<PAGE>
Annual Report
March 31, 2000
Legg Mason
Investors
Trust, Inc.
American Leading
Companies Trust
Balanced Trust
U.S. Small-Cap
Value Trust
Financial Services
Fund
Primary Class and
Class A
[LEGG MASON FUNDS LOGO]
The Art of Investing/SM/
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To Our Shareholders,
We are pleased to provide you with Legg Mason Investors Trust's annual report
for the Primary Class of the American Leading Companies Trust, the Balanced
Trust and the U.S. Small-Capitalization Value Trust, and for the Primary Class
and Class A of the Financial Services Fund.
The following table summarizes key statistics for the Primary Class of shares
of each Fund, as of March 31, 2000:
3-Month 12-Month
Total Return/1/ Total Return/1/
--------------- ---------------
American Leading Companies Trust -2.30% -6.65%
Balanced Trust +3.30% +4.53%
U.S. Small-Capitalization Value Trust -6.29% -1.06%
Financial Services Fund
Primary Class -2.44% -7.65%
Class A -2.21% -6.83%
S&P 500 Stock Composite Index +2.29% +17.94%
Lehman Brothers Intermediate Government/
Corporate Bond Index +1.50% +2.09%
Lipper Balanced Fund Index/2/ +2.98% +10.45%
Russell 2000 Index +7.08% +37.29%
Lipper Financial Services Fund Index/3/ +.20% -5.39%
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.
- -----------------
/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 Balanced Fund Index is composed of approximately 30 funds whose
primary objective is to conserve principal by maintaining a balanced
portfolio of stocks and bonds with stock/bond ratio ranges of approximately
60%/40%.
/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.
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We hope you will consider using the Trust for investments of additional funds
as they become available. Some shareholders regularly add to their investment in
the Funds by authorizing automatic, monthly transfers from their bank checking
or Legg Mason accounts. Your Financial Advisor will be happy to help you make
these arrangements if you would like to purchase additional shares in this
convenient manner.
Sincerely,
/s/ Edward A. Taber, III
------------------------
Edward A. Taber, III
President
April 26, 2000
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Portfolio Managers' Comments
American Leading Companies Trust
Market Commentary
Webster's College Dictionary defines "mania" as "(1) excessive excitement or
enthusiasm; a craze; (2) a pathological state characterized by euphoric mood,
excessive activity and impaired judgment." We believe the market environment in
the first three months of 2000, and for much of the last year, exhibited all the
characteristics of a "mania" for nearly anything related to technology,
telecommunications and the Internet. "Excessive enthusiasm," "euphoric mood"
and "impaired judgment" have all been in evidence, in our opinion. The market
also exhibited schizophrenic behavior patterns as well, since there seemed to be
no price too high to pay for beneficiaries of the "new economy" and no price low
enough to invite interest in participants in the "old economy."
Ed Kerschner, Paine Webber's chief market strategist, highlights the disparity
in valuation between "old" and "new" economy stocks in a recent piece entitled
"New Economy: Yes, New Metrics: No" (March 12, 2000). In his commentary,
Kerschner measures the valuation of three groups of stocks: (1) "Old Old
Industrials": twenty companies from "smokestack" America, representing such
industries as paper, chemicals, metals, machinery and autos; (2) "Old New
Industrials": the twenty largest tech stocks in the S&P 500 that have been
public for at least five years; and (3) "New New Industrials": the twenty
largest tech stocks in the NASDAQ Composite, not in the S&P 500, and public for
less than five years. As of the date of his report, the "old old industrials"
traded at a price-to-earnings ratio (P/E) of 11x, while the "old new
industrials" traded at 54x, and the "new new industrials" traded at infinity,
since they have no earnings. In terms of sales, the "old old" traded at 0.6
times sales; the "old new" at 7.3x, and the "new new" at 85.7x.
The level of optimism built into the pricing of the "new new" industrials is
really quite staggering. Their prices are impossible to justify on any rational
economic basis. And yet, despite their otherworldly valuation levels, this
group of twenty stocks was up an average of 37% in the first three months of
2000, compared to a 16.8% gain in the "old new" industrial group and a 13.1%
decline in the "old old" industrial stocks. These trends were evident in the
broader market indexes in the quarter as well. The predominantly "new new"
NASDAQ 100 Index was up 18.6% in the quarter, while the predominantly "old new"
S&P 500 Index was up 2.3%, and the predominantly "old old" Dow Jones Industrials
was down 4.7%.
As we indicated in our last letter to shareholders and amplified above, the
market environment in the last twelve months was clearly a case of haves and
have nots. Portfolios overweighted in technology generally did well, while
those that were underweighted in tech struggled. The environment was also
unusual in the extent to which it rewarded aggressive behavior and punished
conservative behavior. As evidence, we cite the following statistics. For the
12 months ended March 31, 2000, the 102 stocks in the S&P 500 that pay no
dividend were up an average of 82.7%. The 398 stocks that pay dividends were up
1.1% on average. In even starker contrast, the 196 companies in the S&P 500
with a yield of 1% or less were up 63.4% on average, while those companies with
a yield of more than 1% were down 11.7%. Clearly dividends, which have
accounted for more than 40% of the total return of common stocks over the last
74 years, were an afterthought in the last 12 months. Even earnings seemed to
be of relatively limited interest last year. According to Merrill Lynch market
strategist Bob Farrell, from June 1999 through year end, stocks selling for more
than $10 with no earnings were up an average of 115%, while those with earnings
were up 14%.
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Portfolio Managers' Comments -- Continued
American Leading Companies Trust -- Continued
In summary, the winning strategy in the last twelve months was to be as
aggressive as possible, focusing on high P/E, non-dividend-paying technology
stocks. The more tech you owned, the better off you were. If you were
underweight in technology, you were dead. Recent developments in the market
strongly suggest to us that the investment environment is undergoing a radical
change of character, and that strategies that worked well last year will not
necessarily work going forward. We have more to say about the changing
environment in our market outlook.
Investment Results
Cumulative results for the American Leading Companies Trust for the three-
month, one-, three- and five-year periods ended March 31, 2000, are listed
below, along with those of some representative benchmarks:
3 Months 1 Year 3 Years 5 Years
-------- ------ ------- -------
American Leading Companies -2.30% -6.65% +50.83% +128.09%
S&P 500 Composite Index +2.29% +17.94% +106.77% +227.29%
Lipper Large-Cap Core Funds +4.11% +21.70% +101.02% +199.85%
Dow Jones Industrial Average -4.65% +13.39% +74.60% +189.61%
The Fund had a generally poor quarter, trailing the S&P 500 and the Lipper
Large-Cap Core Funds Index, but bettering the Dow Industrials for the three
months. One-year, three-year and five-year comparisons are also unfavorable.
As has been the case throughout the last twelve months, an underweighting in
the technology sector (which we regard as expensive) and an overweighted
position in financials and health care (which we regard as very attractively
priced) hurt performance in the latest three months. The Fund's prospectus-
mandated focus on established, dividend-paying companies was also a negative
contributor to performance, as the stocks of these companies substantially
underperformed non-dividend-paying, less seasoned issues. Your Fund manager's
preference for stocks selling at "reasonable" multiples of earnings was also a
handicap to performance, as high P/E stocks substantially outperformed their
lower P/E brethren. Finally, the portfolio's performance was hurt by a number
of poor stock selections, including Waste Management, Rite Aid Corporation and
Mattel. Waste Management remains a portfolio holding, but Rite Aid and Mattel
were sold at a loss during the year to offset gains taken in other securities,
including Amgen and Cisco Systems. Positive contributors to performance that
remained in the portfolio for the full twelve months included: Intel
Corporation, Koninklijke (Royal) Philips Electronics N.V., Hewlett-Packard
Company, General Electric Company, Citigroup Inc., IBM Corporation, Minnesota
Mining and Manufacturing Company, MGIC Investment Corporation, AMR Corporation
and Wal-Mart Stores, Inc. Laggards that remained in the portfolio for the full
year included: Conseco, Inc., Avon Products, Inc., Bank One Corporation,
Washington Mutual, Inc., Foundation Health Systems, Inc., Schering-Plough
Corporation, Burlington Northern Santa Fe Corporation, Sara Lee Corporation,
Bank of America Corporation and Johnson & Johnson.
A complete listing of new purchases and stocks eliminated from the portfolio
for the quarter is presented in another section of this report.
