets -- 100.0% $2,771,938
==========
Net asset value per share:
Primary Class $40.28
======
Navigator Class $42.91
======
- --------------------------------------------------------------------------------------------------------------------------
</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 March 31, 2000, the total
market value of Affiliated Companies was $568,466 and the identified cost
was $466,048.
/C/ Private placement and an illiquid security valued at fair value under
procedures adopted by the Board of Directors. This security represents 0%
of net assets.
/D/ Rule 144a security -- A security purchased pursuant to Rule 144a under the
Securities Act of 1933 which may not be resold subject to that rule except
to qualified institutional buyers. This security represents 0.7% of net
assets.
See notes to financial statements.
22
<PAGE>
Statement of Net Assets
March 31, 2000
(Amounts in Thousands)
Legg Mason Total Return Trust, Inc.
<TABLE>
<CAPTION>
Shares/Par Value
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks and Equity Interests -- 92.0%
Capital Goods -- 5.0%
Aerospace/Defense -- 1.3%
Northrop Grumman Corporation 95 $ 5,029
-------
Electrical Equipment -- 1.9%
General Electric Company 45 6,983
-------
Waste Management -- 1.8%
Waste Management Inc. 480 6,570
-------
Communication Services -- 6.9%
Telecommunications (Long Distance) -- 4.5%
AT&T Corp. 155 8,719
MCI WorldCom, Inc. 175 7,929/A/
-------
16,648
-------
Telephone -- 2.4%
GTE Corporation 60 4,260
SBC Communications Inc. 115 4,830
-------
9,090
-------
Consumer Cyclicals -- 15.5%
Automobiles -- 2.4%
Ford Motor Company 100 4,594
General Motors Corporation 55 4,555
-------
9,149
-------
Gaming, Lottery and Parimutuel Companies -- 0.5%
Mandalay Resort Group 100 1,688/A/
-------
Household Furniture and Appliances -- 1.6%
Maytag Corporation 120 3,975
The Black & Decker Corporation 50 1,878
-------
5,853
-------
Leisure Time (Products) -- 2.0%
Brunswick Corporation 223 4,223
Mattel, Inc. 320 3,340
-------
7,563
-------
Retail (Department Stores) -- 3.5%
Nordstrom Inc. 160 4,720
Saks Incorporated 275 3,987/A/
The May Department Stores Company 150 4,275
-------
12,982
-------
</TABLE>
23
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Total Return Trust, Inc. -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer Cyclicals (continued)
Retail (Specialty) -- 4.1%
Toys "R" Us, Inc. 1,025 $ 15,183/A/
--------
Retail (Specialty-Apparel) -- 1.2%
The TJX Companies, Inc. 202 4,484
--------
Textiles (Apparel) -- 0.2%
Tommy Hilfiger Corporation 50 725/A/
--------
Consumer Staples -- 9.3%
Entertainment -- 2.2%
The Walt Disney Company 75 3,103
Time Warner Inc. 50 5,000
--------
8,103
--------
Foods -- 1.0%
Sara Lee Corporation 210 3,780
--------
Housewares -- 1.2%
Tupperware Corporation 281 4,440
--------
Personal Care -- 0.5%
Avon Products, Inc. 70 2,034
--------
Retail Stores (Food Chains) -- 4.4%
Albertson's, Inc. 250 7,750
Safeway Inc. 110 4,977/A/
The Kroger Co. 202 3,541/A/
--------
16,268
--------
Financials -- 31.8%
Banks (International) -- 5.8%
Lloyds TSB Group plc 2,045 21,620
--------
Banks (Major Regional) -- 2.8%
Bank One Corporation 195 6,703
FleetBoston Financial Corporation 100 3,650
--------
10,353
--------
Banks (Money Center) -- 3.7%
Bank of America Corporation 75 3,933
The Chase Manhattan Corporation 115 10,000
--------
13,933
--------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Financials (continued)
Consumer Finance -- 1.2%
Countrywide Credit Industries, Inc. 100 $ 2,725
Household International, Inc. 50 1,866
