CFIPX QS Global Equity Fund Class A (MM)

 

 

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)

620 Eighth Avenue, 49th Floor, New York, NY 10018

(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: 1-877-721-1926

Date of fiscal year end: October 31

Date of reporting period: January 31, 2013

 

 

 

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ITEM 1.

SCHEDULE OF INVESTMENTS.

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LEGG MASON PARTNERS EQUITY TRUST

CLEARBRIDGE LARGE CAP VALUE FUND

FORM N-Q

JANUARY 31, 2013

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CLEARBRIDGE LARGE CAP VALUE FUND

 

Schedule of Investments (unaudited)		January 31, 2013

 

SECURITY		SHARES				VALUE
COMMON STOCKS - 99.1%
CONSUMER DISCRETIONARY - 16.0%
Hotels, Restaurants & Leisure - 0.9%
McDonald’s Corp.			70,980			$	6,763,684
Media - 12.1%
DISH Network Corp., Class A Shares			477,219				17,785,952
News Corp., Class A Shares			947,319				26,278,629
SES Global SA, FDR			306,454				9,381,054
Time Warner Cable Inc.			215,246				19,230,078
Time Warner Inc.			463,696				23,425,922
Total Media							96,101,635
Multiline Retail - 1.1%
Target Corp.			144,357				8,720,606
Specialty Retail - 1.9%
Home Depot Inc.			229,001				15,324,747
TOTAL CONSUMER DISCRETIONARY							126,910,672
CONSUMER STAPLES - 12.1%
Beverages - 1.8%
Anheuser-Busch InBev NV, ADR			157,140				13,922,604
Food & Staples Retailing - 3.0%
CVS Caremark Corp.			464,158				23,764,889
Household Products - 1.9%
Kimberly-Clark Corp.			171,319				15,334,764
Tobacco - 5.4%
Altria Group Inc.			177,361				5,973,519
Lorillard Inc.			290,445				11,347,686
Philip Morris International Inc.			291,788				25,724,030
Total Tobacco							43,045,235
TOTAL CONSUMER STAPLES							96,067,492
ENERGY - 12.4%
Energy Equipment & Services - 3.3%
Halliburton Co.			368,589				14,994,201
Transocean Ltd.			190,456				10,800,760
Total Energy Equipment & Services							25,794,961
Oil, Gas & Consumable Fuels - 9.1%
Apache Corp.			95,226				7,976,130
Chevron Corp.			199,785				23,005,243
Exxon Mobil Corp.			214,382				19,287,948
Royal Dutch Shell PLC, ADR, Class A Shares			166,915				11,770,846
Suncor Energy Inc.			291,771				9,926,049
Total Oil, Gas & Consumable Fuels							71,966,216
TOTAL ENERGY							97,761,177
FINANCIALS - 24.5%
Capital Markets - 3.5%
Bank of New York Mellon Corp.			323,088				8,775,070
State Street Corp.			346,872				19,303,427
Total Capital Markets							28,078,497
Commercial Banks - 6.6%
U.S. Bancorp			738,296				24,437,597
Wells Fargo & Co.			799,849				27,858,741
Total Commercial Banks							52,296,338
Consumer Finance - 3.2%
American Express Co.			269,035				15,821,948

 

See Notes to Schedule of Investments.

 

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CLEARBRIDGE LARGE CAP VALUE FUND

 

Schedule of Investments (unaudited) (cont’d)		January 31, 2013

 