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Outlook
The NASDAQ Composite Index (our proxy for the "new economy") reached its peak
for the year to date on March 10, 2000. As of that date, according to Paine
Webber's Ed Kerschner, the NASDAQ was trading at more than 100 times earnings,
the highest multiple of earnings ever recorded by any major market index. Since
March 10, the NASDAQ has undergone its most severe correction in ten years and
the overall stock market picture has changed rather dramatically, as illustrated
below:
Percentage Price Change of Major Market Indices
-----------------------------------------------
12/31/99 3/10/00 12/31/99
to to to
3/10/00 4/14/00 4/14/00
-------- ------- -------
NASDAQ 100 Index +23.72% -30.07% -13.48%
NASDAQ Composite Index +24.10% -34.20% -18.35%
Russell 2000 Index +19.85% -24.76% -9.83%
S&P 500 Index -4.82% -2.62% -7.31%
Dow Jones Industrials -13.41% +3.91% -10.02%
As of March 10, the NASDAQ Composite was up over 24% for the year to date,
while the Dow was down over 13%. Since then, the Dow is up almost 4%, while the
NASDAQ is down 34%. We believe this reversal is very significant. We believe
it marks the peak of speculative activity in the NASDAQ and the beginning of a
return to a more balanced, and ultimately healthier, equity market. It is a not
widely recognized fact that the vast majority of stocks have been in a bear
market for nearly two years, and many are now selling at very reasonable prices
with favorable long-term outlooks. As those investors who have been mesmerized
by the "new new industrials" discover that those stocks can go down (sometimes
sharply) as well as up, we believe their interest in equities may broaden. They
may also come to have a heightened interest in companies with real earnings and
dividends.
As far as the overall stock market is concerned, we will be watching for
evidence of a reverse "wealth effect." Anecdotal evidence suggests that the
strong equity markets of the last few years have buoyed consumer spending. The
exact degree is uncertain, but research by the International Strategy and
Investment Group shows a strong correlation between the year-over-year change in
the NASDAQ Composite and year-over-year changes in consumer spending. It stands
to reason that the $2 trillion drop in the market valuation of U.S. equity
markets for the week ending April 14, 2000, may put a crimp in a few people's
spending plans.
We think the other key to the overall direction of the equity markets
continues to be interest rates. Prior to the latest market downdraft, we had
expected another 50 to 75 basis points/1/ of tightening by the Federal Reserve.
That still may be a reasonable bet, but it is also possible that the market
pullback may signal or even cause an economic slowdown, thus relieving the Fed
of the job of pushing up short rates much further. We think, at a minimum,
Chairman Greenspan will continue to move incrementally on the rate front.
- -----------
/1/100 basis points = 1%.
5
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Portfolio Managers' Comments -- Continued
American Leading Companies Trust -- Continued
One thing that seems certain is that the equity markets will continue to be
very volatile. At times such as these, we think it is particularly important to
maintain a balanced perspective and to have realistic expectations. Rather than
focusing on how fast they are going to make money (or make back losses), we
suggest that investors focus on what they actually own, and whether it meets
their long-term investment needs.
As always, we welcome your comments or questions.
David E. Nelson, CFA
April 17, 2000
DJIA 10582.50
6
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Portfolio Managers' Comments
Balanced Trust
Investment Results
Cumulative results for the Balanced Trust for the periods ended March 31,
2000, are listed below, along with those of some representative benchmarks:
Life
3 Months 1 Year of Class*
-------- ------ ---------
Balanced Trust +3.30% +4.53% +32.62%
Lipper Balanced Fund Index +2.98% +10.45% +64.06%
S&P 500 Stock Composite Index +2.29% +17.94% +130.00%
Lehman Intermediate Government/
Corporate Bond Index +1.50% +2.09% +22.10%
- ----------
*The Balanced Trust return is for the period October 1, 1996 (inception of the
Fund) to March 31, 2000. Index returns are for the period September 30, 1996 to
March 31, 2000.
Equities
While our equity performance improved nicely during the first quarter of 2000,
our full fiscal year results still lagged the S&P 500 Index by a substantial
margin. Until very recently, the equity market was paced almost exclusively by
technology companies. Though our companies generally delivered solid business
results throughout the last year, with excellent growth in earnings and cash
flow, many stocks underperformed as investors shunned value stocks in sectors
like manufacturing, financial services, and health care. The extremely "narrow"
market environment was very challenging for managers who believe in diversified
and value-based stock selection.
Our guiding principle as value investors is that stock prices parallel
business performance over the long run, so we are very encouraged by the
continued fundamental progress of our companies. First quarter earnings reports
have been solid, and many of our companies are following up with healthy
dividend increases and stock repurchase programs. We are hopeful that the
nascent shift in favor of high-quality companies and away from more speculative
"dot.com" stocks will continue, for such a change would favor our companies.
For most of the first quarter of 2000, we experienced a continuation of the
unusual market conditions that prevailed last year. Technology stocks soared,
while the rest of the market snored. The Wall Street Journal suggested that
investors were differentiating between "Old Economy" and "New Economy"
companies, and following the NASDAQ became a national pastime as this popular
technology-laden index rocketed to record highs. Like many value investors, we
found ourselves amazed by the popularity of unproven "dot.com" companies and the
corresponding indifference toward excellent companies with solid earnings
prospects.
The extreme market conditions allowed us to buy very good companies at
attractive prices during the quarter. We added to positions in Emerson Electric,
Johnson & Johnson and McDonald's as these fine companies were available at very
attractive relative valuations. We initiated a new position in CVS, a pharmacy
retailer whose stock price had collapsed apparently in response to the
disclosure of a financial scandal at Rite Aid. We felt this "guilt by
association" was unwarranted, and further believed that the Rite Aid problems
would allow for accelerated store expansion and market share
7
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Portfolio Managers' Comments -- Continued
Balanced Trust -- Continued
gains by CVS. In the technology sector, we added Dell Computer early in the year
after the stock had been buffeted by the highly publicized Y2K impact on
hardware spending. Following a severe 40% sell-off of Lucent Technologies, we
bought the stock. We concluded that the company was experiencing transitional
problems related to new product development, challenges that seemed very
manageable and unlikely to deter it from continued long-term growth as a
dominant telecommunications equipment supplier.
Companies eliminated from the portfolio during the quarter included AMR, GATX,
Kaydon, Post Properties, and Potash. We have a substantial overweighting in
financial services companies, so eliminating GATX was done largely to moderate
the interest rate sensitivity of the portfolio. We sold Post Properties for the
same reason, though we also feared they might experience excess capacity in some
of their markets, which would cause fundamental deterioration. AMR and Kaydon
were disappointments, and we were pleased to reallocate funds from those sales
to higher quality companies as opportunities developed.
The equities in the Fund turned in above-market performance during the latest
quarter, and this has continued so far in April. We certainly welcome the
nascent shift toward blue-chip firms and away from "dot.coms," as it seems that
arithmetic has supplanted optimism in the evaluation of companies. Value
investors were being fitted for dunce caps earlier this year, but the resurgence
of quality companies over more speculative fare has prompted a reassessment.
We continue to be guided by the conviction that stock prices ultimately
parallel business performance. We feel very comfortable with our diversified
portfolio of fine companies. They collectively show double-digit earnings and
dividend growth rates, high earnings predictability, excellent financial
strength and solid ROE. Yet they are currently valued -- using traditional
measurements like earnings and cash flow multiples -- at a considerable discount
to the S&P 500 Index. We feel confident that this diversified portfolio of fine
companies will perform very well over the long haul, both in absolute and
relative terms and on a risk-adjusted basis.
Fixed Income
During the twelve months ended March 31, 2000, the fixed income portion of the
Fund continued to outperform the market. This period was characterized by
rising interest rates and a flattening yield curve. Our outperformance can
primarily be attributed to favorable sector allocation. Specifically, the Fund
was overweight in mortgage-backed securities and Treasury Inflation Index Notes
(TIPS), which were among the best performing sectors of the fixed-income market,
and maintained an underweight position in intermediate corporate bonds, which
was one of the poorest performing sectors. Additionally, our foray into longer-
dated Treasury bonds in the first quarter of 2000 was additive to investment
performance as the market came to realize the bullish significance of a
reduction, and indeed possible elimination, of the longer-term bonds issued by
the U.S. government.
In our last report to shareholders dated December 31, 1999, we expressed the
view that U.S. Treasury bonds were extremely cheap at current levels and that
fundamentals were quite positive due to the fact that the U.S. Treasury had
announced its intention to buy back $30 billion of U.S. government debt via open
market purchases. Further, we felt that it was very likely that the next 12 to
18 months would produce a significant bond rally as a result of increased
allocations to the fixed income
8
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sector. Little did we know that this significant rally was right around the
corner and, during the past quarter, Treasury bonds with maturities in excess of
ten years embarked on a swift rally that left many institutional investors, who
were underweighted in Treasury securities, scrambling to readjust their
portfolios. For the quarter, the Lehman Intermediate Government/Corporate Index
posted a return of 1.5%, and longer-dated bonds produced returns approaching
double digits.
I am pleased to report that, for the most part, we got it right for the
quarter, as we had significant exposure to Treasury securities, both in long-
term Treasury coupon bonds (which we traded in and out of during the quarter)
and a significant exposure to zero coupon Treasury STRIPS, which we continue to
favor. These positions, coupled with a significant position in Treasury
Inflation Index bonds (TIPS), as well as underexposure to intermediate-to-long
term corporate bonds, were all additive to the Fund's returns for the quarter.
The only drag on performance was our exposure to mortgage pass-through
securities, which underperformed significantly during this period.
