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Previous: LEGG MASON INVESTORS TRUST INC, NSAR-BT, EX-27, 2000-05-31 |
Next: TRANSTEXAS GAS CORP, S-1, 2000-05-31 |
<PAGE>
Annual Report
March 31, 2000
Legg Mason
Investors
Trust, Inc.
U.S. Small-Cap
Value Trust
Financial Services
Fund
Navigator Class
[LEGG MASON FUNDS LOGO]
The Art of Investing/SM/
<PAGE>
To Our Shareholders,
We are pleased to provide you with Legg Mason Investors Trust's annual report
for the Navigator Class of the U.S. Small-Capitalization Value Trust and the
Financial Services Fund.
The following table summarizes key statistics for the Navigator Class of
shares of each Fund, as of March 31, 2000:
<TABLE>
<CAPTION>
3-Month 12-Month
Total Return/1/ Total Return/1/
---------------- ----------------
<S> <C> <C>
U.S. Small-Capitalization Value Trust -6.06% -.15%
Financial Services Fund -2.21% N/A
S&P 500 Stock Composite Index +2.29% +17.94%
Russell 2000 Index +7.08% +37.29%
Lipper Financial Services Fund Index/2/ +.20% -5.39%
</TABLE>
On the following pages, the portfolio managers for each of the Funds discuss
the investment outlook for the Funds. Long-term investment results for each of
the Funds are shown in the Performance Information section of this report.
Ernst & Young LLP, independent auditors for the Funds, has completed its annual
audit, and audited financial statements for the fiscal year ended March 31,
2000, are included in this report.
Sincerely,
/s/ Edward A. Taber, III
------------------------
Edward A. Taber, III
President
April 26, 2000
--------------
/1/ Total return measures investment performance in terms of appreciation or
depreciation in net asset value per share plus dividends and any capital
gain distributions. It assumes that dividends and distributions were
reinvested at the time they were paid.
/2/ The Lipper Financial Services Fund Index is composed of approximately 10
funds whose primary objective is to invest 65% of their portfolios in equity
securities of companies engaged in providing financial services.
<PAGE>
Portfolio Managers' Comments
U.S. Small-Capitalization Value Trust
The past twelve months began with a large upswing in small-cap value
performance and ended with another, albeit smaller, gain. A year ago,
anticipation of a global economic recovery drove investors to smaller, more
cyclical stocks. In this environment, the Fund performed well on an absolute and
relative basis. However, growth and technology took over in the third quarter of
1999 and governed the market up until March.
For the fiscal year, the technology sector accounted for most of the
portfolio's underperformance versus most benchmarks. Our disciplined value
approach kept our portfolios underweighted in technology stocks given their
steep current valuations, yet investors have had a nearly insatiable appetite
for these stocks. Valuations in the Internet and related sectors have
skyrocketed at an unprecedented pace. Even when one tech group's stock momentum
slows with the realization that valuations have exceeded fundamentals, as with
Internet retailers in December, another technology sector becomes hot, such as
business-to-business Internet, semiconductors and Linux in the last six months.
During the year, the portfolio's health care investments were another major
source of poor relative performance versus the benchmarks. Revised reimbursement
regulations had a much harsher impact on our nursing home and elder care
holdings than expected.
For the quarter, the portfolio was down 6.1%, compared to gains of 3.8% for
the Russell 2000 Value, 7.1% for the Russell 2000 and 2.3% for the S&P 500.
U.S. equity markets were highly volatile in the first quarter, with large
swings in performance and market leadership. For most of the quarter, the same
narrow group of technology and biotechnology stocks that dominated the market in
1999 drove market performance. Investor optimism over these companies' ability
to reap large profits by pioneering new technologies and industries propelled
these stocks to extraordinary prices and valuations. Much of the strong
performance came from money-losing companies, such as in the Internet area,
which have not proven their viability but have generated tremendous expectations
of future success. Because of the uncertainty of companies with no profits, they
have historically been among the worst performers. Yet, they gained over 100%
from the beginning of 1999 through February 2000.
However, in mid-March, the high-flying market leaders of technology and
biotechnology experienced a sharp reversal in performance. Some high profile
disappointments among Internet companies such as drkoop.com, Cdnow and
MicroStrategy raised concerns that many more Internet firms may fall far short
of initial investor hopes. Even some growth managers, whose portfolios had
benefited greatly from the strong technology stock momentum, began to wonder
publicly if prices in this group had risen too far. At the same time, value
stocks rallied as investors began to recognize that traditional measures of
companies' value do matter, even in the era of the "New Economy." These stocks
had fallen to unprecedented discounts to the rest of the market, particularly in
the small-cap area, as investors had focused narrowly on tech and biotech.
The Fund's lagging performance in the first quarter was primarily the result
of our significant underweighting in technology and biotechnology versus both
the Russell 2000 and the Russell 2000 Value. Because of the excessive valuations
in these two areas, we reduced our already low weighting in these sectors. In
addition, we always exclude companies that are money-losers from the portfolio,
which also hurt performance versus the benchmarks. However, our portfolio
positioning aided perfor-
2
<PAGE>
Portfolio Managers' Comments -- Continued
U.S. Small-Capitalization Value Trust -- Continued
mance in March during the sharp decline in technology (off -17.2% in the Russell
2000 Value and -13.3% in the Russell 2000) and health care (down -17.2% in the
Russell 2000 Value and -28.8% in the Russell 2000). This positive relative
performance trend for the portfolio has continued in early April. On average, we
have gained approximately 19% versus the Russell 2000 and 4.5% versus the
Russell 2000 Value between February 29 and April 14.
The Russell small-cap benchmarks continue to be heavily dominated by stocks
that are not small-cap and, in the case of the value index, do not meet
traditional value criteria. This inconsistency arises because the Russell index
holdings are changed only once a year on June 30. The tech and biotech stocks
that achieved huge returns in 1999 and early 2000 have reached higher
capitalizations and valuations as well as a larger weight in the indices. If the
indices were rebalanced today, they would experience a large drop in the average
size of the companies as well as significant drop in average valuation,
particularly for the Russell 2000 Value Index.
March's reversal in market leadership put only a small dent in the huge
pricing gap between the undervalued stocks in the portfolio and expensive
valuations in the tech and biotech sectors. Our holdings are still priced at
extraordinarily low levels on an absolute basis and relative to the rest of the
U.S. stock market. Meanwhile, the popular sectors of the last eighteen months
are still priced at extreme multiples to revenues and earnings (in the few cases
where earnings exist) and remain supported by optimistic (though now declining)
expectations. As these companies disappoint investors, as many are bound to do
given the intense competition in every Internet market and the potentially long
wait for profits, investors will once again refocus on valuations. In this new
environment, our emphasis on undervalued securities has the potential to
generate strong portfolio returns.
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 Director Managing Director
April 18, 2000
DJIA 10767.40
3
<PAGE>
Portfolio Managers' Comments
Financial Services Fund
Although this letter is for the 2000 fiscal year end, it covers only the
three-month period from January 1, 2000 through March 31, 2000. When the Legg
Mason Financial Services Fund joined Investors Trust, Inc., the fiscal year end
changed from December 31 to March 31.
As you are well aware, our particular theme, financial services, has been out
of favor for the past 18 months. While we are disappointed with our performance,
we have never felt more positive about the fundamentals of the companies we own
in the Fund. Unfortunately, in today's market you are judged as much by what you
own as by what you don't own. We have heard the current market referred to as a
"stealth bear market" since more than 50% of stocks are selling at or near their
52-week lows. We have heard over and over again about the glory of the "new
economy" stocks versus the drabness of the "old economy" stocks. While we may
have wished we had owned some of these stocks over the past year, right now we
are very nervous. We feel there is going to be a large sell-off, as there has
been too much money made too quickly. The NASDAQ has doubled since April 1999.
People are not buying companies, they are buying stock symbols. Unfortunately,
none of these symbols represent companies with the term "Financial" in their
titles.
In the last two weeks of December the Fund had strong performance, rising 4%.
January and February brought about a reversal, with the Fund performing very
weakly. March began no better and the Fund reached its all-time low on March
14th. However, the last two weeks of March saw an incredible turnaround as we
had a 10% jump in performance. We feel that a contributing factor to this
performance was a news "leak" that some brokers and banking companies were going
to have stronger than expected first quarter earnings. For the period December
31, 1999 through March 31, 2000, the NavigatorClass of the Fund lost 2.2%. By
way of comparison with our benchmarks, the S&P Financials Index was up 2.3% and
the S&P 500 was up 2.3% in this period.
We have made changes in the portfolio. We have bought the large brokers, as
they are the main beneficiaries of the tech companies going public. Whether the
deal is successful after the first day of trading matters to the investor, but
the investment bank has already been paid. The first quarter is going to show
very strong earnings for broker/dealers. Despite a whole year and a half of
rising rates, the banks in the Fund are still reporting higher earnings. The
first quarter earnings for certain banks will be a strong surprise on the
upside.
Those of us who invest in financial stocks are still contending with Alan
Greenspan. We fear he may be pushing too hard on rates. We are now looking at a
9% prime. Mr. Greenspan has been quite vocal about too much economic growth and
perceived excesses in the stock market. He has made it clear that short-term
rates "are going up until the economy slows down." He is very concerned that
inflation (which is currently nonexistent) will suddenly become a problem.
