<PAGE>
INVESTMENT MANAGER
Legg Mason Fund Adviser, Inc.
Baltimore, MD
INVESTMENT ADVISER
Legg Mason Capital Management, Inc.
Baltimore, MD
BOARD OF DIRECTORS
John F. Curley, Jr., Chairman
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, D.C.
INDEPENDENT AUDITORS
Ernst & Young LLP
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-013
REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED
MARCH 31, 1995
THE
LEGG MASON
AMERICAN
LEADING
COMPANIES
TRUST
PUTTING YOUR FUTURE FIRST
--Legg Mason logo appears here--<PAGE>
<PAGE>
TO OUR SHAREHOLDERS,
The American Leading Companies Trust's net asset value increased from
$9.53 to $10.18 per share during the quarter ended March 31, 1995. The
Fund's total net assets have grown to nearly $60 million as of the end of
March.
The Fund seeks to invest at least three-quarters of its assets in the
common stocks of large capitalization companies that exhibit the ability to
maintain or increase their market share. The balance of its assets may be
invested in smaller market capitalization stocks, bonds, or foreign
securities.
On the following pages, J. Eric Leo, the Fund's portfolio manager,
reviews the portfolio's structure and comments on the investment outlook.
The American Leading Companies Trust is Legg Mason's large company
growth alternative within its family of value stock funds. It is designed
for conservative investors who are most comfortable with large, stable,
well-recognized companies. We hope you will consider using the American
Leading Companies Trust for investments of additional funds as they become
available. Some shareholders regularly add to their investment in the Fund
by authorizing automatic, monthly transfers from their bank checking
accounts or Legg Mason money market funds. Your Investment Executive will
be happy to help you make these arrangements if you would like to purchase
additional shares in this convenient manner.
Ernst & Young LLP, the American Leading Companies Trust's independent
auditors, have completed their annual examination, and audited financial
statements for the fiscal year ended March 31, 1995 are included in this
report.
The Board of Directors has approved an income dividend of $.04 payable
May 12, 1995 to shareholders of record on May 9. Most shareholders will
receive the dividend in the form of additional shares credited to their
accounts.
Sincerely,
(signature of Edward A. Taber, III appears here)
Edward A. Taber, III
President
May 8, 1995
<PAGE>
<PAGE>
PORTFOLIO MANAGER'S COMMENTS
The first quarter ended with a thunderous stampede of the bulls into both
the stock and bond markets. The triggering event was the acknowledgment by the
Chairman of the Federal Reserve that during the past 12 months interest rates
had been raised enough to slow the U.S. economy from the 5.1% rate of increase
in the fourth quarter of 1994 to the target range of 2-2 1/2% for 1995. Economic
weakness manifested itself in slower auto and housing sales, combined with the
negative impact of the peso devaluation and the Mexican recession on the U.S.
export economy (Mexico is a major consumer of U.S. goods and services). The
markets were also cheered by the continuation of the trend toward stable prices,
as reflected by low wage and price inflation. As the quarter progressed,
expectations for further tightening by the Federal Reserve Board diminished as
evidence mounted to support a slowing economy.
The equity market's powerful surge in the first quarter that lifted most of
the popular averages to new highs was led again by momentum investors who
continued to push up the price of growth stocks, in particular, heath care and
technology companies. The fund was well represented in health care, but was
limited in exposure to pure technology companies, which hurt performance. Our
modest exposure to the technology group is not due to a lack of appreciation for
their collective accomplishments in providing the tools that are driving the
productivity revolution for corporate America. Rather, it is because these
products are, for the most part, highly perishable and highly competitive,
thereby reducing the predictability of their business. Our strategy is to invest
in companies that use the technology to gain market share and earn a higher rate
of return than their competitors. This strategy is less exciting and requires
more patience than investing in the pure producers of technology. We believe our
approach is less risky, with rewards that will at least equal the higher-risk
technology group over time.