The debate about inflation rages on, with one camp believing that a sustained
pattern of continued Fed tightenings will be necessary to rein in the economy,
while the other camp believes that inflation will remain comparatively benign
and that economic growth, in and of itself, does not have any bearing on
inflation. Our inclination would be to belong to the latter camp and, although
bonds are no longer as undervalued as they were earlier in the year, we continue
to believe in a secular decline in interest rates that will persist for some
time. In addition, with speculation in the so-called "new economy" sectors of
the stock market at mania levels, it is quite possible that we could see a
flight to quality due to a significant correction in the stock market. To us,
the current market eerily resembles the conditions that existed in the third
quarter of 1987, when stocks were overvalued and the Federal Reserve was
vigorously tightening interest rates. We believe that the current inverted yield
curve is not attributable solely to the expectation of a reduced supply of long-
dated bonds, but rather is a classical late stage occurrence from unwarranted
Federal Reserve tightening of short-term interest rates, which becomes
increasingly discounted in the longer maturities of the bond market. We would
point out that historically, every inverted yield curve eventually has led to a
significant bond rally, and we believe that the current period will prove to be
no exception.
We are enthusiastic about the volatility that exists in the bond market, for
it is exactly this type of market condition that gives rise to opportunities due
to price dislocations resulting from this volatility. Whether or not we have our
bets placed correctly remains to be seen; however, we are finding very
compelling values in the mortgage securities market as, in most cases, these
securities are trading at wider spreads than were seen in the 1998 Long-Term
Capital debacle. In addition, there are two other anomalies that exist in the
market at present, one of which we believe is unwarranted while the other is
warranted.
Specifically, the yield spreads on government-sponsored enterprise debt
(Federal National Mortgage Association and Federal Home Loan Mortgage
Association) are trading at the widest spreads in more than a decade. This is a
result of recent legislation introduced in Congress that proposes to sever the
implicit government guarantee that Fannie Mae and Freddie Mac have enjoyed since
their creation. At issue is whether the agencies will be able to maintain their
AAA credit rating if this legislation is successful in cutting the umbilical
cord between the Treasury and the government agencies. At present, the debt of
these agencies is trading at spreads that are normally reflective of
9
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Portfolio Managers' Comments -- Continued
Balanced Trust -- Continued
single A or indeed even BBB credits, which is perceived to be quite attractive.
While it is anyone's guess as to what the government may do, we believe it is
unlikely that this legislation will pass in its present form and, if it is
successful at some point, it is unlikely it will take on the draconian effect of
a massive downgrade against agency securities. The other anomaly is that
corporate bonds are also trading at historically wide levels. In this instance,
we believe the market is more rational for two reasons: one, if the Federal
Reserve is successful in slowing down the economy either through tightening or
through inducing a stock market decline, the best earnings of the cycle will be
behind corporate issuers, which normally is an environment that leads to a
slowdown or recession, which is typically accompanied by widening corporate
spreads. In addition, reminiscent of the mid-eighties, we perceive there to be a
high degree of event risk in the corporate market due to the fact that many of
the major issuers of corporate debt are exactly the types of companies that will
be prone to mergers, takeovers and/or restructurings, all three of which are
seldom favorable to the bondholder. Accordingly, we will proceed with caution in
the corporate bond market.
At this point, we would characterize the overall bond market as fairly valued;
however, we believe that the undervaluation in the sectors mentioned previously
will allow our fixed income holdings to produce attractive total returns over
the next twelve months and, regardless of whether the Fed continues tightening
or not, that a year from now, we will see lower interest rates in general.
As always, we appreciate your continued support.
James B. Hagerty, CFA Dale H. Rabiner, CFA
Peter A. Sorrentino, CFA Fixed Income Portfolio Manager
Equity Portfolio Managers
April 17, 2000
DJIA 10582.50
10
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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 6.29%, 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-
11
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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
12
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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 PrimaryClass of the Fund lost 2.4%. By way
of comparison with our benchmarks, the S&P Financial 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
13
<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
14
<PAGE>
Performance Information
Legg Mason Investors Trust, Inc.
Performance Comparison of a $10,000 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 $10,000 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 for Financial
Services Fund Class Ashares reflects the maximum sales charge of 4.75% (the
return table shown with the respective graph provides information both
including and excluding the effect of the maximum sales charge). 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, and assumes 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 Navigator Class, offered only to
certain institutional investors, is contained in a separate report to its
shareholders.
American Leading Companies Trust -- Primary Class
-------------------------------------------------------------------
Cumulative Average Annual
Total Return Total Return
-------------------------------------------------------------------
One Year -6.65% -6.65%
Five Years +128.09% +17.93%
Life of Class(dagger) +135.42% +13.89%
-------------------------------------------------------------------
(dagger) Inception Date -- September 1, 1993
-------------------------------------------------------------------
[MOUNTAIN GRAPH APPEARS HERE -- SEE PLOT POINTS BELOW]
American Leading Companies Standard & Poor's 500
Trust Primary Class Stock Composite Index(1)
9/1/93 $10,000 $10,000
9,960 9,923
10,085 10,153
3/31/94 9,714 9,768
9,714 9,809
10,077 10,289
9,662 10,287
3/31/95 10,321 11,289
10,869 12,367
11,557 13,349
11,879 14,153
3/31/96 12,513 14,913
13,005 15,582
13,557 16,064
15,248 17,403
3/31/97 15,608 17,869
17,990 20,990
18,827 22,561
18,869 23,209
3/31/98 21,100 26,447
20,969 27,320
18,470 24,602
22,893 29,842
3/31/99 25,219 31,330
26,099 33,540
22,269 31,442
24,096 36,121
3/31/2000 23,542 36,949
15
<PAGE>
Performance Information -- Continued
Balanced Trust -- Primary Class
- --------------------------------------------------------------------
Cumulative Average Annual
Total Return Total Return
- --------------------------------------------------------------------
One Year +4.53% +4.53%
Life of Class(dagger) +32.62% +8.40%
- --------------------------------------------------------------------
(dagger) Inception Date -- October 1, 1996
- --------------------------------------------------------------------
[MOUNTAIN GRAPH APPEARS HERE -- SEE PLOT POINTS BELOW]
<TABLE>
<CAPTION>
Lehman Intermediate
Balanced Trust Lipper Balanced Standard & Poor's 500 Government/Corporate
Primary Class Fund Index(2) Stock Composite Index(1) Bond Index(3)
<S> <C> <C> <C> <C>
10/1/96 $10,000 $10,000 $10,000 $10,000
10,383 10,559 10,833 10,306
3/31/97 10,202 10,609 11,124 10,217
11,114 11,752 13,066 10,589
12,026 12,507 14,044 10,960
12,325 12,703 14,448 11,311
3/31/98 13,038 13,708 16,463 11,483
12,850 13,916 17,007 11,783
11,941 13,111 15,315 12,367
13,016 14,619 18,576 12,383
3/31/99 12,687 14,854 19,503 12,235
13,092 15,521 20,879 12,101
12,343 14,878 19,573 12,166
12,838 15,932 22,485 12,117
3/31/00 13,262 16,406 23,000 12,443
</TABLE>
U.S. Small-Cap Value Trust -- Primary Class
- ----------------------------------------------------------------------
Cumulative Average Annual
Total Return Total Return
- ----------------------------------------------------------------------
One Year -1.06% -1.06%
Life of Class(dagger) -22.73% -13.38%
- ----------------------------------------------------------------------
(dagger) Inception Date -- June 15, 1998
- ----------------------------------------------------------------------
[MOUNTAIN GRAPH APPEARS HERE -- SEE PLOT POINTS BELOW]
U.S. Small-Cap
Value Trust
Primary Class Russell 2000 Index(4)
6/15/98 $10,000
6/30/98 10,050 $10,000
9/30/98 7,880 7,985
12/31/98 8,680 9,288
3/31/99 7,810 8,784
6/30/99 9,459 10,150
9/30/99 8,395 9,508
12/31/99 8,246 11,262
3/31/00 7,727 12,060
16
<PAGE>
Financial Services Fund -- Primary Class
- -------------------------------------------------------------
Cumulative Average Annual
Total Return Total Return
- -------------------------------------------------------------
One Year -7.65% -7.65%
Life of Fund(dagger) -8.20 -6.04
- -------------------------------------------------------------
(dagger) Inception Date -- November 16, 1998
- -------------------------------------------------------------
[MOUNTAIN GRAPH APPEARS HERE -- SEE PLOT POINTS BELOW]
<TABLE>
<CAPTION>
Lipper Financial S&P 500
Financial Services Services Fund S&P Financials Composite Stock
Fund -- Primary Class Index(5)(6) Index(5)(7) Index(1)(5)
<S> <C> <C> <C> <C>
11/16/98 $10,000 $10,000 $10,000 $10,000
12/31/98 10,570 10,371 10,205 10,576
3/31/99 9,940 10,503 10,964 11,103
6/30/99 10,430 10,980 11,515 11,886
9/30/99 9,050 9,464 9,760 11,143
12/31/99 9,410 9,917 10,610 12,801
3/31/2000 9,180 9,936 10,850 13,094
</TABLE>
Financial Services Fund -- Class A
- --------------------------------------------------------------------------------
Cumulative Total Return Average Annual Total Return
- --------------------------------------------------------------------------------
One Year -6.83%* -11.28% -6.83%* -11.28%
Life of Fund(dagger) -7.20* -11.62 -5.30* -8.61
- --------------------------------------------------------------------------------
(dagger) Inception Date -- November 16, 1998
* This column reflects return information on Class A shares excluding the
maximum 4.75% sales charge. The second column in the table reflects
return information including the maximum sales charge.
