Investment Manager
Legg Mason Fund Adviser, Inc.
Baltimore, MD
Investment Adviser
For American Leading Companies Trust:
Legg Mason Capital Management, Inc.
Baltimore, MD
For Balanced Trust:
Bartlett & Co.
Cincinnati, OH
Board of Directors
John F. Curley, Jr., Chairman
Edward A. Taber, III, President
Richard G. Gilmore
Charles F. Haugh
Arnold L. Lehman
Dr. Jill E. McGovern
T. A. Rodgers
Transfer and Shareholder Servicing Agent
Boston Financial Data Services
Boston, MA
Custodian
State Street Bank & Trust Company
Boston, MA
Counsel
Kirkpatrick & Lockhart LLP
Washington, D.C.
Independent 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 o 539 o 0000
LMF-013
8/97
<PAGE>
Quarterly Report
June 30, 1997
Legg Mason
Investors
Trust, Inc.
American Leading
Companies Trust
Balanced Trust
Putting Your Future First
[Legg Mason Logo]
FUNDS
<PAGE>
To Our Shareholders,
We are pleased to provide you with Legg Mason Investors Trust's combined
quarterly report.
During the quarter ended June 30, 1997 American Leading Companies Trust's
Primary Class net asset value increased from $14.74 to $16.34 per share and
Balanced Trust's net asset value increased from $10.16 to $11.00 per share.
American Leading Companies Trust seeks to invest at least three-quarters of
its assets in the common stock 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. The Balanced Trust seeks to invest at least 25% of its
portfolio in fixed income securities and no more than 75% of its assets in
equity securities. Balanced Trust will emphasize investments in dividend paying
equity securities.
Comments on the investment outlook, portfolio structure and performance of
each Trust follows this letter.
We hope you will consider using the Trust for investments of additional funds
as they become available. Some shareholders regularly add to their investment in
the Funds by authorizing automatic, monthly transfers from their bank checking
or Legg Mason accounts. Your Financial Advisor will be happy to help you make
these arrangements if you would like to purchase additional shares in this
convenient manner.
Sincerely,
/s/ Edward A. Taber III
________________________
Edward A. Taber, III
President
August 7, 1997
<PAGE>
Portfolio Managers' Comments
American Leading Companies Trust
At the end of 1996, after the stock market had risen by almost 70% on a
cumulative two year basis, we stated that it doesn't get much better than this.
Fortunately, we were wrong. It did in the second quarter of 1997. Indeed,
essentially everything that could go right for investors did so in the quarter.
The economy continued to expand at an acceptable, albeit slower rate than the
robust 4.9% pace recorded during the first quarter, inflation remained extremely
benign (the Producer Price Index declined for an unprecedented six consecutive
months between January and June) and fears that the Fed again would raise
short-term interest rates proved to be unfounded, as long rates fell from the
7.10% level recorded at the end of March to 6.79% three months later, and growth
in corporate profits remained robust.
Although the stock market started out slowly in April (the DJIA declined by
almost 10% between March 11 and April 11), it roared back by a far stronger
21.3% over the ensuing nine weeks and recorded a 17.1% gain for the quarter.
Indeed, the 20% plus gain recorded by the S&P 500 in such a short period marked
only the eighth increase of that magnitude in such a condensed period since that
index was founded in 1928; all of the previous instances occurred when the
market was severely depressed. Moreover, unlike the first quarter when gains
were confined primarily to large cap stocks, gains in the most recent quarter
were broadly based. The Russell 2000 Index, which tracks the performance of
smaller market capitalization stocks, advanced by a healthy 16.2%, while the
Nasdaq Composite Index increased by an even more robust 18.0%.
The level of stock market volatility increased during the quarter as well.
Indeed, year-to-date, the S&P 500 has advanced or declined by more than one
percentage point in 30% of the trading days of the year. By comparison, the
market advanced or declined by a similar amount in only 6% and 15% of the
trading days in 1995 and 1996, respectively.
