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Previous: NORWOOD PROMOTIONAL PRODUCTS INC, 8-K, 1998-08-25 |
Next: HOUSEHOLD FINANCE CORP HOUSEHOLD AFF CRE CAR MAS TR I, 8-K, 1998-08-25 |
Quarterly Report
June 30, 1998
Legg Mason
Investors Trust, Inc.
American Leading
Companies Trust
Balanced Trust
U.S. Small-Cap
Value Trust
The Art of Investing
[LEGG MASON FUNDS LOGO]
Investment Manager
Legg Mason Fund Adviser, Inc.
Baltimore, MD
Investment Advisers
For American Leading Companies Trust:
Legg Mason Fund Adviser, Inc.
Baltimore, MD
For Balanced Trust:
Bartlett & Co.
Cincinnati, OH
For U.S. Small-Cap Value Trust:
Brandywine Asset Management,Inc.
Wilmington, DE
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
Philadelphia, PA
This report is not to be distributed unless preceded or accompanied by a
prospectus.
Legg Mason Wood Walker, Incorporated
--------------------------------------
100 Light Street
P.O. Box 1476, Baltimore, MD 21203-1476
410 o 539 o 0000
LMF-013
7/98
<PAGE>
To Our Shareholders,
We are pleased to provide you with the quarterly report for the Legg Mason
Investors Trust, consisting of the American Leading Companies Trust, the
Balanced Trust and the recently introduced Small-Cap Value Trust.
We welcome Brandywine Asset Management, Inc. as the adviser for the Small-Cap
Value Trust which began operations on June 15, 1998. As of June 30, 1998, the
Fund had net assets of $31.4 million. Brandywine Asset Management was acquired
by Legg Mason in January of 1998. Brandywine began investing in small-cap value
stocks in 1988. The firm's investment process focuses on the deep-value portion
of the small-cap market, which has historically been the best performing segment
of the stock market. They purchase small-cap stocks which their analysis
indicates are undervalued and they sell them when the stocks are no longer
undervalued or no longer small. The Small-Cap Value Trust intends to be broadly
diversified across economic sectors, though Brandywine will overweight
undervalued sectors of the market. Brandywine will also maintain a significant
exposure to microcaps in order to enhance their returns.
We are very excited about this new addition to the Legg Mason Family of
Funds, and we welcome those of you who are shareholders of the Fund.
The following table summarizes key statistics for the Primary Class of shares
of American Leading Companies and Balanced Trust, as of June 30, 1998.
<TABLE>
<CAPTION>
3 Month 12 Month
Total Return* Total Return*
------------- -------------
<S><C>
American Leading Companies Trust -0.62% 16.56%
Balanced Trust -1.44% 15.62%
S&P 500 Stock Composite Index 3.30% 30.16%
Lehman Brothers Intermediate Government/Corporate
Bond Index 2.62% 11.28%
</TABLE>
In June, shareholders of American Leading Companies received a short-term
capital gain distribution of $.136 per share and a long-term capital gain
distribution of $.322. Shareholders of Balanced Trust received ordinary income
dividends of $.047 per share, a short-term capital gain distribution of $.016
per share and a long-term capital gain distribution of $.095 per share.
On the following pages, the portfolio managers for each of the Funds discuss
the investment outlook. Long-term investment results for each Fund are shown in
the Performance Information section of this report.
The Board of Directors has approved an ordinary income dividend of $.053 per
share to shareholders of Balanced Trust, payable on August 21, 1998, to
shareholders of record on August 19, 1998. Most shareholders will receive this
distribution in the form of additional shares credited to their accounts.
Sincerely,
/s/ Edward A. Taber, III
___________________________
Edward A. Taber, III
President
July 31, 1998
- ----------
*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.
<PAGE>
Portfolio Managers' Comments
American Leading Companies Trust
Market Commentary
The US equity market continued to make upward progress in the second quarter,
but the market's leadership was quite narrow, concentrated in about two dozen of
the largest, most expensive stocks. A few statistics will illustrate this point.
While the S&P 500 Index was up 2.9% in the quarter (all returns are on a price
only basis), the average stock in the index was down 1.4%, and the median stock
was down 2.5%. The largest 50 companies, which account for about half of the S&P
500's total market value, were up 5.5%, while the other 450 companies were down
0.7%. Of the top 50 companies, the 25 stocks with the highest price-to-earnings
(p/e) ratios were up 10.3%, while the other 25 were down 1.6%. The relative
performance of high p/e stocks in the quarter and first half was the best in 20
years, and nearly the best in the prior 50 years. Portfolios concentrating on
these large capitalization growth stocks made good progress in the quarter. Most
other investment strategies--value, small-cap, international, emerging markets,
yield-oriented, low p/e, growth-at-a-reasonable-price (GARP)--were less
rewarding as evidenced by the fact that Lipper Analytical Services' index of
3,473 General Equity mutual funds was down 0.3% in the quarter, while its All
Equity Fund index was down 1.8%.
In our opinion, the highly selective nature of the market's advance in the
second quarter was a "flight to quality" response to renewed weakness in Asian
currency and equity markets. As the deflationary effects of Asia's financial
crisis began to feed into the global economy, investors, both foreign and
domestic, reacted by seeking safe haven in the largest companies in the largest
equity market in the world, namely the US. We think these substantial foreign
investment inflows are the main reason why the US dollar has remained so strong
in the face of a record current account deficit, which would normally be
expected to produce a weaker dollar. The fact that US financial markets are now
soaking up a sizable percentage of the world's excess liquidity is a key and
ongoing risk to the global economy, particularly to Asian economies, where
liquidity is much-needed and in short supply.
The current attraction of US equities is understandable. Corporate America is
performing at peak levels, with record returns on equity and near record profit
margins. Inflation has remained subdued, the economy is continuing to expand
(albeit at a reduced rate), and long-term interest rates have declined to
29-year lows. Personal income is rising faster than inflation and consumer
confidence is at record levels. If one were looking for a set of economic
conditions to produce high and rising equity prices, current conditions in the
US would be hard to beat.
The key question for US investors now is the ultimate impact of the financial
crisis in Asia on our markets. It seems clear at this point that the problems in
Asia are having a dampening effect on global GDP. Japan is in recession for the
first time since 1975. Malaysia, Indonesia, South Korea and other former Asian
Tigers are in what amounts to a depression. Many multinationals that do business
in Asia are seeing a sharp fall off in business activity. Commodity producers
and capital equipment manufacturers of all descriptions are seeing pressure on
prices and volumes. These trends seem likely to continue. At this point, we do
not expect a recession in the US but GDP growth will almost certainly slow to 2%
or less for a period of time. As companies report second quarter earnings in the
next few weeks, we will be looking for clues as to the ultimate severity of any
profit slowdown.