Two questions remain: How long will it take for higher interest rates to have
the intended effect? And second, will the resultant slowdown turn into a
recession? It should be noted that most past recessions were a result of an
over-active Federal Reserve. We do not see a recession but feel the inverted
yield curve is signaling a slowdown in the economy in the second half of the
year. Financial
4
<PAGE>
Portfolio Managers' Comments -- Continued
Financial Services Fund -- Continued
stocks generally begin to perform better about three to six months before the
last rate hike. We are looking forward to much better performance starting in
the second quarter.
When you have this bifurcation between one group of stocks and another, it
doesn't last forever. One of two things must happen. Either the so-called "new
economy" stocks will correct back down to the value stocks, or value stocks will
have to move up to the levels of the "new economy" stocks. The latter could
happen if private capital starts to buy companies with depressed market values.
We have seen this happen before when price/earnings multiples have contracted,
while underlying business fundamentals have remained strong.
In conclusion, while our market performance since mid-1998 has not been up to
our usual standards as financial stocks fell out of favor, we remain confident
that the consistent earnings growth of our companies will turn this around.
Amy LaGuardia, CFA
Portfolio Manager
April 17, 2000
DJIA 10582.50
5
<PAGE>
Performance Information
Legg Mason Investors Trust, Inc.
Performance Comparison of a $50,000 Investment as of March 31, 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 a Fund's 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 following graphs compare each Fund's total returns against that of a
closely matched broad-based securities market index. The lines illustrate the
cumulative total return of an initial $50,000 investment for the periods
indicated. The line for each Fund represents the total return after deducting
all Fund investment management and other administrative expenses and the
transaction costs of buying and selling securities. The line representing
each securities market index does not include any transaction costs
associated with buying and selling securities in the index or other
administrative expenses. Both the LeggMason Funds' results and the indices'
results assume reinvestment of all dividends and distributions.
Each Fund has two authorized classes of shares: Primary Class and Navigator
Class. Financial Services Fund has an additional authorized class of
shares:Class A. Information about the Primary Class and Class A (Financial
Services), offered to retail investors, is contained in a separate report to
its shareholders.
U.S. Small-Cap Value Trust -- Navigator Class
Cumulative Average Annual
Total Return Total Return
-------------------------------------------------------------
One Year -.15% -.15%
Life of Class(dagger) -20.68% -12.18%
-------------------------------------------------------------
(dagger) Inception Date -- June 19, 1998
-------------------------------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
U.S. Small-Cap Value Trust Navigator Class Russell 2000 Index(1)
------------------------------------------ ---------------------
<S> <C> <C>
6/19/98 $50,000 $50,000
9/30/98 $39,869 $39,925
12/31/98 $44,002 $46,440
3/31/99 $39,718 $43,920
6/30/99 $48,229 $50,750
9/30/99 $42,870 $47,540
12/31/99 $42,220 $56,310
3/31/00 $39,660 $60,300
</TABLE>
6
<PAGE>
Performance Information -- Continued
Financial Services Fund -- Navigator Class
Cumulative Average Annual
Total Return Total Return
----------------------------------------------------------------
Life of Fund(dagger) +.22% N/A
----------------------------------------------------------------
(dagger) Inception Date -- October 7, 1999
----------------------------------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Financial Services Fund S&P 500 Composite S&P Financials Lipper Financial Services
Navigator Class Stock Index (2)(5) Index(2)(4) Fund Index(2)(3)
----------------------- ------------------ -------------- -------------------------
<S> <C> <C> <C> <C>
9/30/99 50,000 50,000 50,000 50,000
12/31/99 51,241 57,440 54,355 52,390
3/31/00 50,108 58,755 55,585 52,490
</TABLE>
--------------
(1) The Russell 2000 Index measures the performance of the 2,000 smallest
companies in the Russell 3000 Index, which represents approximately 11% of
the total market capitalization of the Russell 3000 Index. As of the latest
reconstitution, the average market capitalization was approximately $592
million; the median market capitalization was approximately $500 million.
The largest company in the index had an approximate market capitalization of
$1.403 billion. The return for this index is for the period beginning June
30, 1998.
(2) Index returns are for the periods beginning September 30, 1999.
(3) The Lipper Financial Services Fund Index is composed of approximately 10
funds whose primary objective is to invest 65% of their portfolios in equity
securities of companies engaged in providing financial services.
(4) The S&P Financials Index is a capitalization-weighted index of all stocks
designed to measure the performance of the financial sector of the Standard
& Poor's 500 Index.
(5) An unmanaged index of widely held common stocks.
7
<PAGE>
U.S. Small-Capitalization Value Trust
Selected Portfolio Performance*
Strong performers for the year ended March 31, 2000
---------------------------------------------------
1. Nu Horizons Electronics Corp. +436.2%
2. Applied Signal Technology, Inc. +174.1%
3. Pioneer-Standard Electronics, Inc. +140.0%
4. FTI Consulting, Inc. +130.6%
5. Suprema Specialties, Inc. +114.9%
6. Richardson Electronics, Ltd. +112.0%
7. Exponent, Inc. +95.6%
8. Cameron Ashley Building
Products, Inc. +89.0%
9. Adams Resources & Energy +85.2%
10. Advanta Corp. +83.6%
Weak performers for the year ended March 31, 2000
-------------------------------------------------
1. Rural/Metro Corporation -85.0%
2. The General Chemical Group, Inc. -83.8%
3. Southern Energy Homes, Inc. -76.7%
4. Resource Bancshares Mortgage
Group, Inc. -69.4%
5. ACX Technologies, Inc. -68.6%
6. InaCom Corp. -64.5%
7. Delta Financial Corporation -64.4%
8. R&B, Inc. -63.3%
9. Sierra Health Services, Inc. -62.0%
10. Pilgrim's Pride Corporation -61.6%
* Securities held for the entire year.
Portfolio Changes
Top 10 securities added during the 1st quarter 2000/+/
------------------------------------------------------
CKE Restaurants, Inc.
USFreightways Corporation
Furniture Brands International, Inc.
Briggs & Stratton Corporation
York International Corporation
Tecumseh Products Company
National Service Industries, Inc.
Tower Automotive, Inc.
IMCO Recycling Inc.
Dollar Thrifty Automotive Group, Inc.
/+/ Ranked using market values calculated as of March 31, 2000.
Top 10 securities sold during the 1st quarter 2000/++/
------------------------------------------------------
Omnicare, Inc.
Texas Industries, Inc.
AK Steel Holding Corporation
Seacor Smit Inc.
Pier 1 Imports, Inc.
ADVO, Inc.
Fremont General Corporation
Micro Warehouse, Inc.
Herbalife International, Inc.
Watts Industries, Inc.
/++/ Ranked using market values calculated as of December 31,1999.
8
<PAGE>
Performance Information -- Continued
Financial Services Fund
Selected Portfolio Performance
Strong performers for the period ended March 31, 2000
-----------------------------------------------------
1. Waddell & Reed Financial, Inc. +56.0%
2. Kohl's Corporation +42.0%
3. Medtronic, Inc. +41.2%
4. Jack Henry & Associates, Inc. +37.4%
5. National Bancorp of Alaska, Inc. +34.6%
6. Hooper Holmes, Inc. +33.2%
7. State Street Corporation +32.6%
8. Northern Trust Corporation +27.5%
9. Safeway Inc. +27.2%
10. Merrill Lynch & Co., Inc. +25.7%
Weak performers for the period ended March 31, 2000
---------------------------------------------------
1. First Security Corporation -53.0%
2. UnumProvident Corporation -47.0%
3. Cascade Bancorp -32.0%
4. Zions Bancorporation -29.7%
5. Synopsys, Inc. -27.0%
6. American General Corporation -26.0%
7. Johnson & Johnson -24.8%
8. Mid-State Bancshares -21.6%
9. SLM Holding Corporation -21.2%
10. Pacific Capital Bancorp -21.1%
Portfolio Changes
Securities added during the 1st quarter 2000
--------------------------------------------
AXA Financial, Inc.
Cintas Corporation
Citigroup Inc.
Elan Corporation plc
Lehman Brothers Holdings Inc.
Mercantile Bankshares Corporation
Morgan Stanley Dean Witter &Co.
Neuberger Berman Inc.
Solectron Corporation
Securities sold during the 1st quarter 2000
-------------------------------------------
Albertson's, Inc.
AmSouth Bancorporation
Centura Banks, Inc.
First Tennessee National Corporation
First Washington Bancorp, Inc.
FirstBank NW Corp.
Frontier Financial Corporation
Furniture Brands International, Inc.
Medical Assurance, Inc.
National City Corporation
Nationwide Financial Services, Inc.
Peoples Heritage Financial Group, Inc.
Ragen Mackenzie Group Incorporated
South Trust Corporation
The BISYS Group, Inc.
The Progressive Corporation
Transaction Systems Architects, Inc.
WestCoast Bancorp
Westamerica Bancorporation
9
<PAGE>
Statement of Net Assets
Legg Mason Investors Trust, Inc.