--------
4,591
--------
Financial (Diversified) -- 7.7%
Citigroup Inc. 118 6,969
Fannie Mae 50 2,822
Mid-America Apartment Communities, Inc. 236 5,315
National Golf Properties, Inc. 294 6,197
Nationwide Health Properties, Inc. 492 5,138
XL Capital Ltd. 41 2,270
--------
28,711
--------
Insurance (Life/Health) -- 1.6%
UnumProvident Corporation 360 6,120
--------
Insurance (Multi-Line) -- 0.7%
The Hartford Financial Services Group, Inc. 50 2,638
--------
Insurance (Property/Casualty) -- 5.2%
American Financial Group, Inc. 147 4,202
Enhance Financial Services Group, Inc. 392 5,537
IPC Holdings Limited 209 2,508
MGIC Investment Corporation 50 2,181
The Allstate Corporation 200 4,763
--------
19,191
--------
Investment Banking/Brokerage-- 0.5%
The Bear Stearns Companies, Inc. 40 1,838
--------
Savings and Loan Companies-- 2.6%
Washington Mutual, Inc. 365 9,673
--------
Health Care -- 6.6%
Health Care (Diversified) -- 3.3%
Abbott Laboratories 173 6,077
Bristol-Myers Squibb Company 30 1,733
Johnson & Johnson 65 4,554
--------
12,364
--------
</TABLE>
25
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Total Return Trust, Inc. -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Health Care (continued)
Health Care (Drugs/Major Pharmaceuticals) -- 3.3%
Eli Lilly & Company 65 $ 4,095
Merck & Co., Inc. 135 8,387
--------
12,482
--------
Technology -- 16.3%
Computers (Hardware) -- 10.3%
Dell Computer Corporation 100 5,394/A/
Gateway, Inc. 75 5,300/A/
Hewlett-Packard Company 10 1,326
International Business Machines Corporation 225 26,550
--------
38,570
--------
Computers (Software Services) -- 1.0%
Unisys Corporation 150 3,825/A/
--------
Electronics (Semiconductors) -- 2.6%
Intel Corporation 75 9,895
--------
Photography/Imaging -- 2.4%
Eastman Kodak Company 110 5,974
Xerox Corporation 120 3,120
--------
9,094
--------
Utilities -- 0.6%
Electric Companies -- 0.6%
Edison International 138 2,277
--------
Total Common Stocks and Equity Interests (Identified Cost -- $295,681) 343,747
---------------------------------------------------------------------------------------------------------------------
Repurchase Agreements -- 2.9%
Bank of America
6.15%, dated 3/31/00, to be repurchased at $5,416
on 4/3/00 (Collateral: $6,087 Freddie Mac mortgage-
backed securities, 6%, due 9/1/28, value $5,570) $5,413 5,413
Goldman, Sachs & Company
6.15%, dated 3/31/00, to be repurchased at $5,416
on 4/3/00 (Collateral: $6,136 Fannie Mae mortgage-
backed securities, 6%, due 10/1/29, value $5,613) 5,414 5,414
--------
Total Repurchase Agreements (Identified Cost -- $10,827) 10,827
---------------------------------------------------------------------------------------------------------------------
Total investments-- 94.9% (identified cost -- $306,508) 354,574
Other assets less liabilities -- 5.1% 19,075
--------
Net assets -- 100.0% $373,649
========
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net assets consisting of:
Accumulated paid-in capital applicable to:
19,829 Primary Class shares outstanding $306,671
633 Navigator Class shares outstanding 10,343
Accumulated net investment income/(loss) 845
Accumulated net realized gain/(loss) on investments
and foreign currency transactions 7,726
Unrealized appreciation/(depreciation) of investments
and foreign currency translations 48,064
--------
Net assets -- 100.0% $373,649
========
Net asset value per share:
Primary Class $18.26
======
Navigator Class $18.39
======
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
/A/ Non-income producing.
See notes to financial statements.