The good news about the Asian-induced slowdown in US GDP is that it may well
eliminate the necessity for the Fed to raise short-term interest rates in order
to cool the economy and head off incipient wage inflation. In fact, we think
there is a good argument that Fed policy is already too tight, and
2
<PAGE>
that the Fed should lower, rather than raise, rates in an effort to stem the
liquidity crisis now facing many Asian countries.
Investment Results
Cumulative results for the American Leading Companies Trust for the quarter,
calendar year-to-date, one year, and three year periods ended June 30, 1998 are
listed below, along with those of some representative benchmarks:
<TABLE>
<CAPTION>
Second Quarter Year-to-date
1998 1998 One Year Three Years
- ----------------------------------------------------------------------------------------------------
<S><C>
American Leading Companies -0.62% 11.13% 16.56% 92.92%
S&P 500 Composite Index 3.30% 17.71% 30.16% 120.94%
Lipper General Equity Funds -0.29% 11.75% 22.62% 86.70%
Dow Jones Industrial Average 2.14% 14.14% 18.67% 108.94%
</TABLE>
As is evident from the figures above, results for the quarter trailed the S&P
500 and Dow Jones Industrials and were in line with the Lipper Analytical
Services' index of General Equity mutual funds. As we discussed earlier in this
letter, it has been especially difficult to better the S&P 500 Index in recent
quarters, and this quarter was no exception. In recent years, approximately 90%
of active managers have failed to better the S&P 500 Index. We would suspect
that the percentages where similar in the latest quarter. Stocks contributing
positively to investment results in the quarter included technology companies
such as Cisco Systems and EMC Corporation, as well as America Online, Ford Motor
Company and MCI Communications. Laggards included RJR Nabisco Holdings, Toys "R"
US, Conseco, Rockwell International and Banc One Corporation.
Investment Strategy
Having managed your Fund only since the beginning of April 1998, new
management has had only a limited impact on results to date. We are pleased and
honored to have been given the opportunity to serve you as manager of this Fund.
We have begun a restructuring process--which we will discuss more fully in a
moment--that we hope and believe will lead to improved performance in the
future. We can, of course, make no promises on this score.
In managing the American Leading Companies Trust, we intend to focus almost
exclusively on large companies whose names most people would recognize. We have
a preference for companies with a demonstrated ability to grow profitably, whose
management thinks like owners and who understand the necessity of earning
returns in excess of their cost of capital. We also intend to pay attention to
the prices we pay for these companies, trying to achieve the best combination of
attractive growth prospects and reasonable valuation that is available in the
marketplace. As of the end of June, we had turned over approximately 25% to 30%
of the portfolio and estimate that we are more than half finished with our
restructuring. We have tried to move judiciously in this effort, being sensitive
to the fact that the vast majority of the Fund's shareholders are taxable.
Following the capital gains distribution paid in June, we now have an
approximate six month window until the next distribution to complete our work.
Once the process is complete, we would hope to keep annual Fund turnover to
one-third or less, both because it is more tax-efficient and because it implies
the longer-term focus which we believe is conducive to successful investing.
3
<PAGE>
Portfolio Managers' Comments --Continued
American Leading Companies Trust --Continued
Portfolio Activity
We established new positions in twenty-six companies during the quarter, and
sold existing holdings in six companies, expanding the total number of positions
from 41 to 61. The list of purchases and sales is presented in another section
of this report. The weighted average price-to-earnings (p/e) ratio of the new
purchases is 16.3x this year's expected earnings and 14.2x next. This compares
to p/e's for the S&P 500 Index of 23.5x and 20.1x, respectively. The weighted
average expected growth rate in earnings of the new purchases is 15% both this
year and next. The new stocks have a composite return on equity of 23% and,
since they are retaining more than 75% of their earnings, should be able to
finance earnings growth of up to 17% from internal sources. In short, we believe
they represent a group of quality companies, selling in aggregate at reasonable
prices in relation to their prospects.
Outlook
We remain optimistic about the long-term prospects for US equities in general
and your Fund in particular. As long as the economy and corporate profits
continue to grow, and interest rates and inflation stay low, the outlook for US
financial markets remains sanguine. Developments in Asia bear watching, and with
valuation levels stretched, some near-term caution seems warranted.
In closing, we reiterate that we are honored to be managing the American
Leading Companies Trust and are optimistic about its long-term prospects. If you
have comments or questions, we would be happy to hear from you.
David E. Nelson, CFA
July 31, 1998
DJIA 8883.29
4
<PAGE>
Portfolio Managers' Comments
Balanced Trust
Cumulative results for the second quarter and twelve months ended June 30,
1998, for the Balanced Trust and related benchmarks are reflected in the
following table:
<TABLE>
<CAPTION>
Second Quarter
1998 One Year
- --------------------------------------------------------------------------------------------
<S><C>
Balanced Trust -1.44% 15.62%
Lipper Balanced Fund composite 1.49 18.38
S&P 500 Stock Composite Index (large-cap) 3.30 30.16
S&P 400 Composite Index (mid-cap) -2.14 27.10
Russell 2000 Index (small-cap) -4.66 16.51
Lehman Intermediate Government/Corporate Bond Index 2.62 11.28
</TABLE>
Equity
Defying the predictions of a growing chorus of skeptics, the US stock market
surged to record high levels during the first half of 1998. The Dow Jones
Industrial Average passed 9000 in early April and is currently establishing all
time highs. The S&P 500, a more representative market proxy, gained more than
17% during this period. The US bond market also posted solid inflation adjusted
returns during this period while selected European markets rallied due to
optimism about economic recovery and impending monetary union.
Many analysts are talking about a "stealth bear market" which started around
the beginning of this calendar year. Like the stealth bomber, it is not visible
using ordinary radar (like the Dow Jones Industrials or the S&P 500). However, a
look at the broader markets listed above and the components of the S&P 500 are
very revealing.
Although the S&P 500 has returned 17.7% for the first six months of the year,
the average stock in the Index has returned only 11.2%(1). The popularity of the
very large companies is underscored by the 28.3% return of the largest fifty
companies in the Index versus a small loss for the smallest one hundred. This
superior performance is not supported by more attractive valuations, as the
largest companies have price/earnings multiples nearly 50% higher than the
smaller group while having nearly the same outlook for growth. Obviously, our
focus on value and wide diversification by market cap has been a strong headwind
in keeping up with the large-company market indices. Ultimately, this
over-emphasis on "safe" large-cap companies will prove to be disappointing as
investors will learn, once again, that ignoring value can be perilous. Values
among smaller companies are actually more compelling today than in 1990, which
represented a low point during the last twenty years. Those who bought or stayed
the course at that time were amply rewarded in the ensuing years.
In view of the market conditions described above, it is not surprising that
many of our best performing stocks for the quarter were among the larger
companies: Ford Motor (+37.1%), Time Warner (+18.7%), AMR (+16.3%), Tyco
(+15.3%) and McDonald's (+15.0%).