In the face of a slowing economy, transactions during the quarter reflected
our desire to build portfolio exposure to companies with high earnings
consistency and less economic sensitivity. AMERICAN GREETINGS, purchased early
in the quarter, fits extremely well. It is a conservative company with little
debt, strong cash flow, and a forward-looking management. AMERICAN GREETINGS,
together with Hallmark, a private company, control almost 75% of the total
greeting card market. AMERICAN GREETINGS is gaining market share because it is
focusing on mass merchandisers, such as Wal-Mart, while Hallmark continues to
concentrate on individual mall-based stores. AMERICAN GREETINGS' strengths are
customer service and application of technology, which are becoming increasingly
more important for the future. An unrecognized advantage of AMERICAN GREETINGS
is that it has locked in low-cost paper contracts for three years, avoiding the
recent large run-up in paper prices. We were able to purchase its shares after a
sharp price decline and we believe the company represents an excellent
growth-to-value relationship, that is, a price-earnings ratio significantly
below the market and an expected growth rate well above the market.
We also established a position in AVON PRODUCTS during the quarter. Deriving
well over one-half of its earnings from emerging markets, AVON satisfies our
desire to increase portfolio exposure to emerging markets with a lower level of
risk. We purchased the shares late in the quarter after they had weakened on
concerns over their large exposure to Mexico. We are particularly impressed with
AVON'S presence in developing regions of the world, such as Eastern Europe, the
Far East and South America. AVON'S direct selling techniques are thriving in
parts of the world where retail stores or road systems cannot support demand for
consumer products. Investments being made today in China and India could
generate significant paybacks in 1996 and beyond. AVON generates excellent free
cash flow as well as superior returns on assets and equity. Since taking control
of the company in 1988, AVON'S current management team has taken steps to
improve shareholder value. Specifically, the company has sold low-return
businesses, invested in rapidly growing overseas markets, repurchased shares,
and raised its dividend at a compounded rate of 15% since 1990. We believe
AVON'S global presence should enable earnings per share to grow 12-15% over the
next several years, despite the turmoil in Mexico.
2
<PAGE>
<PAGE>
The final addition to the portfolio was COLUMBIA/HCA HEALTHCARE.
COLUMBIA/HCA HEALTHCARE has grown rapidly through acquisitions to become the
country's largest hospital chain. Its large size gives the company the critical
mass needed to take advantage of economies of scale and efficiencies that will
be difficult for smaller competitors to match. COLUMBIA/HCA HEALTHCARE'S size
also gives them the ability to deal more effectively with managed care
providers. Providing patients with a high quality of service at affordable
pricing should provide the backdrop for solid long-term growth.
To fund the purchase of the aforementioned companies, we sold our positions
in WMX Technologies, Daimler-Benz, and RJR Nabisco.
Looking forward, we believe slowing economic growth and stable or declining
interest rates will propel both the stock and bond markets to higher levels over
the balance of the year. However, markets moved so far, so fast during the first
quarter, it seems prudent to expect a retrenchment phase before the year is
complete. We believe investors eventually will question whether the economy is
slowing more or less than the "soft landing" consensus. While it is possible for
the Federal Reserve to engineer a "soft landing" for a six-trillion-dollar
economy, we do not believe it is probable. Historically, there have been few
enough "soft landings" to question if their existence was more a matter of luck
than of design. The slowing economy eventually will bring with it concerns of
corporate earnings. The weak dollar and stronger
economies in Europe should offset the slowing domestic earnings. As the year
progresses, the tax reduction bill and spending referendum will also place
increasing weight on the financial markets.
On balance, we see the positives currently outweighing the negatives. Our
focus for the balance of the year will center around finding stocks of companies
that have excellent long-term fundamentals at valuation and risk levels below
that of the market. We are encouraged that most of our problem stocks of 1994
have begun to recover. Based on improving fundamentals, we are hopeful that most
of our stocks which lagged the market in 1994 will continue to recover smartly.
Individual names, such as BAUSCH & LOMB, and sectors, such as energy and
selected retail, look much stronger in 1995.
We hope to perform well in the current market environment because, in
addition to increased portfolio exposure to less economically sensitive
companies, we have had an on-going focus on companies with a large component of
international earnings, such as AVON, AMP, MINNESOTA MINING AND MANUFACTURING,
and EMERSON ELECTRIC. We are also very excited about the long-term prospects for
the American Leading Companies Trust and would like to take this opportunity to
thank you for your continued support.
J. Eric Leo
May 8, 1995
DJIA 4383.87
3
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
LEGG MASON INVESTORS TRUST, INC.