March 31, 2000
(Amounts in Thousands)
U.S. Small-Capitalization Value Trust
<TABLE>
<CAPTION>
Shares/Par Value
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks and Equity Interests -- 97.4%
Aerospace/Defense -- 1.5%
Alliant Techsystems Inc. 5 $ 277/A/
Aviation Sales Company 10 64/A/
AVTEAM, Inc. 8 27/A/
EDO Corporation 4 28
GenCorp Inc. 14 106
Herley Industries, Inc. 3 51/A/
International Airline Support Group, Inc. 2 6/A/
Kaman Corporation 17 161
Kellstrom Industries, Inc. 8 46/A/
Ladish Co., Inc. 9 58/A/
SIFCO Industries, Inc. 3 19
-------
843
-------
Apparel -- 3.8%
Bernard Chaus, Inc. 15 25/A/
Cache, Inc. 2 12/A/
Garan, Incorporated 4 93
Genesco Inc. 19 247/A/
Goody's Family Clothing, Inc. 25 152/A/
Hartmarx Corporation 4 11/A/
Kellwood Company 20 346
Maxwell Shoe Company Inc. 6 51/A/
Nautica Enterprises, Inc. 37 437/A/
One Price Clothing Stores, Inc. 7 24/A/
Oxford Industries, Inc. 6 111
Paul Harris Stores, Inc. 5 15/A/
Perry Ellis International, Inc. 4 37/A/
PremiumWear, Inc. 1 9/A/
S&K Famous Brands, Inc. 3 23/A/
Shoe Pavilion, Inc. 5 9/A/
Sport-Haley, Inc. 3 15/A/
Superior Uniform Group Inc. 1 13
Tandy Brands Accessories, Inc. 3 28/A/
The Cato Corporation 13 150
The Dress Barn, Inc. 17 318/A/
The Warnaco Group, Inc. 5 60
-------
2,186
-------
Automotive -- 3.3%
Arvin Industries, Inc. 17 387
Bandag, Incorporated 13 294
Bandag, Incorporated-Class A 4 82
</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>
Automotive (continued)
Barnes Group Inc. 13 $ 184
Collins Industries, Inc. 5 30
Donnelly Corporation 3 32
Dura Automotive Systems, Inc. 12 210/A/
Edelbrock Corporation 2 26
Featherlite Inc. 4 15/A/
Hayes Lemmerz International, Inc. 1 21/A/
Monaco Coach Corporation 6 115/A/
R&B, Inc. 6 17/A/
Riviera Tool Company 1 6/A/
Simpson Industries, Inc. 14 134
Strattec Security Corporation 2 79/A/
TBC Corporation 15 73/A/
Tower Automotive, Inc. 10 159/A/
-------
1,864
-------
Broadcast/Media -- 0.1%
Courier Corporation 2 35
-------
Chemicals -- 3.4%
A. Schulman, Inc. 19 253
Aceto Corporation 1 8
Albemarle Corporation 13 272
American Vanguard Corporation 1 9
Chemfab Corporation 1 9/A/
Ethyl Corporation 89 273
Hawkins Chemical, Inc. 3 25
International Specialty Products Inc. 22 142/A/
NL Industries, Inc. 39 506
Northern Technologies International Corporation 2 16
Omnova Solutions Inc. 13 75
Quaker Chemical Corporation 7 114
Stepan Company 7 158
Sybron Chemicals Inc. 4 55/A/
The General Chemical Group, Inc. 16 34
-------
1,949
-------
Commercial/Industrial Services -- 8.7%
Alternative Resources Corporation 5 12/A/
ASI Solutions Incorporated 4 18/A/
Avis Group Holdings, Inc. 22 386/A/
Ballantyne of Omaha, Inc. 3 9/A/
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial/Industrial Services (continued)
BCT International, Inc. 3 $ 6/A/
Bell Microproducts Inc. 7 114/A/
Billing Concepts Corp. 8 59/A/
Briggs & Stratton Corporation 5 193
Burns International Services Corporation 4 42
Business Resource Group 1 8/A/
Butler International, Inc. 7 84/A/
Butler Manufacturing Company 5 120
Cadmus Communications Corporation 5 42/A/
Cameron Ashley Building Products, Inc. 6 110/A/
Carriage Services, Inc. 11 44/A/
CDI Corp. 14 268/A/
Children's Comprehensive Services, Inc. 5 21/A/
Comfort Systems USA, Inc. 8 49/A/
Consolidated Graphics, Inc. 3 40/A/
Corrpro Companies 5 24/A/
Dollar Thrifty Automotive Group, Inc. 8 129/A/
Electro Rent Corporation 6 70/A/
Ellett Brothers, Inc. 5 30
Encompass Services Corporation 18 104/A/
Ennis Business Forms, Inc. 12 88
Exponent, Inc. 3 37/A/
FiberMark, Inc. 5 69/A/
Franklin Covey Co. 16 114/A/
FTI Consulting, Inc. 3 20/A/
General Employment Enterprises, Inc. 4 15
Gradco Systems, Inc. 5 11/A/
Headway Corporate Resources, Inc. 5 16/A/
Healthcare Services Group, Inc. 8 41/A/
Interstate National Dealer Services, Inc. 3 18/A/
Lawson Products, Inc. 6 138
Mail-Well, Inc. 17 145/A/
Mercury Air Group, Inc. 6 41/A/
Nash-Finch Company 5 42
National Equipment Services, Inc. 5 30/A/
National Technical Systems, Inc. 6 22
Nortek, Inc. 2 53/A/
Ogden Corporation 34 401
Perini Corporation 4 18/A/
Personal Group Of America, Inc. 20 122/A/
PrimeSource Corporation 4 19
Refac 3 10/A/
Robertson-Ceco Corporation 4 36/A/
</TABLE>
12
<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>
Commercial/Industrial Services (continued)
Rush Enterprises, Inc. 2 $ 10/A/
Service Corporation International 23 68
Sola International Inc. 5 31/A/
SOS Staffing Services, Inc. 10 42/A/
Staff Leasing, Inc. 15 87/A/
Star Buffet, Inc. 2 6/A/
Stewart Enterprises, Inc. 77 381
Tecumseh Products Company 4 180
The Standard Register Company 16 200
Thomas Group, Inc. 3 36/A/
URS Corporation 3 43/A/
USEC Inc. 3 12
Wallace Computer Services, Inc. 8 98
Westaff, Inc. 12 108/A/
York International Corporation 8 192
-------
4,982
-------
Computer Services and Systems -- 1.9%
ANSYS, Inc. 6 64/A/
Avant! Corporation 24 303/A/
CFI ProServices Inc. 2 16/A/
MTS Systems Corporation 11 85
NeoMagic Corporation 20 97/A/
Paravant Inc. 1 4/A/
PSC Inc. 9 50/A/
Savoir Technology Group, Inc. 9 61/A/
Software Spectrum, Inc. 3 59/A/
Structural Dynamics Research Corporation 25 331/A/
-------
1,070
-------
Construction and Building Materials -- 9.8%
American Homestar Corporation 14 23/A/
Ameron International Corporation 3 92
Aztec Manufacturing Co. 4 48
Baltek Corporation 1 4/A/
Beazer Homes USA, Inc. 6 114/A/
Building Materials Holding Corporation 9 78/A/
Cavalier Homes, Inc. 14 39
Centex Construction Products, Inc. 4 102
Champion Enterprises, Inc. 28 163/A/
Craftmade International, Inc. 3 18
D.R. Horton, Inc. 35 451
Dayton Superior Corporation 4 91/A/
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Construction and Building Materials (continued)
Del Webb Corporation 14 $ 207/A/
Dominion Homes, Inc. 4 22/A/
Drew Industries Incorporated 9 60/A/
Engle Homes, Inc. 8 79
Fleetwood Enterprises, Inc. 22 329
Homebase, Inc. 23 46/A/
Hovnanian Enterprises, Inc. 16 98/A/
Hughes Supply, Inc. 17 264
International Aluminum Corporation 2 36
JLK Direct Distribution Inc. 17 152/A/
M/I Schottenstein Homes, Inc. 6 95
McGrath Rentcorp 8 119
Meadow Valley Corporation 2 9/A/
Miller Building Systems, Inc. 2 8/A/
NCI Building Systems, Inc. 13 246/A/
Palm Harbor Homes, Inc. 12 177/A/
Patrick Industries, Inc. 4 27
Pulte Corporation 37 766
Republic Group Incorporated 7 80
Skyline Corporation 7 148
Southern Energy Homes, Inc. 9 11/A/
Standard Pacific Corp. 23 226
Terex Corporation 6 81/A/
The Ryland Group, Inc. 12 216
Toll Brothers, Inc. 25 498/A/
U.S. Home Corporation 10 361/A/
Washington Homes, Inc. 5 31/A/
-------
5,615
-------
Consumer Durables -- 2.8%
Boston Acoustics, Inc. 4 38
Catalina Lighting, Inc. 3 13/A/
Central Garden & Pet Company 21 208/A/
Chromcraft Revington, Inc. 8 61/A/
Cobra Electronics Corporation 3 20/A/
Congoleum Corporation 6 21/A/
Department 56, Inc. 12 182/A/
Fedders Corporation 20 112
Flexsteel Industries, Inc. 4 50
Furniture Brands International, Inc. 10 194/A/
Home Products International, Inc. 6 61/A/