- --------------------------------------------------------------------------------
[MOUNTAIN GRAPH APPEARS HERE -- SEE PLOT POINTS BELOW]
<TABLE>
<CAPTION>
Lipper Financial S&P 500
Financial Services Services Fund S&P Financials Composite Stock
Fund -- Class A(8) Index(5)(6) Index(5)(7) Index(1)(5)
<S> <C> <C> <C> <C>
11/16/98 $ 9,525 10,000 10,000 10,000
12/31/98 10,077 10,371 10,205 10,576
3/31/99 9,487 10,503 10,964 11,103
6/30/99 9,982 10,980 11,515 11,886
9/30/99 8,687 9,464 9,760 11,143
12/31/99 9,039 9,917 10,610 12,801
3/31/00 8,839 9,936 10,850 13,094
</TABLE>
17
<PAGE>
Performance Information -- Continued
- -------------------
(1) An unmanaged index of widely held common stocks.
(2) The Lipper Balanced Fund Index is composed of approximately 30 funds whose
primary objective is to conserve principal by maintaining a balanced
portfolio of stocks and bonds with stock/bond ratio ranges of approximately
60%/40%.
(3) The Lehman Intermediate Government/Corporate Bond Index includes government
and corporate bond securities, including U.S. Government Treasury and agency
securities, corporate and Yankee bonds. The index returns are market value
weighted, inclusive of accrued interest, and include bonds with maturities
between 1 and 10 years. The return for this Index is for the period
beginning September 30, 1996.
(4) 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.
(5) Index returns are for the periods beginning November 30, 1998.
(6) 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.
(7) 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.
(8) This performance graph reflects the maximum 4.75% sales charge.
18
<PAGE>
American Leading Companies Trust
Selected Portfolio Performance*
<TABLE>
<CAPTION>
Strong performers for the year ended March 31, 2000 Weak performers for the year ended March 31, 2000
--------------------------------------------------- -------------------------------------------------
<S> <C> <S> <C>
1. Intel Corporation +122.0% 1. Conseco, Inc. -63.0%
2. Koninklijke (Royal)Philips 2. Avon Products, Inc. -38.3%
Electronics N.V. +101.2% 3. Bank One Corporation -37.6%
3. Hewlett-PackardCompany +95.5% 4. Washington Mutual, Inc. -35.2%
4. General Electric Company +40.3% 5. Foundation Health Systems, Inc. -34.4%
5. Citigroup Inc. +39.3% 6. Schering-Plough Corporation -33.6%
6. International Business Machines 7. Burlington Northern Santa Fe
Corporation +33.2% Corporation -32.7%
7. Minnesota Mining and 8. Sara Lee Corporation -27.3%
Manufacturing Company (3M) +25.2% 9. Bank of America Corporation -25.8%
8. MGIC Investment Corporation +24.4% 10. Johnson & Johnson -25.2%
9. AMR Corporation +21.7%
10. Wal-Mart Stores, Inc. +20.4%
</TABLE>
* Securities held for the entire year.
Portfolio Changes
<TABLE>
<CAPTION>
Securities added during the 1st quarter 2000 Securities sold during the 1st quarter 2000
--------------------------------------------------- -------------------------------------------------
<S> <C>
Aetna Inc. American International Group, Inc.
Berkshire Hathaway Inc. - Class A Amgen Inc.
Lloyds TSB Group plc Bell Atlantic Corp.
Sabre Holdings Corporation Exxon Mobil Corporation
The TJX Companies, Inc. First Union Corporation
GTE Corp.
Lucent Technologies, Inc.
Mattel, Inc.
Saks Incorporated
Storage Technology Corporation
The Procter & Gamble Company
</TABLE>
19
<PAGE>
Performance Information -- Continued
Balanced Trust
Selected Portfolio Performance*
<TABLE>
<CAPTION>
Strong performers for the year ended March 31, 2000 Weak performers for the year ended March 31, 2000
--------------------------------------------------- -------------------------------------------------
<S> <C> <S> <C>
1. BroadWing Inc.** +65.7% 1. Union Pacific Corporation -26.8%
2. Kansas City Southern Industries, Inc. +50.8% 2. Abbott Laboratories -24.8%
3. Dover Corporation +45.6% 3. Charter One Financial, Inc. -24.0%
4. Time Warner, Inc. +40.7% 4. Ford Motor Company -19.1%
5. Citigroup Inc. +39.3% 5. Fannie Mae -19.0%
6. Tyco International Ltd. +39.0% 6. Anheuser-Busch Companies, Inc. -18.3%
7. AT&T Corp. +5.7% 7. McDonald's Corporation -17.1%
8. Marshall & Ilsley Corporation +4.2% 8. Martin Marietta Materials, Inc. -16.8%
9. United States Treasury STRIPS 9. Mellon Financial Corporation -16.2%
0.00%, 8/15/05 -0.3% 10. Chateau Communities,Inc. -7.3%
10. United States Treasury Notes
3.625%, 1/15/08 -0.3%
</TABLE>
* Securities held for the entire year.
** Formerly known as Cincinnati Bell.
Portfolio Changes
<TABLE>
<CAPTION>
Securities added during the 1st quarter 2000 Securities sold during the 1st quarter 2000
--------------------------------------------------- -------------------------------------------------
<S> <C>
CVS Corporation AMR Corporation
Dell Computer Corporation Compaq Computers Corporation
Emerson Electric Co. Fannie Mae 5.60%, 2/2/01
Fannie Mae 6.77%, 9/1/05 Fannie Mae 7.37%, 4/1/04
Fannie Mae 7.25%, 1/15/10 Fannie Mae 6.00%, 12/1/25-9/1/28
Government National Mortgage Association GATX Corporation
8.00%, 2/15/30 Government National Mortgage Association
Lucent Technologies Inc. 6.00%, 9/15/28-12/15/28
Microsoft Corporation Kaydon Corporation
Texaco Inc. Potash Corporation of Saskatchewan, Inc.
United States Treasury Notes United States Treasury Notes
6.625%, 3/31/02 5.625%, 5/15/01
United States Treasury Notes United States Treasury Notes
6.50%, 5/31/05-10/15/06 6.50%, 5/31/01
United States Treasury Notes United States Treasury Notes
6.00%, 8/15/09 6.25%, 6/30/02-7/15/02
United States Treasury STRIPS United States Treasury Notes
0.00%, 11/15/05-5/15/06 5.25%, 8/15/03
United States Treasury Notes
5.50%, 2/15/08
United States Treasury STRIPS
0.00%, 5/15/00-2/15/05
</TABLE>
20
<PAGE>
U.S. Small-Capitalization Value Trust
Selected Portfolio Performance*
<TABLE>
<CAPTION>
Strong performers for the year ended March 31, 2000 Weak performers for the year ended March 31, 2000
--------------------------------------------------- -------------------------------------------------
<S> <C> <S> <C>
1. Nu Horizons Electronics Corp. +436.2% 1. Rural/Metro Corporation -85.0%
2. Applied Signal Technology, Inc. +174.1% 2. The General Chemical Group, Inc. -83.8%
3. Pioneer-Standard Electronics, Inc. +140.0% 3. Southern Energy Homes, Inc. -76.7%
4. FTI Consulting, Inc. +130.6% 4. Resource Bancshares Mortgage
5. Suprema Specialties, Inc. +114.9% Group, Inc. -69.4%
6. Richardson Electronics, Ltd. +112.0% 5. ACX Technologies, Inc. -68.6%
7. Exponent, Inc. +95.6% 6. InaCom Corp. -64.5%
8. Cameron Ashley Building 7. Delta Financial Corporation -64.4%
Products, Inc. +89.0% 8. R&B, Inc. -63.3%
9. Adams Resources &Energy +85.2% 9. Sierra Health Services, Inc. -62.0%
10. Advanta Corp. +83.6% 10. Pilgrim's Pride Corporation -61.6%
</TABLE>
* Securities held for the entire year.
Portfolio Changes
<TABLE>
<CAPTION>
Top 10 securities added during the 1st quarter 2000(dagger) Top 10 securities sold during the 1st quarter 2000(doubledagger)
----------------------------------------------------------- ----------------------------------------------------------------
<S> <C>
CKE Restaurants, Inc. Omnicare, Inc.
USFreightways Corporation Texas Industries, Inc.
Furniture Brands International, Inc. AK Steel Holding Corporation
Briggs & Stratton Corporation Seacor Smit Inc.