27
<PAGE>
Statements of Operations
(Amounts in Thousands)
<TABLE>
<CAPTION>
Year Ended 3/31/00
-------------------------------------------------------
Value Special Investment Total Return
Trust Trust Trust
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income:
Dividends:
Affiliated companies $ 634 $ 1,090 $ --
Other securities/A/ 98,680 6,301 14,260
Interest 27,888 6,303 1,558
---------- -------- --------
Total income 127,202 13,694 15,818
---------- -------- --------
Expenses:
Investment advisory fee 80,417 16,299 3,970
Distribution and service fees 106,510 22,164 5,143
Transfer agent and shareholder servicing expense 3,754 978 335
Audit and legal fees 234 62 57
Custodian fee 1,921 504 174
Directors' fees 17 17 11
Registration fees 913 235 18
Reports to shareholders 1,142 320 93
Other expenses 232 45 20
---------- -------- --------
195,140 40,624 9,821
Less expenses reimbursed (60) (49) --
---------- -------- --------
Total expenses, net of reimbursement 195,080 40,575 9,821
---------- -------- --------
Net Investment Income/(Loss) (67,878) (26,881) 5,997
---------- -------- --------
Net Realized and Unrealized Gain/(Loss) on Investments:
Realized gain/(loss) on investments
and foreign currency transactions/B/ 1,174,559 201,007 19,405
Change in unrealized appreciation/(depreciation)
of investments and foreign currency translations (260,951) 406,280 (60,980)
---------- -------- --------
Net Realized and Unrealized Gain/(Loss) on Investments 913,608 607,287 (41,575)
-----------------------------------------------------------------------------------------------------------------------
Change in Net Assets Resulting From Operations $ 845,730 $580,406 $(35,578)
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
/A/ Net of foreign taxes withheld of $1,471, $65 and $116, respectively.
/B/ Includes net realized gains/(losses) of $0 for Value Trust, $55,198
for Special Investment Trust and $(716) for Total Return Trust on
sales of shares of Affiliated Companies. See notes to financial
statements.
28
<PAGE>
Statements of Changes in Net Assets
(Amounts in Thousands)
<TABLE>
<CAPTION>
Value Special Investment Total Return
Trust Trust Trust
--------------------- --------------------- ---------------------
Years Ended Years Ended Years Ended
3/31/00 3/31/99 3/31/00 3/31/99 3/31/00 3/31/99
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Change in Net Assets:
Net investment income/(loss) $ (67,878) $ (22,075) $ (26,881) $ (14,981) $ 5,997 $ 11,315
Net realized gain/(loss) on investments
and foreign currency transactions 1,174,559 448,566 201,007 336,374 19,405 39,998
Change in unrealized appreciation/
(depreciation) of investments
and foreign currency translations (260,951) 2,834,373 406,280 (48,661) (60,980) (111,047)
--------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations 845,730 3,260,864 580,406 272,732 (35,578) (59,734)
Distributions to shareholders:
From net investment income:
Primary Class -- -- -- -- (7,936) (11,139)
Navigator Class -- -- -- -- (421) (484)
From net realized gain on investments:
Primary Class (366,234) (150,596) (405,384) (116,290) (34,027) (34,968)
Navigator Class (30,950) (7,843) (15,735) (4,400) (944) (897)
Change in net assets from Fund share
transactions:
Primary Class 1,626,765 2,429,161 651,428 149,813 (126,787) (30,622)
Navigator Class 340,303 390,271 39,442 1,291 (1,250) 109
--------------------------------------------------------------------------------------------------------------------------
Change in net assets 2,415,614 5,921,857 850,157 303,146 (206,943) (137,735)
Net Assets:
Beginning of year 10,911,930 4,990,073 1,921,781 1,618,635 580,592 718,327
--------------------------------------------------------------------------------------------------------------------------
End of year $13,327,544 $10,911,930 $2,771,938 $1,921,781 $373,649 $580,592
--------------------------------------------------------------------------------------------------------------------------
Accumulated net investment
income/(loss) $ (124) $ (75) $ -- $ (4) $ 845 $ 3,199
--------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
</TABLE>
29
<PAGE>
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 Net Asset
Value, Investment and Unrealized From Net Realized Value,
Beginning Income/ Gain/(Loss) on Investment Investment Gain on Total End of