AMERICAN LEADING COMPANIES TRUST
The fund had positive results for the past 12 months but
underperformed its benchmark, the S&P 500. Coupled with some
underperforming holdings, performance lagged in large measure because the
fund was too conservatively positioned. The conservative posture was the
result of a measured deployment of cash since the fund's inception
(September 1993) and the defensive nature of the securities. Cash levels
were 22% on 3/31/94 versus 6.4% on 3/31/95. In retrospect, the deployment
of cash was too gradual. The basis for the strategy was the historical
evidence supporting weak stock market performance during periods of rising
interest rates, coupled with relatively high equity valuation levels,
which did not come to pass. Additionally, we had too few holdings in
technology stocks, which have been a primary market driver during the past
year, and too much retail exposure, which has performed poorly. The
portfolio was not without a significant number of strong stocks,
especially the drug group.
Strategy Employed
The strategy employed has shifted gradually over the course of the
year to reflect the maturation process of a new fund with high cash levels
to a mature fund that is close to being fully invested. The portfolio
continues to have a cautious bias, although not as heavy as one year ago.
Broad diversification, a high percentage of recognizable names, and a
long-term focus continue to be the key portfolio objectives. The portfolio
will maintain its focus on large, well-financed, U.S. companies that are
also dominant globally.
The Legg Mason American Leading Companies Trust is designed for
conservative long-term investors who are seeking a well-diversified
portfolio made up of stocks of large, well-known companies. Rapidly
changing environments can create significant adjustment problems for large
companies and potentially, very serious problems for smaller or
under-capitalized companies. Legg Mason American Leading Companies Trust
believes that large, well-capitalized, U.S.-based, globally-oriented
companies possess significant long-term advantages. Our goal is to
identify the blue chip companies of the future. The companies that
interest us the most are those making significant progress meeting the
challenge of change. We strive to purchase these companies at valuation
levels consistent with our value orientation but with the potential to
evolve into companies possessing growth stock characteristics.
TOTAL RETURN FOR ONE YEAR AND LIFE OF FUND, AS OF MARCH 31, 1995
The returns shown below 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. No
adjustment has been made for any income taxes payable by shareholders.
The fund's total returns as of March 31, 1995 were as follows:
<TABLE>
<CAPTION>
CUMULATIVE AVERAGE ANNUAL
TOTAL RETURN TOTAL RETURN
<S> <C> <C>
One Year +6.24 % +6.24%
Life of Fund(|) +3.20 +2.02
</TABLE>
(|) Fund inception -- September 1, 1993.
4
<PAGE>
<PAGE>
PERFORMANCE INFORMATION
LEGG MASON INVESTORS TRUST, INC.
AMERICAN LEADING COMPANIES TRUST
SELECTED PORTFOLIO PERFORMANCE
Top Ten Holdings
1. Emerson Electric Co.
2. McCormick & Company, Incorporated
3. Minnesota Mining and Manufacturing
Company
4. Avon Products, Inc.
5. American Greetings Corporation
6. Bausch & Lomb Incorporated
7. American Brands, Inc.
8. Unocal Corporation
9. Pfizer Inc.
10. Union Pacific Corporation
Strong Performers for the 1st quarter 1995*
Corning, Incorporated
McCormick & Company, Incorporated
Union Pacific Corporation
Woolworth Corporation
Weak Performers for the 1st quarter 1995*
Buenos Aires Emobotelladora S.A. ADS
Diebold, Incorporated
Federal-Mogul Corporation
NEXTEL Communications, Inc.
PORTFOLIO CHANGES
Securities Added
Avon Products, Inc.
American Greetings Corporation
Columbia/HCA Healthcare Corporation
Securities Sold
Daimler-Benz A.G. ADR
RJR Nabisco Holdings Corp.
preferred equity redemption
cumulative stock
WMX Technologies, Inc.
* SECURITIES HELD FOR THE ENTIRE QUARTER.
Performance Comparison of a $10,000 Investment as of March 31 1995(dagger)
(graph appears here--plot points below)
<TABLE>
<CAPTION>
9/1/93 9/30/93 12/31/93 3/31/94 6/30/94 9/30/94 12/31/94 3/31/95
<S> <C> <C> <C> <C> <C> <C> <C> <C>
American Leading Companies Trust 10,000 9,960 10,085 9,714 9,714 10,076 9,661 10,320
Standard & Poor's 500 Stock Composite
Index(1) 10,000 9,923 10,152 9,772 9,811 10,289 10,286 11,290
</TABLE>
(dagger) Fund Inception--September 1, 1993.
