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Previous: LEGG MASON INVESTORS TRUST INC, NSAR-A, EX-27, 2000-11-21 |
Next: NEUBERGER BERMAN EQUITY TRUST, 497, 2000-11-21 |
<PAGE>
------------------------------
----------------------
Semi-Annual Report
September 30, 2000
Legg Mason
Investors
Trust, Inc.
U.S. Small-Cap
Value Trust
Navigator Class
----------------------
[LOGO]
------------------------------
<PAGE>
To Our Shareholders,
We are pleased to provide you with Legg Mason Investors Trust's semi-annual
report for the Navigator Class of the U.S. Small-Capitalization Value Trust.
The following table summarizes key statistics for the Navigator Class of
shares of the Fund, as of September 30, 2000:
3-Month 12-Month
Total Return/1/ Total Return/1/
--------------- ---------------
U.S. Small-Capitalization Value Trust +10.26% -0.42%
S&P 500 Stock Composite Index -0.97% +13.28%
Russell 2000 Index +1.11% +23.39%
On the following pages, the portfolio managers for the Fund discuss the
investment outlook for the Fund. Long-term investment results for the Fund are
shown in the Performance Information section of this report.
Sincerely,
/s/ Edward A. Taber, III
Edward A. Taber, III
President
October 30, 2000
____________________
/1/ Total return measures investment performance in terms of appreciation or
depreciation in net asset value per share plus dividends and any capital
gain distributions. It assumes that dividends and distributions were
reinvested at the time they were paid.
<PAGE>
Portfolio Managers' Comments
U.S. Small-Capitalization Value Trust
For the quarter, the portfolio rose 10.3%, compared to gains of 7.3% for the
Russell 2000 Value and 1.1% for the Russell 2000, and a loss of -1.0% for the
S&P 500. Year-to-date, the portfolio has returned 1.1% while the Russell 2000
Value has gained 13.6%, the Russell 2000 is up 4.2% (well below its high in
2000) and the S&P is down 1.4%.
U.S. equity markets underwent a large fundamental shift in the third quarter
of 2000. Earlier in the year, investors were motivated by a narrow, intense
focus on technology and biotechnology stocks. In this environment, small value
stocks were shunned despite their attractive valuations and improving
fundamentals. Now that Internet stocks have produced a series of fundamental
disappointments, investors have begun to grow disenchanted with the group and
broaden their interest into previously ignored sectors. At the same time, we
have seen indications that the Federal Reserve's interest rate hikes were
leading the U.S. economy toward a "soft landing," i.e., a return to moderate,
sustainable growth that would not ignite inflationary pressure. Small-cap value
stocks, and especially our portfolio, benefited from this new market
environment. More investors now appear willing to consider small-cap value
stocks at the same time that a more optimistic economic outlook should benefit
these companies.
The market did close the quarter on a more cautious note, as investors seemed
less confident in the Fed's ability to achieve the soft landing. The twin
concerns of rapidly rising oil prices and a weak European currency threatened to
interrupt an extended period of robust corporate earnings. A diverse string of
companies pre-announced earnings below expectations, including DuPont, Gillette,
Caterpillar, Apple, Intel and Priceline.com. A number of these shortfalls came
in the technology sector, which has been a primary driver leading both the U.S.
economy and stock markets higher over the last two years. The Fund's portfolio
held up well in this more uncertain environment due to the fact that our stocks
are priced at valuations that already discount most negative possibilities.
The dramatic shift in the market environment this quarter can best be
appreciated by reviewing the behavior of one portfolio holding. Carpenter
Technology is a specialty metals company whose earnings were hurt by the global
economic problems that began in 1997. This earnings decline drove down the
stock's valuation and put the stock in our value universe and then in our
portfolio. Fundamentals began to improve for Carpenter in the fourth quarter of
1999; and in January 2000, the company reported quarterly earnings, which, for
the first time in almost two years, were up over the previous year. Despite this
fundamental turnaround, the stock declined significantly in the first quarter;
investors were selling "old economy" stocks to invest in the hot Internet
stocks. In August, Carpenter reported, for the third time in a row, quarterly
earnings that beat those reported in the previous year. In the new market
environment, investors finally took notice of the earnings improvement and took
the stock up over 50% in August, exemplifying the dramatic shift in focus and
sentiment.
This new attention toward small-cap value stocks may unleash the tremendous
potential existing in our portfolio. Our portfolio, according to consensus
analyst earnings predictions, has growth prospects similar to the Russell 2000
Value, yet it has an average price-to-earnings ratio that is just over half of
the benchmark's valuation. At the same time, the Russell 2000 Value's valuation
compared to large-cap stocks is at a much lower level than we have seen in the
last twenty years. Our stocks are very out of favor relative to the U.S. equity
market and to a degree that is not justified by fundamental prospects. Any
movement toward a more normal and reasonable valuation level for our stocks will
produce superb returns from our portfolio.
2
<PAGE>
An important indication of our portfolio's potential is the dramatic rise in
the number of holdings being acquired at significant premiums to market prices.
Across our small-cap portfolios, the number of stocks taken over has risen from
an average of 5 to 10 per quarter in early 1998 to 25 to 40 per quarter
currently. Those closest to these companies, such as management and competitors,
recognize that, at current prices, many of these stocks are too attractive not
to purchase the whole company. Almost all of these deals have been for cash,
demonstrating the buyers' confidence in the value of their purchase.
With investors' concerns about corporate earnings growth, the stock market
has continued to decline early in the fourth quarter. Should markets continue to
weaken, our stocks are priced to provide defensive returns, falling less than
other stocks just as they have done in previous down markets. The portfolio has
demonstrated its defensive strength this year; on days when the Russell 2000 was
down, our portfolio outperformed the index by an average of 1.1%. Similarly, on
days when the Russell 2000 Value fell, our portfolio was down on average 0.3%
less than that benchmark. However, should the earnings outlook brighten, our
companies will benefit fundamentally and their deep valuation discounts offer
tremendous upside potential.
In our experience with portfolio management, as well as in our historical
research, we have seen previous periods like the one that ended earlier this
year (where investors had an undue focus on a narrow portion of the market).
This recent period was the most extended example of such an environment we have
seen, and our portfolio's performance lag was the greatest we have experienced.
However, investors' focus has always returned to the long-term fundamental
drivers of markets: earnings, valuations and economic worth. Our portfolios have
excelled in these environments because these principles define our investment
process. Following periods when our portfolios have lagged the Russell 2000
Value for three years, we have subsequently beaten the benchmark over the next
three years by 3.3% on an average, annual basis. The turn in both the market and
in our portfolio's performance indicates that we have entered this recovery
phase and the opportunity in our portfolio is as great as we have ever seen.
As always, we welcome the opportunity to discuss the portfolio and this
report in more detail. If you have any questions or comments, please contact us.