of Year (Loss) Investments Operations Income Investments Distributions Year
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Value Trust
Years Ended Mar. 31,
2000 $73.09 $(.44) $ 5.06 $ 4.62 $ -- $(2.46) $(2.46) $75.25
1999 50.10 (.18) 24.58 24.40 -- (1.41) (1.41) 73.09
1998 34.11 (.02) 18.37 18.35 (.04) (2.32) (2.36) 50.10
1997 26.99 .13 8.68 8.81 (.16) (1.53) (1.69) 34.11
1996 20.21 .19 8.00 8.19 (.17) (1.24) (1.41) 26.99
Special Investment Trust
Years Ended Mar. 31,
2000 $38.82 $(.40) $ 9.90 $ 9.50 $ -- $(8.04) $(8.04) $40.28
1999 36.02 (.32) 5.78 5.46 -- (2.66) (2.66) 38.82
1998 26.55 (.31) 11.28 10.97 -- (1.50) (1.50) 36.02
1997 25.09 (.23) 3.10 2.87 -- (1.41) (1.41) 26.55
1996 19.96 -- 5.60 5.60 -- (.47) (.47) 25.09
Total Return Trust
Years Ended Mar. 31,
2000 $21.08 $ .22 $(1.43) $(1.21) $(.30) $(1.31) $(1.61) $18.26
1999 24.63 .38 (2.35) (1.97) (.38) (1.20) (1.58) 21.08
1998 19.39 .44 7.23 7.67 (.40) (2.03) (2.43) 24.63
1997 16.45 .46 3.47 3.93 (.43) (.56) (.99) 19.39
1996 12.79 .48 3.69 4.17 (.51) -- (.51) 16.45
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------------------------
Net
Investment Net Assets,
Expenses Income/(Loss) Portfolio End of
Total to Average to Average Turnover Year
Return Net Assets Net Assets Rate (in thousands)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Value Trust
Years Ended Mar. 31,
2000 6.74% 1.68% (.6)% 19.7% $12,116,912
1999 49.93% 1.69% (.4)% 19.3% 10,097,527
1998 55.34% 1.73% (.1)% 12.9% 4,810,409
1997 33.59% 1.77% .4% 10.5% 2,236,400
1996 42.09% 1.82% .8% 19.6% 1,450,774
Special Investment Trust
Years Ended Mar. 31,
2000 28.55% 1.80% (1.2)% 29.3% $ 2,649,860
1999 16.85% 1.84% (1.0)% 47.8% 1,850,289
1998 42.88% 1.86% (1.1)% 29.8% 1,555,336
1997 11.58% 1.92% (.9)% 29.2% 947,684
1996 28.47% 1.96% -- 35.6% 792,240
Total Return Trust
Years Ended Mar. 31,
2000 (6.62)% 1.89% 1.1% 85.4% $ 362,006
1999 (8.13)% 1.87% 1.7% 44.2% 565,317
1998 42.44% 1.88% 2.1% 20.6% 700,535
1997 24.33% 1.93% 2.6% 38.4% 380,458
1996 33.23% 1.95% 3.2% 34.7% 267,010
- -------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
30
<PAGE>
Notes to Financial Statements
Value Trust
Special Investment Trust
Total Return Trust
(Amounts in Thousands)
----------------------------------------------------------------------------
1. Significant Accounting Policies:
The Legg Mason Value Trust, Inc. ("Value Trust"), the Legg Mason Special
Investment Trust, Inc. ("Special Investment Trust") and the Legg Mason Total
Return Trust, Inc. ("Total Return Trust") (each a "Fund") are registered
under the Investment Company Act of 1940, as amended, each as an open-end,
diversified investment company.
Each Fund consists of two classes of shares: Primary Class, offered since
April 16, 1982, for Value Trust, since December 30, 1985, for Special
Investment Trust, and since November 21, 1985, for Total Return Trust; and
Navigator Class, offered to certain institutional investors since December 1,
1994, for each Fund. Information about the Navigator Class is contained in a
separate report to its shareholders. The income and expenses of each of these
Funds are allocated proportionately to the two classes of shares based on
daily net assets, except for Rule 12b-1 distribution fees, which are charged
only on Primary Class 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, or if no sales price is available, at the mean between
the latest bid and asked prices. Over the counter securities are valued at
the mean between the latest bid and asked prices as furnished by dealers who
make markets in such securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued
at fair value as determined by management and approved in good faith by the
Board of Directors. Fixed income securities with 60 days or less remaining to
maturity are valued using the amortized cost method, which approximates
current market value.
Foreign Currency Translation
The books and records of the Funds are maintained in U.S. dollars. Foreign
currency amounts are translated into U.S. dollars on the following basis:
(i) market value of investment securities, assets and liabilities at the
closing daily rate of exchange; and
(ii) purchases and sales of investment securities, interest income and
expenses at the rate of exchange prevailing on the respective dates
of such transactions.