The biggest declines in the portfolio came from RJR Nabisco (-24.2 %), Toys
`R' Us (-21.6 %), Union Pacific (-21.5 %) and Pioneer Standard (-21.4%).
We added incrementally to many of our positions including H&R BLOCK, MARTIN
Marietta Materials, AT&T, Western Resources, and more substantially to Union
Pacific. Union Pacific continues to struggle with congestion on its Houston rail
line due to track maintenance and upgrades. These difficulties
5
<PAGE>
Portfolio Managers' Comments -- Continued
Balanced Trust -- Continued
may penalize earnings for the next quarter or two, but may be necessary for
their long-term growth strategy. We believe the company will have significantly
improved normalized earning power as these challenges are overcome. In addition,
Union Pacific represents the only economically feasible transportation
alternative for many of its customers.
We eliminated a number of stocks from the portfolio during the quarter.
Lowe's, Associates First Capital, Federated Department Stores, and Stewart &
Stevenson were sold. Associates First stock was received as a distribution from
our holding of Ford and we did not choose to own it independently. Federated and
Lowe's reached our price target. Stewart and Stevenson was sold because our
original premise for owning this company was no longer valid.
In a market environment in which investors are paying even larger premiums
for size and stability, our approach is finding plenty of challenges.
Historically, however, when valuation disparities have reached these levels, our
approach has proven to be very rewarding.
Fixed Income
During the quarter, the bond market generated positive returns while interest
rate volatility decreased. Generally speaking, the longer the maturity, the
greater the reward, with 30-year treasuries posting the most significant gains.
The yields on these bonds declined from 5.93% to 5.62%. On the other hand,
yields on one-year treasuries remained virtually unchanged at 5.37%. Perhaps the
most significant aspect of the yield curve is that it has become slightly
inverted. That is, 2-year treasury notes now carry higher yields than 10-year
treasury notes. Historically, this situation has been comparatively short-lived,
with one or both ends of the yield curve changing significantly. We would tend
to be in the camp that believes that short-term rates are too high rather than
think that long-term rates are too low. For example, in 1993, when long-term
treasury bonds were at comparable levels, 3-month treasury bills were in the
2.75% range, which is some 230 basis points(2) lower than at present. In
addition, today's economic and fiscal conditions are far more favorable than
those that existed in 1993. Going forward, we expect Southeast Asia to continue
as the dominant factor influencing the Federal Reserve's posture, i.e., if the
Asian countries weaken further it is unlikely that the Federal Reserve will
allow rates to remain at present levels, but rather will reduce short-term
interest rates. On the other hand, if those economies appear to be firming we
may indeed see some upward pressure on US interest rates.
With the yield curve essentially flat and the absolute level of rates
comparatively low, the search for value becomes a daunting task. We are finding
value in mortgage-backed securities and 7-year treasury STRIPS, which continue
to be the Fund's top two fixed income holdings. In particular, we favor the
premium mortgage securities that presently offer a yield advantage of
approximately 150 basis points over comparable treasuries. Under the Fund's
present portfolio structure, we believe that the fixed income portion of the
Fund will perform well in a variety of potential market conditions.
Woodrow H. Uible, CFA Dale H. Rabiner, CFA
Equity Portfolio Manager Fixed Income Portfolio Manager
July 31, 1998
DJIA 8883.29
- ----------
(1)Returns include reinvested dividends.
(2)100 basis points = 1%
6
<PAGE>
Portfolio Managers' Comments
Legg Mason U.S. Small-Capitalization Value Trust
Brandywine is pleased to have the opportunity to manage the Legg Mason
U.S. Small-Capitalization Value Trust. Since its inception on June 15, 1998,
investments have been made in nearly 300 small-cap value companies ranging from
$10 million to $980 million in market capitalization. Weighted average portfolio
capitalization is $480 million vs. the Russell 2000 index of $780 million. The
resulting portfolio has a weighted average p/e of 11.6x vs. the Russell 2000 at
24.0x, reflecting our deep value focus.
Initial investments were made in all segments of the market with overweights
in the cyclical sectors. Investor over-reaction to the economic and political
situation in Southeast Asia has depressed prices in primary material and durable
goods' producers while discounting the domestic economic strength and European
demand thus creating attractively priced cyclical opportunities. Financials are
currently under-weight relative to the small-cap market. Heavy merger activity,
coupled with low interest rates and a strong economy, has caused many of the
financial stocks--particularly in the banking, savings and loan, and brokerage
segments--to become overvalued and unattractive in this environment. We are
underweight in the technology sector, with our emphasis being on the hardware
segment including semiconductor, semiconductor materials, and computer
components. Southeast Asian concerns have impacted this segment of technology,
but we are cautiously investing in those companies that have controlled exposure
and depressed prices.
While we have been in the midst of such a momentum driven market for some
time, renewed concerns about the economic and political situation in Southeast
Asia exacerbated this trend during the second quarter. Economic fears led
investors to seek actively traded stocks in order to increase their portfolios'
liquidity and to capture companies with histories of stable earnings in
difficult economic times. This flight to perceived quality pushed up prices for
the largest cap stocks, while smaller companies lagged by a wide margin. This
performance differential has led to a severe valuation gap that favors small-cap
stocks in the future.
To highlight the effect of size on the market, we analyzed the returns of the
S&P 500 by market capitalization decile. We divided the index into ten parts,
with each tenth having the same weight in the index but a different number of
stocks. During the first six months of the year, the top decile of the S&P 500
(4 stocks!) was up 35.8%, while the bottom decile (239 stocks) rose only 5%. Put
differently, the top five deciles (48 stocks) outperformed the bottom 5 deciles
(452 stocks) by over fourteen percentage points! While large stocks certainly
have done well this year, we remain committed to our belief that small company
stocks are an excellent long-term investment. In fact, as strong believers in
mean reversion, we think that the recent outperformance of large stocks bodes
well for the future performance of small stocks.
We believe that the recent strong performance from large-cap stocks is a
result of investors' single-minded search for issues with high liquidity and
historically stable earnings. In focusing on these two issues, many investors
are missing the attractions of smaller stocks. First, large companies tend to
have greater exposure to foreign markets than small companies. Therefore, global
weakness outside the US, in combination with a strong dollar, should have a
greater negative impact on larger stocks. Second, according to analysts'
estimates, smaller companies are expected to sustain earnings growth
7
<PAGE>
Portfolio Managers' Comments -- Continued
Legg Mason U.S. Small Capitalization Value Trust -- Continued
better than large companies as the economy slows. At the same time, the return
disparity between large- and small-caps has created a relative valuation
discount for small-caps that is now even larger than the 1990 discount. This
valuation gap, coupled with fundamental conditions favoring smaller companies,
creates an incredibly strong return potential for the small-cap segment of the
market.