York International Corporation Pier 1 Imports, Inc.
Tecumseh Products Company ADVO, Inc.
National Service Industries, Inc. Fremont General Corporation
Tower Automotive, Inc. Micro Warehouse, Inc.
IMCO Recycling Inc. Herbalife International, Inc.
Dollar Thrifty Automotive Group, Inc. Watts Industries, Inc.
</TABLE>
(dagger) Ranked using market values calculated as of March 31, 2000.
(doubledagger) Ranked using market values calculated as of December 31,1999.
21
<PAGE>
Performance Information -- Continued
Financial Services Fund
Selected Portfolio Performance
<TABLE>
<CAPTION>
Strong performers for the period ended March 31, 2000 Weak performers for the period ended March 31, 2000
----------------------------------------------------- ---------------------------------------------------
<S> <C> <S> <C>
1. Waddell & Reed Financial, Inc. +56.0% 1. First Security Corporation -53.0%
2. Kohl's Corporation +42.0% 2. UnumProvident Corporation -47.0%
3. Medtronic, Inc. +41.2% 3. Cascade Bancorp -32.0%
4. Jack Henry & Associates, Inc. +37.4% 4. Zions Bancorporation -29.7%
5. National Bancorp of Alaska, Inc. +34.6% 5. Synopsys, Inc. -27.0%
6. Hooper Holmes, Inc. +33.2% 6. American General Corporation -26.0%
7. State Street Corporation +32.6% 7. Johnson & Johnson -24.8%
8. Northern Trust Corporation +27.5% 8. Mid-State Bancshares -21.6%
9. Safeway Inc. +27.2% 9. SLM Holding Corporation -21.2%
10. Merrill Lynch & Co., Inc. +25.7% 10. Pacific Capital Bancorp -21.1%
</TABLE>
Portfolio Changes
<TABLE>
<CAPTION>
Securities added during the 1st quarter 2000 Securities sold during the 1st quarter 2000
----------------------------------------------------- ---------------------------------------------------
<S> <C>
AXA Financial, Inc. Albertson's, Inc.
Cintas Corporation AmSouth Bancorporation
Citigroup Inc. Centura Banks, Inc.
Elan Corporation plc First Tennessee National Corporation
Lehman Brothers Holdings Inc. First Washington Bancorp, Inc.
Mercantile Bankshares Corporation FirstBank NW Corp.
Morgan Stanley Dean Witter & Co. Frontier Financial Corporation
Neuberger Berman Inc. Furniture Brands International, Inc.
Solectron Corporation 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.
West Coast Bancorp
Westamerica Bancorporation
</TABLE>
22
<PAGE>
Statement of Net Assets
Legg Mason Investors Trust, Inc.
March 31, 2000
(Amounts in Thousands)
American Leading Companies Trust
<TABLE>
<CAPTION>
Shares/Par Value
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks and Equity Interests -- 99.3%
Airlines--0.8%
AMR Corporation 78 $ 2,486/A/
--------
Automobiles--3.1%
Ford Motor Company 65 2,986
General Motors Corporation 75 6,211
--------
9,197
--------
Banks (International)--2.3%
Lloyds TSB Group plc 640 6,766
--------
Banks (Major Regional)--3.7%
Bank One Corporation 256 8,800
Mellon Financial Corporation 78 2,301
--------
11,101
--------
Banks (Money Center)--5.6%
Bank of America Corporation 99 5,191
The Chase Manhattan Corporation 133 11,596
--------
16,787
--------
Computers (Hardware)--9.5%
Dell Computer Corporation 30 1,618/A/
Gateway, Inc. 180 9,540/A/
Hewlett-Packard Company 28 3,712
International Business Machines Corporation 115 13,570
--------
28,440
--------
Computers (Software and Services)--9.0%
America Online, Inc. 210 14,122/A/
Microsoft Corporation 70 7,437/A/
Unisys Corporation 203 5,164/A/
--------
26,723
--------
Consumer Finance--3.7%
Berkshire Hathaway Inc.- Class B 6 10,920/A/
--------
Distributors (Food and Health)--1.4%
McKesson HBOC, Inc. 200 4,200
--------
Electrical Equipment--5.5%
General Electric Company 30 4,656
Koninklijke (Royal) Philips Electronics N.V. 69 11,821
--------
16,477
--------
</TABLE>
23
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Investors Trust, Inc.
American Leading Companies Trust -- Contined
<TABLE>
<CAPTION>
Shares/Par Value
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Electronics (Semiconductors)--3.7%
Intel Corporation 84 $ 11,082
--------
Financial (Diversified)--8.8%
Citigroup Inc. 246 14,591
Equity Office Properties Trust 62 1,563
Fannie Mae 90 5,079
Starwood Hotels & Resorts Worldwide, Inc. 185 4,856
--------
26,089
--------
Foods--0.5%
Sara Lee Corporation 80 1,440
--------
Health Care (Diversified)--2.5%
Bristol-Myers Squibb Company 85 4,909
Johnson & Johnson 35 2,452
--------
7,361
--------
Health Care (Drugs/Major Pharmaceuticals)--2.6%
Merck & Co., Inc. 78 4,846
Schering-Plough Corporation 80 2,940
--------
7,786
--------
Health Care (Managed Care)--6.1%
Aetna Inc. 40 2,227
Foundation Health Systems, Inc. 650 5,200/A/
United HealthCare Corporation 180 10,732
--------
18,159
--------
Household Products (Non-Durables)--0.9%
Kimberly-Clark Corporation 50 2,800
--------
Insurance (Life/Health)--1.0%
Conseco, Inc. 270 3,088
--------
Insurance (Property/Casualty)--3.1%
Berkshire Hathaway Inc.-Class A .02 1,144/A/
MGIC Investment Corporation 188 8,215
--------
9,359
--------
Manufacturing (Diversified)--1.0%
Minnesota Mining and Manufacturing Company (3M) 33 2,923
--------
Personal Care--1.6%
Avon Products, Inc. 160 4,650
--------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Photography/Imaging--0.9%
Eastman Kodak Company 50 $ 2,716
--------
Railroads--0.9%
Burlington Northern Santa Fe Corporation 120 2,655
--------
Retail (General Merchandise)--1.3%
Wal-Mart Stores, Inc. 70 3,885
--------
Retail (Home Shopping)--1.4%
Amazon.com, Inc. 60 4,020/A/
--------
Retail (Speciality)--1.4%
Toys "R" Us, Inc. 273 4,044/A/
--------
Retail (Specialty-Apparel)--2.0%
The TJX Companies, Inc. 263 5,824
--------
Retail Stores (Food Chains)--0.9%
Albertson's, Inc. 90 2,790
--------
Savings and Loan Companies--2.9%
Washington Mutual, Inc. 327 8,665
--------
Services (Computer Systems)--0.7%
Sabre Holdings Corporation 56 2,082/A/
--------
Telecommunications (Long Distance)--7.4%
AT&T Corp. 120 6,750
MCI WorldCom, Inc. 160 7,250/A/
Qwest Communications International Inc. 120 5,820/A/
Sprint Corporation 33 2,079
--------
21,899
--------
Telephone--0.9%
US WEST, Inc. 36 2,615
--------
Textiles (Apparel)--0.9%
Tommy Hilfiger Corporation 194 2,816/A/
--------
Waste Management--1.3%
Waste Management Inc. 280 3,833
--------
Total Common Stocks and Equity Interests (Identified Cost--$230,936) 295,678
--------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
Statement of Net Assets--Continued
Legg Mason Investors Trust, Inc.
American Leading Companies Trust--Continued
<TABLE>
<CAPTION>
Shares/Par Value
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements--1.1%
Bank of America
6.15%, dated 3/31/00, to be repurchased at $1,669 on
4/3/00 (Collateral: $1,880 Freddie Mac mortgage-backed
securities, 6%, due 9/1/28, value $1,720) $ 1,668 $ 1,668
Goldman, Sachs & Company
6.15%, dated 3/31/00, to be repurchased at $1,669 on
4/3/00 (Collateral: $1,890 Fannie Mae mortgage-backed
securities, 6%, due 10/1/29, value $1,729) 1,668 1,668
--------
Total Repurchase Agreements (Identified Cost--$3,336) 3,336
--------------------------------------------------------------------------------------------------------------------
Total Investments--100.4% (Identified Cost--$234,272) 299,014
Other assets less liabilities--(0.4)% (1,308)
--------
Net assets consisting of:
Accumulated paid-in capital applicable to
15,929 Primary Class shares outstanding $232,396
Accumulated net realized gain/(loss) on investments 568
Unrealized appreciation/(depreciation) of investments 64,742
--------
Net assets--100.0% $297,706
========
Net asset value per share:
Primary Class $18.69
======
--------------------------------------------------------------------------------------------------------------------
</TABLE>
/A/ Non-income producing.
See notes to financial statements.
26
<PAGE>
Statement of Net Assets
Legg Mason Investors Trust, Inc.