The effect of changes in foreign exchange rates on realized and unrealized
security gains or losses is reflected as a component of such gains or losses.
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 for financial reporting and federal income tax purposes.
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 quarterly for Value Trust and Total Return
Trust, and annually for Special Investment Trust. 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 generally accepted accounting
principles; accordingly, periodic reclassifications are made within the
Funds' capital accounts to reflect income and gains available for
distribution under federal income tax regulations.
31
<PAGE>
Notes to Financial Statements -- Continued
----------------------------------------------------------------------------
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 March 31,
2000, receivables for securities sold and payables for securities purchased
for each of the Funds were as follows:
<TABLE>
<CAPTION>
Receivable for Payable for
Securities Sold Securities Purchased
- -------------------------------------------------------------------------------
<S> <C> <C>
Value Trust $238,131 $140,468
Special Investment Trust 19,588 0
Total Return Trust 27,719 8,361
</TABLE>
Federal Income Taxes
No provision for federal income or excise taxes is required since each
Fund intends to continue 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 generally
accepted accounting principles 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 year ended March 31, 2000, investment transactions (excluding
short-term investments) were as follows:
<TABLE>
<CAPTION>
Purchases Proceeds From Sales
- -----------------------------------------------------------------------------
<S> <C> <C>
Value Trust $4,281,348 $2,283,084
Special Investment Trust 918,694 649,165
Total Return Trust 420,270 573,183
</TABLE>
At March 31, 2000, cost, gross unrealized appreciation and gross
unrealized depreciation based on the cost of securities for federal income
tax purposes for each Fund were as follows:
<TABLE>
<CAPTION>
Net
Appreciation/
Cost Appreciation Depreciation (Depreciation)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Value Trust $8,332,254 $6,130,752 $(1,234,928) $4,895,824
Special Investment Trust 1,828,511 1,131,663 (207,491) 924,172
Total Return Trust 307,298 69,975 (22,699) 47,276
</TABLE>
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 Funds' 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 Funds' investment adviser reviews
the value of the collateral and the creditworthiness of those banks and
dealers with which the Funds enter into repurchase agreements to evaluate
potential risks.
32
<PAGE>
----------------------------------------------------------------------------
4. Transactions With Affiliates:
Each Fund has an investment advisory and management agreement with Legg
Mason Fund Adviser, Inc. ("LMFA"). Pursuant to their respective agreements,
LMFA provides the Funds with investment advisory, management and
administrative services for which each Fund pays a fee, computed daily and
payable monthly, at annual rates of each Fund's average daily net assets.
LMFA has agreed to waive indefinitely its fees in any month to the extent
Total Return Trust's expenses (exclusive of taxes, interest, brokerage and
extraordinary expenses) exceed during that month an annual rate of 1.95% of
average daily net assets for Primary Class shares. The Funds' agreements with
LMFA provide that expense reimbursements be made to Value Trust and Special
Investment Trust for audit fees and compensation of the Funds' independent
directors. The following chart shows the annual rate of advisory fees and
audit and director fee reimbursements for each Fund:
<TABLE>
<CAPTION>
Year Ended
March 31, 2000 At March 31, 2000
-------------- -----------------
Audit and
Advisory Asset Expense Director Fee Advisory
Fund Fee Breakpoint Limitation Reimbursement Fee Payable
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Value Trust 1.00% $0-$100 million N/A $60 $7,147
0.75% $100 million-$1 billion
0.65% in excess of $1 billion
Special Investment Trust same as above same as above N/A 49 1,659
Total Return Trust 0.75% all assets 1.95% N/A 229
</TABLE>
Legg Mason Wood Walker, Incorporated ("Legg Mason"), a member of the New
York Stock Exchange, serves as distributor of the Funds. Legg Mason receives
an annual distribution fee and an annual service fee, based on each Fund's
Primary Class's average daily net assets, computed daily and payable monthly
as follows:
<TABLE>
<CAPTION>
At March 31, 2000
------------------------
Distribution Service Distribution and Service
Fund Fund Fee Fees Payable
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Value Trust 0.70% 0.25% $9,359
Special Investment Trust 0.75% 0.25% 2,282
Total Return Trust 0.75% 0.25% 296
</TABLE>
Value Trust paid $5 and Special Investment Trust paid $22 in brokerage
commissions to Legg Mason for Fund security transactions during the year
ended March 31, 2000. Total Return Trust paid no brokerage commissions to
Legg Mason during the year ended March 31, 2000.