Henry F. Otto
Steven M. Tonkovich
Managing Directors
October 24, 2000
DJIA 10393.1
3
<PAGE>
Performance Information
Legg Mason Investors Trust, Inc.
Total Returns for One Year and Life of Class, as of September 30, 2000
The returns shown 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 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. 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 that they differ from actual
year-to-year results. No adjustment has been made for any income taxes
payable by shareholders.
The Fund offers two classes of shares:Primary Class and Navigator
Class. Information about the Primary Class, offered to retail investors, is
contained in a separate report to its shareholders.
The Fund's total returns as of September 30, 2000, were as follows:
U.S. Small-Cap
Value Trust
-----------------------------------------------------------------
Average Annual Total Return
Navigator Class:
One Year -0.42%
Life of Class/A/ -6.68%
Cumulative Total Return
Navigator Class:
One Year -0.42%
Life of Class/A/ -14.62%
-----------------------------------------------------------------
/A/ The inception date for the Navigator Class of the U.S. Small-Cap Value
Trust was June 19, 1998.
U.S. Small-Capitalization Value Trust+
Selected Portfolio Performance*
Strong performers for the 3rd quarter 2000
--------------------------------------------------------------------------
1. R.H. Phillips, Inc. +158.1%
2. Beverly Enterprises, Inc. +111.1%
3. Republic Group Incorporated +104.2%
4. Del Webb Corporation +81.2%
5. Standard Pacific Corp. +80.0%
Weak performers for the 3rd quarter 2000
--------------------------------------------------------------------------
1. Owens Corning -71.6%
2. PSC Inc. -63.1%
3. Home Products International, Inc. -59.7%
4. RailWorks Corporation -57.7%
5. Mail-Well, Inc. -48.6%
+ Portfolio changes have not been reported for U.S. Small-Cap due to the
high volume of trading during the quarter.
* Securities held for the entire quarter.
4
<PAGE>
Statement of Net Assets
Legg Mason Investors Trust, Inc.
September 30, 2000 (Unaudited)
(Amounts in Thousands)
U.S. Small-Capitalization Value Trust
Shares/Par Value
-------------------------------------------------------------------------------
Common Stock and Equity Interests -- 95.3%
Basic Materials -- 8.1%
Agricultural Products-- 1.6%
DIMON Incorporated 16 $ 50
Standard Commercial Corporation 9 41
The Anderson's Inc. 6 53
Universal Corporation 25 725
-----
869
-----
Chemicals-- 0.3%
Aceto Corporation 1 9
Georgia Gulf Corporation 10 118
Hawkins Chemical, Inc. 3 23
-----
150
-----
Chemicals (Specialty)-- 2.9%
A. Schulman, Inc. 19 210
American Vanguard Corporation 1 9
Bairnco Corporation 6 41
Ethyl Corporation 89 128
International Specialty Products Inc. 22 118/A/
NL Industries, Inc. 39 824
Omnova Solutions Inc. 13 75
Quaker Chemical Corporation 7 114
USEC Inc. 3 11
-----
1,530
-----
Construction Materials-- 0.6%
Oglebay Norton Company 3 92
Texas Industries, Inc. 8 246
-----
338
-----
Containers and Packaging (Paper)-- 0.6%
Mail-Well, Inc. 17 74/A/
Northern Technologies International Corporation 2 16
Rock-Tenn Company 22 218
-----
308
-----
Metals/Mining-- N.M.
Lindberg Corporation 4 28
-----
5
<PAGE>
Shares/Par Value
-------------------------------------------------------------------------------
Paper and Forest Products-- 0.3%
Baltek Corporation 1 $ 3/A/
BCT International, Inc. 3 5/A/
FiberMark, Inc. 5 54/A/
Nortek, Inc. 3 60/A/
Republic Group Incorporated 2 29
-----
151
-----
Steel Products-- 1.3%
Commercial Metals Company 11 281
Friedman Industries, Incorporated 5 18
IMCO Recycling Inc. 13 78
Niagara Corporation 5 20/A/
Quanex Corporation 10 198
Roanoke Electric Steel Corporation 3 33
Steel Technologies Inc. 8 48
-----
676
-----
Steel (Producers)-- 0.5%
Bayou Steel Corporation 9 16/A/
Northwest Pipe Company 4 49/A/
UCAR International, Inc. 14 173/A/
-----
238
-----
Capital Goods-- 16.6%
Aerospace/Defense-- 2.0%
AAR CORP. 2 17
Alliant Techsystems Inc. 5 386/A/
Kellstrom Industries, Inc. 8 42/A/
Ladish Co., Inc. 9 122/A/
Triumph Group, Inc. 9 320/A/
Woodward Governor Company 4 187
-----
1,074
-----
Containers (Metal and Glass)-- 1.1%
Ball Corporation 14 453
Silgan Holdings Inc. 14 131/A/
-----
584
-----
Electrical Equipment-- 0.7%
A.O. Smith Corporation 9 112
Boston Acoustics, Inc. 4 52
Catalina Lighting, Inc. 3 10/A/
Cohu, Inc. 5 78
6
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Investors Trust, Inc.
U.S. Small-Capitalization Value Trust -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Electrical Equipment -- continued
EDO Corporation 4 $ 36
Koss Corporation 2 46/A/
Tech/Ops Sevcon, Inc. 1 15
The Carbide/Graphite Group, Inc. 4 13/A/
-------
362
-------
Engineering and Construction -- 0.9%
Butler Manufacturing Company 5 112
Comfort Systems USA, Inc. 14 72/A/
Corrpro Companies 5 21/A/
Encompass Services Corporation 22 182/A/
Meadow Valley Corporation 2 7/A/
Perini Corporation 4 17/A/
RailWorks Corporation 3 10/A/
URS Corporation 5 62/A/
-------
483
-------
Machinery (Diversified) -- 2.6%
AVTEAM, Inc. 1 1/A/
Cascade Corporation 9 135
Detroit Diesel Corporation 9 214
JLK Direct Distribution Inc. 8 71/A/
Met-Pro Corporation 2 22
Milacron Inc. 30 397
Pitt-Des Moines, Inc. 2 67
Raven Industries, Inc. 4 56
Shiloh Industries, Inc. 4 29/A/
TB Wood's Corporation 4 45
Tecumseh Products Company 6 239
The Manitowoc Company, Inc. 5 96
-------
1,372
-------
Manufacturing (Diversified) -- 4.2%
Alltrista Corporation 6 120/A/
Amcast Industrial Corporation 1 11
Ampco-Pittsburgh Corporation 7 68
Baldwin Technology Company, Inc. 13 24/A/
CIRCOR International, Inc. 1 13
Donnelly Corporation 3 41
GenCorp Inc. 14 111
Graham Corporation 1 13/A/
Griffon Corporation 23 176/A/
Kaman Corporation 17 208
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Manufacturing (Diversified) -- continued
Lawson Products, Inc. 6 $ 140
Myers Industries, Inc. 6 82
NACCO Industries, Inc. 6 256
National Service Industries, Inc. 13 260
Penn Engineering & Manufacturing Corp. - Class A 4 130
Standex International Corporation 8 158
Terex Corporation 6 73/A/
The First Years Inc. 2 18
The York Group, Inc. 6 39/A/
Trinity Industries, Inc. 11 264
-------
2,205
-------
Manufacturing (Specialized) -- 2.8%
Briggs & Stratton Corporation 7 261
Fansteel Inc. 5 17/A/
Gehl Company 4 41/A/
JLG Industries, Inc. 1 17
Lincoln Electric Holdings, Inc. 14 186
PrimeSource Corporation 4 18
Regal-Beloit Corporation 13 224
Specialty Equipment Companies, Inc. 8 202/A/
SPS Technologies, Inc. 4 199/A/
York International Corporation 12 308
-------
1,473
-------
Metals -- 1.1%
Chase Industries, Inc. 11 95/A/
General Cable Corporation 13 95
Metals USA, Inc. 29 84
Ryerson Tull, Inc. 8 76
Superior TeleCom Inc. 10 58
Wolverine Tube, Inc. 10 152/A/
-------
560
-------
Office Equipment and Supplies -- 1.0%
Ennis Business Forms, Inc. 12 92
New England Business Service, Inc. 4 72
The Standard Register Company 16 248
Wallace Computer Services, Inc. 8 127
-------
539
-------
</TABLE>
8
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Investors Trust, Inc.
