N-Q 1 dnq.htm LEGG MASON PARTNERS INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND Legg Mason Partners Intermediate Maturity California Municipals Fund

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-04254

Legg Mason Partners Income Trust

(Exact name of registrant as specified in charter)

125 Broad Street, New York, NY 10004

(Address of principal executive offices) (Zip code)

Robert I. Frenkel, Esq.

Legg Mason & Co., LLC

300 First Stamford Place

Stamford, CT 06902

(Name and address of agent for service)

Registrant’s telephone number, including area code: 1-800-451-2010

Date of fiscal year end: November 30,

Date of reporting period: August 31, 2007

 



ITEM 1. SCHEDULE OF INVESTMENTS

 


LEGG MASON PARTNERS INCOME TRUST

LEGG MASON PARTNERS INTERMEDIATE

MATURITY CALIFORNIA MUNICIPALS FUND

FORM N-Q

August 31, 2007


LEGG MASON PARTNERS INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND

 

Schedule of Investments (unaudited)   August 31, 2007

 

 

FACE
AMOUNT
    

SECURITY

   VALUE
  MUNICIPAL BONDS - 97.0%
  Education - 1.7%
$ 1,000,000     

California State Public Works Board, Lease Revenue, Refunding, Various California State University Project, Series B, 5.450% due 9/1/14

   $ 1,027,690
           
  Escrowed to Maturity - 1.5%
  700,000     

California Health Facilities Financing Authority Revenue, Kaiser Permanente, Series B, AMBAC-Insured, 5.250% due 10/1/10 (a)

     718,837
  70,000     

Montclair, CA, RDA, Residential Mortgage Revenue, FNMA-Collateralized, 7.750% due 10/1/11 (a)

     75,364
  135,000     

San Francisco, CA, Airport Improvement Corp. Lease Revenue, United Airlines Inc., 8.000% due 7/1/13 (a)

     152,211
           
    

Total Escrowed to Maturity

     946,412
           
  Finance - 3.7%
  2,165,000     

San Jose, CA, Financing Authority Lease Revenue, Civic Center Project, Series B, AMBAC-Insured, 5.250% due 6/1/14

     2,308,540
           
  General Obligation - 13.2%
  1,500,000     

California State Economic Recovery GO, Series A, MBIA-Insured, 5.000% due 7/1/15

     1,603,485
  2,000,000     

Los Angeles, CA, GO, USD, Refunding, MBIA-Insured, 5.750% due 7/1/15

     2,248,700
    

Tahoe Truckee, CA, GO, USD, Refunding, School Facilities Improvement, MBIA-Insured:

  
  1,480,000     

District Number 1, 5.000% due 8/1/14

     1,590,659
  1,180,000     

District Number 2, 5.000% due 8/1/14

     1,268,229
  1,500,000     

Visalia, CA, GO, USD, Series A, FGIC-Insured, 4.900% due 8/1/12

     1,549,005
           
    

Total General Obligation

     8,260,078
           
  Hospitals - 3.2%
  2,000,000     

California Statewide CDA Revenue, Kaiser Permanente, Series E, 4.700% due 6/1/09 (b)(c)

     2,018,820
           
  Miscellaneous - 14.1%
  1,470,000     

Inglewood, CA, Public Financing Authority Revenue, Refunding, Series A, AMBAC-Insured, 5.125% due 8/1/13

     1,536,679
    

Ontario, CA, Redevelopment Financing Authority Revenue, Project Number 1 Centre City & Cimarron, MBIA-Insured:

  
  1,935,000     

5.250% due 8/1/15

     2,056,924
  1,060,000     

5.250% due 8/1/16

     1,125,604
    

Solano County, CA, COP, Capital Improvement Program, AMBAC-Insured:

  
  1,000,000     

4.875% due 11/15/11

     1,034,150
  1,000,000     

5.000% due 11/15/13

     1,036,760
  2,000,000     

Virgin Islands Public Finance Authority Revenue, Senior Lien, Series A, 5.300% due 10/1/11

     2,047,820
           
    

Total Miscellaneous

     8,837,937
           
  Pre-Refunded - 31.6%
  1,000,000     

California Health Facilities Financing Authority Revenue, Scripps Health, Series C, MBIA-Insured, Call 10/1/08 @ 101, 5.000% due 10/1/13 (d)

