N-Q 1 dnq.htm LEGG MASON PARTNERS EQUITY TRUST LEGG MASON PARTNERS EQUITY TRUST

 

 

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 811-06444

Legg Mason Partners Equity Trust

(Exact name of registrant as specified in charter)

55 Water Street, New York, NY 10041

(Address of principal executive offices) (Zip code)

Robert I. Frenkel, Esq.

Legg Mason & Co., LLC

100 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: December 31

Date of reporting period: September 30, 2008

 

 

 

 

ITEM 1. SCHEDULE OF INVESTMENTS

LEGG MASON PARTNERS EQUITY TRUST

LEGG MASON PARTNERS EQUITY FUND

FORM N-Q

SEPTEMBER 30, 2008

LEGG MASON PARTNERS EQUITY FUND

 

Schedule of Investments (unaudited)    September 30, 2008

 

SHARES     

SECURITY

      VALUE
COMMON STOCKS - 98.4%   
CONSUMER DISCRETIONARY - 12.9%   
Hotels, Restaurants & Leisure - 1.9%   
185,679     

McDonald’s Corp.

    $ 11,456,394
Household Durables - 5.2%   
679,140     

Centex Corp.

      11,002,068
818,930     

Toll Brothers Inc. *

      20,661,604
     Total Household Durables      31,663,672
Media - 2.8%   
829,440     

News Corp., Class B Shares

      10,077,696
224,590     

Walt Disney Co.

      6,892,667
     Total Media      16,970,363
Specialty Retail - 3.0%   
737,504     

Staples Inc.

      16,593,840
48,580     

TJX Cos. Inc.

      1,482,662
     Total Specialty Retail      18,076,502
     TOTAL CONSUMER DISCRETIONARY      78,166,931
CONSUMER STAPLES - 13.4%   
Beverages - 2.7%   
230,610     

PepsiCo Inc.

      16,435,575
Food & Staples Retailing - 2.6%   
265,680     

Wal-Mart Stores Inc.

      15,911,575
Food Products - 3.4%   
213,100     

Kellogg Co.

      11,954,910
227,200     

McCormick & Co. Inc., Non Voting Shares

      8,735,840
     Total Food Products      20,690,750
Household Products - 2.7%   
236,320     

Procter & Gamble Co.

      16,469,141
Tobacco - 2.0%   
244,570     

Philip Morris International Inc.

      11,763,817
     TOTAL CONSUMER STAPLES      81,270,858
ENERGY - 12.0%   
Energy Equipment & Services - 3.8%   
123,880     

Diamond Offshore Drilling Inc.

      12,767,073
321,850     

Halliburton Co.

      10,424,721
     Total Energy Equipment & Services      23,191,794
Oil, Gas & Consumable Fuels - 8.2%   
119,962     

ConocoPhillips

      8,787,217
167,770     

Exxon Mobil Corp.

      13,029,018
1     

Louis Broussard Sealed Envelope (a)(b)

      0
318,740     

Newfield Exploration Co. *

      10,196,492
126,650     

SandRidge Energy Inc. *

      2,482,340
255,980     

Total SA, ADR

      15,532,866
     Total Oil, Gas & Consumable Fuels      50,027,933
     TOTAL ENERGY      73,219,727
FINANCIALS - 18.7%   
Capital Markets - 2.5%   
39,860     

Goldman Sachs Group Inc.

      5,102,080
157,160     

Merrill Lynch & Co. Inc.

      3,976,148
108,130     

State Street Corp.

      6,150,435
     Total Capital Markets      15,228,663
Commercial Banks - 3.3%   
536,410     

Wells Fargo & Co.

      20,131,467

 

See Notes to Schedule of Investments.

 

1

LEGG MASON PARTNERS EQUITY FUND

 

Schedule of Investments (unaudited) (continued)    September 30, 2008

 

SHARES     

SECURITY

      VALUE
Consumer Finance - 1.7%   
303,540     

American Express Co.

    $ 10,754,422
Diversified Financial Services - 4.6%   
463,200     

JPMorgan Chase & Co.

      21,631,440
182,260     

Moody’s Corp.

      6,196,840
     Total Diversified Financial Services      27,828,280
Insurance - 5.0%   
135,830     

AFLAC Inc.

      7,980,013
100     

Berkshire Hathaway Inc., Class A Shares *

      13,060,000
537,820     

Progressive Corp.

      9,358,068
     Total Insurance      30,398,081
Thrifts & Mortgage Finance - 1.6%   
521,300     

Hudson City Bancorp Inc.

      9,617,985
     TOTAL FINANCIALS      113,958,898
HEALTH CARE - 10.3%   
Biotechnology - 1.7%   
129,030     

Genzyme Corp. *

      10,437,237
Health Care Equipment & Supplies - 1.3%   
159,360     

Medtronic Inc.

      7,983,936
Health Care Providers & Services - 1.0%   
114,000     

McKesson Corp.

      6,134,340
Pharmaceuticals - 6.3%   
246,490     

Abbott Laboratories

      14,192,894
226,980     

Novartis AG, ADR

      11,993,623
659,810     

Schering-Plough Corp.

      12,186,691
     Total Pharmaceuticals      38,373,208
     TOTAL HEALTH CARE      62,928,721
INDUSTRIALS - 9.6%   
Aerospace & Defense - 1.7%   
439,760     

Orbital Sciences Corp. *

      10,541,047
Building Products - 2.4%   
826,050     

Masco Corp.

      14,819,337
Industrial Conglomerates - 3.4%   
630,430     

General Electric Co.

      16,075,965
160,297     

Textron Inc.

      4,693,496
     Total Industrial Conglomerates      20,769,461
Machinery - 0.8%   
81,530     

Eaton Corp.