Unlike the first quarter, when robust portfolio gains were concentrated in
the pharmaceutical sector, strong second quarter gains were far more
broadly-based and included stocks in the technology (Microsoft +37.8%, IBM
+31.3%), household and consumer products (Avon +34.4%, Colgate-Palmolive
+31.0%), pharmaceutical (Bristol-Myers Squibb +37.3%, Schering Plough +25.2%)
and financial services sectors (Banc One +28.1%). Mattel, which was under
pressure in the previous quarter because of disappointing first quarter results,
was the Fund's second best performing stock in the second quarter (41.2%), as
investors anticipated (correctly, we believe) strong second half earnings gains
by that company. First USA, which was the best performing stock in the Fund
during the first quarter of the year (22.4%), advanced by an additional 28.1% in
the second quarter due to a combination of continued strong fundamental
performance by that company and the pending consummation of Banc One's
acquisition of First USA at the quarter's end.
As previously noted, the performance of pharmaceutical stocks in the quarter
was spectacular. Indeed, for the first half of the year, the aggregate price
appreciation of our pharmaceutical holdings approximated 45%. This outstanding
performance reflects the combination of enhanced growth expectations resulting
from the recent success or improved prospects of several new drugs and the
defensive earnings characteristics generally perceived to exist in the group.
While we believe the fundamental prospects for the pharmaceutical industry
remain quite favorable, we also believe further near-term price gains will be
far more circumscribed.
2
<PAGE>
EMC Corporation and Amgen were two of our more notable additions to the Fund
in the quarter. EMC is the world's leading designer and manufacturer of high
performance information storage devices. The market for EMC's products, which
the company helped pioneer, is growing in excess of 20% per year as corporate
managers increasingly strive to better utilize the vast amounts of information
available to them to enhance their corporate decision-making processes. EMC has
fully shared in that growth and has maintained a pristine balance sheet in the
process. The company's revenues last year approximated $2.3 billion compared
with a far smaller $350 million four years earlier and EMC's cash position at
year end 1996 exceeded its long-term debt by more than $500 million. We believe
EMC will continue to record rapid and highly profitable growth over the next
several years and anticipate the company will become an increasingly important
factor in the information technology arena.
The performance of Amgen's shares has significantly lagged that of most major
pharmaceutical companies over the past year as growth in Amgen's two major
products--Epogen and Neupogen--have slowed and earnings estimates for the
company have been reduced. At present, Amgen sells at a below market P/E
multiple based on 1998 earnings estimates despite the fact that the company
spends 25% of its revenues on R&D, has over $1 billion in cash on its balance
sheet, no long-term debt and generates approximately $800 million per year from
operations. While Amgen's shares could continue to lag the market near-term, we
believe they represent excellent value longer-term and will prove to be a
superior longer-term holding.
Acrophobia is defined as the fear of heights. While we don't suffer from
acrophobia, we do have a sense of history. As previously noted, the S&P 500
advanced by an almost unprecedented 70% over the past two years and recorded its
strongest back-to-back gain during that period in over 40 years. Moreover, the
market advanced by an additional 20% during the first half of 1997 and has
continued to rise since then. By comparison, during the entire decade of the
1970s, the S&P 500 advanced by a meager 17.2%, while the DJIA grew by an even
more anemic 4.8%.
Conditions today admittedly are far different than they were in the 1970s.
Two decades ago, the economy was in the doldrums, the federal deficit was
expanding and inflation was rampant. By comparison, the economy currently is
experiencing its seventh year of uninterrupted growth, inflation remains
extremely benign, growth in corporate profits continues to exceed general
expectations, and the flow of capital into the stock market via the public's
purchase of mutual funds continues to provide a firm underpinning to equity
prices. Additionally, the enormous reduction in the Federal deficit over the
past few years has limited any pressure on interest rates and investors
correctly have learned to buy on any market dips.
We, too, have enjoyed the market's meteoric rise over the past few years; do
not foresee any specific events that will cause a meaningful market correction;
and are not attempting to be a Cassandra. However, when it doesn't get any
better than this, there is room for unpleasant surprises and we believe a little
caution is warranted at present. Accordingly, we have become even more vigilant
about valuations paid and continue to emphasize companies that we believe
possess defensive earnings characteristics, superior growth potential and the
ability to successfully weather unexpected economic conditions.