Koss Corporation 2 32/A/
La-Z-Boy Incorporated 4 54
</TABLE>
14
<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>
Consumer Durables (continued)
Mikasa, Inc. 8 $ 57
Pulaski Furniture Corporation 2 39
Royal Appliance Mfg. Co. 3 17/A/
Russ Berrie and Company, Inc. 14 259
The First Years Inc. 2 14
The L. S. Starrett Company 4 99
The Rowe Companies 10 58
The York Group, Inc. 6 30
-------
1,619
-------
Consumer Non-Durables -- 0.5%
French Fragrances, Inc. 10 82/A/
Nature's Sunshine Products, Inc. 13 107
Ocular Sciences, Inc. 5 80/A/
Rural/Metro Corporation 11 13/A/
-------
282
-------
Diversified -- 0.7%
Bell Industries, Inc. 2 6
Esterline Technologies Corporation 4 47/A/
National Service Industries, Inc. 8 175
Pittston Brink's Group 7 119
The IT Group, Inc. 4 28/A/
-------
375
-------
Electrical Equipment and Electronics -- 2.2%
Acme Electric Corporation 3 17/A/
Axsys Technologies, Inc. 2 35/A/
Graham Corporation 1 8/A/
InaCom Corp. 31 85/A/
Nu Horizons Electronics Corp. 7 153/A/
Pioneer-Standard Electronics, Inc. 18 284
Printronix, Inc. 4 80/A/
Richardson Electronics, Ltd. 8 92
ScanSoft, Inc. 3 14/A/
The Lamson & Sessions Co. 8 56/A/
Triumph Group, Inc. 9 259/A/
UCAR International, Inc. 14 179/A/
-------
1,262
-------
Entertainment and Leisure -- 4.1%
Anchor Gaming 8 311/A/
Arctic Cat, Inc. 20 209
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Entertainment and Leisure (continued)
Black Hawk Gaming & Development Company, Inc. 3 $ 17/A/
Boyd Gaming Corporation 46 228/A/
Cannondale Corporation 2 10/A/
Dave & Busters, Inc. 9 80/A/
GTECH Holdings Corporation 25 471/A/
Johnson Outdoors Inc. 6 35/A/
K2 Inc. 12 98/A/
Lakes Gaming, Inc. 8 61/A/
Lodgian, Inc. 19 72/A/
MarineMax, Inc. 3 30/A/
PlayCore, Inc. 3 21/A/
Prime Hospitality Corp. 43 309/A/
Scientific Games Holdings Corp. 8 135/A/
Silverleaf Resorts, Inc. 3 12/A/
Suburban Lodges of America, Inc. 12 72/A/
Travis Boats & Motors, Inc. 1 18/A/
Winnebago Industries, Inc. 7 134
-------
2,323
-------
Financial Services -- 8.4%
Advanta Corp. 18 360
Alliance Bancorp of New England, Inc. 1 8
Amplicon, Inc. 6 66
Arcadia Financial Ltd. 28 141/A/
Bank United Corp. 2 57
BankAtlantic Bancorp, Inc. 30 118
Bay View Capital Corporation 13 100
BNC Mortgage, Inc. 4 34/A/
BSB Bancorp, Inc. 7 142
BYL Bancorp 2 18
Camco Financial Corporation 1 11
Community Bank System, Inc. 2 46
Conning Corporation 9 114
Corrus Bankshares, Inc. 11 260
Credit Acceptance Corporation 10 57/A/
Delta Financial Corporation 11 21/A/
Dime Community Bancshares 3 41
Downey Financial Corp. 12 247
DVI, Inc. 3 44/A/
Enhance Financial Services Group, Inc. 29 415
Fidelity National Financial, Inc. 23 320
First Alliance Corporation 14 30/A/
First Citizens Bancshares Inc. 6 339
First Essex Bancorp, Inc. 2 34
</TABLE>
16
<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>
Financial Services (continued)
First Republic Bank 3 $ 61/A/
FirstFed Financial Corp. 15 196/A/
Flagstar Bancorp, Inc. 9 122
GA Financial, Inc. 4 40
GBC Bancorp 2 46
Hamilton Bancorp Inc. 8 117/A/
Hawthorne Financial Corporation 4 30/A/
Interpool, Inc. 20 128
ISB Financial Corporation 5 63
ITLA Capital Corporation 5 63/A/
Jefferies Group, Inc. 6 142
MAF Bancorp, Inc. 5 79
Matrix Bancorp, Inc. 2 12/A/
Merchants Bancshares, Inc. 3 50
MetroWest Bank 4 23
National City Bancorporation 7 96/A/
Pacific Crest Capital, Inc. 2 21
Parkvale Financial Corporation 5 74
PFF Bancorp, Inc. 3 43
Resource Bancshares Mortgage Group, Inc. 17 67
Sterling Financial Corporation 6 61/A/
Sunrise International Leasing Corporation 5 26/A/
TFC Enterprises, Inc. 10 29/A/
Union Acceptance Corporation 1 5/A/
USBANCORP, Inc. 10 113
World Acceptance Corporation 14 71/A/
-------
4,801
-------
Food, Beverage and Tobacco -- 2.6%
Cagle's, Inc. 4 29
Fresh America Corporation 3 10/A/
General Cigar Holdings, Inc. 18 274/A/
International Multifoods Corporation 4 51
M&F Worldwide Corp. 15 64/A/
Marsh Supermarkets, Inc. 3 49
Michael Foods, Inc. 9 178
Natural Alternatives International, Inc. 4 9/A/
Pilgrim's Pride Corporation-Class A 4 19
Pilgrim's Pride Corporation-Class B 9 56
R.H. Phillips, Inc. 4 9/A/
Sanderson Farms, Inc. 6 49
Scheid Vineyards Inc. 4 15
Schweitzer-Mauduit International, Inc. 12 154
Standard Commercial Corporation 9 31
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Food, Beverage and Tobacco (continued)
Suprema Specialties, Inc. 1 $ 12/A/
Sylvan, Inc. 3 22/A/
Todhunter International, Inc. 2 16/A/
Universal Corporation 25 372
WLR Foods, Inc. 12 71/A/
-------
1,490
-------
Gas/Pipeline -- 0.7%
Adams Resources & Energy 3 29
EnergySouth, Inc. 3 50
Friede Goldman International Inc. 16 110/A/
Penn Virginia Corporation 6 108
Petroleum Development Corporation 5 21/A/
World Fuel Services Corporation 9 62
-------
380
-------
Health Care -- 2.8%
Alterra Healthcare Corporation 15 60/A/
American Dental Technologies, Inc. 5 10/A/
American Physicians Service Group, Inc. 2 5/A/
AmeriPath, Inc. 16 128/A/
Beverly Enterprises, Inc. 80 295/A/
Capital Senior Living Corporation 14 42/A/
Carematrix Corporation 12 16/A/
Castle Dental Centers, Inc. 5 12/A/
Coast Dental Services, Inc. 5 11/A/
Curative Health Services, Inc. 7 41/A/
Healthcare Recoveries, Inc. 7 23/A/
Hi-Tech Pharmacal Co., Inc. 2 12/A/
Horizon Health Corporation 4 23/A/
Lifemark Corporation 2 7/A/
Magellan Health Services, Inc. 7 32/A/
Mesa Laboratories, Inc. 2 7/A/
Monarch Dental Corporation 7 20/A/
Moore Medical Corporation 2 25/A/
OrthAlliance, Inc. 5 34/A/
Pediatrix Medical Group, Inc. 11 77/A/
Pharmaceutical Product Development, Inc. 17 285/A/
ProMedCo Management Company 16 39/A/
Radiologix, Inc. 15 78/A/
Raytel Medical Corporation 6 18/A/
RehabCare Group, Inc. 4 109/A/
Serologicals Corporation 15 80/A/
Sierra Health Services, Inc. 20 100/A/
</TABLE>
18
<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>
Health Care (continued)
Total Renal Care Holdings, Inc. 1 $ 3/A/
USANA, Inc. 2 8/A/
Utah Medical Products, Inc. 3 25/A/
-------
1,625
-------
Industrial -- 4.3%
ACX Technologies, Inc. 21 85/A/
American Biltrite, Inc. 3 33
Ampco-Pittsburgh Corporation 7 72
Bairnco Corporation 6 38
Baldwin Technology Company, Inc. 13 26/A/
Cascade Corporation 9 96
Channell Commercial Corporation 5 67/A/
Commercial Intertech Corp. 11 213
CPAC, Inc. 4 28
Detroit Diesel Corporation 9 180
Farrel Corporation 3 6
Gehl Company 4 64/A/
Gentek, Inc. 16 227
Holly Corporation 6 71
Lincoln Electric Holdings, Inc. 4 104
Lydall, Inc. 4 38/A/
Milacron Inc. 30 430
O.I. Corporation 2 8/A/
Regal-Beloit Corporation 13 231
Specialty Equipment Companies, Inc. 8 170/A/
Summa Industries 3 27/A/
Supreme Industries, Inc. 8 38/A/
TB Wood's Corporation 4 36
Tech/Ops Sevcon, Inc. 2 20
The Carbide/Graphite Group, Inc. 6 27/A/
Woodward Governor Company 4 96
-------
2,431
-------
Insurance -- 6.0%
AmerUs Life Holdings, Inc. 22 399
Atlantic American Corporation 1 4/A/
Bancinsurance Corporation 2 11/A/
Delphi Financial Group, Inc. 14 434/A/
Donegal Group Inc. 6 39