     1,025,050
  3,000,000     

California Infrastructure & Economic Development Bank Revenue, Bay Area Toll Bridges, First Lien, Series A, FSA-Insured, Call 7/1/13 @ 100, 5.250% due 7/1/14 (d)

     3,244,650
  1,010,000     

California State University Channel Islands Financing Authority Revenue, East Campus Community, Series A, MBIA-Insured, LOC-Citibank NA, Call 9/1/11 @ 100, 4.875% due 9/1/16 (d)

     1,058,601
  1,000,000     

Castaic Lake Water Agency California Revenue COP, Water System Improvement Project, AMBAC-Insured, Call 8/1/09 @ 101, 5.000% due 8/1/12 (d)

     1,036,000

 

See notes to Schedule of Investments

 

1


LEGG MASON PARTNERS INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND

 

Schedule of Investments (unaudited) (continued)   August 31, 2007

 

FACE
AMOUNT
    

SECURITY

   VALUE
  Pre-Refunded - 31.6% (continued)   
$ 650,000     

Corona-Norco, CA, GO, USD, Series C, FGIC-Insured, Call 9/1/11 @ 100, 5.250% due 9/1/15 (d)

   $ 690,261
    

Los Angeles, CA, GO:

  
  475,000     

Series B, Call 9/1/09 @ 101, 5.000% due 9/1/10 (d)

     492,632
  3,000,000     

USD, Election of 1997, Series E, MBIA-Insured, Call 7/1/12 @ 100, 5.500% due 7/1/15 (d)

     3,244,590
  3,000,000     

Los Angeles County, CA, Metropolitan Transportation Authority Sales Tax Revenue, Property C, Second Senior Lien, Series A, FGIC-Insured, Call 7/1/10 @ 101, 5.000% due 7/1/17 (d)

     3,142,020
  1,320,000     

Monterey County, CA, COP, Master Plan Financing, MBIA-Insured, Call 8/1/11 @ 100, 5.250% due 8/1/15 (d)

     1,400,137
  2,170,000     

Morgan Hill, CA, GO, USD, FGIC-Insured, Call 8/1/11 @ 101, 5.250% due 8/1/16 (d)

     2,320,620
  2,000,000     

University of California Revenue, Multiple Purpose Projects, Series M, FGIC-Insured, Call 9/1/09 @ 101, 5.125% due 9/1/16 (d)

     2,079,000
           
    

Total Pre-Refunded

     19,733,561
           
  Public Facilities - 1.7%   
  1,080,000     

Los Angeles County, CA, Community Facilities District Number 3 Special Tax, Refunding, Improvement Area A, Series A, FSA-Insured, 5.250% due 9/1/07

     1,080,000
           
  Solid Waste - 3.7%   
    

Sunnyvale, CA, Solid Waste Revenue, Refunding, AMBAC-Insured:

  
  1,520,000     

5.500% due 10/1/13 (e)

     1,643,500
  605,000     

5.500% due 10/1/14 (e)

     646,412
           
    

Total Solid Waste

     2,289,912
           
  Tax Allocation - 12.0%   
  3,675,000     

Livermore, CA, RDA, Tax Allocation Revenue, Redevelopment Project Area, Series A, MBIA-Insured, 5.250% due 8/1/15

     3,874,773
  2,000,000     

Oakland, CA, RDA, Subordinated, Tax Allocation Central District Redevelopment Project, FGIC-Insured, 5.500% due 9/1/14

     2,160,840
  1,375,000     

San Diego, CA, RDA, Tax Allocation, Centre City Redevelopment Project, FSA-Insured, 5.250% due 9/1/15

     1,463,137
           
    

Total Tax Allocation

     7,498,750
           
  Tobacco - 4.7%   
  2,905,000     

California County, CA, Tobacco Securitization Agency, Asset-Backed, Alameda County, 4.750% due 6/1/12

     2,936,723
           
  Utilities - 4.2%   
  500,000     

California State Department Water Resources Power Supply Revenue, Series A, 5.500% due 5/1/12

     535,490
  2,000,000     

MSR Public Power Agency California San Juan Project Revenue, Refunding, Series I, MBIA-Insured, 5.000% due 7/1/15

     2,085,260
           
    