Henry F. Otto Steven M. Tonkovich
Managing Director Managing Director
July 31, 1998
DJIA 8883.29
8
<PAGE>
Performance Information
Legg Mason Investors Trust, Inc.
Total Return for One Year and Life of Funds as of June 30, 1998
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.
U.S. Small-Cap Value Trust commenced operations on June 15, 1998. Since
performance results for the period June 15 to June 30, 1998 would not be
meaningful, they are excluded from this performance information.
The Funds' total returns as of June 30, 1998 were as follows:
American Leading Balanced
Companies Trust Trust
- -----------------------------------------------------------------------------
Average Annual Total Return
Primary Class:
One Year +16.56% +15.62%
Life of Class(A) +16.56% +15.43%
Navigator Class:
One Year +17.65% N/A
Life of Class(B) +29.47% N/A
Cumulative Total Return
Primary Class:
One Year +16.56% +15.62%
Life of Class(A) +109.69% +28.50%
Navigator Class:
One Year +17.65% N/A
Life of Class(B) +56.84% N/A
- -----------------------------------------------------------------------------
(A) Primary Class inception dates are:
American Leading Companies Trust -- September 1, 1993
Balanced Trust -- October 1, 1996
(B) Navigator Class inception date is:
American Leading Companies Trust -- October 4, 1996
9
<PAGE>
Performance Information -- Continued
American Leading Companies Trust
Selected Portfolio Performance*
Strong performers for the 2nd quarter 1998
--------------------------------------------------
1. America Online, Inc. +55.2%
2. Ford Motor Company +37.1%
3. Cisco Systems, Inc. +34.6%
4. EMC Corporation +18.5%
5. MCI Communications Corporation +17.4%
* Securities held for the entire quarter.
Portfolio Changes
Securities added during the 2nd quarter 1998
--------------------------------------------------
American International Group, Inc.
AT&T Corp.
The Boeing Company
Burlington Northern Santa Fe Corporation
Caterpillar Inc.
The Coca-Cola Company
Consolidated Edison, Inc.
Delta Air Lines, Inc.
Diamond Offshore Drilling, Inc.
Dole Food Company, Inc.
Eastman Kodak Company
Edison International
Exxon Corporation
H. F. Ahmanson & Company
Hewlett-Packard Company
Johnson & Johnson
Microsoft Corporation
Minnesota Mining and Manufacturing
Company
PepsiCo, Inc.
Pfizer Inc.
Philips Electronics N.V.
The Procter & Gamble Company
Royal Dutch Petroleum Company
Schlumberger Limited
TRW Inc.
Wal-Mart Stores, Inc.
Weak performers for the 2nd quarter 1998
--------------------------------------------------
1. RJR Nabisco Holdings Corp. -24.2%
2. Toys "R" Us, Inc. -21.6%
3. Conseco, Inc. -17.4%
4. Rockwell International Corporation -16.2%
5. Banc One Corporation -11.8%
Securities sold during the 2nd quarter 1998
--------------------------------------------------
Applied Materials, Inc.
Circus Circus Enterprises, Inc.
KLA-Tencor Corporation
Monsanto Co.
Ryder System, Inc.
Western Digital Corporation
10
<PAGE>
Balanced Trust
Selected Portfolio Performance*
Strong performers for the 2nd quarter 1998
--------------------------------------------------
1. Ford Motor Company +37.1%
2. Time Warner, Inc. +18.7%
3. AMR Corporation +16.3%
4. Tyco International Ltd. +15.3%
5. McDonald's Corporation +15.0%
* Securities held for the entire quarter.
Portfolio Changes
Securities added during the 2nd quarter 1998
--------------------------------------------------
Cendant Corporation Cv.
3%, 2/15/02
Fannie Mae
6%, 4/1/28
Freddie Mac
6.50%, 5/1/28
Government National Mortgage Association
8%, 9/15/26
United States Treasury Inflation-indexed Security
3.625%, 7/15/02
United States Treasury STRIPS
0%, 8/15/05
Weak performers for the 2nd quarter 1998
--------------------------------------------------
1. RJR Nabisco Holdings Corp. -24.2%
2. Toys "R" Us, Inc. -21.6%
3. Korea Fund, Inc. -21.5%
4. Union Pacific Corporation -21.5%
5. Pioneer-Standard Electronics, Inc. -21.4%
Securities sold during the 2nd quarter 1998
--------------------------------------------------
Federated Department Stores, Inc.
Kroger Company
8.5%, 6/15/03
Lowe's Companies, Inc.
Stewart & Stevenson Services, Inc.
United States Treasury STRIPS
0%, 5/15/04
11
<PAGE>
Portfolio of Investments
Legg Mason Investors Trust, Inc.
June 30, 1998 (Unaudited)
(Amounts in Thousands)
American Leading Companies Trust
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------------------------------------------
<S><C>
Common Stocks and Equity Interests -- 99.3%
Airlines -- 3.1%
Delta Air Lines, Inc. 50 $ 6,463
--------
Auto/Truck Parts & Equipment -- 1.2%
TRW INC. 47 2,567
--------
Automotive -- 2.3%
Ford Motor Company 25 1,475
General Motors Corporation 50 3,341
--------
4,816
--------
Banking -- 11.2%
Banc One Corporation 77 4,298
Chase Manhattan Corporation 120 9,060
Citicorp 50 7,462
Mellon Bank Corporation 40 2,785
--------
23,605
--------
Capital Goods -- 4.3%
The Boeing Company 24 1,070
Emerson Electric Company 60 3,622
General Electric Company 25 2,275
Rockwell International Corporation 42 2,019
--------
8,986
--------
Computer Services and Systems -- 12.9%
Cisco Systems, Inc. 38 3,452(A)
Compaq Computer Corporation 150 4,256
EMC Corporation 136 6,103(A)
Hewlett-Packard Company 17 1,036
Intel Corporation 66 4,892
International Business Machines Corporation 65 7,463
--------
27,202
--------
Computer Software -- 0.5%
Microsoft Corporation 10 1,084(A)
--------
Consumer Cyclicals -- 3.5%
Mattel, Inc. 150 6,347
Wal-Mart Stores, Inc. 17 1,033
--------
7,380
--------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------------------------------------------
<S><C>
Consumer Staples -- 4.5%
Avon Products, Inc. 55 $ 4,262
Fortune Brands,Inc. 48 1,845
Kimberly-Clark Corporation 50 2,294
The Procter & Gamble Company 12 1,056
--------
9,457
--------
Electric Integrated -- 2.0%
Consolidated Edison, Inc. 45 2,050
Edison International 70 2,069
--------
4,119
--------
Electrical Equipment -- 1.4%
Philips Electronics N.V. 36 3,060
--------
Energy -- 2.1%
Exxon Corporation 15 1,035
Royal Dutch Petroleum Company 19 1,041
Texaco, Incorporated 40 2,388
--------
4,464
--------
Financial Services -- 2.5%
Fannie Mae 50 3,038
Travelers Group, Inc. 39 2,364
--------
5,402
--------
Food, Beverage and Tobacco -- 6.4%
Dole Food Company, Inc. 69 3,428
PepsiCo, Inc. 25 1,030
Philip Morris Companies, Inc. 153 6,024
RJR Nabisco Holdings Corp. 80 1,900
The Coca-Cola Company 12 1,026
--------
13,408
--------
Health Care -- 11.4%
Amgen, Inc. 66 4,315(A)
Bristol-Myers Squibb Company 44 5,057
First Health Group Corp. 76 2,166(A)
Johnson & Johnson 14 1,051
Merck & Co., Inc. 42 5,618
Pfizer Inc. 10 1,065
Schering-Plough Corporation 51 4,627
--------
23,899
--------
</TABLE>
13
<PAGE>
Portfolio of Investments -- Continued
Legg Mason Investors Trust, Inc.