Harleysville Group Inc. 22 318
HCC Insurance Holdings, Inc. 2 22
Kaye Group Inc. 4 32
LandAmerica Financial Group, Inc. 9 180
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Insurance (continued)
Merchants Group, Inc. 1 $ 15
MMI Companies, Inc. 13 129
National Western Life Insurance Company 3 211/A/
Nymagic, Inc. 3 45
Penn Treaty American Corporation 6 95/A/
Philadelphia Consolidated Holding Corp. 3 38/A/
Professionals Group, Inc. 4 85/A/
Reliance Group Holdings, Inc. 16 54
Selective Insurance Group, Inc. 2 41
Standard Management Corporation 5 23/A/
State Auto Financial Corporation 3 24
Stewart Information Services Corporation 11 168
The Commerce Group, Inc. 26 770
The Midland Company 3 80
Trenwick Group Inc. 12 174
Unico American Corporation 4 20
-------
3,411
-------
Metals -- 4.0%
Alltrista Corporation 6 131/A/
Amcast Industrial Corporation 7 63
Atchison Casting Corporation 5 37/A/
Bayou Steel Corporation 9 27/A/
Carpenter Technology Corporation 17 354
Chase Industries, Inc. 11 96/A/
Commercial Metals Company 11 304
Fansteel Inc. 5 17/A/
Friedman Industries, Incorporated 5 18
IMCO Recycling Inc. 13 144
Intermet Corporation 20 182
Lindberg Corporation 4 22
Metals USA, Inc. 29 189
Myers Industries, Inc. 4 49
Niagara Corporation 5 24/A/
Northwest Pipe Company 4 62/A/
Oglebay Norton Company 3 71
Oregon Steel Mills, Inc. 5 21
Quanex Corporation 10 187
Roanoke Electric Steel Corporation 3 56
Shiloh Industries, Inc. 4 40/A/
Steel Technologies Inc. 8 60
Wolverine Tube, Inc. 10 131/A/
-------
2,285
-------
</TABLE>
20
<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>
Miscellaneous Manufacturing -- 7.6%
A.O. Smith Corporation 9 $ 160
Bacou USA, Inc. 8 130/A/
Buckeye Technologies Inc. 27 467/A/
CIRCOR International, Inc. 6 83/A/
Coachmen Industries Inc. 12 163
Columbus McKinnon Corporation 10 130
Cybex International, Inc. N.M. 1/A/
Denali Incorporated 3 10/A/
Griffon Corporation 23 181/A/
Hexcel Corporation 16 82/A/
Ivex Packaging Corporation 4 33/A/
Jason Incorporated 11 111/A/
Lennox International Inc. 8 70
Mark IV Industries, Inc. 1 29
MascoTech, Inc. 35 410
Met-Pro Corporation 2 20
Metrika Systems Corporation 4 36/A/
NACCO Industries, Inc. 6 292
NCH Corporation 2 109
OroAmerica, Inc. 4 24/A/
Park-Ohio Holdings Corp. 7 70/A/
Penn Engineering & Manufacturing Corp. 4 103
Penn Engineering & Manufacturing Corp.-Class A 4 94
Precision Castparts Corp. 17 624
Q.E.P. Co., Inc. 2 17/A/
Raven Industries, Inc. 4 39
SPS Technologies, Inc. 6 174/A/
Standard Motor Products, Inc. 9 134
Standex International Corporation 8 127
Sturm, Ruger & Company, Inc. 6 48
The Alpine Group, Inc. 3 27/A/
The Eastern Company 1 19
The JPM Company 4 29/A/
TransTechnology Corporation 4 48
Westinghouse Air Brake Company 23 243
-------
4,337
-------
Process Industries -- 0.7%
Rock-Tenn Company 22 213
Silgan Holdings Inc. 14 170/A/
The Anderson's Inc. 6 43
-------
426
-------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Real Estate -- 0.6%
AMREP Corporation 5 $ 29/A/
Bluegreen Corporation 17 56/A/
DeWolfe Companies, Inc. 2 16/A/
Saxton Incorporated 3 3/A/
Trammell Crow Company 21 233/A/
-------
337
-------
Restaurants -- 2.4%
Ark Restaurants Corp. 3 17/A/
CBRL Group, Inc. 2 18
CKE Restaurants, Inc. 39 245
Cooker Restaurant Corporation 6 17/A/
ELXSI Corporation 3 34/A/
Landry's Seafood Restaurants, Inc. 22 140/A/
Lone Star Steakhouse & Saloon, Inc. 24 243/A/
Luby's, Inc. 16 150
Main Street & Main Inc. 1 2/A/
Max & Erma's Restaurants, Inc. 2 14/A/
NPC International, Inc. 5 35/A/
Rainforest Cafe, Inc. 19 66/A/
Ryan's Family Steak Houses, Inc. 30 282/A/
Schlotzsky's, Inc. 5 31/A/
Sizzler International, Inc. 19 53/A/
-------
1,347
-------
Retail -- 3.6%
A.C. Moore Arts & Crafts, Inc. 5 38/A/
Barnett Inc. 12 134/A/
Brown Shoe Company, Inc. 4 44
Cole National Corporation 11 90
Duckwall-ALCO Stores, Inc. 4 29/A/
EZCORP, Inc. 7 29
Finlay Enterprises, Inc. 7 87/A/
Friedman's, Inc. 13 77
Funco, Inc. 3 39/A/
Hancock Fabrics, Inc. 4 11/A/
Jan Bell Marketing, Inc. 18 52/A/
Jos. A. Bank Clothiers, Inc. 4 15/A/
Media Arts Group, Inc. 9 63/A/
Michael Anthony Jewelers, Inc. 2 4/A/
Movie Gallery, Inc. 3 11
Movie Star, Inc. 9 9/A/
Musicland Stores Corporation 12 74/A/
</TABLE>
22
<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>
Retail (continued)
OfficeMax, Inc. 85 $ 551/A/
Piercing Pagoda, Inc. 3 43/A/
RDO Equipment Co. 8 44/A/
ShopKo Stores, Inc. 7 123/A/
Specialty Catalog Corp. 1 3/A/
Systemax, Inc. 25 226/A/
The Bon-Ton Stores, Inc. 12 35/A/
Tractor Supply Company 2 39/A/
Wilmar Industries, Inc. 10 169/A/
Wolohan Lumber Co. 3 34
-------
2,073
-------
Technology -- 0.6%
Del Global Technologies Corp. 5 45/A/
Equinox Systems, Inc. 2 15/A/
Hurco Companies, Inc. 4 15/A/
K-Tron International, Inc. 2 34/A/
Splash Technology Holdings, Inc. 11 131/A/
ThermoQuest Corporation 6 106/A/
-------
346
-------
Telecommunications -- 1.4%
Applied Signal Technology, Inc. 6 99
Blonder Tongue Laboratories, Inc. 6 41/A/
CellStar Corporation 51 409/A/
Comdial Corporation 5 66/A/
Generale Cable Corporation Delaware New 7 56
Superior TeleCom Inc. 10 123
-------
794
-------
Textiles -- 1.0%
Burlington Industries, Inc. 45 196/A/
Decorator Industries, Inc. 2 11
Interface, Inc. 41 173
Lakeland Industries, Inc. 1 4/A/
The Dixie Group, Inc. 9 40/A/
UniFirst Corporation 12 140
WestPoint Stevens Inc. 2 30
-------
594
-------
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Transportation -- 6.4%
Alaska Air Group, Inc. 6 $ 165/A/
Amerco 10 186/A/
America West Holdings Corporation 32 496/A/
Amtran, Inc. 2 30/A/
Arkansas Best Corporation 14 149/A/
Arnold Industries, Inc. 19 238
Boyd Bros. Transportation Inc. 2 12/A/
Consolidated Delivery & Logistics, Inc. 5 13/A/
Consolidated Freightways Corporation 17 100/A/
Covenant Transport, Inc. 11 178/A/
Dynamex Inc. 2 4/A/
Frozen Food Express Industries, Inc. 1 4
Genesee & Wyoming Inc. 3 45/A/
Hawaiian Airlines, Inc. 28 63/A/
Kitty Hawk, Inc. 12 58/A/
Landstar System, Inc. 3 164/A/
Midway Airlines Corporation 6 29/A/
Old Dominion Freight Line, Inc. 5 64/A/
P.A.M. Transportation Services, Inc. 6 63/A/
RailAmerica, Inc. 5 31/A/
RailWorks Corporation 3 29/A/
Roadway Express, Inc. 15 302
Smithway Motor Xpress Corp. 3 9/A/
The Greenbrier Companies, Inc. 11 84
Tower Air, Inc. 7 6/A/
Transport Corporation of America, Inc. 5 23/A/
U.S. Xpress Enterprises, Inc. 11 98/A/
USA Truck, Inc. 6 46/A/
USFreightways Corporation 5 202
Wisconsin Central Transportation Corporation 33 402/A/
Yellow Corporation 20 367/A/
-------
3,660
-------
Utilities -- 1.5%
Bangor Hydro-Electric Company 5 78
Maine Public Service Company 1 21
Public Service Company of New Mexico 32 502
RGS Energy Group, Inc. 12 264
-------
865
-------
Total Common Stocks and Equity Interests (Identified Cost -- $70,036) 55,607
---------------------------------------------------------------------------------------------------------
</TABLE>
24
<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>
Preferred Shares -- N.M.