U.S. Small-Capitalization Value Trust -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Trucks and Parts -- 0.1%
Collins Industries, Inc. 5 $ 17
Featherlite Inc. 4 11/A/
Standard Automotive Corporation 1 7/A/
Supreme Industries, Inc. 9 38/A/
Wabash National Corporation N.M. 2
-------
75
-------
Waste Management -- 0.1%
The IT Group, Inc. 7 35/A/
-------
Consumer Cyclicals -- 35.9%
Auto Parts and Equipment -- 6.3%
ArvinMeritor, Inc. 17 251
Bandag, Incorporated 13 460
Bandag, Incorporated-Class A 4 103
BorgWarner, Inc. 9 288
Cooper Tire & Rubber Company 27 268
Dura Automotive Systems, Inc. 12 113/A/
Edelbrock Corporation 2 27
Federal-Mogul Corporation 25 136
Gentek, Inc. 16 247
Hayes Lemmerz International, Inc. 10 108/A/
Intermet Corporation 20 144
MascoTech, Inc. 35 578
Midas, Inc. 5 71
R & B, Inc. 6 16/A/
Simpson Industries, Inc. 14 167
Standard Motor Products, Inc. 5 40
Strattec Security Corporation 2 76/A/
TBC Corporation 15 71/A/
Tower Automotive, Inc. 16 145/A/
-------
3,309
-------
Building Materials -- 1.8%
Ameron International Corporation 3 96
Centex Construction Products, Inc. 6 144
Dal-Tile International Inc. 22 275/A/
Mikasa, Inc. 8 124
Miller Building Systems, Inc. 2 13/A/
NCI Building Systems, Inc. 13 192/A/
Owens Corning 5 14
Universal Forest Products, Inc. 7 84
-------
942
-------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer (Jewelry, Novelties and Gifts) -- 1.4%
Department 56, Inc. 12 $ 162/A/
Enesco Group, Inc. 5 28
Lancaster Colony Corporation 9 214
Michael Anthony Jewelers, Inc. 2 4/A/
OroAmerica, Inc. 4 30/A/
Russ Berrie and Company, Inc. 14 276
--------
714
--------
Footwear -- 0.2%
Brown Shoe Company, Inc. 6 51
Saucony, Inc. 1 12/A/
The Stride Rite Corporation 13 67
--------
130
--------
Gaming, Lottery and Parimutuel Companies -- 1.4%
Black Hawk Gaming & Development Company, Inc. 3 18/A/
Boyd Gaming Corporation 46 228/A/
GTECH Holdings Corporation 25 421/A/
Lakes Gaming, Inc. 8 66/A/
--------
733
--------
Hardware and Tools -- 0.4%
Park-Ohio Holdings Corp. 7 52/A/
Q.E.P. Co., Inc. 3 15/A/
The Eastern Company 1 16
The L.S. Starrett Company 4 81
TransTechnology Corporation 4 24
--------
188
--------
Homebuilding -- 9.3%
Beazer Homes USA, Inc. 6 165/A/
Bluegreen Corporation 17 50/A/
Champion Enterprises, Inc. 28 121/A/
Crossmann Communities, Inc. 3 65/A/
D.R.Horton, Inc. 38 646
Del Webb Corporation 14 389/A/
DeWolfe Companies, Inc. 2 16/A/
Dominion Homes, Inc. 4 34/A/
Engle Homes, Inc. 8 126
Fleetwood Enterprises, Inc. 22 302
Hovnanian Enterprises, Inc. 16 119/A/
Kaufman and Broad Home Corporation 14 369
M/I Schottenstein Homes, Inc. 6 122
</TABLE>
10
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Investors Trust, Inc.