American Leading Companies Trust -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------------------------------------------
<S><C>
Insurance -- 7.5%
Aetna, Inc. 35 $ 2,664
American International Group, Inc. 7 1,080
Conseco, Inc. 155 7,246
The PMI Group, Inc. 65 4,733
--------
15,723
--------
Machinery -- 0.9%
Caterpillar Inc. 36 1,904
--------
Manufacturing -- 0.9%
Minnesota Mining and Manufacturing Company 22 1,808
--------
Media -- 2.5%
America Online, Inc. 50 5,300(A)
--------
Oil & Gas: Drilling and Equipment -- 4.3%
Diamond Offshore Drilling, Inc. 111 4,440
Schlumberger Limited 68 4,645
--------
9,085
--------
Photo Equipment & Supplies -- 1.0%
Eastman KodakCompany 28 2,046
--------
Real Estate -- 2.3%
Starwood Hotels &Resorts 100 4,831
--------
Retail Sales -- 1.5%
Toys "R" Us, Inc. 136 3,205(A)
--------
Savings and Loan -- 1.2%
H.F. Ahmanson &Company 37 2,627
--------
Telecommunications -- 5.8%
AT&T Corp. 60 3,428
MCI Communications Corporation 150 8,719
--------
12,147
--------
Transportation -- 2.1%
Burlington Northern Santa Fe Corporation 45 4,418
--------
Total Common Stocks and Equity Interests
(Identified Cost-- $163,346) 209,006
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------------------------------------------
<S><C>
Repurchase Agreements -- 6.5%
Lehman Brothers, Inc.
5.95%, dated 6/30/98, to be repurchased at $13,687 on 7/1/98
(Collateral: $14,228 Freddie Mac Mortgage-backed securities,
6% due 5/1/13, value $14,150)
(Identified Cost-- $13,684) $13,684 $ 13,684
- ------------------------------------------------------------------------------------------------------------------
Total Investments-- 105.8% (Identified Cost-- $177,030) 222,690
Other Assets Less Liabilities-- (5.8%) (12,307)
--------
Net assets-- 100.0% $210,383
========
Net asset value per share:
Primary Class $17.19
======
Navigator Class $17.41
======
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Non-income producing
15
<PAGE>
Portfolio of Investments
Legg Mason Investors Trust, Inc.
June 30, 1998 (Unaudited)
(Amounts in Thousands)
Balanced Trust
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------------------------------------------
<S><C>
Common Stocks and Equity Interests -- 57.2%
Advertising/Media -- 1.9%
A.H. Belo Corporation 22 $ 536
Time Warner, Inc. 6 513
--------
1,049
--------
Aerospace -- 0.6%
Lockheed Martin Corporation 3 360
--------
Automotive -- 1.6%
Ford Motor Company 15 914
--------
Chemicals -- 2.1%
Ferro Corporation 28 709
Potash Corporation of Saskatchewan, Inc. 7 491
--------
1,200
--------
Computer Services and Systems -- 1.6%
First Data Corporation 18 599
Pitney Bowes, Inc. 6 289
--------
888
--------
Construction and Building Materials -- 0.9%
Martin Marietta Materials, Inc. 11 495
--------
Electrical Equipment and Electronics -- 2.2%
Littelfuse, Inc. 20 505(A)
Pioneer-Standard Electronics, Inc. 31 303
UCAR International, Inc. 15 426(A)
--------
1,234
--------
Energy -- 3.7%
Phillips Petroleum Company 10 482
Southwestern Energy Company 10 92
Triton Energy Ltd. 35 1,249(A)
YPF Sociedad Anonima ADR 10 300
--------
2,123
--------
Financial Services -- 4.3%
Fannie Mae 19 1,154
H&R Block Inc. 15 632
Travelers Group, Inc. 11 667
--------
2,453
--------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------------------------------------------
<S><C>
Food, Beverage and Tobacco -- 3.9%
Archer-Daniels-Midland Company 23 $ 450
McDonald's Corporation 15 1,035
RJR Nabisco Holdings Corp. 7 166
UST, Inc. 21 567
--------
2,218
--------
Hospital Management -- 0.5%
Columbia/HCA HealthCare Corporation 10 280
--------
Insurance -- 1.3%
Aetna, Inc. 6 442
Frontier Insurance Group, Inc. 14 320
--------
762
--------
Investment Companies -- 2.7%
Blackrock North American Government Income Trust, Inc. 100 1,062
Korea Fund, Inc. 24 153(A)
Latin America Investment Fund, Inc. 17 196
PMCCapital, Inc. 10 138
--------
1,549
--------
Manufacturing -- 6.2%
Fleetwood Enterprises, Inc. 28 1,120
Kaydon Corporation 28 989
Tyco International Ltd. 8 504
York International Corporation 20 893
--------
3,506
--------
Multi-Industry -- 1.3%
Loews Corporation 9 749
--------
Real Estate -- 2.5%
Chateau Communities, Inc. 29 834
United Dominion Realty Trust, Inc. 42 583
--------
1,417
--------
Retail Sales -- 2.2%
Jostens, Inc. 31 740
Toys "R" Us, Inc. 21 495(A)
--------
1,235
--------
17
</TABLE>
<PAGE>
Portfolio of Investments -- Continued
Legg Mason Investors Trust, Inc.