March 31, 2000
(Amounts in Thousands)
Balanced Trust
<TABLE>
<CAPTION>
Shares/Par Value
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks and Equity Interests -- 64.8%
Advertising/Media--1.7%
Time Warner, Inc. 7 $ 650
--------
Automotive--2.1%
Ford Motor Company 17 781
--------
Computer Services and Systems--5.3%
Dell Computer Corporation 14 744/A/
International Business Machines Corporation 5 566
Microsoft Corporation 6 638/A/
--------
1,948
--------
Construction and Building Materials--2.0%
Martin Marietta Materials, Inc. 16 736
--------
Electrical Equipment and Electronics--3.0%
Emerson Electric Co. 9 455
Intel Corporation 5 659
--------
1,114
--------
Energy--2.8%
Atlantic Richfield Company (ARCO) 6 485
Total Fina SA 8 552
--------
1,037
--------
Entertainment--1.7%
The Walt Disney Company 15 621
--------
Financial Services--9.4%
Citigroup Inc. 20 1,210
Fannie Mae 20 1,129
Marshall & Ilsley Corporation 10 577
Mellon Financial Corporation 19 561
--------
3,477
--------
Food, Beverage and Tobacco--4.4%
Anheuser-Busch Companies, Inc. 10 647
McDonald's Corporation 13 485
SYSCO Corporation 14 500
--------
1,632
--------
</TABLE>
27
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Investors Trust, Inc.
Balanced Trust -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Health Care--3.1%
Abbott Laboratories 20 $ 686
Johnson & Johnson 6 448
--------
1,134
--------
Investment Companies--2.6%
Blackrock North American Government Income Trust, Inc. 100 969
--------
Manufacturing--3.6%
Dover Corporation 13 622
Tyco International Ltd. 14 718
--------
1,340
--------
Oil Production--1.1%
Texaco Inc. 8 429
--------
Pharmaceuticals--1.9%
Merck & Co., Inc. 11 690
--------
Real Estate Investment Trusts (REITs)--1.4%
Chateau Communities, Inc. 20 510
--------
Retail--2.6%
CVS Corporation 13 488
The Home Depot, Inc. 8 484
--------
972
--------
Savings and Loan--2.5%
Charter One Financial, Inc. 44 917
--------
Services--1.7%
Cintas Corporation 16 635
--------
Telecommunications--8.6%
AT&T Corp. 19 1,069
BroadWing Inc. 14 520/A/
Lucent Technologies Inc. 8 486
MCI WorldCom, Inc. 11 510/A/
Nortel Networks Corporation 5 592
--------
3,177
--------
Transportation--3.3%
Kansas City Southern Industries, Inc. 8 661
Union Pacific Corporation 14 548
--------
1,209
--------
Total Common Stocks and Equity Interests (Identified Cost-- $20,077) 23,978
--------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Rate Maturity Date Shares/Par Value
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Corporate and Other Bonds--11.6%
Banking and Finance--6.3%
Associates Corporation of North America 5.50% 2/15/02 $ 400 $ 388
General Electric Capital Corporation 6.29% 12/15/07 1,000 987
Merrill Lynch & Co., Inc. 6.00% 11/15/04 1,000 950
--------
2,325
--------
Media--1.8%
Tribune Company 6.50% 7/30/04 700 669
--------
Retail Grocery--2.1%
Safeway Inc. 5.75% 11/15/00 770 764
--------
Transportation--1.4%
Union Pacific Corporation 5.78% 10/15/01 550 535
--------
Total Corporate and Other Bonds (Identified Cost--$4,404) 4,293
--------------------------------------------------------------------------------------------------------------------
U.S. Government and Agency Obligations--17.1%
Fixed-Rate Securities--12.3%
Fannie Mae 6.77% 9/1/05 375 368
Fannie Mae 7.25% 1/15/10 375 378
Federal Farm Credit Bank 5.52% 2/25/02 1,000 974
United States Treasury Notes 6.625% 3/31/02 300 300
United States Treasury Notes 6.50% 5/31/02 - 10/15/06 2,030 2,042
United States Treasury Notes 6.00% 8/15/09 500 494
--------
4,556
--------
Indexed Securities--2.0%
United States Treasury Inflation-Indexed Security/B/ 3.625% 1/15/08 783 763
--------
Stripped Securities--2.8%
United States Treasury STRIPS/C/ 0% 8/15/05 - 5/15/06 1,500 1,034
--------
Total U.S. Government and Agency Obligations (Identified Cost--$6,393) 6,353
--------------------------------------------------------------------------------------------------------------------
U.S. Government Agency Mortgage-Backed Securities--6.2%
Fixed-Rate Securities--6.2%
Fannie Mae 6.00% 1/1/27 541 498
Government National Mortgage Association 6.00% 8/15/28 - 10/15/28 1,080 988
Government National Mortgage Association 8.00% 2/15/30 799 809
--------
Total U.S. Government Agency Mortgage-Backed Securities (Identified Cost-- $2,370) 2,295
--------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Investors Trust, Inc.
Balanced Trust -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements--0.3%
State Street Bank & Trust Company
3.50%, dated 3/31/00, to be repurchased at $110 on
4/3/00 (Collateral: $115 Freddie Mac mortgage-backed
securities, 6.70%, due 1/3/02, value $118) $ 110 $ 110
--------
Total Repurchase Agreements (Identified Cost--$110) 110
--------------------------------------------------------------------------------------------------------------------
Total investments--100.0% (identified cost--$33,354) 37,029
Other assets less liabilities--N.M. (3)
--------
Net assets consisting of:
Accumulated paid-in capital applicable to
3,035 Primary Class shares outstanding $33,477
Accumulated net realized gain/(loss) on investments (126)
Unrealized appreciation/(depreciation) of investments 3,675
-------
Net assets--100.0% $ 37,026
========
Net asset value per share:
Primary Class $12.20
========
--------------------------------------------------------------------------------------------------------------------
</TABLE>
/A/ Non-income producing.
/B/ United States Treasury Inflation-Indexed Security -- U.S. Treasury
security whose principal value is adjusted daily in accordance with
changes to the Consumer Price Index. Interest is calculated on the
basis of the current adjusted principal value.
/C/ STRIPS-- Separate Trading of Registered Interest and Principal of
Securities. A pre-stripped zero coupon bond that is a direct
obligation of the U.S. Treasury.
N.M. - Not meaningful.
See notes to financial statements.
30
<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>
31
<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>
32
<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>
33
<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>
34
<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>
35
<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>
36
<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>
37
<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>
38
<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>
39
<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>
40
<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>
41
<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>
42
<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>
43
<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>
44
<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>
45
<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.
46
<PAGE>
Statement of Net Assets
Legg Mason Investors Trust, Inc.
March 31, 2000
(Amounts in Thousands)
Financial Services Fund
<TABLE>
<CAPTION>
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>
47
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Investors Trust, Inc.
Financial Services Fund -- Continued
<TABLE>
<CAPTION>
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>
48
<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>
49
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Investors Trust, Inc.
Financial Services Fund -- Continued
<TABLE>
<CAPTION>
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 PrimaryClass 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
=====
Maximum offering price per share:
Class A $9.74
=====
--------------------------------------------------------------------------------------------------------------------
</TABLE>
/A/ Non-income producing.
See notes to financial statements.
50
<PAGE>
Statements of Operations
Legg Mason Investors Trust, Inc.
(Amounts in Thousands)
<TABLE>
<CAPTION>
U.S.
American Leading Balanced Small-Capitalization
Companies Trust Trust Value Trust Financial Services Fund
------------------------------------------------- -----------------------
3 Months
Year Ended Year Ended Year Ended Ended Year Ended
3/31/00 3/31/00 3/31/00 3/31/00/A/ 12/31/99/B/
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividends $ 3,514 $ 549 $ 868 $ 160 $ 568
Interest 687 1,092 168 5 2
-------- ------ ------- ------- -------
Total investment income 4,201 1,641 1,036 165 570
Expenses:
Management fee 2,386 356 607 88 376
Distribution and service fees 3,181 356 713 72 301
Transfer agent and shareholder
servicing expense 201 36 80 8 29
Audit and legal fees 47 29 33 14 55
Custodian fee 101 50 172 20 80
Directors' fees 5 5 8 2 37
Organization expense -- 17 9 -- --
Registration fees 33 20 23 16 52
Reports to shareholders 85 26 32 6 13
Other expenses 8 -- 2 1 14
-------- ------ ------- ------- -------
6,047 895 1,679 227 957
Less fees waived -- (14) (259) (44) (187)
-------- ------ ------- ------- -------
Total expenses, net of waivers 6,047 881 1,420 183 770
-------- ------ ------- ------- -------
Net Investment Income/(Loss) (1,846) 760 (384) (18) (200)
-------- ------ ------- ------- -------
Net Realized and Unrealized Gain/(Loss) on Investments:
Realized gain/(loss) on investments 888 724 670 (2,380) (1,415)
Change in unrealized appreciation/
(depreciation) of investments (23,480) 222 (2,521) 1,846 (2,359)
-------- ------ ------- ------- -------
Net Realized and Unrealized Gain/
(Loss) on Investments (22,592) 946 (1,851) (534) (3,774)
--------------------------------------------------------------------------------------------------------------------------
Change in Net Assets Resulting
From Operations $(24,438) $1,706 $(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.