(1) An unmanaged index of widely held common stocks.
5
<PAGE>
STATEMENT OF NET ASSETS
LEGG MASON INVESTORS TRUST, INC.
AMERICAN LEADING COMPANIES TRUST
MARCH 31, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands) Shares Value
<S> <C> <C>
</TABLE>
COMMON STOCKS AND EQUITY INTERESTS -- 92.0%
<TABLE>
<S> <C> <C>
Automotive Parts -- 1.1%
Federal-Mogul Corporation 35 $ 630
Banking -- 3.6%
First Union Corporation 15 651
J.P. Morgan & Co. Incorporated 25 1,525
2,176
Business Services -- 2.5%
Deluxe Corporation 20 570
Premier Industrial Corporation 40 945
1,515
Computer Services and Systems -- 2.4%
Diebold, Incorporated 40 1,425
Cosmetics -- 3.0%
Avon Products, Inc. 30 1,815
Defense -- 3.2%
Litton Industries, Inc. 33 1,184*
Raytheon Company 10 729
1,913
Electrical Equipment -- 6.1%
AMP Incorporated 46 1,656
Emerson Electric Co. 30 1,995
3,651
Entertainment -- 1.4%
The Walt Disney Company 16 854
Food, Beverage and Tobacco -- 10.6%
American Brands, Inc. 45 1,766
Buenos Aires Embotelladora S.A.
ADS 30 780
CPC International Inc. 17 920
McCormick & Company, Incorporated 85 1,923
Philip Morris Companies Inc. 15 979
6,368
Health Care -- 4.1%
Bausch & Lomb Incorporated 50 1,788
Columbia/HCA Healthcare
Corporation 15 645
2,433
</TABLE>
<TABLE>
<CAPTION>
(Amounts in Thousands) Shares Value
<S> <C> <C>
</TABLE>
<TABLE>
<S> <C> <C>
Industrial Machinery -- 1.9%
Varity Corporation 30 $ 1,140*
Insurance -- 5.6%
American General Corporation 40 1,290
First Colony Corporation 55 1,244
Lincoln National Corporation 20 805
3,339
Metals and Mining -- 1.6%
Cleveland-Cliffs Inc. 25 963
Multi-Industry -- 11.8%
Alco Standard Corporation 15 1,087
Corning Incorporated 35 1,260
Eastman Kodak Company 15 797
Hanson P.L.C. 35 661
Minnesota Mining and
Manufacturing Company 33 1,918
Rockwell International
Corporation 35 1,365
7,088
Oil and Oil Services -- 8.9%
Schlumberger Limited 10 596
Texaco Inc. 15 998
Unocal Corporation 60 1,725
Vastar Resources Inc. 35 967
Western Atlas Inc. 25 1,078*
5,364
Pharmaceuticals -- 5.3%
Eli Lilly and Company 20 1,462
Pfizer Inc. 20 1,715
3,177
Publishing -- 3.0%
American Greetings Corporation 60 1,793
Railroads and Equipment -- 3.9%
Southern Pacific Rail Corporation 40 700*
Union Pacific Corporation 30 1,650
2,350
Retail Sales -- 3.2%
Kmart Corporation 65 894
Woolworth Corporation 55 1,010
1,904
</TABLE>
6
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
(Amounts in Thousands) Shares Value
<S> <C> <C>
Telecommunications -- 8.8%
AT&T Corp. 32 $ 1,656
BCE Inc. 40 1,235
GTE Corporation 30 997
MCI Communications Corporation 45 928
NEXTEL Communications, Inc. 35 477*
5,293
Total Common Stocks and Equity
Interests
(Identified Cost -- $53,879) 55,191
</TABLE>
PREFERRED STOCK -- 1.3%
<TABLE>
<S> <C> <C>
Sonoco Products Company
$2.25 Series A Cum. Cv.
(Identified Cost -- $752) 15 788
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<S> <C> <C>
</TABLE>
U.S. GOVERNMENT AGENCY OBLIGATION -- 1.7%
<TABLE>
<S> <C> <C>
Student Loan Marketing
Association
6.57%(|) 5-1-96
(Identified Cost -- $1,006) $1,000 1,002
Principal
(Amounts in Thousands) Amount Value
</TABLE>
REPURCHASE AGREEMENT -- 5.1%
<TABLE>
<S> <C> <C>
Prudential Securities, Inc.