U.S. Small-Capitalization Value Trust -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Homebuilding -- continued
Palm Harbor Homes, Inc. 12 $ 158/A/
Pulte Corporation 3 89
Silverleaf Resorts, Inc. 3 10/A/
Skyline Corporation 3 62
Standard Pacific Corp. 23 407
The Ryland Group, Inc. 12 357
Toll Brothers, Inc. 25 856/A/
Trammell Crow Company 21 317/A/
Trendwest Resorts, Inc. 6 91/A/
Washington Homes, Inc. 5 53/A/
--------
4,924
--------
Household Furnishings and Appliances -- 1.7%
Chromcraft Revington, Inc. 8 65/A/
Fedders Corporation 20 78
Flexsteel Industries, Inc. 4 50
Furniture Brands International, Inc. 16 273/A/
La-Z-Boy Incorporated 4 51
The Rowe Companies 10 31
U. S. Industries, Inc. 38 376
--------
924
--------
Leisure Time (Products) -- 1.3%
Arctic Cat, Inc. 5 64
Coachmen Industries Inc. 12 123
Ellett Brothers, Inc. 5 14
Equity Marketing, Inc. 2 31/A/
GameTech International, Inc. 1 3/A/
Johnson Outdoors Inc. 6 39/A/
K2 Inc. 11 100/A/
Monaco Coach Corporation 6 100/A/
Steinway Musical Instruments, Inc. 2 42/A/
Sturm, Ruger & Company, Inc. 8 66
Winnebago Industries, Inc. 7 93
--------
675
--------
Lodging/Hotels -- 0.8%
Prime Hospitality Corp. 43 432/A/
Suburban Lodges of America, Inc. 2 11/A/
--------
443
--------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Publishing -- 0.1%
Courier Corporation 2 $ 43
--------
Retail (Building Supplies) -- 0.8%
Building Materials Holding Corporation 9 76/A/
Hughes Supply, Inc. 17 334
Tractor Supply Company 3 32/A/
--------
442
--------
Retail (Department Stores) -- 0.1%
The Bon-Ton Stores, Inc. 3 7/A/
The Elder-Beerman Stores Corp. 5 21/A/
--------
28
--------
Retail (Discounters) -- 0.3%
Duckwall-ALCO Stores, Inc. 4 32/A/
ShopKo Stores, Inc. 9 93/A/
Value City Department Stores, Inc. 3 27/A/
--------
152
--------
Retail (Home Shopping) -- 0.4%
Barnett Inc. 6 81/A/
Spiegel, Inc. 5 39
Systemax, Inc. 25 68/A/
--------
188
--------
Retail (Specialty - Apparel) -- 0.6%
Burlington Coat Factory Warehouse Corporation 2 30
Goody's Family Clothing, Inc. 23 90/A/
One Price Clothing Stores, Inc. 1 2/A/
S&K Famous Brands, Inc. 3 23/A/
The Buckle, Inc. 3 36/A/
The Cato Corporation 13 160
--------
341
--------
Retail (Specialty) -- 1.3%
A.C. Moore Arts & Crafts, Inc. 5 40/A/
Brookstone, Inc. 3 35/A/
Cache, Inc. 2 6/A/
Discount Auto Parts, Inc. 6 42/A/
Finlay Enterprises, Inc. 7 99/A/
Friedman's, Inc. 13 62
Hancock Fabrics, Inc. 4 19
Haverty Furniture Companies, Inc. 6 70
J. Baker, Inc. 4 19
</TABLE>
12
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Investors Trust, Inc.
U.S. Small-Capitalization Value Trust -- Continued
Shares/Par Value
--------------------------------------------------------------------------------
Retail (Specialty) -- continued
Jo-Ann Stores, Inc. 6 $ 40/A/
Lithia Motors, Inc. 3 34/A/
MarineMax, Inc. 4 24/A/
Musicland Stores Corporation 12 82/A/
RDO Equipment Co. 4 13/A/
Rush Enterprises, Inc. 2 9/A/
Shoe Carnival, Inc. 4 22/A/
Shoe Pavilion, Inc. 5 14/A/
Travis Boats & Motors, Inc. 1 5/A/
Ugly Duckling Corporation 4 24/A/
United Auto Group, Inc. 6 51/A/
--------
710
--------
Services (Commercial and Consumer) -- 4.4%
Amerco 10 198/A/
Avis Group Holdings, Inc. 22 649/A/
Capital Senior Living Corporation 14 35/A/
Carriage Services, Inc. 11 25/A/
Castle Dental Centers, Inc. 5 9/A/
Central Garden & Pet Company 21 146/A/
Children's Comprehensive Services, Inc. 5 18/A/
Cornell Companies, Inc. 3 25/A/
Dollar Thrifty Automotive Group, Inc. 8 148/A/
Electro Rent Corporation 2 22/A/
Exponent, Inc. 3 29/A/
FTI Consulting, Inc. 3 24/A/
Horizon Health Corporation 4 21/A/
Interpool, Inc. 20 223
Lennox International Inc. 8 75
McGrath Rentcorp 8 143
National Equipment Services, Inc. 7 34/A/
National Technical Systems, Inc. 6 19
NCH Corporation 2 85
OrthAlliance, Inc. 5 30/A/
ProMedCo Management Company 16 12/A/
Refac 3 8/A/
Right Management Consultants, Inc. 2 23/A/
Schlotzsky's, Inc. 5 21/A/
Service Corporation International 36 88/A/
Stewart Enterprises, Inc. 77 149
Sylvan, Inc. 3 28/A/
Thomas Group, Inc. 3 22/A/
--------
2,309
--------
13
<PAGE>
Shares/Par Value
--------------------------------------------------------------------------------
Textiles -- 0.1%
Dan River Inc. 7 $ 28/A/
The Dixie Group, Inc. 9 35/A/
------
63
------
Textiles (Apparel) -- 2.6%
Cutter & Buck Inc. 3 40/A/
Decorator Industries, Inc. 2 10
Garan, Incorporated 4 82
Gerber Childrenswear, Inc. 1 5/A/
Haggar Corp. 1 10
Hartmarx Corporation 4 12/A/
Jos. A. Bank Clothiers, Inc. 4 17/A/
Kellwood Company 20 359
Nautica Enterprises, Inc. 37 481/A/
OshKosh B'Gosh, Inc. 2 32
Oxford Industries, Inc. 6 109
Perry Ellis International, Inc. 4 29/A/
Sport-Haley, Inc. 3 13/A/
Superior Uniform Group Inc. 1 10
Tandy Brands Accessories, Inc. 3 22/A/
UniFirst Corporation 12 124
------
1,355
------
Textiles (Home Furnishings) -- 0.6%
Springs Industries, Inc. 4 99
WestPoint Stevens Inc. 16 198
------
297
------
Consumer Staples -- 6.5%
Beverages (Alcoholic) -- 0.1%
R.H. Phillips, Inc. 4 25/A/
Todhunter International, Inc. 2 14/A/
------
39
------
Beverages (Non-Alcoholic) -- 0.2%
M&F Worldwide Corp. 15 85/A/
------
Distributors (Food and Health) -- 0.4%
Allou Health & Beauty Care, Inc. 2 12/A/
Herbalife International, Inc. 17 155
Nash-Finch Company 5 54
Suprema Specialties, Inc. 1 10/A/
------
231
------
14
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Investors Trust, Inc.
U.S. Small-Capitalization Value Trust -- Continued
Shares/Par Value
-------------------------------------------------------------------------------
Entertainment -- N.M.