E. Robert Quasman
July 25, 1997
DJIA 8113.44
3
<PAGE>
Portfolio Managers' Comments
Balanced Trust
The quarter's returns on the common stock portion of the Legg Mason Balanced
Trust were very good--better than 15%. That's the good news. The bad news, if
one could call it that, is that this occurred as the Standard & Poor's 500
produced a 17.5% return.
Money managers today are in a difficult position. During the wonderful market
that we have had, most investors want good relative results. Our guess is that,
if and when the market generates losses, these investors will want high absolute
results. In other words, when there is easy sledding, we better win the race
and, when the going gets tough, we'd better not lose any money. Over a complete
market cycle, which would include good times as well as bad, value managers
generally do win the race. During the last six months, however, we have felt
more like the tortoise than the hare.
The most difficult decision money managers have today, whether they consider
themselves to be either growth or value managers, is the dilemma between taking
a business risk or an investment risk. For instance, buying an index fund can be
an indication that we do not want to take much of a business risk in as much as
this is a standard against which we are measured. However, if we feel that the
market is overvalued and we either are uninvested or are buying more reasonably
priced stocks that might not be an integral part of this index, we would be
trying to moderate our investment risk. At Bartlett, we have always opted to
reduce the riskiness of our clients' investment posture by buying companies with
a strong value portfolio that do not typically fall in the domain of household
names such as General Electric or Coca Cola. The key point is that, although
these are familiar names, they present undue investment risk given the lofty
valuations they have attained. Alternatively, by buying companies with strong
balance sheets and strong positions within their industry, but perhaps not the
largest companies, we may not get the boost that the most familiar names do in a
rip-roaring market. The hardest point to convey to our shareholders is that
owning these institutional favorites exclusively would be tantamount to limiting
our business risk while shifting all the investment risk onto our clients.
To more readily grasp the significance of our approach, one need only recall
the lesson learned by international investors a few years ago. The EAFE (Europe,
Australia, Far East) Index, which is the international equivalent of the S&P 500
Index, had a 48% weighting in Japanese stocks. At the end of the third quarter,
1991, the Japanese stock market was trading for roughly 65x earnings. Since the
Japanese market had such a heavy weighting in the EAFE Index, international
investors who were judged against this index would mimic the index by investing
roughly half of their portfolios in Japanese stocks. The reason being, if they
were held to the benchmark of performing in line with the international market,
they would want to reduce business risk by mimicking the market. Of course,
having 50% exposure to grossly overpriced securities in a Japanese market would
present undue investment risk, something that was borne out during the ensuing
four year period when this market plummeted. We would tend to avoid situations
such as this in a domestic market by paying much more attention to investment
risk than to business risk.
With respect to asset allocation, barring any unusual change in market
conditions, we expect to maintain our target asset allocation of 60% equities
and 40% fixed income going forward.
Fixed Income
In the annual report letter to shareholders dated May 9, 1997, we expressed
the view that valuations in the bond market had become very attractive as a
result of price declines stemming from the pre-
4
<PAGE>
emptive strike of the Federal Reserve Board last March. We are pleased to report
that our assessment of market conditions has proven to be correct and, over the
past quarter, bond yields declined dramatically as market participants became
convinced that no further increases in interest rates would be forthcoming
anytime soon. Continued reports of low inflation coupled with further progress
on the budget front has caused many fixed income managers to reassess their
extremely bearish positions of the prior quarter. As a result, during the
quarter ended June 30, 1997, the fixed income portion of the Balanced Trust
recouped the negative return experienced during the first quarter, posting a
return of 2.73% for the quarter and 2.94% for the calendar year-to-date which is
slightly above the Fund's fixed income benchmark, the Lehman Intermediate
Government/Corporate Bond Index returns of 2.95% and 2.83%, respectively, for
the same periods.