O'Sullivan Industries Holdings, Inc. 3 $ 2
-------
Total Preferred Shares (Identified Cost -- $2) 2
---------------------------------------------------------------------------------------------------------
Repurchase Agreements -- 1.5%
Goldman, Sachs & Company
6.15%, dated 3/31/00, to be repurchased at $838 on
4/3/00 (Collateral: $950 Fannie Mae mortgage-
backed securities, 6%, due 10/1/29, value $869) $ 837 837
-------
Total Repurchase Agreements (Identified Cost -- $837) 837
---------------------------------------------------------------------------------------------------------
Total Investments -- 98.9% (Identified Cost -- $70,875) 56,446
Other Assets Less Liabilities -- 1.1% 631
-------
Net assets consisting of:
Accumulated paid-in capital applicable to:
7,657 PrimaryClass shares outstanding $ 72,744
4 Navigator Class shares outstanding 46
Distributions in excess of net realized gains on investments (1,284)
Unrealized appreciation/(depreciation) of investments (14,429)
--------
Net assets -- 100.0% $57,077
=======
Net asset value per share:
Primary Class $7.45
=====
Navigator Class $7.59
=====
---------------------------------------------------------------------------------------------------------
</TABLE>
/A/ Non-income producing.
N.M. - Not meaningful.
See notes to financial statements.
25
<PAGE>
Statement of Net Assets
Legg Mason Investors Trust, Inc.
March 31, 2000
(Amounts in Thousands)
<TABLE>
<CAPTION>
Financial Services Fund
Shares/Par Value
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks and Equity Interests -- 97.6%
Asset Management -- 3.8%
Neuberger Berman Inc. 13 $ 367
T. Rowe Price Associates, Inc. 14 533
Waddell & Reed Financial, Inc. 15 635
-------
1,535
-------
Brokerage Firms -- 5.4%
A.G. Edwards, Inc. 10 400
Lehman Brothers Holdings Inc. 3 291
Merrill Lynch & Co., Inc. 6 630
Morgan Stanley Dean Witter & Co. 5 408
Paine Webber Group Inc. 10 440
-------
2,169
-------
Diversified Financial -- 2.5%
AXA Financial, Inc. 10 359
Citigroup Inc. 11 652
-------
1,011
-------
Finance -- 1.7%
Financial Federal Corporation 20 364/A/
SLM Holding Corporation 10 316
-------
680
-------
Financial Technology Companies -- 3.6%
DST Systems, Inc. 7 422/A/
Fiserv, Inc. 13 484/A/
Jack Henry & Associates, Inc. 15 553
-------
1,459
-------
Insurance -- 8.7%
American General Corporation 7 382
American International Group, Inc. 4 479
Jefferson-Pilot Corporation 9 566
Lincoln National Corporation 11 368
Philadelphia Consolidated Holding Corp. 21 310/A/
Protective Life Corporation 14 444
ReliaStar Financial Corp. 12 393
StanCorp Financial Group, Inc. 15 411
UnumProvident Corporation 10 161
-------
3,514
-------
</TABLE>
26
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Investors Trust, Inc.
<TABLE>
<CAPTION>
Financial Services Fund -- Continued
Shares/Par Value
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Miscellaneous -- 22.1%
Cintas Corporation 11 $ 441
CVS Corporation 10 376
Elan Corporation plc 8 356/A/
Eli Lilly and Company 7 441
Guidant Corporation 8 441/A/
Hershey Foods Corporation 8 366
Hooper Holmes, Inc. 21 721
Johnson & Johnson 4 308
Kohl's Corporation 7 717/A/
MCI WorldCom, Inc. 8 363/A/
Medtronic, Inc. 12 617
Pfizer Inc. 13 461
Riviana Foods, Inc. 13 212
Safeway Inc. 9 398/A/
Target Corporation 6 456
The Home Depot, Inc. 10 645
The Kroger Co. 20 351/A/
Wal-Mart Stores, Inc. 9 499
Walgreen Co. 17 438
Wm. Wrigley Jr. Company 4 292
-------
8,899
-------
Regional Banks -- 29.4%
BancWest Corporation 15 291
BB&T Corporation 22 617
Cascade Bancorp 17 149
CCB Financial Corporation 7 288
Centennial Bancorp 36 345/A/
City National Corporation 15 505
Colorado Business Bankshares, Inc. 16 215
Comerica Incorporated 15 628
Commerce Bancshares, Inc. 12 377
Community First Bankshares, Inc. 13 208
Cullen/Frost Bankers, Inc. 13 344
Fifth Third Bancorp 12 756
First Security Corporation 30 360
Firstar Corporation 27 619
Greater Bay Bancorp 15 604
Marshall & Ilsley Corporation 11 635
Mercantile Bankshares Corporation 12 367
Mid-State Bancshares 20 500
Mississippi Valley Bancshares, Inc. 10 239
National Bancorp of Alaska, Inc. 9 321
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Regional Banks (continued)
North Fork Bancorporation, Inc. 30 $ 536
Old Kent Financial Corporation 14 452
Pacific Capital Bancorp 15 364
Pacific Century Financial Corporation 30 609
Seacoast Banking Corporation of Florida 10 246
Southwest Bancorporation of Texas, Inc. 15 291/A/
Texas Regional Bancshares, Inc. 22 560
Zions Bancorporation 10 416
-------
11,842
-------
Savings and Loan -- 3.4%
Harbor Florida Bancshares, Inc. 30 341
TCF Financial Corporation 22 524
Washington Mutual, Inc. 18 477
-------
1,342
-------
Super-Regional Banks -- 8.3%
Bank of America Corporation 6 315
Bank One Corporation 10 344
FleetBoston Financial Corporation 21 766
SunTrust Banks, Inc. 8 462
U.S. Bancorp 12 263
Wachovia Corporation 6 405
Wells Fargo Company 19 793
-------
3,348
-------
Technology -- 4.2%
Computer Sciences Corporation 6 435/A/
International Business Machines Corporation 5 590
Solectron Corporation 7 281/A/
Synopsys, Inc. 8 390/A/
-------
1,696
-------
Trust/Custody Banks -- 4.5%
Northern Trust Corporation 10 675
State Street Corporation 8 775
Wilmington Trust Corporation 8 365
-------
1,815
-------
Total Common Stock and Equity Interests (Identified Cost -- $38,806) 39,310
----------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Investors Trust, Inc.
<TABLE>
<CAPTION>
Financial Services Fund -- Continued
Shares/Par Value
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements -- 2.3%
State Street Corporation
3.50%, dated 3/31/00, to be repurchased at
$907 on 4/3/00 (Collateral: $915 Fannie Mae
mortgage-backed securities, 6.195%, due
12/27/00, value $926) $ 907 $ 907
-------
Total Repurchase Agreements (Identified Cost -- $907) 907
----------------------------------------------------------------------------------------------------------------------
Total Investments -- 99.9% (Identified Cost -- $39,713) 40,217
Other Assets Less Liabilities -- 0.1% 41
-------
Net assets consisting of:
Accumulated paid-in capital applicable to:
3,419 Primary Class shares outstanding $33,840
954 Class A shares outstanding 9,704
1 Navigator Class share outstanding 5
Accumulated net realized gain/(loss) on investments (3,795)
Unrealized appreciation/(depreciation) of investments 504
-------
Net assets -- 100.0% $40,258
=======
Net asset value per share:
Primary Class $9.18
=====
Navigator Class $9.29
=====
Net asset value and redemption price per share -- Class A $9.28
=====
----------------------------------------------------------------------------------------------------------------------
</TABLE>
/A/ Non-income producing.
See notes to financial statements.
29
<PAGE>
Statements of Operations
Legg Mason Investors Trust, Inc.
(Amounts in Thousands)
<TABLE>
<CAPTION>
U.S. Small-
Capitalization
Value Trust Financial Services Fund
-------------- -------------------------
3 Months
Year Ended Ended Year Ended
3/31/00 3/31/00/A/ 12/31/99/B/
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income:
Dividends $ 868 $ 160 $ 568
Interest 168 5 2
------- ------- -------
Total investment income 1,036 165 570
Expenses:
Management fee 607 88 376
Distribution and service fees 713 72 301
Transfer agent and shareholder servicing expense 80 8 29
Audit and legal fees 33 14 55
Custodian fee 172 20 80
Directors' fees 8 2 37
Organization expense 9 -- --
Registration fees 23 16 52
Reports to shareholders 32 6 13
Other expenses 2 1 14
------- ------- -------
1,679 227 957
Less fees waived (259) (44) (187)
------- ------- -------
Total expenses, net of waivers 1,420 183 770
------- ------- -------
Net Investment Income/(Loss) (384) (18) (200)
------- ------- -------
Net Realized and Unrealized Gain/(Loss) on Investments:
Realized gain/(loss) on investments 670 (2,380) (1,415)
Change in unrealized appreciation/(depreciation) of investments (2,521) 1,846 (2,359)
------- ------- -------
Net Realized and Unrealized Gain/(Loss) on Investments (1,851) (534) (3,774)
--------------------------------------------------------------------------------------------------------------------
Change in Net Assets Resulting From Operations $(2,235) $ (552) $(3,974)
--------------------------------------------------------------------------------------------------------------------
</TABLE>
/A/ The year end for Financial Services Fund changed from December 31 to
March 31.