Balanced Trust -- Continued
<TABLE>
<CAPTION>
Rate Maturity Date Shares/Par Value
- ------------------------------------------------------------------------------------------------------------------
<S><C>
Savings and Loan -- 3.1%
Charter One Financial, Inc. 26 $ 876
Washington Federal, Inc. 32 884
--------
1,760
--------
Telecommunications -- 3.3%
AT&T Corp. 18 1,028
Century Telephone Enterprises, Inc. 11 482
Cincinnati Bell, Inc. 13 372
--------
1,882
--------
Transportation -- 7.7%
AMR Corporation 14 1,207(A)
GATX Corporation 17 746
Kansas City Southern Industries, Inc. 27 1,340
Union Pacific Corporation 24 1,059
--------
4,352
--------
Utilities -- 3.6%
Kansas City Power & Light Company 19 551
TNP Enterprises, Inc. 16 497
Western Resources, Inc. 25 970
--------
2,018
--------
Total Common Stocks and Equity Interests
(Identified Cost-- $28,858) 32,444
- ------------------------------------------------------------------------------------------------------------------
Preferred Stock -- 0.7%
Chiquita Brands International, Inc., 3.75%, Series B, Cv
(Identified Cost-- $396) 7 384
- ------------------------------------------------------------------------------------------------------------------
Corporate Bonds and Notes -- 3.5%
Cendant Corporation Cv. 3% 2/15/02 $ 750 739
Merrill Lynch & Co., Inc. 7.05% 4/15/03 425 425
Toronto-Dominion Bank 7.875% 8/15/04 825 836
--------
Total Corporate Bonds and Notes
(Identified Cost-- $2,011) 2,000
- ------------------------------------------------------------------------------------------------------------------
U.S. Government and Agency Obligations -- 33.7%
Treasury Notes/STRIPS -- 17.8%
United States Treasury Notes 6.25% 5/31/00 2,000 2,026
United States Treasury Notes 6.50% 5/31/01 500 513
United States Treasury Notes 6.25% 6/30/02 500 513
United States Treasury STRIPS 0% 5/15/00 1,000 904(B)
United States Treasury STRIPS 0% 2/15/02 1,000 821(B)
United States Treasury STRIPS 0% 11/15/04 3,500 2,470(B)
United States Treasury STRIPS 0% 2/15/05 3,100 2,158(B)
United States Treasury STRIPS 0% 8/15/05 1,000 677(B)
--------
10,082
--------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Rate Maturity Date Shares/Par Value
- ------------------------------------------------------------------------------------------------------------------
<S><C>
Inflation-indexed Securities(C) -- 1.3%
United States Treasury
Inflation-indexed Security 3.625% 7/15/02 $ 761 $ 753
--------
Medium-term Notes -- 2.8%
Fannie Mae 7.37% 4/1/04 300 303
Fannie Mae 8.25% 10/12/04 900 928
Freddie Mac 8.14% 9/29/04 350 360
--------
1,591
--------
Mortgage-backed Securities -- 11.8%
Fannie Mae 6% 12/1/25-4/1/28 1,895 1,847
Freddie Mac 6% 3/1/26 72 70
Freddie Mac 6.50% 1/1/26-5/1/28 1,354 1,351
Government National Mortgage
Association 8% 4/15/26-12/15/27 3,305 3,424
--------
6,692
--------
Total U.S. Government and Agency Obligations
(Identified Cost-- $18,950) 19,118
- ------------------------------------------------------------------------------------------------------------------
Repurchase Agreements -- 5.4%
State Street Bank & Trust Company
4.25%, dated 6/30/98, to be repurchased at $3,096 on 7/1/98
(Collateral: $2,015 United States Treasury Notes,
10.625% due 8/15/15, value $3,243)
(Identified Cost-- $3,096) 3,096 3,096
- ------------------------------------------------------------------------------------------------------------------
Total Investments-- 100.5% (Identified Cost-- $53,311) 57,042
Other Assets Less Liabilities-- (0.5)% (299)
--------
Net assets-- 100% $ 56,743
========
Net asset value per share $ 12.28
========
- ------------------------------------------------------------------------------------------------------------------
(A) Non-income producing
(B) STRIPS -- Separate Trading of Registered Interest and Principal of
Securities- A pre-stripped zero-coupon bond that is a direct
obligation of the U.S. Treasury.
(C) United States Treasury Inflation-indexed Security -- U.S. Treasury
security whose principal value is adjusted daily in accordance with
changes in the Consumer Price Index. Interest is calculated on the
basis of the current adjusted principal value.
19
</TABLE>
<PAGE>
Portfolio of Investments
Legg Mason Investors Trust, Inc.
June 30, 1998 (Unaudited)
(Amounts in Thousands)
U.S. Small-Capitalization Value Trust
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------------------------------------------
<S><C>
COMMON STOCKS AND EQUITY INTERESTS -- 74.5%
Aerospace/Defense -- 1.5%
Alliant Techsystems Inc. 5 $ 297(A)
EDO Corporation 3 25
Kaman Corporation 8 156
--------
478
--------
Apparel -- 2.4%
G-III Apparel Group, Ltd. 3 12(A)
Garan, Incorporated 2 54
LaCrosse Footwear, Inc. 3 31
Marisa Christina, Incorporated 2 5(A)
Nine West Group, Inc. 9 221(A)
Oxford Industries, Inc. 3 122
Rocky Shoes & Boots, Inc. 2 31(A)
Supreme International Corporation 1 18(A)
Syms Corp. 7 101
The Gymboree Corporation 10 146(A)
--------
741
--------
Automotive -- 3.9%
Arvin Industries, Inc. 9 341
Bandag, Incorporated 5 179
Defiance, Inc. 2 20
Excel Industries, Inc. 4 64
Holiday RV Superstores, Incorporated 1 2(A)
Motorcar Parts and Accessories, Inc. 3 38(A)
R&B, Inc. 2 16(A)
SMC Corporation 3 20(A)
Simpson Industries, Inc. 3 44
Superior Industries International, Inc. 11 316
TBC Corporation 9 61(A)
The Standard Products Company 4 118
--------
1,219
--------
Chemicals -- 5.4%
A. Schulman, Inc. 14 280
CPAC, Inc. 2 18
Ethyl Corporation 33 204
Georgia Gulf Corporation 13 290
M. A. Hanna Company 20 366
Quaker Chemical Corporation 2 40
Stepan Company 4 116
The Dexter Corporation 5 146
The General Chemical Group Inc. 8 233
--------
1,693
--------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------------------------------------------
<S><C>
Commercial/Industrial Services -- 2.7%
Allou Health and Beauty, Inc. 1 $ 11(A)
AmeriLink Corporation 1 16(A)
Aviall, Inc. 8 110
Cameron Ashley Building Products, Inc. 4 62(A)
Dames & Moore Group 5 67
Franklin Covey Co. 10 189(A)
Home Products International, Inc. 2 23(A)
Lawson Products, Inc. 3 77
Maxco, Inc. 1 11(A)
Nash-Finch Company 4 68
Olsten Corporation 4 47
Perini Corporation 2 18
PrimeSource Corporation 3 23
REFAC Technology Development Corporation N.M. 1
Trico Marine Services, Inc. 8 111(A)
--------
834
--------
Computer Services and Systems -- 1.5%
AlphaNet Solutions, Inc. 2 28(A)
Ampex Corporation 3 5(A)
BancTec, Inc. 9 199(A)
HMT Technology Corporation 8 63(A)
Kentek Information Systems, Inc. 1 10
Miltope Group Inc. 2 6(A)
Percon Incorporated 2 17(A)
Programmer's Paradise, Inc. 2 16(A)
STB Systems, Inc. 6 79(A)
Scan-Optics, Inc. 1 6(A)
The MacNeal-Schwendler Corporation 5 53
--------
482
--------
Construction and Building Materials -- 2.7%
ABT Building Products Corporation 4 74(A)
Ameron International Corporation 2 93
Aztec Manufacturing Co. 1 14
Beazer Homes USA, Inc. 1 16(A)
Del Webb Corporation 5 132
Dravo Corporation 6 54
Engle Homes, Inc. 3 44
Hovnanian Enterprises, Inc. 9 90(A)
M/I Schottenstein Homes, Inc. 3 65
Patrick Industries, Inc. 1 15
</TABLE>
21
<PAGE>
Portfolio of Investments -- Continued
Legg Mason Investors Trust, Inc.