The past three months was an active period for us. During the quarter, we
sold certain of the Fund's shorter-term Treasury securities and reinvested the
proceeds in selected callable government agency notes and corporate bonds which
were selling for very attractive valuations owing to the overly bearish
sentiment on short-term rates. We have continued to favor the mortgage market
which has been the best performing fixed income asset year-to-date and, as
spreads have narrowed to comparatively rich levels, we have elected to take some
money off the table. Accordingly, we recently sold certain current coupon Ginnie
Mae securities and invested the proceeds in seven-year Treasury Strips which we
think are still attractively priced.
As to where we go from here, as long as economic activity remains relatively
contained and inflation remains benign, we can expect the bond market to
continue to offer attractive rates of return. Recently, gold prices have plunged
to a twelve year low, which is typically more indicative of a disinflationary
trend rather than an inflationary trend. In addition, we are seeing very little
in the way of price increases. In fact, many products such as computers and
automobiles, are actually experiencing price reductions.
As always, we will continue to monitor markets closely and seek opportunities
as they present themselves. Thank you for your continued support.
Woodrow H. Uible, CFA Dale H. Rabiner, CFA
Equity Portfolio Manager Fixed Income Portfolio Manager
August 4, 1997
DJIA 8198.45
5
<PAGE>
Performance Information
Legg Mason Investors Trust, Inc.
Total Return for One Year and Life of Funds as of June 30, 1997
The returns shown on these pages are based on historical results and
are not intended to indicate future performance. Total return measures
investment performance in terms of appreciation or depreciation in a
portfolio's net assets per share plus dividends and any capital gain
distributions. The investment return and principal value of an investment
in each 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 they
differ from actual year-to-year results. No adjustment has been made for
any income taxes payable by shareholders.
The American Leading Companies Trust has two classes of shares: Primary
Class and Navigator Class. The Navigator Class, offered only to certain
institutional investors, pays fund expenses similar to those paid by the
Primary Class, except that transfer agency fees and shareholder servicing
expenses are determined separately for each class and the Navigator Class
does not incur Rule 12b-1 distribution fees.
The Funds' total returns as of June 30, 1997 were as follows:
American Leading Balanced
Companies Trust Trust
- --------------------------------------------------------------------------------
Average Annual Total Return
Primary Class:
One Year +38.26% N/A
Life of Class(dagger) +16.54% N/A
Cumulative Total Return
Primary Class:
One Year +38.26% N/A
Life of Class(dagger) +79.79% 11.14%
Navigator Class:
One Year N/A N/A
Life of Class(dagger dagger) +33.31% N/A
- --------------------------------------------------------------------------------
(dagger) Primary Class inception dates are:
American Leading Companies Trust -- September 1, 1993
Balanced Trust -- October 1, 1996
(dagger dagger) Navigator Class inception dates are:
American Leading Companies Trust -- October 4, 1996
6
<PAGE>
American Leading Companies Trust
Selected Portfolio Performance*
Strong Performers for the 2nd quarter 1997
- --------------------------------------------------------------------------------
1. Pfizer, Inc. +42.1%
2. Mattel, Inc. +41.2%
3. Microsoft Corporation +37.8%
4. Bristol-Myers Squibb Company +37.3%
5. Lucent Technologies, Incorporated +36.6%
* Securities held for the entire quarter.
Portfolio Changes
Securities added during the 2nd quarter 1997
- --------------------------------------------------------------------------------
Amgen, Inc.
EMC Corporation
RJRNabisco Holdings Corp.
Raychem Corporation
Weak Performers for the 2nd quarter 1997
- --------------------------------------------------------------------------------
1. Rockwell International Corporation -9.1%
2. Union Pacific Resources Group, Inc. -7.0%
3. Gallaher Group PLC ADR -1.1%
4. Texaco, Incorporated -0.7%
5. Kimberly-Clark Corporation +0.1%
Securities sold during the 2nd quarter 1997
- --------------------------------------------------------------------------------
Comsat Corporation
GTECorporation
New Holland N.V.
7
<PAGE>
Performance Information--Continued
Legg Mason Investors Trust, Inc.