Legg Mason also has an agreement with the Funds' transfer agent to assist
it with some of its duties. For this assistance, the transfer agent paid
Legg Mason the following amounts for the year ended March 31, 2000: Value
Trust, $1,174; Special Investment Trust, $310; and Total Return Trust, $88.
LMFA and Legg Mason are corporate affiliates and wholly owned subsidiaries
of Legg Mason, Inc.
33
<PAGE>
Notes to Financial Statements -- Continued
----------------------------------------------------------------------------
5. Line of Credit:
The Funds, along with certain other Legg Mason Funds, participate 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 year ended March
31, 2000, the Funds had no borrowings under the Credit Agreement.
6. Fund Share Transactions:
At March 31, 2000, there were 400,000, 100,000 and 50,000 shares
authorized at $.001 par value for the Primary Class of Value Trust, Special
Investment Trust and Total Return Trust, respectively. 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>
Value Trust
- --Primary Class
Year Ended March 31, 2000 54,139 $3,838,426 5,175 $347,619 (36,445) $(2,559,280) 22,869 $1,626,765
Year Ended March 31, 1999 64,387 3,627,343 2,789 143,657 (25,054) (1,341,839) 42,122 2,429,161
- --Navigator Class
Year Ended March 31, 2000 7,623 $ 553,197 413 $ 28,343 (3,351) $ (241,237) 4,685 $ 340,303
Year Ended March 31, 1999 8,759 469,123 133 7,050 (1,512) (85,902) 7,380 390,271
Special Investment Trust
- --Primary Class
Year Ended March 31, 2000 14,535 $ 552,539 11,373 $395,951 (7,775) $ (297,062) 18,133 $ 651,428
Year Ended March 31, 1999 15,145 485,457 3,628 114,566 (14,290) (450,210) 4,483 149,813
- --Navigator Class
Year Ended March 31, 2000 1,136 $ 43,594 410 $ 15,184 (466) $ (19,336) 1,080 $ 39,442
Year Ended March 31, 1999 403 13,258 133 4,362 (476) (16,329) 60 1,291
Total Return Trust
- --Primary Class
Year Ended March 31, 2000 3,156 $ 66,495 1,920 $ 40,459 (12,059) $ (233,741) (6,983) $ (126,787)
Year Ended March 31, 1999 5,844 131,325 2,014 44,666 (9,494) (206,613) (1,636) (30,622)
- --Navigator Class
Year Ended March 31, 2000 213 $ 4,447 64 $ 1,347 (362) $ (7,044) (85) $ (1,250)
Year Ended March 31, 1999 172 3,717 61 1,369 (230) (4,977) 3 109
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
Report of Independent Accountants
<TABLE>
<CAPTION>
<S> <C>
To the Board of Directors and Shareholders of Legg Mason Value Trust, Inc.
Legg Mason Special Investment Trust, Inc.
Legg Mason Total Return Trust, Inc.:
</TABLE>
In our opinion, the accompanying statements 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
Legg Mason Value Trust, Inc., Legg Mason Special Investment Trust, Inc., and
Legg Mason Total Return Trust, Inc. (hereafter referred to as the "Funds") at
March 31, 2000, and the results of each of their operations, the changes in each
of their net assets and the financial highlights for each of the fiscal periods
presented, in conformity with accounting principles generally accepted in the
United States. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Funds'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. 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
audits, which included confirmation of securities at March 31, 2000, by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
May 5, 2000
35
<PAGE>
Investment Adviser
Legg Mason Fund Adviser, Inc.
Baltimore, MD
Board of Directors
Raymond A. Mason, Chairman
John F. Curley, Jr., President
Nelson A. Diaz
Richard G. Gilmore
Arnold L. Lehman
Dr. Jill E. McGovern
G. Peter O'Brien
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 LLP
Washington, DC
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 o 539 o 0000
LMF-002
5/00