SECURITY		SHARES				VALUE
Consumer Finance - 3.2% (continued)
Capital One Financial Corp.			167,814			$	9,451,285
Total Consumer Finance							25,273,233
Diversified Financial Services - 4.0%
JPMorgan Chase & Co.			669,054				31,478,991
Insurance - 7.2%
Loews Corp.			242,731				10,527,244
Marsh & McLennan Cos. Inc.			381,209				13,525,295
MetLife Inc.			241,092				9,002,375
Progressive Corp.			339,456				7,634,366
Travelers Cos. Inc.			203,627				15,976,574
Total Insurance							56,665,854
TOTAL FINANCIALS							193,792,913
HEALTH CARE - 8.9%
Health Care Providers & Services - 1.4%
WellPoint Inc.			166,144				10,769,454
Pharmaceuticals - 7.5%
Johnson & Johnson			188,485				13,932,811
Merck & Co. Inc.			396,246				17,137,639
Novartis AG, ADR			133,247				9,036,812
Pfizer Inc.			378,172				10,316,532
Teva Pharmaceutical Industries Ltd., ADR			235,625				8,951,394
Total Pharmaceuticals							59,375,188
TOTAL HEALTH CARE							70,144,642
INDUSTRIALS - 9.3%
Aerospace & Defense - 3.1%
Honeywell International Inc.			286,835				19,573,620
Raytheon Co.			86,269				4,544,651
Total Aerospace & Defense							24,118,271
Industrial Conglomerates - 4.3%
General Electric Co.			815,392				18,166,934
United Technologies Corp.			181,942				15,932,661
Total Industrial Conglomerates							34,099,595
Machinery - 1.9%
Illinois Tool Works Inc.			240,187				15,090,949
TOTAL INDUSTRIALS							73,308,815
INFORMATION TECHNOLOGY - 7.7%
Communications Equipment - 1.7%
Motorola Solutions Inc.			227,902				13,307,198
Electronic Equipment, Instruments & Components - 1.5%
TE Connectivity Ltd.			312,601				12,153,927
IT Services - 2.1%
International Business Machines Corp.			82,363				16,725,454
Office Electronics - 1.2%
Xerox Corp.			1,145,583				9,176,120
Software - 1.2%
Microsoft Corp.			359,196				9,867,114
TOTAL INFORMATION TECHNOLOGY							61,229,813
MATERIALS - 2.9%
Chemicals - 1.5%
Air Products & Chemicals Inc.			135,336				11,832,426
Containers & Packaging - 1.4%
Crown Holdings Inc.			292,358				11,068,674	*

 

 

See Notes to Schedule of Investments.

 

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CLEARBRIDGE LARGE CAP VALUE FUND

 

Schedule of Investments (unaudited) (cont’d)		January 31, 2013

 

SECURITY										SHARES				VALUE
Containers & Packaging - 1.4% (continued)
TOTAL MATERIALS														$	22,901,100
TELECOMMUNICATION SERVICES - 3.0%
Diversified Telecommunication Services - 3.0%
AT&T Inc.											252,309				8,777,830
CenturyLink Inc.											179,775				7,271,899
Verizon Communications Inc.											171,872				7,495,338
TOTAL TELECOMMUNICATION SERVICES															23,545,067
UTILITIES - 2.3%
Multi-Utilities - 2.3%
Sempra Energy											238,994				17,936,500
TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS (Cost - $532,617,180)															783,598,191
		RATE				MATURITY DATE				FACE AMOUNT
SHORT-TERM INVESTMENTS - 0.6%
Repurchase Agreements - 0.6%
Interest in $675,000,000 joint tri-party repurchase agreement dated 1/31/13 with RBS Securities Inc.; Proceeds at maturity - $4,938,018; (Fully collateralized by various U.S. government obligations, 0.000% to 11.250% due 2/15/15 to 8/15/41; Market value - $5,036,777) (Cost - $4,938,000)			0.130	%			2/1/13			$	4,938,000				4,938,000
TOTAL INVESTMENTS - 99.7 % (Cost - $537,555,180#)															788,536,191
Other Assets in Excess of Liabilities - 0.3%															2,526,125
TOTAL NET ASSETS - 100.0%														$	791,062,316

 

*	Non-income producing security.

 

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

Abbreviations used in this schedule:

ADR		— American Depositary Receipts
FDR		— Foreign Depositary Receipts

 

See Notes to Schedule of Investments.

 

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Notes to Schedule of Investments (unaudited)

 

1. Organization and significant accounting policies

ClearBridge Large Cap Value Fund (formerly Legg Mason ClearBridge Large Cap Value Fund) (the “Fund”) is a separate diversified investment series of Legg Mason Partners Equity Trust (the “Trust”). The Trust, a Maryland statutory 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) Investment valuation. 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. The valuations for fixed income securities (which may include, but are not limited to, corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and certain derivative instruments are typically the prices supplied by independent third party pricing services, which may use market prices or broker/dealer quotations or a variety of valuation techniques and methodologies. The independent third party pricing services use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar securities. Short-term fixed income securities that will mature in 60 days or less are valued at amortized cost, unless it is determined that using this method would not reflect an investment’s fair value. When the Fund holds securities or other assets that are denominated in a foreign currency, the Fund will normally use the currency exchange rates as of 4:00 p.m. (Eastern Time). If independent third party pricing services are unable to supply prices for a portfolio investment, or if the prices supplied are deemed by the manager to be unreliable, the market price may be determined by the manager using quotations from one or more broker/dealers or at the transaction price if the security has recently been purchased and no value has yet been obtained from a pricing service or pricing broker. When reliable prices are not readily available, 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 values these securities as determined in accordance with procedures approved by the Fund’s Board of Trustees.