U.S. Small-Capitalization Value Trust -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------------------------------------------
<S><C>
Construction and Building Materials -- Continued
Southern Energy Homes, Inc. 3 $ 33(A)
The Fortress Group, Inc. 5 26
U.S. Home Corporation 5 190
Washington Homes, Inc. 3 15
--------
861
--------
Consumer Durables -- 2.3%
Barnes Group Inc. 4 122
Catalina Lighting, Inc. 3 11(A)
Conso Products Company 3 24(A)
Go-Video, Inc. 5 13
Harman International Industries, Incorporated 5 193
Koss Corporation 1 13
Lifetime Hoan Corporation 2 22
Mikasa, Inc. 5 60
Royal Appliance Mfg. Co. 9 58(A)
The L. S. Starrett Company 1 47
The Rival Company 4 51
The Toro Company 2 62
The York Group, Inc. 2 30
Trend-Lines, Inc. 1 6(A)
--------
712
--------
Consumer Non-Durables -- 0.3%
American Safety Razor Company 3 45(A)
CCA Industries, Inc. 3 7(A)
Educational Development Corporation 1 3
Jean Philippe Fragrances, Inc. 3 22(A)
Scott's Liquid Gold-Inc. 4 9
The Stephan Co. 1 12
--------
98
--------
Electrical Equipment and Electronics -- 8.6%
Altron Incorporated 3 40(A)
Bel Fuse Inc. 1 22(A)
Belden Inc. 10 322
Bell Industries, Inc. 4 42
CHS Electronics, Inc. 10 177(A)
C. P. Clare Corporation 4 35(A)
Cobra Electronics Corporation 2 8(A)
Cohu, Inc. 3 62
Dallas Semiconductor Corporation 11 347
Excel Technology, Inc. 4 38(A)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------------------------------------------
<S><C>
Electronics -- Continued
Inacom Corp. 3 $ 86(A)
Integrated Circuit Systems, Inc. 2 37(A)
MagneTek, Inc. 13 198(A)
Marshall Industries 7 180(A)
Methode Electronics, Inc. 14 223
NeoMagic Corporation 4 65(A)
Nu Horizons Electroncis Corp. 2 13(A)
Park Electrochemical Corp. 5 97
Pioneer-Standard Electronics, Inc. 12 119
Richey Electronics, Inc. 4 29(A)
SED International Holdings, Inc. 4 34(A)
SEEQ Technology Incorporated 12 22(A)
SEMX Corporation 1 9(A)
SMART Modular Technologies, Inc. 17 250(A)
Stratus Computer, Inc. 10 243(A)
The Cherry Corporation N.M. 7(A)
--------
2,705
--------
Entertainment & Leisure -- 2.5%
Arctic Cat, Inc. 6 57
Cannondale Corporation 3 41(A)
Casino America, Inc. 1 4(A)
Grand Casinos, Inc. 17 281(A)
Midway Games Inc. 15 241(A)
Play By Play Toys & Novelties, Inc. 3 30(A)
Quintel Entertainment, Inc. 7 29(A)
Scientific Games Holdings Corp. 5 110(A)
--------
793
--------
Financial Services -- 3.5%
Advanta Corp. 18 388
Amplicon, Inc. 2 31
Arcadia Financial Ltd. 15 117
CPB Inc. N.M. 5
FirstCity Financial Corporation 3 75(A)
IMC Mortgage Company 5 57(A)
Interpool, Inc. 11 159
Southern Pacific Funding Corporation 8 130(A)
Southwest Securities Group, Inc. 4 92
Sunrise International Leasing Corporation 3 11(A)
World Acceptance Corporation 7 40(A)
--------
1,105
--------
</TABLE>
23
<PAGE>
Portfolio of Investments -- Continued
Legg Mason Investors Trust, Inc.
U.S. Small-Capitalization Value Trust -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------------------------------------------
<S><C>
Food, Beverage and Tobacco -- 3.3%
Chock Full o' Nuts Corporation 4 $ 29(A)
Consolidated Cigar Holdings Inc. 2 28(A)
DIMON, Incorporated 18 200
Herbalife International, Inc. 12 293
M&F Worldwide Corp. 5 50(A)
Marsh Supermarkets, Inc. 3 56
Pilgrim's Pride Corporation 6 120
Schweitzer-Mauduit International, Inc. 6 186
Standard Commercial Corporation 5 56
The Lion Brewery, Inc. 1 4(A)
--------
1,022
--------
Gas/Pipeline -- 1.9%
Lufkin Industries, Inc. 3 86
Offshore Logistics, Inc. 9 154
Pool Energy Services Co. 8 115(A)
Seitel, Inc. 7 112
Superior Energy Services, Inc. 5 26(A)
Swift Energy Company 7 106(A)
TMBR/Sharp Drilling, Inc. 1 12(A)
--------
611
--------
Health Care -- 1.6%
Advanced Health Corporation 3 16(A)
American Dental Technologies, Inc. 3 14(A)
American Physicians Service Group, Inc. 2 12(A)
CNS, Inc. 7 34(A)
CompDent Corporation 4 63(A)
Empi, Inc. 1 23(A)
Health Power, Inc. 1 9(A)
Mesa Laboratories, Inc. 2 9(A)
Pediatric Services of America, Inc. 3 45(A)
PhyMatrix Corp. 6 48(A)
Raytel Medical Corporation 2 9(A)
SafeGuard Health Enterprises, Inc. 1 8(A)
Superior Uniform Group Inc. 1 21
The West Company, Incorporated 6 176
Utah Medical Products, Inc. 1 7
--------
494
--------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------------------------------------------
<S><C>
Industrial -- 1.1%
Ampco-Pittsburgh Corporation 2 $ 29
Bairnco Corporation 3 31
Channell Commercial Corporation 4 41(A)
DT Industries, Inc. 2 56
Foilmark, Inc. 2 5(A)
Hardinge, Inc. 2 61
Hirsch International Corp. 4 33(A)
Selas Corporation of America 2 19
Specialty Equipment Companies, Inc. 1 23(A)
The Carbide/Graphite Group, Inc. 2 47(A)
Triple S Plastics, Inc. 2 10(A)
--------
355
--------
Insurance -- 7.4%
Acceptance Insurance Companies Inc. 3 74
Chartwell Re Corporation 2 71
EMC Insurance Group, Inc. 5 68
Foremost Corporation of America 11 265
Frontier Insurance Group, Inc. 11 251
GAINSCO, Inc. 8 54
Harleysville Group Inc. 12 241
Life USA Holding, Inc. 7 85
MMI Companies, Inc. 8 176
Mobile America Corporation 3 28
NAC Re Corp. 7 390
Nymagic, Inc. 1 27
PXRE Corporation 5 165
Selective Insurance Group, Inc. 12 264
The Centris Group, Inc. 2 21
The Navigators Group, Inc. 2 40(A)
Trenwick Group Inc. 3 117
--------
2,337
--------
Metals and Mining -- 7.3%
Alltrista Corporation 3 77(A)
Amcast Industrial Corporation 4 69
Armco Inc. 22 138
Atchison Casting Corporation 3 59(A)
Bayou Steel Corporation 3 22(A)
Citation Corporation 7 142(A)
Commercial Metal Company 6 184
Intermet Corporation 10 185
</TABLE>
25
<PAGE>
Portfolio of Investments -- Continued
Legg Mason Investors Trust, Inc.