Total Utilities

     2,620,750
           
  Water & Sewer - 1.7%   
  1,000,000     

Modesto, CA, Irrigation District, COP, Capital Improvement, Series A, FSA-Insured, 5.250% due 7/1/15

     1,059,690
           
    

TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS

(Cost - $58,685,595)

     60,618,863
           
  SHORT-TERM INVESTMENTS - 1.8%   
  Water & Sewer - 1.5%   
  900,000     

Metropolitan Water District of Southern California, Waterworks Revenue, Series C-2, SPA-Lloyds TSB Bank PLC, 3.910%, 9/4/07 (f)

     900,000
           

 

See notes to Schedule of Investments

 

2


LEGG MASON PARTNERS INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND

 

Schedule of Investments (unaudited) (continued)   August 31, 2007

 

FACE
AMOUNT
  

SECURITY

   VALUE
  SHORT-TERM INVESTMENTS - 1.8% (continued)   
  Utilities - 0.3%   
$ 200,000   

California State Department of Water Resource Power Supply Revenue, Series B-2, LOC-BNP Paribas, 3.950%, 9/4/07 (f)

   $ 200,000
         
  

TOTAL SHORT-TERM INVESTMENTS

(Cost - $1,100,000)

     1,100,000
         
  

TOTAL INVESTMENTS - 98.8%

(Cost - $59,785,595#)

     61,718,863
  

Other Assets in Excess of Liabilities - 1.2%

     770,462
         
  

TOTAL NET ASSETS - 100.0%

   $ 62,489,325
         

 

(a) Bonds are escrowed to maturity by government securities and/or U.S. government agency securities and are considered by the Manager to be triple-A rated even if issuer has not applied for new ratings.

 

(b) Variable rate security. Interest rate disclosed is that which is in effect at August 31, 2007.

 

(c) Maturity date shown represents the mandatory tender date.

 

(d) Pre-Refunded bonds are escrowed with government obligations and/or government agency securities and are considered by the Manager to be triple-A rated even if issuer has not applied for new ratings.

 

(e) Income from this issue is considered a preference item for purposes of calculating the alternative minimum tax (“AMT”).

 

(f) Variable rate demand obligations have a demand feature under which the Fund can tender them back to the issuer on no more than 7 days notice. Date shown is the date of the next interest rate change.

 

# Aggregate cost for federal income tax purposes is substantially the same.

 

Abbreviations used in this schedule:
AMBAC   

— Ambac Assurance Corporation

CDA   

— Community Development Authority

COP   

— Certificate of Participation

FGIC   

— Financial Guaranty Insurance Company

FNMA   

— Federal National Mortgage Association

FSA   

— Financial Security Assurance

GO   

— General Obligation

LOC   

— Letter of Credit

MBIA   

— Municipal Bond Investors Assurance Corporation

RDA   

— Redevelopment Agency

SPA   

— Standby Bond Purchase Agreement

USD   

— Unified School District

 

Ratings Table August 31, 2007 (unaudited)†

  

S&P/Moodys

  

AAA/Aaa

   83.5 %

AA/Aa

   0.8  

A

   5.8  

BBB/Baa

   8.1  

A-1/VMIG1

   1.8  
      
   100.0 %
      

 

As a percentage of total investments.
S&P primary rating; Moody’s secondary
     See page 4 for definition of ratings.

 

See notes to Schedule of Investments

 

3


Bond Ratings (unaudited)

The definitions of the applicable rating symbols are set forth below:

Standard & Poor’s Ratings Service (“Standard & Poor’s”) — Ratings from “AA” to “CCC” may be modified by the addition of a plus (+) or minus (–) sign to show relative standings within the major rating categories.

AAA — Bonds rated “AAA” have the highest rating assigned by Standard & Poor’s. Capacity to pay interest and repay principal is extremely strong.

AA — Bonds rated “AA” have a very strong capacity to pay interest and repay principal and differ from the highest rated issues only in a small degree.

A — Bonds rated “A” have a strong capacity to pay interest and repay principal although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories.

BBB — Bonds rated “BBB” are regarded as having an adequate capacity to pay interest and repay principal. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for bonds in this category than in higher rated categories.

BB, B, CCC, CC and C — Bonds rated “BB”, “B”, “CCC”, “CC” and “C” are regarded, on balance, as predominantly, speculative with respect to capacity to pay interest and repay principal in accordance with terms of the obligation. “BB” represents the lowest degree of speculation and “C” the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.