Movie Gallery, Inc. 4 $ 14/A/
------
Food -- 0.6%
Cagle's, Inc. 4 30
Michael Foods, Inc. 9 199
Pilgrim's Pride Corporation 9 61
Pilgrim's Pride Corporation Class A 4 21
------
311
------
Household Products (Non-Durables) -- 0.4%
CPAC, Inc. 4 30
Craftmade International, Inc. 3 22
Stepan Company 7 146
------
198
------
Housewares -- 0.6%
American Biltrite, Inc. 3 39
Applica Incorporated 8 46/A/
Associated Materials Incorporated 1 14
Foamex International Incorporated 8 48/A/
Home Products International, Inc. 6 9/A/
Ivex Packaging Corporation 4 42/A/
Oneida Ltd. 5 68
Royal Appliance Mfg. Co. 2 13/A/
Summa Industries 3 37/A/
------
316
------
Personal Care -- 0.3%
French Fragrances, Inc. 10 87/A/
Nature's Sunshine Products, Inc. 13 100
------
187
------
Restaurants -- 1.5%
Ark Restaurants Corp. 3 24/A/
CKE Restaurants, Inc. 27 84
Dave & Busters, Inc. 9 71/A/
ELXSI Corporation 3 29/A/
Landry's Seafood Restaurants, Inc. 22 149/A/
Luby's, Inc. 15 77
NPC International, Inc. 5 45/A/
Rainforest Cafe, Inc. 15 44/A/
Roadhouse Grill, Inc. 3 11/A/
Ryan's Family Steak Houses, Inc. 30 227/A/
Star Buffet, Inc. 2 6/A/
Taco Cabana, Inc. 3 12
------
779
------
15
<PAGE>
Shares/Par Value
-------------------------------------------------------------------------------
Retail (Food Chains) -- 0.1%
Marsh Supermarkets, Inc. 3 $ 54
------
Services -- 0.1%
Correctional Services Corporation 1 5/A/
Healthcare Services Group, Inc. 8 37/A/
------
42
------
Sevices (Employment) -- 1.4%
Butler International, Inc. 7 36/A/
CDI Corp. 14 226/A/
General Employment Enterprises, Inc. 4 12
Headway Corporate Resources, Inc. 5 12/A/
Personal Group Of America, Inc. 20 62/A/
RCM Technologies, Inc. 3 12/A/
RemedyTemp, Inc. 2 28/A/
SOS Staffing Services, Inc. 10 24/A/
Spherion Corporation 23 279/A/
Westaff, Inc. 12 47/A/
------
738
------
Specialty Printing -- 0.5%
Cadmus Communications Corporation 5 38
Consolidated Graphics, Inc. 3 37/A/
John H. Harland Company 9 142
Media Arts Group, Inc. 9 30/A/
------
247
------
Tobacco -- 0.3%
Schweitzer-Mauduit International, Inc. 12 159
------
Energy -- 0.9%
Oil (International Integrated) -- 0.1%
Holly Corporation 6 77
------
Oil and Gas (Drilling and Equipment) -- 0.1%
Kaneb Services, Inc. 10 48/A/
------
Oil and Gas (Exploration and Production) -- 0.7%
Adams Resources & Energy 3 40
EnergySouth, Inc. 3 54
Mercury Air Group, Inc. 6 34/A/
Penn Virginia Corporation 6 164
World Fuel Services Corporation 9 69
------
361
------
16
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Investors Trust, Inc.
U.S. Small-Capitalization Value Trust -- Continued
Shares/Par Value
------------------------------------------------------------------------------
Financials -- 15.2%
Banks (Major Regional) -- 3.4%
BancFirst Ohio Corp. 3 $ 43
BSB Bancorp, Inc. 7 152
BYL Bancorp 2 20
Capital Crossing Bank 2 16/A/
Community Bank System, Inc. 2 52
Corrus Bankshares, Inc. 11 397
First Citizens Bancshares Inc. 6 429
First Oak Brook Bancshares, Inc. 2 25
GBC Bancorp 2 68
Granite State Bankshares, Inc. N.M. 8
Hamilton Bancorp Inc. 8 128/A/
Merchants Bancshares, Inc. 3 61
National City Bancorporation 7 123/A/
Pacific Crest Capital, Inc. 2 28
Republic Bancorp Inc. 17 157
Three Rivers Bancorp, Inc. 5 40
USBANCORP, Inc. 10 39
Yardville National Bancorp 2 21
-------
1,807
-------
Consumer Finance -- 0.5%
Advanta Corp. 13 149
American Business Financial Services, Inc. 1 7
Onyx Acceptance Corporation 2 7/A/
Union Acceptance Corporation 1 6/A/
World Acceptance Corporation 14 72/A/
-------
241
-------
Financial (Diversified) -- 0.9%
DVI, Inc. 3 60/A/
FPIC Insurance Group, Inc. 3 41/A/
LandAmerica Financial Group, Inc. 9 266
Professionals Group, Inc. 4 98/A/
TFC Enterprises, Inc. 10 15/A/
-------
480
-------
Insurance Brokers -- 0.3%
E. W. Blanch Holdings, Inc. 4 89
Healthcare Recoveries, Inc. 7 31/A/
Interstate National Dealer Services, Inc. 3 19/A/
Kaye Group Inc. 4 26
-------
165
-------
17
<PAGE>
Shares/Par Value
----------------------------------------------------------------------------
Insurance (Life/Health) -- 2.8%
AmerUs Group Co. 22 $ 566
Delphi Financial Group, Inc. 14 579/A/
National Western Life Insurance Company 3 190/A/
Presidential Life Corporation 10 148
Standard Management Corporation 5 16/A/
--------
1,499
--------
Insurance (Multi-Line) -- 0.2%
Penn Treaty American Corporation 6 104/A/
--------
Insurance (Property/Casualty) -- 2.9%
Atlantic American Corporation 1 3/A/
Bancinsurance Corporation 2 11/A/
Donegal Group Inc. 6 45
Enhance Financial Services Group, Inc. 29 382
Merchants Group, Inc. 1 18
Philadelphia Consolidated Holding Corp. 4 84/A/
SCPIE Holdings Inc. 3 68
Selective Insurance Group, Inc. 1 13
State Auto Financial Corporation 3 39
The Commerce Group, Inc. 26 755
The Midland Company 3 90
--------
1,508
--------
Investment Management -- N.M.
American Physicians Service Group, Inc. 2 6/A/
--------
Savings and Loan Companies -- 4.2%
Alliance Bancorp of New England, Inc. 1 9
BankAtlantic Bancorp, Inc. 30 125
BankUnited Financial Corporation 6 43/A/
Camco Financial Corporation 1 15
Dime Community Bancshares 3 64
Downey Financial Corp. 12 458
First Essex Bancorp, Inc. 2 47
First Republic Bank 3 93/A/
First Washington Bancorp, Inc. 1 19
FirstFed Financial Corp. 15 340/A/
Flagstar Bancorp, Inc. 9 115
GA Financial, Inc. 4 50
Hawthorne Financial Corporation 4 43/A/
IBERIABANK Corporation 5 86
Industrial Bancorp, Inc. 1 16
ITLA Capital Corporation 5 73/A/
18
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Investors Trust, Inc.