U.S. Small-Capitalization Value Trust -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------------------------------------------
<S><C>
Metals and Mining -- continued
Kaiser Aluminum Corporation 22 $ 207
Keystone Consolidated Industries, Inc. 4 43(A)
Lone Star Technologies, Inc. 9 137(A)
MAXXAM Inc. 3 159(A)
NS Group, Inc. 11 96
National Steel Corporation 17 205
ROHN Industries, Inc. 1 5
Special Metals Corporation 4 55(A)
Steel Technologies Inc. 1 13
Steel of West Virginia, Inc. 1 10(A)
Titanium Metals Corporation 13 278
Universal Stainless & Alloy Products, Inc. 2 23(A)
Zeigler Coal Holding Company 11 182
--------
2,289
--------
Miscellaneous Manufacturing -- 2.2%
Alamo Group Inc. 4 74
Global Industrial Technologies, Inc. 9 127(A)
Gradall Industries, Inc. 4 53(A)
Griffon Corporation 5 69(A)
Hurco Companies, Inc. 3 19
Jason Incorporated 3 26(A)
O.I. Corporation 1 5(A)
Ocal, Inc. 1 3(A)
Powell Industries, Inc. 4 54(A)
Printware, Inc. 2 6(A)
Shelby Williams Industries, Inc. 4 56
TransAct Technologies Incorporated 3 22(A)
Watts Industries, Inc. 7 150
Woodhead Industries, Inc. 2 29
--------
693
--------
Process Industries -- 0.6%
Shorewood Packaging Corporation 11 171(A)
Uniflex, Inc. 2 9(A)
--------
180
--------
Real Estate -- N.M.
ILX Resorts Incorporated 1 6(A)
--------
Restaurants -- 1.6%
Ark Restaurants Corp. 2 18(A)
Cooker Restaurant Corporation 4 39
ELXSI Corporation 1 13(A)
Lone Star Steakhouse & Saloon, Inc. 16 228(A)
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------------------------------------------
<S><C>
Restaurants -- continued
Max & Erma's Restaurants, Inc. 2 $ 12(A)
Piccadilly Cafeterias, Inc. 4 54
Ryan's Family Steak Houses, Inc. 9 93(A)
Sizzler International, Inc. 13 32
--------
489
--------
Retail -- 1.0%
Books-A-Million, Inc. 7 32(A)
DAMARK International, Inc. 2 13(A)
Duckwall-ALCO Stores, Inc. 1 18(A)
Elcom International, Inc. 11 40(A)
Funco, Inc. 1 16(A)
Global DirectMail Corp 6 72(A)
Rentrak Corporation 4 24(A)
REX Stores Corporation 3 39(A)
Tandycrafts, Inc. 5 23(A)
The Sportman's Guide, Inc. 1 5(A)
Travel Ports of America, Inc. 2 8(A)
Wolohan Lumber Co. 2 23
--------
313
--------
Telecommunications -- 0.3%
Microdyne Corporation 5 23
Mosaix, Inc. 3 30(A)
Vertex Communications Corporation 2 47(A)
--------
100
--------
Textiles -- 2.2%
Burlington Industries, Inc. 12 169(A)
Collins & Aikman Corporation 22 166(A)
Culp, Inc. 5 66
Dyersburg Corporation 5 31
Galey & Lord, Inc. 5 70(A)
Guilford Mills, Inc. 7 132
The Dixie Group, Inc. 3 28
Worldtex, Inc. 5 31(A)
--------
693
--------
Transportation -- 3.1%
Arnold Industries, Inc. 10 153
Consolidated Freightways Corporation 5 64(A)
Genesee & Wyoming Inc. 1 25(A)
Hvide Marine Incorporated 6 83(A)
Kitty Hawk, Inc. 7 114(A)
</TABLE>
27
<PAGE>
Portfolio of Investments -- Continued
Legg Mason Investors Trust, Inc.
U.S. Small-Capitalization Value Trust -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------------------------------------------
<S><C>
Transportation -- continued
RailTex, Inc. 2 $ 29(A)
Roadway Express, Inc. 8 155
Transport Corporation of America, Inc. 3 43(A)
USFreightways Corporation 7 217
Yellow Corporation 4 76
--------
959
--------
Utilities -- 3.6%
Cleco Corporation 9 268
CTG Resources, Inc. 3 82
Public Service Company of New Mexico 17 379
St. Joseph Light & Power Company 2 37
TNP Enterprises, Inc. 5 164
UniSource Energy Corporation 13 203
--------
1,133
--------
Total Common Stocks and Equity Interests
(Identified Cost-- $23,222) 23,395
- ------------------------------------------------------------------------------------------------------------------
Repurchase Agreements -- 24.5%
Lehman Brothers, Inc.
5.95%, dated 6/30/98, to be repurchased at $7,700 on 7/1/98
(Collateral: $8,004 Freddie Mac Mortgage-backed securities,
6% due 05/1/13, value $7,960)
(Identified Cost-- $7,698) $7,698 7,698
- ------------------------------------------------------------------------------------------------------------------
Total Investments-- 99.0% (Identified Cost-- $30,920) 31,093
Other Assets Less Liabilities-- 1.0% 304
--------
Net assets-- 100% $ 31,397
========
Net asset value per share:
Primary Class $ 10.05
========
Navigator Class $ 10.05
========
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Non-income producing
N.M. Not meaningful
28
<PAGE>
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<PAGE>
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<PAGE>
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