D — Bonds rated “D” are in default and payment of interest and/or repayment of principal is in arrears.

Moody’s Investors Service (“Moody’s”) — Numerical modifiers 1, 2 and 3 may be applied to each generic rating from “Aa” to “Caa,” where 1 is the highest and 3 the lowest ranking within its generic category.

Aaa — Bonds rated “Aaa” are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as “gilt edge.” Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.

Aa — Bonds rated “Aa” are judged to be of high quality by all standards. Together with the “Aaa” group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in “Aaa” securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in “Aaa” securities.

A — Bonds rated “A” possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment some time in the future.

Baa — Bonds rated “Baa” are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.

Ba — Bonds rated “Ba” are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.

B — Bonds that are rated “B” generally lack characteristics of desirable investments. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.

Caa — Bonds rated “Caa” are of poor standing. These issues may be in default, or present elements of danger may exist with respect to principal or interest.

Ca — Bonds rated “Ca” represent obligations which are speculative in a high degree. Such issues are often in default or have other marked short-comings.

C — Bonds rated “C” are the lowest class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.

NR- Indicates that the bond is not rated by Standard & Poor’s or Moody’s.

Short-Term Security Ratings (unaudited)

SP-1 — Standard & Poor’s highest rating indicating very strong or strong capacity to pay principal and interest; those issues determined to possess overwhelming safety characteristics are denoted with a plus (+) sign.

A-1 — Standard & Poor’s highest commercial paper and variable-rate demand obligation (VRDO) rating indicating that the degree of safety regarding timely payment is either overwhelming or very strong; those issues determined to possess overwhelming safety characteristics are denoted with a plus (+) sign.

VMIG 1 — Moody’s highest rating for issues having a demand feature — VRDO.

MIG1 — Moody’s highest rating for short-term municipal obligations.

P-1 — Moody’s highest rating for commercial paper and for VRDO prior to the advent of the VMIG 1 rating.

NR- Indicates that the bond is not rated by Standard & Poor’s or Moody’s.

 

4


Notes to Schedule of Investments (unaudited)

1. Organization and Significant Accounting Policies

Legg Mason Partners Intermediate Maturity California Municipals Fund (the “Fund”) is a separate non-diversified series of Legg Mason Partners Income Trust (the “Trust”). The Trust, a Maryland business trust, is registered under the Investment Company Act of 1940, as amended, (the “1940 Act”), as an open-end management investment company. Prior to April 16, 2007, the Fund was a separate non-diversified investment fund of Legg Mason Partners Investment Trust, a Massachusetts business trust, registered under the 1940 Act.

The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles (“GAAP”).

(a) Investment Valuation. Securities are valued at the mean between the last quoted bid and asked prices provided by an independent pricing service that are based on transactions in municipal obligations, quotations from municipal bond dealers, market transactions in comparable securities and various other relationships between securities. When prices are not readily available, or are determined not to reflect fair value, the Fund may value these securities at fair value as determined in accordance with the procedures approved by the Fund’s Board of Trustees. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates fair value.

(b) Fund Concentration. Since the Fund invests primarily in obligations of issuers within California, it is subject to possible concentration risks associated with economic, political, or legal developments or industrial or regional matters specifically affecting California.

(c) Security Transactions. Security transactions are accounted for on a trade date basis.

2. Investments

At August 31, 2007, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:

 

Gross unrealized appreciation

   $ 1,933,268

Gross unrealized depreciation

     —  
      

Net unrealized appreciation

   $ 1,933,268
      

 

5


ITEM 2. CONTROLS AND PROCEDURES.

 

  (a) The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a- 3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934.

 

  (b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant’s last fiscal quarter that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting.

 

ITEM 3. EXHIBITS.

Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are attached hereto.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Legg Mason Partners Income Trust

 

By

 

/s/    R. JAY GERKEN        

  R. Jay Gerken
  Chief Executive Officer

Date: October 29, 2007

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By

 

/s/    R. JAY GERKEN        

  R. Jay Gerken
  Chief Executive Officer

Date: October 29, 2007

By

 

/s/    FRANCES M. GUGGINO        

  Frances M. Guggino
  Chief Financial Officer

Date: October 29, 2007