      4,580,355
Road & Rail - 1.3%   
116,850     

Norfolk Southern Corp.

      7,736,639
     TOTAL INDUSTRIALS      58,446,839
INFORMATION TECHNOLOGY - 16.5%   
Communications Equipment - 7.1%   
761,770     

Cisco Systems Inc. *

      17,185,531
738,100     

Corning Inc.

      11,543,884
332,190     

QUALCOMM Inc.

      14,274,205
     Total Communications Equipment      43,003,620
Computers & Peripherals - 2.3%   
264,540     

Hewlett-Packard Co.

      12,232,330
83,810     

NetApp Inc. *

      1,527,856
     Total Computers & Peripherals      13,760,186

 

See Notes to Schedule of Investments.

 

2

LEGG MASON PARTNERS EQUITY FUND

 

Schedule of Investments (unaudited) (continued)    September 30, 2008

 

  SHARES     

SECURITY

      VALUE  
  Electronic Equipment, Instruments & Components - 1.8%  
  308,660     

Dolby Laboratories Inc., Class A Shares *

    $ 10,861,745  
             
  IT Services - 0.5%   
    52,880     

Visa Inc.

      3,246,303  
             
  Semiconductors & Semiconductor Equipment - 2.7%   
  495,071     

ASML Holding NV, New York Registered Shares

      8,718,200  
  350,610     

Texas Instruments Inc.

      7,538,115  
             
     Total Semiconductors & Semiconductor Equipment      16,256,315  
             
  Software - 2.1%   
  492,298     

Microsoft Corp.

      13,139,434  
             
     TOTAL INFORMATION TECHNOLOGY      100,267,603  
             
  UTILITIES - 5.0%   
  Electric Utilities - 1.5%   
  147,320     

Exelon Corp.

      9,225,178  
             
  Multi-Utilities - 3.5%   
  155,640     

Dominion Resources Inc.

      6,658,279  
  287,240     

Sempra Energy

      14,497,003  
             
     Total Multi-Utilities      21,155,282  
             
     TOTAL UTILITIES      30,380,460  
             
    

TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT

(Cost - $534,035,553)

      598,640,037  
             
 
 		 FACE
AMOUNT		        
  SHORT-TERM INVESTMENT - 2.0%   
  Repurchase Agreement - 2.0%   
$ 12,229,000     

Interest in $482,062,000 joint tri-party repurchase agreement dated 9/30/08
with Barclays Capital Inc., 2.000% due 10/1/08; Proceeds at maturity -
$12,229,679; (Fully collateralized by various U.S. government agency
obligations, 2.624% to 4.000% due 5/13/09 to 8/26/11; Market value -
$12,473,640) (Cost - $12,229,000)

      12,229,000  
             
    

TOTAL INVESTMENTS - 100.4%

(Cost - $546,264,553#)

      610,869,037  
     Liabilities in Excess of Other Assets - (0.4)%      (2,193,199 )
             
     TOTAL NET ASSETS - 100.0%    $ 608,675,838  
             

 

* Non-income producing security.

 

(a) Security is valued in good faith at fair value by or under the direction of the Board of Trustees (See Note 2).

 

(b) Illiquid security.

 

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

 

Abbreviation used in this schedule:
ADR   — American Depositary Receipt

 

See Notes to Schedule of Investments.

 

3

Notes to Schedule of Investments (unaudited)

1. Organization and Significant Accounting Policies

Legg Mason Partners Equity Fund (the “Fund”) is a separate diversified investment series of Legg Mason Partners Equity 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.

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

(a) Repurchase Agreements. When entering into repurchase agreements, it is the Fund’s policy that its custodian or a third party custodian take possession of the underlying collateral securities, the market value of which, at all times, at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market to ensure the adequacy of the collateral. If the seller defaults, and the market value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited.

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

2. Investment Valuation

Effective January 1, 2008, the Fund adopted Statement of Financial Accounting Standards No. 157 (“FAS 157”). FAS 157 establishes a single definition of fair value, creates a three-tier hierarchy as a framework for measuring fair value based on inputs used to value the Fund’s investments, and requires additional disclosure about fair value. The hierarchy of inputs is summarized below.

 

  •  

Level 1 – quoted prices in active markets for identical investments

 

  •  

Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

 

  •  

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

Equity securities for which market quotations are available are valued at the last reported sales price or official closing price on the primary market or exchange on which they trade. Debt 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 debt obligations, quotations from 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, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset 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.

The following is a summary of the inputs used in valuing the Fund’s assets carried at fair value:

 

     September 30, 2008    Quoted Prices
(Level 1)		    Other Significant
Observable Inputs
(Level 2)		    Significant
Unobservable
Inputs
(Level 3)

Investments in Securities

    $610,869,037    $598,640,037    $12,229,000    —  

3. Investments

At September 30, 2008, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:

 

Gross unrealized appreciation

    $ 110,944,560  

Gross unrealized depreciation

      (46,340,076 )
        

Net unrealized appreciation

    $ 64,604,484  
        

 

4

Notes to Schedule of Investments (unaudited) (continued)

 

4. Recent Accounting Pronouncement

In March 2008, the Financial Accounting Standards Board issued the Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (“FAS 161”). FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial position, performance and cash flows. Management is currently evaluating the impact the adoption of FAS 161 will have on the Fund’s financial statements and related disclosures.

 

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 Equity Trust

By:   /s/    R. JAY GERKEN        
      R. Jay Gerken    
      Chief Executive Officer    

Date:

  

November 25, 2008

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:

  

November 25, 2008

By:   /s/    KAPREL OZSOLAK        
      Kaprel Ozsolak    
      Chief Financial Officer    

Date:

  

November 25, 2008