51
<PAGE>
Statements of Changes in Net Assets
Legg Mason Investors Trust, Inc.
(Amounts in Thousands)
<TABLE>
<CAPTION>
American Leading
Companies Trust Balanced Trust
------------------------ -----------------------
Year Ended Year Ended Year Ended Year Ended
3/31/00 3/31/99 3/31/00 3/31/99
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in Net Assets:
Net investment income/(loss) $ (1,846) $ (818) $ 760 $ 1,097
Net realized gain/(loss) on investments 888 8,963 724 (841)
Change in unrealized appreciation/
(depreciation) of investments (23,480) 37,543 222 (1,810)
----------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations (24,438) 45,688 1,706 (1,554)
Distributions to shareholders:
From net investment income:
Primary Class -- -- (1,150) (902)
Class A NA NA NA NA
Navigator Class NA -- NA NA
In excess of net investment income:
Primary Class -- -- (107) --
Class A NA NA NA NA
Navigator Class NA -- NA NA
From net realized gain on investments:
Primary Class (5,587) (8,688) -- (490)
Class A NA NA NA NA
Navigator Class NA -- NA NA
In excess of net realized gain on investments:
Primary Class -- -- -- --
Class A NA NA NA NA
Navigator Class NA -- NA NA
Change in net assets from Fund share transactions:
Primary Class 38,774 51,631 (19,323) 11,085
Class A NA NA NA NA
Navigator Class NA (82) NA NA
----------------------------------------------------------------------------------------------------------------
Change in net assets 8,749 88,549 (18,874) 8,139
Net Assets:
Beginning of period 288,957 200,408 55,900 47,761
----------------------------------------------------------------------------------------------------------------
End of period $297,706 $288,957 $ 37,026 $55,900
----------------------------------------------------------------------------------------------------------------
Undistributed net investment income $ -- $ -- $ -- $ 390
----------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
<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 investment income:
Primary Class -- -- -- -- --
Class A NA NA -- -- --
Navigator Class -- -- -- -- --
In excess of net investment income:
Primary Class -- -- -- -- --
Class A NA NA -- -- --
Navigator Class -- -- -- -- --
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.
53
<PAGE>
Financial Highlights
Legg Mason Investors Trust, Inc.
Contained below is per share operating performance data for a Primary Class
share and, with respect to Financial Services Fund, for a Class A share of
common stock outstanding, total investment return, ratios to average net assets
and other supplemental data. This information has been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Investment Operations Distributions
-------------------------------------- -----------------------------------
From
Net Asset Net Net Realized Total From In Excess Net
Value, Investment and Unrealized From Net of Net Realized
Beginning Income/Gain/ (Loss) on Investment Investment Investment Gain on
of Period (Loss) Investments Operations Income Income Investments
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
American Leading Companies Trust
-- Primary Class
Years Ended Mar. 31,
2000 $20.38 $(.12) $(1.21) $(1.33) $ -- $ -- $ (.36)
1999 17.78 (.06) 3.38 3.32 -- -- (.72)
1998 14.74 (.04)/A/ 4.93 4.89 -- -- (1.85)
1997 12.23 .01/A/ 3.00 3.01 (.02) -- (.48)
1996 10.18 .07/A/ 2.08 2.15 (.10) -- --
Balanced Trust
-- Primary Class
Years Ended Mar. 31,
2000 $11.98 $ .20/B/ $ .33 $ .53 $(.27) $(.04) $ --
1999 12.62 .22/B/ (.56) (.34) (.19) -- (.11)
1998 10.16 .21/B/ 2.58 2.79 (.21) -- (.12)
1997/C/ 10.00 .09/B/ .11 .20 (.04) -- --
U.S. Small-Capitalization Value Trust
-- Primary Class
Year Ended Mar. 31,
2000 $ 7.81 $(.05)/F/ $ -- $ (.05) $ -- $ -- $ (.16)
1999/G/ 10.00 (.02)/F/ (2.17) (2.19) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Distributions Ratios/Supplemental Data
-------------------------- ----------------------------------------------------------
In Excess Net
of Net Net Asset Investment Net Assets,
Realized Value, Expenses Income/(Loss) Portfolio End of
Gain on Total End of Total to Average to Average Turnover Period
Investments Distributions Period Return Net Assets Net Assets Rate (in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
American Leading Companies Trust
-- Primary Class
Years Ended Mar. 31,
2000 $ -- $ (.36) $18.69 (6.65)% 1.90% (.58)% 43.5% $297,706
1999 -- (.72) 20.38 19.52% 1.93% (.37)% 47.6% 288,957
1998 -- (1.85) 17.78 35.18% 1.95%/A/ (.28)%/A/ 51.4% 200,326
1997 -- (.50) 14.74 24.73% 1.95%/A/ .05%/A/ 55.7% 104,812
1996 -- (.10) 12.23 21.24% 1.95%/A/ .69%/A/ 43.4% 76,100
Balanced Trust
-- Primary Class
Years Ended Mar. 31,
2000 $ -- $ (.31) $12.20 4.53% 1.85%/B/ 1.67%/B/ 58.0% $ 37,026
1999 -- (.30) 11.98 (2.69)% 1.85%/B/ 1.96%/B/ 50.0% 55,900
1998 -- (.33) 12.62 27.80% 1.85%/B/ 2.08%/B/ 34.5% 47,761
1997/C/ -- (.04) 10.16 2.02%/D/ 1.85%/B,E/ 2.52%/B,E/ 5.1%/E/ 17,948
U.S. Small-Capitalization Value Trust
-- Primary Class
Year Ended Mar. 31,
2000 $(.15) $ (.31) $ 7.45 (1.06)% 1.99%/F/ (.54)%/F/ 66.2% $ 57,046
1999/G/ -- -- 7.81 (21.90)%/D/ 2.00%/F,E/ (.44)%/F,E/ 29.5%/E/ 58,365
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
Investment Operations Distributions
---------------------------------------- ----------------------------------------
From
Net Asset Net Net Realized Total From In Excess Net
Value, Investment and Unrealized From Net of Net Realized
Beginning Income/ Gain/(Loss) on Investment Investment Investment Gain on
of Period (Loss) Investments Operations Income Income Investments
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Financial Services Fund
-- Primary Class
Three Months Ended
Mar. 31, 2000/H/ $ 9.41 $(.01)/I/ $ (.22) $ (.23) $-- $-- $--
Year Ended Dec. 31,
1999/J,K/ 10.57 (.07)/I/ (1.09) (1.16) -- -- --
Period Ended Dec. 31,
1998/L,M/ 10.00 (.01)/I/ .58 .57 -- -- --
-- Class A
Three Months Ended
Mar. 31, 2000/H/ $ 9.49 $ .01/N/ $ (.22) $ (.21) $-- $-- $--
Year Ended Dec. 31,
1999/J,K/ 10.58 --/N/ (1.09) (1.09) -- -- --
Period Ended Dec. 31,
1998/L,M/ 10.00 --/N/ .58 .58 -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Distributions Ratios/Supplemental Data
-------------------------- ----------------------------------------------------------------
In Excess Net
of Net Net Asset Investment Net Assets,
Realized Value, Expenses Income/(Loss) Portfolio End of
Gain on Total End of Total to Average to Average Turnover Period
Investments Distributions Period Return Net Assets Net Assets Rate (in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Financial Services Fund
-- Primary Class
Three Months Ended
Mar. 31, 2000/H/ $-- $-- $ 9.18 (2.44)%/D/ 2.25%/I,E/ (.38)%/I,E/ 60.9%/E/ $31,397
Year Ended Dec. 31,
1999/J,K/ -- -- 9.41 (10.97)% 2.25%/I/ (.73)%/I/ 27.1% 28,366
Period Ended Dec. 31,
1998/L,M/ -- -- 10.57 5.70%/D/ 2.25%/I,E/ (.11)%/I,E/ --% 14,598
-- Class A
Three Months Ended
Mar. 31, 2000/H/ $-- $-- $ 9.28 (2.21)%/D,O/ 1.50%/E,N/ .36%/E,N/ 60.9%/E/ $ 8,856
Year Ended Dec. 31,
1999/J,K/ -- -- 9.49 (10.30)%/O/ 1.50%/N/ .01%/N/ 27.1% 9,399
Period Ended Dec. 31,
1998/L,M/ -- -- 10.58 5.80%/D,O/ 1.50%/E,N/ .22%/E,N/ --% 7,451
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/A/ Net of fees waived pursuant to a voluntary expense limitation of 1.95% of
average daily net assets. If no fees had been waived by LMFA, the
annualized ratio of expenses to average daily net assets for the years
ended March 31, 1998, 1997 and 1996, would have been 1.99%, 2.06% and
2.20%, respectively.