Balanced Trust
Selected Portfolio Performance*
Strong Performers for the 2nd quarter 1997
- --------------------------------------------------------------------------------
1. ADT, Ltd. +32.0%
2. Archer-Daniels-Midland Company +31.5%
3. Stewart &Stevenson Services, Inc. +30.0%
4. Kansas City Southern Industries, Inc. +29.0%
5. Martin Marietta Materials, Inc. +25.7%
* Securities held for the entire quarter.
Portfolio Changes
Securities added during the 2nd quarter 1997
- --------------------------------------------------------------------------------
AT&T Corporation
Century Telephone Enterprises, Inc.
Cincinnati Bell, Inc.
Federal Home Loan Mortgage Corporation
8.14% 9/29/04
Federal National Mortgage Association
7.37% 4/1/04
Federal National Mortgage Association
8.25% 10/12/04
First Data Corporation
General Motors Acceptance Corporation
5.98% 1/29/99
Kroger Company
8.50% 6/15/03
McDonald's Corporation
Merrill Lynch & Co., Inc.
7.05% 4/15/03
Pitney Bowes, Inc.
Triton Energy Ltd.
UnitedStates Treasury Notes
6.25% 6/30/02
Weak Performers for the 2nd quarter 1997
- --------------------------------------------------------------------------------
1. Zilog, Inc. -9.5%
2. Chiquita Brands International, Inc. -4.1%
3. United Dominion Realty Trust, Inc. -3.0%
4. Southwestern Energy Company -2.8%
5. Potash Corporation of Saskatchewan, Inc. -1.2%
Securities sold during the 2nd quarter 1997
- --------------------------------------------------------------------------------
Cabot Oil & Gas Corporation
Government National Mortgage Association
7.50% 10/15/26
Time Warner Sr. Notes
0% 6/22/13
United States Treasury Notes
6.75% 5/31/99
UnitedStates Treasury Notes
5.875% 8/15/98
United States Treasury Bonds
0% 8/15/98
United States Treasury Bonds
0% 2/15/99
United States Treasury Bonds
0% 8/15/03
8
<PAGE>
Portfolio of Investments
Legg Mason Investors Trust, Inc.
June 30, 1997 (Unaudited)
(Amounts in Thousands)
American Leading Companies Trust
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Common Stocks and Equity Interests -- 94.3%
Basic Materials -- 3.1%
Monsanto Co. 100 $ 4,306
-------
Capital Goods -- 6.2%
Corning Incorporated 53 2,948
Emerson Electric Company 60 3,304
Rockwell International Corporation 42 2,478
-------
8,730
-------
Consumer Cyclicals -- 10.4%
Eastman Kodak Company 72 5,526
Mattel, Inc. 195 6,606
Waban, Inc. 80 2,575(A)
-------
14,707
-------
Consumer Staples -- 15.4%
Avon Products Inc. 55 3,881
CPC International, Inc. 15 1,385
Colgate-Palmolive Company 40 2,610
Fortune Brands, Inc. 48 1,791
Gallaher Group PLC ADR 38 701(A)
Kimberly-Clark Corporation 50 2,487
Philip Morris Companies Inc. 120 5,325
Procter & Gamble Company 10 1,412
RJR Nabisco Holdings Corp. 65 2,145
-------
21,737
-------
Energy -- 4.9%
Texaco, Incorporated 20 2,175
Union Pacific Resources Group, Inc. 30 746
Unocal Corporation 55 2,135
Western Atlas, Inc. 25 1,831(A)
-------
6,887
-------
Financial Services -- 13.9%
Banc One Corporation 120 5,871
Chase Manhattan Corporation 60 5,824
J.P. Morgan & Co., Incorporated 15 1,566
Mellon Bank Corporation 30 1,354
The PMI Group, Inc. 55 3,431
Travelers Group, Inc. 26 1,640
-------
19,686
-------
Health Care -- 16.0%
Aetna, Inc. 52 5,323
Amgen, Inc. 48 2,790(A)
Bristol-Myers Squibb Company 44 3,564
</TABLE>
9
<PAGE>
Portfolio of Investments--Continued
Legg Mason Investors Trust, Inc.