6.3% dated 3-31-95, to be
repurchased at $3,070 on
4-3-95
(Collateral: $3,159 Federal
National Mortgage
Association Mortgage-backed
securities, 7.5% due
12-1-08, value $3,147)
(Identified Cost -- $3,068) $ 3,068 $ 3,068
Total Investments -- 100.1%
(Identified Cost -- $58,705) 60,049
Other Assets Less Liabilities -- (0.1%) (64)
NET ASSETS CONSISTING OF:
Accumulated paid-in capital
applicable to 5,891 shares
outstanding 58,873
Undistributed net investment
income 248
Accumulated net realized loss
on investments (480)
Unrealized appreciation of
investments 1,344
NET ASSETS -- 100.0% $59,985
NET ASSETS VALUE PER SHARE $ 10.18
</TABLE>
* NON-INCOME PRODUCING.
(|) THE RATE OF INTEREST EARNED IS TIED TO THE 3-MONTH TREASURY BILL INDEX
AND THE COUPON RATE SHOWN IS THE RATE AS OF MARCH 31, 1995.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
STATEMENT OF OPERATIONS
LEGG MASON INVESTORS TRUST, INC.
AMERICAN LEADING COMPANIES TRUST
FOR THE YEAR ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands)
<S> <C> <C>
INVESTMENT INCOME:
Dividends $1,453
Interest 366
Total investment income $ 1,819
EXPENSES:
Management fee 432
Distribution and service fees 575
Custodian fee 54
Transfer agent and shareholder servicing expense 51
Legal and audit fees 30
Registration fees 25
Reports to shareholders 20
Organization expense 18
Directors' fees 10
Other expenses 4
1,219
Less fees waived (94)
Total expenses, net of waivers 1,125
NET INVESTMENT INCOME 694
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized loss on investments (439)
Net unrealized appreciation of investments 3,246
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 2,807
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 3,501
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
LEGG MASON INVESTORS TRUST, INC.
AMERICAN LEADING COMPANIES TRUST
<TABLE>
<CAPTION>
For the Year September 1, 1993*
Ended to
(Amounts in Thousands) March 31, 1995 March 31, 1994
<S> <C> <C>
CHANGE IN NET ASSETS:
Net investment income $ 694 $ 287
Net realized loss on investments (439) (41)
Change in unrealized appreciation (depreciation) of investments 3,246 (1,902)
Change in net assets resulting from operations 3,501 (1,656)
Net equalization credits 6 33
Distributions to shareholders from net investment income (645) (127)
Increase in net assets from Fund share transactions 2,101 56,672
Increase in net assets 4,963 54,922
NET ASSETS:
Beginning of period 55,022 100
End of period (including undistributed net investment income of $248 and
$193, respectively) $ 59,985 $ 55,022
</TABLE>
* COMMENCEMENT OF OPERATIONS.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
<PAGE>
FINANCIAL HIGHLIGHTS
LEGG MASON INVESTORS TRUST, INC.
AMERICAN LEADING COMPANIES TRUST
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>
For the Year
Ended
March 31, 1995
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.69 $10.00
Net investment income 0.12(1) 0.059(1)
Net realized and unrealized gain (loss) on investments 0.48 (0.344)
Total from investment operations 0.60 (0.285)
Distributions to shareholders from net investment income (0.11) (0.025)
Net asset value, end of period $10.18 $9.69
Total return 6.24% (2.86)%(3)
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses 1.95%(1) 1.95%(1)(2)
Net investment income 1.21%(1) 1.14%(1)(2)
Portfolio turnover rate 30.5% 21.0%(2)
Net assets, end of period (in thousands) $59,985 $55,022
</TABLE>
* COMMENCEMENT OF OPERATIONS.
(1) NET OF FEES WAIVED PURSUANT TO A VOLUNTARY EXPENSE LIMITATION OF 1.95%
OF AVERAGE DAILY NET ASSETS. IF NO FEES HAD BEEN WAIVED BY THE ADVISER,
THE RATIO OF EXPENSES TO AVERAGE DAILY NET ASSETS FOR THE PERIOD
SEPTEMBER 1, 1993 TO MARCH 31, 1994 AND THE YEAR ENDED MARCH 31, 1995
WOULD HAVE BEEN 2.28% AND 2.12%, RESPECTIVELY.