/B/ Includes financial information for Legg Mason Financial Services Fund and
its predecessor, Bartlett Financial Services Fund (see Note 6).
See notes to financial statements.
30
<PAGE>
Statements of Changes in Net Assets
Legg Mason Investors Trust, Inc.
(Amounts in Thousands)
<TABLE>
<CAPTION>
U.S. Small-Capitalization
Value Trust Financial Services Fund
------------------------- -----------------------------------------
Year 6/15/98/A/ 3 Months Year 11/16/98/A/
Ended to Ended Ended to
3/31/00 3/31/99 3/31/00/B/ 12/31/99/C/ 12/31/98/D/
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Change in Net Assets:
Net investment income/(loss) $ (384) $ (171) $ (18) $ (200) $ (5)
Net realized gain/(loss) on investments 670 1,138 (2,380) (1,415) --
Change in unrealized appreciation/
(depreciation) of investments (2,521) (11,908) 1,846 (2,359) 1,017
----------------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations (2,235) (10,941) (552) (3,974) 1,012
Distributions to shareholders:
From net realized gain on
investments:
Primary Class (1,413) -- -- -- --
Class A NA NA -- -- --
Navigator Class (1) -- -- -- --
In excess of net realized gain on
investments:
Primary Class (1,283) -- -- -- --
Class A NA NA -- -- --
Navigator Class (1) -- -- -- --
Change in net assets from Fund
share transactions:
Primary Class 3,609 69,295 3,340 16,732 13,939
Class A NA NA (300) 2,958 7,097
Navigator Class (4) 50 -- 5 --
----------------------------------------------------------------------------------------------------------------------
Change in net assets (1,328) 58,404 2,488 15,721 22,048
Net Assets:
Beginning of period 58,405 1 37,770 22,049 1
----------------------------------------------------------------------------------------------------------------------
End of period $57,077 $ 58,405 $40,258 $37,770 $22,049
----------------------------------------------------------------------------------------------------------------------
Undistributed net investment income $ -- $ -- $ -- $ -- $ --
----------------------------------------------------------------------------------------------------------------------
</TABLE>
/A/ Commencement of operations.
/B/ The year end for Financial Services Fund changed from December 31 to
March 31.
/C/ Includes financial information for Legg Mason Financial Services Fund and
its predecessor, Bartlett Financial Services Fund (see Note 6).
/D/ The financial information for the period ended December 31, 1998, is for
the Bartlett Financial Services Fund, Legg Mason Financial Services
Fund's predecessor.
NA -- Not applicable.
See notes to financial statements.
31
<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 Total
of Period (Loss) Investments Operations Investments Investments Distributions
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Small-Capitalization Value Trust
Year Ended Mar. 31,
2000 $7.88 $.07/A/ $ (.05) $ .02 $(.16) $(.15) $(.31)
1999/B/ 9.92 .05/A/ (2.09) (2.04) -- -- --
Financial Services Fund
Three Months Ended
Mar. 31, 2000/E/ $9.50 $.01/G/ $ (.22) $ (.21) $ -- $ -- $ --
Period Ended
Dec. 31, 1999/F/ 9.27 .01/G/ .22 .23 -- -- --
-------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------------------------------------
Net
Net Asset Investment Net Assets,
Value, Expenses Income/(Loss) Portfolio End of
End of Total to Average to Average Turnover Period
Period Return Net Assets Net Assets Rate (in thousands)
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Small-Capitalization Value Trust
Year Ended Mar. 31,
2000 $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
Financial Services Fund
Three Months Ended
Mar. 31, 2000/E/ $9.29 (2.21)%/C/ 1.25%/D,G/ .64%/D,G/ 60.9%/D/ $ 5
Period Ended
Dec. 31, 1999/F/ 9.50 2.37%/C/ 1.25%/D,G/ .33%/D,G/ 27.1%/D/ 5
-------------------------------------------------------------------------------------------------------------------------------
</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 for the year
ended March 31, 2000, and for the period June 19, 1998 to March 31, 1999,
would have been 1.36% and 1.28%, respectively.
/B/ For the period June 19, 1998 (commencement of operations) to March 31,
1999.
/C/ Not annualized.
/D/ Annualized.
/E/ The year end for Financial Services Fund changed from December 31 to
March 31.
/F/ For the period October 7, 1999 (commencement of Sale of Navigator shares)
to December 31, 1999.
/G/ Net of fees waived pursuant to a voluntary expense limitation of 1.25%.
If no fees had been waived by LMFA, the annualized ratio of expenses to
average daily net assets for both the January 1 to March 31, 2000 period
and the October 7 to December 31, 1999 period would have been 1.67%.
See notes to financial statements.
32
<PAGE>
Notes to Financial Statements
Legg Mason Investors Trust, Inc.
(Amounts in Thousands)
------------------------------------------------------------------------------
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 Fund has an additional authorized class of
shares:Class A. The Navigator Class shares of American Leading Companies were
redeemed on December 3, 1998. 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. The income and expenses of each Fund are allocated
proportionately to each class of shares based on daily net assets, except for
Rule 12b-1 distribution fees, which are charged only on Primary Class and
Financial Services' Class A shares, and transfer agent and shareholder
servicing expenses, which are determined separately for each class.
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 is recorded on the ex-dividend date. Distributions to
shareholders are determined at the class level. Dividends from net investment
income, if available, will be paid annually for U.S. Small-Cap and Financial
Services. 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
accounting principles generally accepted in the United States; accordingly,
periodic reclassifications are made within the Fund's capital accounts to
reflect income and gains available for distribution under federal income tax
regulations.
33
<PAGE>
----------------------------------------------------------------------------
Security Transactions
Security transactions are recorded on the trade date. Realized gains and
losses from security transactions are reported on an identified cost basis
for both financial reporting and federal income tax purposes. At March 31,
2000, receivables for securities sold and payables for securities purchased
for each Fund were as follows:
Receivable for Payable for
Securities Sold Securities Purchased
----------------------------------------------------------------
U.S. Small-Cap $1,002 $435
Financial Services -- --
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 each
Fund intends to continue to qualify as a regulated investment company and
distribute substantially all of its taxable income to its shareholders.
Use of Estimates
Preparation of the financial statements in accordance with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results could differ from
those estimates.
2. Investment Transactions:
For the year ended March 31, 2000, investment transactions (excluding
short-term investments) were as follows:
Purchases Proceeds From Sales
----------------------------------------------------------------
U.S. Small-Cap $46,742 $44,652
Financial Services 7,575 5,481
At March 31, 2000, cost, gross unrealized appreciation and gross
unrealized depreciation for federal income tax purposes for each Fund were as
follows:
<TABLE>
<CAPTION>
Net
Appreciation/
Cost Appreciation Depreciation (Depreciation)
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Small-Cap $70,883 $3,319 $(17,756) $(14,437)
Financial Services 39,736 4,244 (3,763) 481
</TABLE>
At March 31, 2000, Financial Services had a capital loss carryforward for
federal income tax purposes of $3,772, which expires in 2008.
34
<PAGE>
Notes to Financial Statements -- Continued
Legg Mason Investors Trust, Inc.
(Amounts in Thousands)
----------------------------------------------------------------------------
3. Repurchase Agreements:
All repurchase agreements are fully collateralized by obligations issued
by the U.S. Government or its agencies, and such collateral is in the
possession of the Funds' custodian. The value of such collateral includes
accrued interest. Risks arise from the possible delay in recovery or
potential loss of rights in the collateral should the issuer of the
repurchase agreement fail financially. The Funds' investment advisers review
the value of the collateral and the creditworthiness of those banks and
dealers with which the Funds enter into repurchase agreements to evaluate
potential risks.
4. Transactions With Affiliates:
Each Fund has a management agreement with Legg Mason Fund Adviser, Inc.
("LMFA"). Pursuant to their respective agreements, LMFAprovides the Funds
with management and administrative services for which each Fund pays a fee,
computed daily and payable monthly, at an annual rate of each Fund's
respective average daily net assets.
LMFA has agreed to waive its fees in any month to the extent a Fund's
expenses (exclusive of taxes, interest, brokerage and extraordinary expenses)
exceed during that month certain annual rates of that Fund's average daily
net assets as shown in the following chart:
<TABLE>
<CAPTION>
Year Ended
March 31, 2000* At March 31, 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, 2000 $259 $ 8
Navigator Class 0.85% 1.00% July 31, 2000 N.M. N.M.