American Leading Companies Trust
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Health Care -- Continued
Conseco Inc. 82 $ 3,035
Eli Lilly and Company 12 1,312
Pfizer, Inc. 20 2,390
Schering-Plough Corporation 88 4,213
-------
22,627
-------
Technology -- 20.6%
EMC Corporation 110 4,290(A)
Electronic Data Systems Corporation 96 3,936
Intel Corporation 33 4,680
International Business Machines Corporation 57 5,141
KLA Instruments Corporation 90 4,387(A)
Lucent Technologies, Incorporated 16 1,153
Microsoft Corporation 13 1,643(A)
Raychem Corporation 52 3,865
-------
29,095
-------
Telecommunications -- 3.8%
MCI Communications Corporation 140 5,359
-------
Total Common Stocks and Equity Interests (Identified Cost-- $94,240) 133,134
------------------------------------------------------------------------------------------------------------
Repurchase Agreement -- 6.7%
Lehman Brothers, Inc.
6.10% dated 6/30/97, to be repurchased at $9,484 on 7/1/97
(Collateral: $10,010 Federal Home Loan Mortgage Corporation
Mortgage-backed securities, 6.5% due 6/1/27, value $10,062)
(Identified Cost-- $9,483) $9,483 9,483
------------------------------------------------------------------------------------------------------------
Total Investments-- 101.0% (Identified Cost-- $103,723) 142,617
Other Assets Less Liabilities-- (1.0%) (1,353)
-------
Net Assets-- 100.0% $141,264
========
Net Asset Value Per Share:
Primary Class $16.34
======
Navigator Class $16.38
======
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Non-income producing
10
<PAGE>
Portfolio of Investments
Legg Mason Investors Trust, Inc.
June 30, 1997 (Unaudited)
(Amounts in Thousands)
Balanced Trust
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Common Stocks and Equity Interests -- 59.6%
Advertising and Media -- 2.9%
A.H. Belo Corporation 9 $ 370
Time Warner, Inc. 5 261
-------
631
-------
Aerospace -- 1.7%
Lockheed Martin Corporation 2 238
Raytheon Company 3 130
-------
368
-------
Automotive -- 1.8%
Ford Motor Company 11 404
-------
Chemicals -- 2.3%
Ferro Corporation 8 293
Potash Corporation of Saskatchewan, Inc. 3 202
-------
495
-------
Computer Services and Systems -- 2.1%
First Data Corporation 5 233
Pitney Bowes, Inc. 3 181
Zilog, Inc. 2 42(A)
-------
456
-------
Construction and Building Materials -- 1.0%
Martin Marietta Materials, Inc. 7 227
-------
Electrical Equipment and Electronics -- 1.5%
Pioneer-Standard Electronics, Inc. 25 338
-------
Energy -- 3.5%
Phillips Petroleum Company 6 245
Southwestern Energy Company 14 177
Triton Energy Ltd. 4 183(A)
YPF Sociedad Anonima ADR 5 166
-------
771
-------
Finance -- 4.2%
Fannie Mae 8 349
Salomon, Inc. 7 378
U.S. Trust Corporation 4 179
-------
906
-------
Food, Beverage and Tobacco -- 5.1%
Archer-Daniels-Midland Company 15 357
McDonald's Corporation 4 203
RJR Nabisco Holdings Corp. 3 109
</TABLE>
11
<PAGE>
Portfolio of Investments--Continued
Legg Mason Investors Trust, Inc.