<TABLE>
<CAPTION>
U.S. Small-Capitalization Value Trust -- Continued
Shares/Par Value
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings and Loan Companies -- continued
Local Financial Corporation 2 $ 19/A/
MAF Bancorp, Inc. 5 122
Matrix Bancorp, Inc. 2 12/A/
MetroWest Bank 4 25
Parkvale Financial Corporation 5 85
PennFed Financial Services, Inc. 3 43
PFF Bancorp, Inc. 3 61
Republic Security Financial Corporation 18 88
St. Francis Capital Corporation 3 51
Sterling Financial Corporation 6 69/A/
WSFS Financial Corporation 4 38
------
2,209
------
Health Care -- 1.9%
Health Care (Diversified) -- 0.2%
Sierra Health Services, Inc. 20 95/A/
------
Health Care (Drugs/Major Pharmaceuticals) -- N.M.
Chattem, Inc. 2 15/A/
Hi-Tech Pharmacal Co., Inc. 2 9/A/
USANA, Inc. 3 9/A/
------
33
------
Health Care (Long-Term Care) -- 0.6%
Beverly Enterprises, Inc. 36 211/A/
Radiologix, Inc. 15 91/A/
------
302
------
Health Care (Managed Care) -- 0.1%
US Oncology, Inc. 10 46/A/
------
Health Care (Medical Products and Supplies) -- 0.5%
CONMED Corporation 5 70/A/
Del Global Technologies Corp. 5 52/A/
Lakeland Industries, Inc. 1 6/A/
Minntech Corporation 2 14
Ocular Sciences, Inc. 5 61/A/
Sola International Inc. 5 33/A/
Utah Medical Products, Inc. 3 24/A/
------
260
------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Health Care (Specialized Services) -- 0.5%
AmeriPath, Inc. 16 $ 229/A/
Curative Health Services, Inc. 7 37/A/
Monarch Dental Corporation 7 12/A/
-----
278
-----
Technology -- 2.3%
Communications Equipment -- 0.2%
Applied Signal Technology, Inc. 6 41
Brightpoint, Inc. 9 46/A/
Cobra Electronics Corporation 3 20/A/
-----
107
-----
Computers (Peripherals) -- 0.1%
Printronix, Inc. 4 38/A/
PSC Inc. 9 27/A/
-----
65
-----
Computers (Software/Services) -- 1.0%
Amplicon, Inc. 6 90
Avant! Corporation 24 442/A/
Bell Industries, Inc. 2 4
-----
536
-----
Electronics (Component Distributors) -- 0.5%
Pioneer-Standard Electronics, Inc. 18 244
-----
Electronics (Instrumentation) -- 0.1%
Hurco Companies, Inc. 4 18/A/
K-Tron International, Inc. 2 36/A/
Mesa Laboratories, Inc. 2 9/A/
O.I. Corporation N.M. 1/A/
-----
64
-----
Electronics (Semiconductors) -- 0.2%
NeoMagic Corporation 20 75/A/
-----
Equipment (Semiconductors) -- N.M.
Farrel Corporation 3 4
-----
Services (Computer Systems) -- 0.2%
Gerber Scientific, Inc. 7 58
Software Spectrum, Inc. 3 28/A/
-----
86
-----
</TABLE>
20
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Investors Trust, Inc.
<TABLE>
<CAPTION>
U.S. Small-Capitalization Value Trust -- Continued
Shares/Par Value
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Transportation -- 6.0%
Air Freight -- N.M.
Air Methods Corporation 3 $ 9/A/
--------
Airlines -- 1.3%
Alaska Air Group, Inc. 9 209/A/
America West Holdings Corporation 32 390/A/
Amtran, Inc. 2 19/A/
Mesaba Holdings, Inc. 1 15/A/
Midway Airlines Corporation 6 31/A/
--------
664
--------
Railroads -- 1.4%
Genesee & Wyoming Inc. 3 70/A/
The Greenbrier Companies, Inc. 11 91
Wabtec Corporation 23 232
Wisconsin Central Transportation Corporation 33 347/A/
--------
740
--------
Truckers -- 3.3%
American Freightways Corporation N.M. 6/A/
Arkansas Best Corporation 14 218/A/
Arnold Industries, Inc. 19 314
Boyd Bros. Transportation Inc. 2 9/A/
Covenant Transport, Inc. 11 104/A/
M. S. Carriers, Inc. N.M. 2/A/
Old Dominion Freight Line, Inc. 5 53/A/
P.A.M. Transportation Services, Inc. 6 58/A/
Roadway Express, Inc. 15 267
Rollins Truck Leasing Corp. 21 134
Transport Corporation of America, Inc. 5 30/A/
U.S. Xpress Enterprises, Inc. 11 70/A/
USA Truck, Inc. 6 34/A/
USFreightways Corporation 5 123
Yellow Corporation 20 301/A/
--------
1,723
--------
Utilities -- 1.9%
Electric Companies -- 1.9%
Maine Public Service Company 1 30
Public Service Company of New Mexico 24 613
RGS Energy Group, Inc. 12 350
--------
993
--------
Total Common Stock and Equity Interests (Identified Cost -- $58,377) 50,189
---------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements -- 1.5%
Goldman, Sachs & Company
6.60%, dated 9/29/00, to be repurchased at $805
on 10/2/00 (Collateral: $879 Fannie Mae mortgage-backed
securities, 6%, due 1/1/29, value $825) $ 805 $ 805
--------
Total Repurchase Agreements (Identified Cost -- $805) 805
---------------------------------------------------------------------------------------------------
Total Investments -- 96.8% (Identified Cost -- $59,182) 50,994
Other Assets Less Liabilities -- 3.2% 1,681
--------
Net assets consisting of:
Accumulated paid-in capital applicable to:
6,601 Primary Class shares outstanding $64,816
4 Navigator Class shares outstanding 46
Undistributed net investment income/(loss) (58)
Accumulated net realized gain/(loss) on investments (3,941)
Unrealized appreciation/(depreciation) of investments (8,188)
-------
Net assets -- 100.0% $ 52,675
========
Net asset value per share:
Primary Class $7.97
=====
Navigator Class $8.17
=====
---------------------------------------------------------------------------------------------------
</TABLE>
/A/ Non-income producing.
N.M. - Not meaningful.
See notes to financial statements.
22
<PAGE>
Statement of Operations
Legg Mason Investors Trust, Inc.
(Amounts in Thousands) (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended 9/30/00
------------------------
U.S.