The Board of Trustees is responsible for the valuation process and has delegated the supervision of the daily valuation process to the Legg Mason North American Fund Valuation Committee (the “Valuation Committee”). The Valuation Committee, pursuant to the policies adopted by the Board of Trustees, is responsible for making fair value determinations, evaluating the effectiveness of the Fund’s pricing policies, and reporting to the Board of Trustees. When determining the reliability of third party pricing information for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the daily change in prices and reviews transactions among market participants.

The Valuation Committee will consider pricing methodologies it deems relevant and appropriate when making fair value determinations. Examples of possible methodologies include, but are not limited to, multiple of earnings; discount from market of a similar freely traded security; discounted cash-flow analysis; book value or a multiple thereof; risk premium/yield analysis; yield to maturity; and/or fundamental investment analysis. The Valuation Committee will also consider factors it deems relevant and appropriate in light of the facts and circumstances. Examples of possible factors include, but are not limited to, the type of security; the issuer’s financial statements; the purchase price of the security; the discount from market value of unrestricted securities of the same class at the time of purchase; analysts’ research and observations from financial institutions; information regarding any transactions or offers with respect to the security; the existence of merger proposals or tender offers affecting the security; the price and extent of public trading in similar securities of the issuer or comparable companies; and the existence of a shelf registration for restricted securities.

For each portfolio security that has been fair valued pursuant to the policies adopted by the Board of Trustees, the fair value price is compared against the last available and next available market quotations. The Valuation Committee reviews the results of such back testing monthly and fair valuation occurrences are reported to the Board of Trustees quarterly.

The Fund uses valuation techniques to measure fair value that are consistent with the market approach and/or income approach, depending on the type of security and the particular circumstance. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable securities. The income approach uses valuation techniques to discount estimated future cash flows to present value.

GAAP establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:

 

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Notes to Schedule of Investments (unaudited) (continued)

 

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Level 1 – quoted prices in active markets for identical investments

 

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

 

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

The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

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

 

ASSETS
DESCRIPTION		QUOTED PRICES (LEVEL 1)				OTHER SIGNIFICANT OBSERVABLE INPUTS (LEVEL 2)				SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)				TOTAL
Common stocks†		$	783,598,191				—				—			$	783,598,191
Short-term investments†			—			$	4,938,000				—				4,938,000
Total investments		$	783,598,191			$	4,938,000				—			$	788,536,191

 

†	See Schedule of Investments for additional detailed categorizations.

(b) Repurchase agreements. The Fund may enter into repurchase agreements with institutions that its investment adviser has determined are creditworthy. Each repurchase agreement is recorded at cost. Under the terms of a typical repurchase agreement, the Fund acquires a debt security subject to an obligation of the seller to repurchase, and of the Fund to resell, the security at an agreed-upon price and time, thereby determining the yield during the Fund’s holding period. When entering into repurchase agreements, it is the Fund’s policy that its custodian or a third party custodian, acting on the Fund’s behalf, 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 maturity exceeds one business day, the value of the collateral is marked-to-market and measured against the value of the agreement in an effort to ensure the adequacy of the collateral. If the counterparty defaults, the Fund generally has the right to use the collateral to satisfy the terms of the repurchase transaction. However, if the market value of the collateral declines during the period in which the Fund seeks to assert its rights 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.

(c) Foreign currency translation. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such transactions.

Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.

(d) Foreign investment risks. The Fund’s investments in foreign securities may involve risks not present in domestic investments. Since securities may be denominated in foreign currencies, may require settlement in foreign currencies or pay interest or dividends in foreign currencies, changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Fund. Foreign investments may also subject the Fund to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, all of which affect the market and/or credit risk of the investments.

 

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

2. Investments

At January 31, 2013, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:

 

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Notes to Schedule of Investments (unaudited) (continued)

 

Gross unrealized appreciation		$	265,870,993
Gross unrealized depreciation			(14,889,982	)
Net unrealized appreciation		$	250,981,011

3. Derivative instruments and hedging activities

GAAP requires enhanced disclosure about an entity’s derivative and hedging activities.

During the period ended   January 31, 2013, the Fund did not invest in any derivative instruments.

 

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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.

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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. J AY G ERKEN
		R. Jay Gerken
		Chief Executive Officer

Date: March 26, 2013

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. J AY G ERKEN
		R. Jay Gerken
		Chief Executive Officer

Date: March 26, 2013

 

By		/ S /    R ICHARD F. S ENNETT
		Richard F. Sennett
		Principal Financial Officer

Date: March 26, 2013