Balanced Trust--Continued
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Food, Beverage and Tobacco -- Continued
Universal Foods Corporation 4 $ 133
UST, Inc. 11 305
-------
1,107
-------
Insurance and Hospital Management -- 0.6%
MBIA, Inc. 1 130
-------
Investment Companies -- 3.3%
Blackrock North American Government Income Trust, Inc. 50 506
Korea Fund, Inc. 14 207
-------
713
-------
Manufacturing -- 7.1%
Fleetwood Enterprises, Inc. 12 346
Kaydon Corporation 9 447
National Presto Industries, Inc. 2 65
Stewart & Stevenson Services, Inc. 1 26
UCAR International, Inc. 7 291(A)
York International Corporation 8 373
-------
1,548
-------
Multi-Industry -- 1.3%
Loews Corporation 3 275
-------
Real Estate -- 2.4%
Chateau Communities, Inc. 10 281
United Dominion Realty Trust, Inc. 17 241
-------
522
-------
Retail -- 4.6%
Federated Department Stores, Inc. 8 281(A)
Jostens, Inc. 14 375
Toys "R" Us, Inc. 10 350(A)
-------
1,006
-------
Savings and Loan -- 1.5%
Washington Federal, Inc. 13 322
-------
Services -- 1.6%
ADT, Ltd. 11 350(A)
-------
Telecommunications -- 2.3%
Ameritech Corporation N.M. 20
AT&T Corporation 6 193
Century Telephone Enterprises, Inc. 7 235
Cincinnati Bell, Inc. 2 63
-------
511
-------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Rate Maturity Date Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Transportation -- 5.0%
AMR Corporation 3 $ 287(A)
GATX Corporation 5 283
Kansas City Southern Industries, Inc. 8 528
------
1,098
------
Utilities -- 3.8%
KU Energy Corporation 7 246
NIPSCO Industries, Inc. 4 145
TNP Enterprises, Inc. 13 290
Western Resources, Inc. 5 146
------
827
------
Total Common Stocks and Equity Interests (Identified Cost-- $11,629) 13,005
--------------------------------------------------------------------------------------------------------------------
Preferred Stock -- 1.0%
Chiquita Brands International, Inc., 3.75%, Series B (Identified Cost-- $235) 4 232
--------------------------------------------------------------------------------------------------------------------
Corporate Bonds and Notes -- 7.5%
General Motors Acceptance Corporation 5.977% 1/29/99 $ 800 803(C)
Kroger Company 8.50% 6/15/03 400 417(B)
Merrill Lynch & Co., Inc. 7.05% 4/15/03 425 421(B)
------
Total Corporate Bonds and Notes (Identified Cost-- $1,639) 1,641
--------------------------------------------------------------------------------------------------------------------
U.S. Government and Agency Obligations -- 28.4%
Treasury Notes/Strips -- 13.6%
United States Treasury Notes 7.125% 2/29/00 750 766
United States Treasury Notes 6.50% 5/31/01 250 251
United States Treasury Notes 6.25% 6/30/02 200 199
United States Treasury Bonds 0% 8/15/99 600 528(B)
United States Treasury Bonds 0% 5/15/04 800 515(B)
United States Treasury Bonds 0% 11/15/04 1,150 715(B)
------
2,974
------
</TABLE>
13
<PAGE>
Portfolio of Investments--Continued
Legg Mason Investors Trust, Inc.
Balanced Trust--Continued
<TABLE>
<CAPTION>
Rate Maturity Date Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Mortgage-backed Securities -- 14.8%
Federal Home Loan Mortgage Corporation 8.14% 9/29/04 $350 $ 360
Federal Home Loan Mortgage Corporation 6.50% 1/1/26-5/1/26 514 493
Federal Home Loan Mortgage Corporation 6% 3/1/26 98 91
Federal National Mortgage Association 7.37% 4/1/04 300 301
Federal National Mortgage Association 8.25% 10/12/04 400 412
Federal National Mortgage Association 6% 1/1/27 600 558
Government National Mortgage Association 7% 3/15/26-4/15/26 267 263
Government National Mortgage Association 8% 4/15/26-11/15/26 734 752
------
3,230
------
Total U.S. Government and Agency Obligations (Identified Cost-- $6,213) 6,204
--------------------------------------------------------------------------------------------------------------------
Commercial Paper -- 2.8%
Associates Corporation of North America
(Identified Cost-- $600) 6.10% 7/1/97 600 600
--------------------------------------------------------------------------------------------------------------------
Total Investments-- 99.3% (Identified Cost-- $20,316) 21,682
Other Assets Less Liabilities-- 0.7% 146
------
Net Assets-- 100.0% $21,828
=======
Net Asset Value Per Share $11.00
======
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Non-income producing
(B) Zero-coupon bond -- A bond with no periodic interest payments which is
sold at such a discount as to produce a current yield-to-maturity.