Small-Capitalization
Value Trust
-------------------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends $ 437
Interest 41
--------
Total income 478
--------
Expenses:
Management fee 228
Distribution and service fees 268
Transfer agent and shareholder servicing expense 52
Audit and legal fees 18
Custodian fee 86
Directors' fees 4
Organization expense 4
Registration fees 12
Reports to shareholders 19
Other expenses 1
--------
692
--------
Less fees waived (156)
--------
Total expenses, net of waivers 536
--------
Net Investment Income/(Loss) (58)
--------
Net Realized and Unrealized Gain/(Loss) on Investments:
Realized gain/(loss) on investments (2,657)
Change in unrealized appreciation/(depreciation) of investments 6,241
Net Realized and Unrealized Gain/(Loss) on Investments 3,584
-------------------------------------------------------------------------------------------------
Change in Net Assets Resulting From Operations $ 3,526
-------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
23
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
U.S. Small-Capitalization
Value Trust
-----------------------------
Six Months Year
Ended Ended
9/30/00 3/31/00
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Change in Net Assets: (Unaudited)
Net investment income/(loss) $ (58) $ (384)
Net realized gain/(loss) on investments (2,657) 670
Change in unrealized appreciation/
(depreciation) of investments 6,241 (2,521)
---------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations 3,526 (2,235)
Distributions to shareholders:
From net realized gain on investments:
Primary Class -- (1,413)
Navigator Class -- (1)
In excess of net realized gain on investments:
Primary Class -- (1,283)
Navigator Class -- (1)
Change in net assets from Fund share transactions:
Primary Class (7,928) 3,609
Navigator Class -- (4)
---------------------------------------------------------------------------------------------------
Change in net assets (4,402) (1,328)
Net Assets:
Beginning of period 57,077 58,405
---------------------------------------------------------------------------------------------------
End of period $52,675 $ 57,077
---------------------------------------------------------------------------------------------------
Undistributed net investment income/(loss) $ (58) $ --
---------------------------------------------------------------------------------------------------
</TABLE>
N/A -- Not applicable.
See notes to financial statements.
24
<PAGE>
Financial Highlights
Legg Mason Investors Trust, Inc.
Contained below is per share operating performance data for a
Navigator Class share of common stock outstanding, total investment return,
ratios to average net assets and other supplemental data. This information
has been derived from information provided in the financial statements.
<TABLE>
<CAPTION>
Investment Operations Distributions
-------------------------------------- ---------------------------------
From In Excess
Net Asset Net Net Realized Total Net of Net
Value Investment and Unrealized from Realized Realized
Beginning Income/ Gain/(Loss) on Investment Gain on Gain on
of Period (Loss) Investments Operations Investments Investments
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Small-Capitalization Value Trust
Six Months Ended
Sept. 30, 2000* $7.59 $.03/A/ $ .55 $ .58 $ -- $ --
Year Ended Mar. 31,
2000 7.88 .07/A/ (.05) .02 (.16) (.15)
1999/B/ 9.92 .05/A/ (2.09) (2.04) -- --
--------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------------------------
Net
Net Asset Investment Net Assets
Value Expensed Income/(Loss) Portfolio End of
Total End of Total to Average to Average Turnover Period
Distributions Period Return Net Assets Net Assets Rate (in thousands)
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Small-Capitalization Value Trust
Six Months Ended
Sept. 30, 2000* $ -- $8.17 7.64%/C/ 1.00%/A,D/ .79%/A,D/ 40.7%/D/ $33
Year Ended Mar. 31,
2000 (.31) 7.59 (.15)% 1.00%/A/ .44%/A/ 66.2% 31
1999/B/ -- 7.88 (20.56)%/C/ .90%/A,D/ .71%/A,D/ 29.5%/D/ 40
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/A/ Net of fees waived pursuant to a voluntary expense limitation of 1.00%
of average daily net assets. If no fees had been waived by LMFA, the
annualized ratio of expenses to average daily net assets would have
been as follows:for the six months ended September 30, 2000, 1.56%; for
the year ended March 31, 2000, 1.36%; and for the period June 19, 1998
to March 31, 1999, 1.28%.
/B/ For the period June 19, 1998 (commencement of operations) to March 31,
1999.
/C/ Not annualized.
/D/ Annualized.
* Unaudited.
See notes to financial statements.
25
<PAGE>
Notes to Financial Statements
Legg Mason Investors Trust, Inc.
(Amounts in Thousands) (Unaudited)
---------------------------------------------------------------------------
1. Significant Accounting Policies:
The Legg Mason Investors Trust, Inc. ("Corporation"), consisting of the
American Leading Companies Trust ("American Leading Companies"), the
Balanced Trust ("Balanced Trust"), the U.S. Small-Capitalization Value
Trust ("U.S. Small-Cap") and the Financial Services Fund ("Financial
Services") (each a "Fund"), is registered under the Investment Company Act
of 1940, as amended, as an open-end, diversified investment company.
Each Fund consists of two classes of shares: Primary Class and Navigator
Class. Financial Services has an additional class of shares: Class A. The
Navigator Class shares of Financial Services and American Leading Companies
were redeemed on May 12, 2000 and December 3, 1998, respectively. The
Navigator Class of Balanced Trust has not commenced operations. Information
about the Primary Classes and Class A, offered to retail investors, is
contained in a separate report to their shareholders. All shareholders bear
the common expenses of the Funds based on daily net assets of each class,
without distinction between share classes. Dividends are declared
separately for each class. Differences in per share dividend rates are
generally due to differences in separate class expenses.
Security Valuation
Equity securities and options listed on national securities exchanges
are valued at the last sale price as of the close of business on the day
the securities are being valued. Listed securities not traded on a
particular day and securities traded in the over-the-counter market are
valued at the mean between the closing bid and ask prices quoted by brokers
or dealers that make markets in the securities. Portfolio securities which
are traded both in the over-the-counter market and on an exchange are
valued according to the broadest and most representative market. In the
absence of readily available market quotations, securities are valued at
fair value under procedures established by and under the general
supervision of the Board of Directors.
Fixed income securities generally are valued by using market quotations
or independent pricing services that use prices provided by market makers
or estimates of market values. Fixed income securities having a maturity of
less than 60 days are valued at amortized cost.
Investment Income and Distributions to Shareholders
Interest income and expenses are recorded on the accrual basis. Bond
premiums are amortized for financial reporting and federal income tax
purposes. Bond discounts, other than original issue and zero-coupon bonds,
are not amortized for financial reporting and federal income tax purposes.
Dividend income and distributions to shareholders are allocated at the
class level and are recorded on the ex-dividend date. Dividends from net
investment income, if available, will be paid annually. Net capital gain
distributions, which are calculated at the Fund level, are declared and
paid after the end of the tax year in which the gain is realized.
Distributions are determined in accordance with federal income tax
regulations, which may differ from those determined in accordance with
generally accepted accounting principles; accordingly, periodic
reclassifications are made within a Fund's capital accounts to reflect
income and gains available for distribution under federal income tax
regulations.
Security Transactions
Security transactions are recorded on the trade date. Realized gains and
losses from security transactions are reported on an identified cost basis
for both financial reporting and federal income tax purposes.
26
<PAGE>
Notes to Financial Statements -- Continued
---------------------------------------------------------------------------
At September 30, 2000, receivables for securities sold and payables for
securities purchased for the Fund were as follows:
Receivable for Payable for
Securities Sold Securities Purchased
-----------------------------------------------------
$3,146 $1,428
Deferred Organizational Expenses
Deferred organizational expenses of $43 for U.S. Small-Cap 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 substantially all of its taxable income to its shareholders.