(2) ANNUALIZED.
(3) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
LEGG MASON INVESTORS TRUST, INC.
AMERICAN LEADING COMPANIES TRUST
(Amounts in Thousands)
1. SIGNIFICANT ACCOUNTING POLICIES:
The Legg Mason Investors Trust, Inc. ("Trust") is registered under the
Investment Company Act of 1940, as amended. The Legg Mason American
Leading Companies Trust ("Fund"), a diversified, open-end management
investment company, is currently the only portfolio established by the
Trust. The Fund was organized on May 5, 1993 and had no operations prior
to September 1, 1993, other than those related to organizational matters.
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
Dividend and interest income and expenses are recorded on the accrual
basis. Net investment income for dividend purposes consists of dividends
and interest earned, less expenses.
Dividends from net investment income and distributions from capital
gains are recorded on the ex-dividend date. Distributions from net capital
gains will be made annually. Additional distributions will be made when
necessary.
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.
Deferred Organizational Expenses
Deferred organizational expenses of $89 are being amortized on a
straight-line basis over 5 years commencing on the date operations began.
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 shareholders.
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
redemption 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 $ 25,780
Proceeds from sales 15,544
</TABLE>
At March 31, 1995, the cost of securities for federal income tax
purposes was $58,920. Aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $4,348
and aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value was $3,219. The net unrealized
appreciation for tax purposes is $1,129.
3. FUND SHARE TRANSACTIONS:
At March 31, 1995, there were 1,000,000 shares authorized at $.001 par
value for all portfolios of the Trust (including the Fund). Transactions
in Fund shares were as follows:
<TABLE>
<CAPTION>
September 1,
For the Year Ended 1993(|) to
March 31, 1995 March 31, 1994
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
<CAPTION>
<S> <C> <C> <C> <C>
Sold 1,404 $13,743 6,226 $62,258
Reinvestment of
distributions 66 638 12 127
Repurchased (1,258) (12,280) (569 ) (5,713)
Net increase 212 $ 2,101 5,669 $56,672
</TABLE>
(|) Commencement of operations.
11
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
LEGG MASON INVESTORS TRUST, INC.
AMERICAN LEADING COMPANIES TRUST
(Amounts in Thousands)
4. TRANSACTIONS WITH AFFILIATES:
The Fund has a management agreement with Legg Mason Fund Adviser, Inc.
("Manager"), 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 Manager provides the
Fund with management and administrative services for which the Fund pays a
fee at an annual rate of 0.75% of average daily net assets, calculated
daily and payable monthly. At March 31, 1995, $28 was due to the Manager.
The agreement with the Manager provides that expense reimbursements be
made to the Fund for expenses which in any month are in excess of an
annual rate of 1.95%, based on average daily net assets. For the year
ended March 31, 1995, advisory fees of $94 were waived.
Legg Mason Capital Managment, Inc. ("Adviser"), a corporate affiliate
of the Manager and Legg Mason, serves as investment adviser to the Fund.
The Adviser is responsible for the actual investment activity of the
Fund, for which the Manager (not the Fund) pays the Adviser a fee at an
annual rate equal to 40% of the fee received by the Manager.
Legg Mason, as distributor of the Fund, receives an annual
distribution fee of 0.75% and an annual service fee of 0.25% of the Fund's
average daily net assets, calculated daily and payable monthly. At March
31, 1995, $50 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 $19 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.
12
<PAGE>
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
TO THE SHAREHOLDERS AND DIRECTORS OF LEGG MASON INVESTORS TRUST, INC.:
We have audited the accompanying statement of net assets of the Legg
Mason American Leading Companies Trust, a portfolio of the Legg Mason
Investors Trust, Inc., as of March 31, 1995, and the related statement of
operations for the year then ended, and the statement of changes in net
assets and financial highlights for the year then ended and for the period
from September 1, 1993 (commencement of operations) to March 31, 1994.
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 as of 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 audit provides 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 American Leading Companies Trust at March 31,
1995, the results of its operations for the year then ended, and the
changes in its net assets and financial highlights for the year then ended
and for the period from September 1, 1993 (commencement of operations) to
March 31, 1994, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Baltimore, Maryland
April 27, 1995
13
<PAGE>