/B/ Net of fees waived pursuant to a voluntary expense limitation of 1.85% 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 years
ended March 31, 2000, 1999, and 1998, and for the period October 1, 1996 to
March 31, 1997, would have been 1.88%, 1.90%, 2.14%, and 3.03%,
respectively.
/C/ For the period October 1, 1996 (commencement of operations) to March 31,
1997.
/D/ Not annualized.
/E/ Annualized.
/F/ Net of fees waived pursuant to a voluntary expense limitation of 2.00% 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 15, 1998 to March 31, 1999, would have been
2.35% and 2.38%, respectively.
/G/ For the period June 15, 1998 (commencement of operations) to March 31, 1999.
/H/ The year end for Financial Services Fund changed from December 31 to
March 31.
/I/ Net of fees waived pursuant to a voluntary expense limitation of 2.25%. If
no fees had been waived by LMFA, the annualized ratio of expenses to average
daily net assets for the years ended March 31, 2000, 1999, and 1998, would
have been 2.73%, 2.73%, and 2.40%, respectively.
/J/ Effective October 5, 1999, Legg MasonFund Adviser ("LMFA") became Financial
Services Fund's adviser, replacing Bartlett &Co.
/K/ Includes financial information for Legg Mason Financial Services Fund and
its predecessor, Bartlett Financial Services Fund (see Note 6).
/L/ For the period November 16, 1998 (commencement of operations) to December
31, 1998.
/M/ The financial information for the period ended December 31, 1998, is for the
Bartlett Financial Services Fund, Legg Mason Financial Services Fund's
predecessor.
/N/ Net of fees waived pursuant to a voluntary expense limitation of 1.50%. If
no fees had been waived by LMFA, the annualized ratio of expenses to average
daily net assets for the years ended March 31, 2000, 1999, and 1998, would
have been 2.08%, 2.05%, and 1.65%, respectively.
/O/ Excluding sales charge on Class A shares.
See notes to financial statements.
55
<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. 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 Navigator Classes of
U.S. Small-Cap and Financial Services, offered to certain institutional
investors, is contained in a separate report to their shareholders.
Financial Services has an additional class of shares: Class A. The income
and expenses of American Leading Companies and U.S. Small-Cap 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 American
Leading Companies, U.S. Small-Cap and Financial Services, and quarterly
for Balanced Trust. 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.
56
<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:
<TABLE>
<CAPTION>
Receivable for Payable for
Securities Sold Securities Purchased
-------------------------------------------------------------------------
<S> <C> <C>
American Leading Companies $ 338 $1,435
Balanced Trust -- --
U.S. Small-Cap 1,002 435
Financial Services -- --
</TABLE>
Deferred Organizational Expenses
Deferred organizational expenses of $86 for Balanced Trust and $43
for U.S. Small-Cap are being amortized on a straight line basis over 5
years commencing on the date their respective 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:
<TABLE>
<CAPTION>
Purchases Proceeds From Sales
--------------------------------------------------------------------------
<S> <C> <C>
American Leading Companies $181,176 $131,368
Balanced Trust 27,055 46,063
U.S. Small-Cap 46,742 44,652
Financial Services 7,575 5,481
</TABLE>
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>
American Leading Companies $235,297 $89,814 $(26,097) $63,717
Balanced Trust 33,362 4,995 (1,328) 3,667
U.S. Small-Cap 70,883 3,319 (17,756) (14,437)
Financial Services 39,736 4,244 (3,763) 481
</TABLE>
57
<PAGE>
Notes to Financial Statements-- Continued
Legg Mason Investors Trust, Inc.
(Amounts in Thousands)
---------------------------------------------------------------------------
At March 31, 2000, Balanced Trust and Financial Services had capital
loss carryforwards for federal income tax purposes of $109 and $3,772,
respectively, which expire in 2007 and 2008.
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>
American Leading Companies
Primary Class 0.75% 1.95% Indefinitely $ 0 $184
Balanced Trust
Primary Class 0.75% 1.85% July 31, 2000 14 23
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.
Bartlett & Co. ("Bartlett") serves as investment adviser to Balanced
Trust. Bartlett is responsible for the actual investment activity of the
Fund. LMFA pays Bartlett a fee for its services, computed daily and
payable monthly, at an annual rate equal to 662/3% of the fee received by
LMFA.
58
<PAGE>
--------------------------------------------------------------------------
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.
Prior to October 5, 1999, Bartlett &Co. served as investment adviser
to Financial Services, under compensation arrangements substantially
similar to those with the current adviser. For its services during the
fiscal year ended December 31, 1998, and for the period January 1, 1999
through October 4, 1999, the Fund paid the adviser a fee of 1.00% of its
average daily net assets, net of any waivers.
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 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>
American Leading Companies 0.75% 0.25% $-- $245
Balanced Trust 0.50% 0.25% -- 23
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:
American Leading Companies, $68; Balanced Trust, $13; U.S. Small-Cap, $25;
and Financial Services, $7.
LMFA, Legg Mason, Bartlett, Brandywine and Gray, Seifert &Co., Inc.
are corporate affiliates and wholly owned subsidiaries of Legg Mason, Inc.
59
<PAGE>
Notes to Financial Statements-- Continued
Legg Mason Investors Trust, Inc.
(Amounts in Thousands)
---------------------------------------------------------------------------
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.
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 250,000, 125,000, 50,000, and 125,000
shares authorized at $.001 par value for the Primary Classes of American
Leading Companies Trust, Balanced Trust, 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
60
<PAGE>
--------------------------------------------------------------------------
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>
American Leading Companies
--Primary Class
Year Ended March 31, 2000 5,496 $108,290 273 $5,499 (4,021) $(75,015) 1,748 $ 38,774
Year Ended March 31, 1999 4,801 84,561 502 8,514 (2,390) (41,444) 2,913 51,631
--Navigator Class
Period Ended December 31, 1998/A/ -- $ -- -- $ -- (5) $ (82) (5) $ (82)
Balanced Trust
--Primary Class
Year Ended March 31, 2000 571 $ 6,855 103 $1,218 (2,306) $(27,396) (1,632) $(19,323)
Year Ended March 31, 1999 2,261 27,489 112 1,362 (1,492) (17,766) 881 11,085
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/B/ 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/C/ 5 50 -- -- -- -- 5 50
Financial Services Fund
--Primary Class
Period Ended March 31, 2000/D/ 666 $ 5,598 -- $ -- (262) $ (2,258) 404 $ 3,340
Year Ended December 31, 1999/E/ 2,363 23,769 -- -- (729) (7,037) 1,634 16,732
Period Ended December 31, 1998/F,G/ 1,388 14,009 -- -- (7) (70) 1,381 13,939
--Class A
Period Ended March 31, 2000/D/ 41 $ 364 -- $ -- (77) $ (664) (36) $ (300)
Year Ended December 31, 1999/E/ 492 4,979 -- -- (206) (2,021) 286 2,958
Period Ended December 31, 1998/F,G/ 706 7,112 -- -- (2) (15) 704 7,097
--Navigator Class
Period Ended March 31, 2000/D/ -- $ -- -- $ -- -- $ -- -- $ --
Period Ended December 31, 1999/E,H/ 1 5 -- -- -- -- 1 5
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/A/ The Navigator Class shares of AmericanLeading Companies were
redeemed on December 3, 1998.
/B/ For the period June 15, 1998 (commencement of sale of Primary Class)
to March 31, 1999.
/C/ For the period June 19, 1998 (commencement of sale of Navigator
Class) to March 31, 1999.
/D/ For the period January 1, 2000 to March 31, 2000
/E/ Includes financial information for Legg Mason Financial Services
Fund and its predecessor, Bartlett Financial Services Fund (see
Note 6).
/F/ For the period November 16, 1998 to December 31, 1998.
/G/ The financial information for the period ended December 31, 1998, is
for the Bartlett Financial Services Fund , Legg Mason Financial
Services Fund's predecessor.
/H/ For the period October 7, 1999 to December 31,1999.
61
<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. (comprised of the American Leading Companies Trust,
Balanced Trust, 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
(Primary Class) for each of the periods presented therein with respect to the
American Leading Companies Trust,BalancedTrust and U.S. Small-Capitalization
Value Trust, and the statements of operations, statements of changes in net
assets and the financial highlights(Primary Class and Class A) 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 and financial highlights 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
dated February 5, 1999, expressed an unqualified opinion on those financial
statements and financial highlights.
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 constituting Legg Mason Investors Trust, Inc. at
March 31, 2000, the results of operations, the changes in net assets, and
financial highlights (Primary Class) for each of the periods presented therein
with respect to the American Leading Companies Trust,Balanced Trust and U.S.
Small-Capitalization Value Trust, and the results of operations, the changes in
net assets, and financial highlights (Primary Class and Class A) 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
62
<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 American Leading Companies Trust:
Legg Mason Fund Adviser, Inc.
Baltimore, MD
For Balanced Trust:
Bartlett & Co.
Cincinnati, OH
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