Use of Estimates
Preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
2. Investment Transactions:
For the six months ended September 30, 2000, investment transactions
(excluding short-term investments) were as follows:
Purchases Proceeds From Sales
------------------------------------------------
$8,915 $17,922
At September 30, 2000, cost, gross unrealized appreciation and gross
unrealized depreciation based on the cost of securities for federal income
tax purposes for the Fund were as follows:
Net
Appreciation/
Cost Appreciation Depreciation (Depreciation)
------------------------------------------------------------
$59,182 $4,845 $(13,033) $(8,188)
3. Repurchase Agreements:
All repurchase agreements are fully collateralized by obligations issued
by the U.S. Government or its agencies, and such collateral is in the
possession of the 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. The Fund's investment adviser
reviews the value of the collateral and the creditworthiness of those banks
and dealers with which the Fund enters into repurchase agreements to
evaluate potential risks.
27
<PAGE>
---------------------------------------------------------------------------
4. Transactions With Affiliates:
The Fund has a management agreement with Legg Mason Fund Adviser, Inc.
("LMFA"). Pursuant to the agreement, LMFA provides the Fund with management
and administrative services for which the Fund pays a fee, computed daily
and payable monthly, at an annual rate of the Fund's average daily net
assets.
LMFA has agreed to waive its fees in any month to the extent the Fund's
expenses (exclusive of taxes, interest, brokerage and extraordinary
expenses) exceed during that month certain annual rates of the Fund's
average daily net assets as shown in the following chart:
<TABLE>
<CAPTION>
Six Months Ended At
September 30, 2000 September 30, 2000
------------------ ------------------
Management Expense Expense Limitation Management Management
Fund Fee Limitation Expiration Date Fees Waived Fees Payable
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Small-Cap
Primary Class 0.85% 2.00% July 31, 2001 $129 $ --
Navigator Class 0.85% 1.00% July 31, 2001 N.M. --
</TABLE>
----------
N.M. Not meaningful.
Brandywine Asset Management, Inc. ("Brandywine") serves as investment
adviser to U.S. Small-Cap. Brandywine is responsible for the actual
investment activity of the Fund. LMFA pays Brandywine a fee for its
services, computed daily and payable monthly, at an annual rate equal to
58.8% of the fee received by LMFA.
Legg Mason Wood Walker, Incorporated ("Legg Mason"), a member of the New
York Stock Exchange, serves as distributor of the Fund. Legg Mason receives
an annual distribution fee and an annual service fee based on the Fund's
Primary Class's average daily net assets, computed daily and payable
monthly as follows:
<TABLE>
<CAPTION>
Year Ended
September 30, 2000 At September 30, 2000
------------------------ ------------------------
Distribution Service Distribution and Service Distribution and Service
Fee Fee Fees Waived Fees Payable
---------------------------------------------------------------------------
<S> <C> <C> <C>
0.75% 0.25% $4 $45
</TABLE>
No brokerage commissions were paid by the Fund to Legg Mason or its
affiliates during the six months ended September 30, 2000.
Legg Mason also has an agreement with the Fund's transfer agent to
assist it with some of its duties. For this assistance, the transfer agent
paid Legg Mason $10 for the six months ended September 30, 2000.
LMFA, Legg Mason and Brandywine are corporate affiliates and wholly
owned subsidiaries of Legg Mason, Inc.
5. Line of Credit:
The Fund, along with certain other Legg Mason Funds, participates in a
$200 million line of credit ("Credit Agreement") to be utilized as an
emergency source of cash in the event of unanticipated, large redemption
requests by shareholders. Pursuant to the Credit Agreement, each
participating Fund is liable only for principal and interest payments
related to borrowings made by that Fund. Borrowings under the Credit
28
<PAGE>
Notes to Financial Statements -- Continued
---------------------------------------------------------------------------
Agreement bear interest at prevailing short-term interest rates. For the
six months ended September 30, 2000, the Fund had no borrowings under the
Credit Agreement.
6. Fund Share Transactions:
At September 30, 2000, there were 250,000, 125,000, 50,000, and 125,000
shares authorized at $.001 par value for the Primary Classes of American
Leading Companies, Balanced Trust, U.S. Small-Cap and Financial Services,
respectively. At September 30, 2000, there were 125,000 shares authorized
at $.001 par value for Class A of Financial Services and there were 50,000
shares authorized at $.001 par value for the Navigator Class of U.S. Small-
Cap.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Share transactions were as follows:
Reinvestment
Sold of Distributions Repurchased Net Change
-------------------- ------------------ ------------------ -----------------------
Shares Amount Shares Amount Shares Amount Shares Amount
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Small-Cap
--Primary Class
Six Months Ended
September 30, 2000 665 $ 5,039 -- $ -- (1,721) $(12,967) (1,056) $ (7,928)
Year Ended March 31,
2000 4,100 35,126 318 2,663 (4,236) (34,180) 182 3,609
--Navigator Class
Six Months Ended
September 30, 2000 N.M. $ 2 -- $ -- N.M. $ (2) -- $ --
Year Ended March 31,
2000 2 20 -- -- (3) (24) (1) (4)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
N.M. -- Not meaningful.
29
<PAGE>
Legg Mason offers a wide range of mutual funds to meet investors' varying
financial needs and investment goals. The funds are listed below:
Equity Funds: Specialty Funds:
Value Trust Balanced Trust
Special Investment Trust Financial Services Fund
Total Return Trust Opportunity Trust
American Leading Companies
Trust
Classic Valuation Fund
Focus Trust
U.S. Small-Capitalization
Value Trust
Global Funds: Taxable Bond Funds:
Global Income Trust U.S. Government Intermediate-Term
Europe Fund Portfolio
International Equity Trust Investment Grade Income Portfolio
Emerging Markets Trust High Yield Portfolio
Tax-Free Bond Funds: Money Market Funds:
Tax-Free Intermediate-Term U.S. Government Money Market
Income Trust Portfolio
Maryland Tax-Free Income Trust Cash Reserve Trust
Pennsylvania Tax-Free Income Trust Tax Exempt Trust
For information on the specific risks, charges, and expenses associated with any
Legg Mason fund, please consult a Legg Mason Financial Advisor for a prospectus.
Read it carefully before investing or sending money.
[LOGO]
<PAGE>
Investment Manager
Legg Mason Fund Adviser, Inc.
Baltimore, MD
Investment Adviser
Brandywine Asset Management, Inc.
Wilmington, DE
Board of Directors
John F. Curley, Jr., Chairman
Edward A. Taber, III, President
Nelson A. Diaz
Richard G. Gilmore
Arnold L. Lehman
Dr. Jill E. McGovern
G. Peter O'Brien
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 . 539 . 0000
LMF-013
11/00
|
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