Financial Services
Primary Class 1.00% 2.25% May 1, 2000 29 13
Class A 1.00% 1.50% May 1, 2000 9 4
Navigator Class 1.00% 1.25% May 1, 2000 -- --
</TABLE>
--------------
*With respect to Financial Services, these figures are for the three months
ended March 31, 2000.
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.
Gray, Seifert & Co., Inc. serves as investment sub-adviser to Financial
Services pursuant to a Sub-Advisory Agreement which was approved by the Board
of Directors. Gray, Seifert is responsible for the actual investment activity
of the Fund. LMFA pays Gray, Seifert a fee, computed daily and payable
monthly, at the rate of 60% of the monthly fee actually paid to LMFA by
Financial Services under the Agreement, taking into account any fee waiver
arrangements in effect.
Legg Mason Wood Walker, Incorporated ("Legg Mason"), a member of the New
York Stock Exchange, serves as distributor of the Funds. Legg Mason receives
an annual distribution fee and an annual service fee
35
<PAGE>
------------------------------------------------------------------------------
based on each Fund's Primary Class's (and, with respect to Financial
Services, Class A's) average daily net assets, computed daily and payable
monthly as follows:
<TABLE>
<CAPTION>
Year Ended March 31, 2000* At March 31, 2000
-------------------------- ------------------------
Distribution Service Distribution and Service Distribution and Service
Fund Fee Fee Fees Waived Fees Payable
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Small-Cap 0.75% 0.25% $-- $49
Financial Services
Primary Class 0.75% 0.25% 3 23
Class A NA 0.25% 3 0
</TABLE>
--------------
*With respect to Financial Services, these figures are for the three months
ended March 31, 2000.
NA -- Not applicable.
No brokerage commissions were paid by the Funds to Legg Mason or its
affiliates during the year ended March 31, 2000.
Legg Mason has an agreement with the Funds' transfer agent to assist it
with some of its duties.
For this assistance, the transfer agent paid Legg Mason the following
amounts for the period ended March 31, 2000: U.S. Small-Cap, $25; and
Financial Services, $7.
LMFA, Legg Mason, Brandywine and Gray, Seifert &Co., Inc. are corporate
affiliates and wholly owned subsidiaries of Legg Mason, Inc.
5. Line of Credit:
The Funds, along with certain other Legg Mason Funds, participate in a
$200 million line of credit ("Credit Agreement") to be utilized as an
emergency source of cash in the event of unanticipated, large redemption
requests by shareholders. Pursuant to the Credit Agreement, each
participating Fund is liable only for principal and interest payments related
to borrowings made by that Fund. Borrowings under the Credit Agreement bear
interest at prevailing short-term interest rates. For the year ended March
31, 2000, the Funds had no borrowings under the Credit Agreement.
6. Acquisition of Bartlett Financial Services Fund:
Effective October 5, 1999, Financial Services acquired all of the assets
and assumed all of the liabilities of the Bartlett Financial Services Fund
("Bartlett Fund"), a series of Bartlett Capital Trust (an open-end management
company), pursuant to a plan of conversion and termination approved by
Bartlett Fund's shareholders on September 23, 1999. The shareholders of
Bartlett Fund received shares of Financial Services equal to the number and
aggregate net asset value (and corresponding class) of their shares in the
Bartlett Fund.
The acquisition was treated as a tax-free reorganization and accordingly,
any unrealized appreciation or depreciation on the securities on the date of
the acquisition was treated as a non-taxable event by the Bartlett Fund. As
such, Financial Services' basis in the securities acquired reflected their
historical cost basis as of the date of transfer. The net assets and net
unrealized depreciation of the Bartlett Fund as of October 5, 1999, were
$37,391 and $3,414, respectively.
36
<PAGE>
Notes to Financial Statements -- Continued
Legg Mason Investors Trust, Inc.
(Amounts in Thousands)
-----------------------------------------------------------------------------
The Bartlett Fund's investment objectives, policies and restrictions were
identical to those of Financial Services, which had no operations prior to
October 5, 1999. For financial reporting purposes, the Bartlett Fund's
operating history prior to the acquisition is reflected in the financial
statements and financial highlights of Financial Services.
7. Fund Share Transactions:
At March 31, 2000, there were 50,000 and 125,000 shares authorized at
$.001 par value for the Primary Classes of U.S. Small-Cap and Financial
Services, respectively. At March 31, 2000, there were 125,000 shares
authorized at $.001 par value for Class A of Financial Services and there
were 50,000 and 125,000 shares authorized at $.001 par value for the
Navigator Classes of U.S. Small-Cap and Financial Services, respectively.
Share transactions were as follows:
<TABLE>
<CAPTION>
Reinvestment
Sold of Distributions Repurchased Net Change
--------------- ---------------- ----------------- -----------------
Shares Amount Shares Amount Shares Amount Shares Amount
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Small-Cap
--Primary Class
Year Ended March 31, 2000 4,100 $35,126 318 $2,663 (4,236) $(34,180) 182 $ 3,609
Period Ended March 31, 1999/A/ 9,383 85,160 -- -- (1,909) (15,865) 7,474 69,295
--Navigator Class
Year Ended March 31, 2000 2 $ 20 -- $ -- (3) $ (24) (1) $ (4)
Period Ended March 31, 1999/B/ 5 50 -- -- -- -- 5 50
Financial Services Fund
--Primary Class
Period Ended March 31, 2000/C/ 666 $ 5,598 -- $ -- (262) $ (2,258) 404 $ 3,340
Year Ended December 31, 1999/D/ 2,363 23,769 -- -- (729) (7,037) 1,634 16,732
Period Ended December 31,
1998/E,F/ 1,388 14,009 -- -- (7) (70) 1,381 13,939
--Class A
Period Ended March 31, 2000/C/ 41 $ 364 -- $ -- (77) $ (664) (36) $ (300)
Year Ended December 31, 1999/D/ 492 4,979 -- -- (206) (2,021) 286 2,958
Period Ended December 31,
1998/E,F/ 706 7,112 -- -- (2) (15) 704 7,097
--Navigator Class
Period Ended March 31, 2000/C/ -- $ -- -- $ -- -- $ -- -- $ --
Period Ended December 31,
1999/D,G/ 1 5 -- -- -- -- 1 5
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
/A/ For the period June 15, 1998 (commencement of sale of Primary Class) to
March 31, 1999.
/B/ For the period June 19, 1998 (commencement of sale of Navigator Class)
to March 31, 1999.
/C/ For the period January 1, 2000 to March 31, 2000.
/D/ Includes financial information for Legg Mason Financial Services Fund
and its predecessor, Bartlett Financial Services Fund (see Note 6).
/E/ For the period November 16, 1998 to December 31, 1998.
/F/ The financial information for the period ended December 31, 1998, is for
the Bartlett Financial Services Fund , Legg Mason Financial Services
Fund's predecessor.
/G/ For the period October 7, 1999 to December 31,1999.
37
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
To the Shareholders and Board of Directors of Legg Mason Investors Trust, Inc.:
We have audited the accompanying statements of net assets of Legg Mason
Investors Trust, Inc. (U.S. Small-Capitalization Value Trust and Financial
Services Fund) (the "Funds") as of March 31, 2000, and the related statements of
operations, statements of changes in net assets, and financial highlights
(Navigator Class) for each of the periods presented therein with respect to the
U.S. Small-Capitalization Value Trust, and the statements of operations,
statements of changes in net assets and the financial highlights(Navigator
Class) for the period ended March 31, 2000, and the year ended December 31,
1999, with respect to the Financial Services Fund. These financial statements
and financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial statements of the
Financial Services Fund for the period November 16, 1998 (commencement of
operations) through December 31, 1998, were audited by other auditors whose
report datedFebruary 5, 1999, expressed an unqualified opinion on those
financial statements.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of March 31, 2000, by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds at March 31, 2000, the results of operations, the
changes in net assets, and financial highlights (Navigator Class) for each of
the periods presented therein with respect to the U.S. Small-Capitalization
Value Trust, and the results of operations, the changes in net assets, and
financial highlights (Navigator Class) for the period ended March 31, 2000, and
the year ended December 31, 1999, with respect to the Financial Services Fund,
in conformity with accounting principles generally accepted in the United
States.
/s/ Ernst & Young LLP
---------------------
Philadelphia, Pennsylvania
May 3, 2000
38
<PAGE>
[LEGG MASON FUNDS LOGO]
The Art of Investing/SM/
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, Inc. Market Neutral Trust
Special Investment Trust, Inc. Balanced Trust
Total Return Trust, Inc. Financial Services Fund
American Leading Companies Opportunity Trust
Trust
Classic Valuation Fund
Focus Trust, Inc.
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, Inc.
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.
<PAGE>
Investment Manager
Legg Mason Fund Adviser, Inc.
Baltimore, MD
Investment Advisers
For Financial Services Fund:
Legg Mason Fund Adviser, Inc.
Baltimore, MD
For U.S. Small-Cap Value Trust:
Brandywine Asset Management,Inc.
Wilmington, DE
Investment Sub-Adviser for Financial Services Fund
Gray, Seifert & Co., Inc.
New York, New York
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 o 539 o 0000
LMF-013
5/00
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