(C) The rate of interest is tied to the London Interbank Offered Rate (LIBOR)
and the coupon rate shown is the rate as of June 30, 1997.
N.M. Not meaningful
14
<PAGE>
Legg Mason Family of Funds
Equity Funds
Legg Mason Balanced Trust
Growth and Income--An equity mutual fund which seeks long-term capital
appreciation and current income in order to achieve an attractive total
investment return consistent with reasonable risk.
Legg Mason Total Return Trust
Growth and Income--An equity mutual fund with investment objectives of capital
appreciation and current income.
Legg Mason American Leading Companies Trust
Growth--A large capitalization equity mutual fund which seeks long-term capital
appreciation and current income consistent with prudent investment management.
Legg Mason Value Trust
Growth--An equity mutual fund which seeks long-term growth of capital using the
"Value Approach" to investing.
Legg Mason Special Investment Trust
Aggressive Growth--An equity mutual fund which seeks capital appreciation.
It invests principally in securities of companies that are involved in
restructurings or other special situations, or are out of favor with, or not
closely followed by the market.
Global Funds*
Legg Mason Emerging Markets Trust
Aggressive Growth--A mutual fund which is designed for investors seeking
long-term growth possibilities available in emerging markets.
Legg Mason International Equity Trust
Aggressive Growth--A diversified, professionally managed portfolio seeking
maximum long-term total return by investing primarily in common stocks of
companies located outside the United States.
Legg Mason Global Government Trust
Growth and Income--A global bond fund which seeks to provide a competitive total
return by investing primarily in a global portfolio of high quality debt
securities of U.S. and foreign governments, their agencies and
instrumentalities, denominated in various currencies.(dagger)
Taxable Bond Funds
Legg Mason U.S. Government Intermediate-Term Portfolio
Conservative Income--A mutual fund which seeks to achieve high current income
consistent with prudent investment risk and liquidity needs.
Legg Mason Investment Grade Income Portfolio
Income--A mutual fund which seeks to provide investors with a high level of
current income through a diversified portfolio of debt instruments.
Legg Mason High Yield Portfolio
Growth and Income--A fund which seeks to provide high current income, and as a
secondary objective, seeks capital appreciation. Under normal circumstances, the
Fund will invest a majority of its total assets in high yield fixed income
securities commonly known as "junk" bonds. The Fund may invest up to 25% of
total assets in foreign securities.
Tax-Free Bond Funds(dagger)
Legg Mason Tax-Free Intermediate-Term Income Trust
Tax-Free Income--A fund which seeks a high level of current income exempt from
federal income tax consistent with prudent investment risk.
Legg Mason Maryland Tax-Free Income Trust
Tax-Free Income--A fund whose objective is a high level of current income exempt
from federal, Maryland state, and local income taxes.
Legg Mason Pennsylvania Tax-Free Income Trust
Tax-Free Income--A fund which seeks a high level of current income exempt from
federal income tax and Pennsylvania personal income tax.
Money Market Funds(dagger dagger)
Legg Mason U.S. Government Money Market Portfolio
A professionally managed portfolio seeking high current income consistent with
liquidity and conservation of principal.
Legg Mason Cash Reserve Trust
A diversified management investment company investing in money market
instruments to achieve stability of principal and current income consistent with
stability of principal.
Legg Mason Tax Exempt Trust
A money market fund seeking to produce high current income exempt from federal
income tax, to preserve capital and to maintain liquidity.
* Investment in foreign securities involves increased risks, such
as currency rate fluctuations, foreign taxation and political
changes.
(dagger) Income produced from the tax-free funds may be subject to state
and local taxes. Long-term capital gain distributions generally
are taxable. A portion of each Fund's dividends may be subject
to the federal alternative minimum tax.
(dagger dagger) An investment in any of these Funds is neither insured nor
guaranteed by the U.S. Government and there can be no guarantee
that these Funds will maintain a stable $1 share price.
For a prospectus containing more complete information, including charges and
expenses on any of the Legg Mason funds, call 1-800-577-8589. Please read the
prospectus carefully before investing or sending money.
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