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II
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ClearBridge Equity Fund
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Fund objectives
The Fund seeks growth and conservation of capital. Income is a secondary investment objective.
Fund and subadviser name changes
Prior to January 1, 2013, the Fund was known as Legg Mason ClearBridge Equity Fund. On December 5, 2012, the name of the Funds subadviser
changed from ClearBridge Advisors, LLC to ClearBridge Investments, LLC. There was no change in the Funds investment objective or strategy as a result of these name changes.
Letter from the chairman
Dear Shareholder,
We are pleased to provide the annual report of ClearBridge Equity Fund for the twelve-month reporting period ended October 31,
2012. Please read on for a detailed look at prevailing economic and market conditions during the Funds reporting period and to learn how those conditions have affected Fund performance.
As always, we remain committed to providing you with excellent service and a full spectrum of investment choices. We also remain committed to supplementing the support you receive from your
financial advisor. One way we accomplish this is through our website, www.leggmason.com/individualinvestors. Here you can gain immediate access to market and investment information, including:
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Fund prices and performance,
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Market insights and commentaries from our portfolio managers, and
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A host of educational resources.
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We look forward to helping you meet your financial goals.
Sincerely,
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
November 30, 2012
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ClearBridge Equity Fund
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III
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Investment commentary
Economic review
The U.S. economy continued to grow over the twelve months ended October 31, 2012, albeit at an uneven pace. U.S. gross
domestic product (GDP)
i
growth, as
reported by the U.S. Department of Commerce, was 4.1% in the fourth quarter of 2011. Economic growth in the U.S. then decelerated, as first quarter 2012 GDP growth was 2.0%. This was primarily due to less robust private inventory and non-residential
fixed investments. The economy slowed further in the second quarter, as GDP growth was a tepid 1.3%. According to the Commerce Departments second estimate, GDP growth then moved to 2.7% in the third quarter. The increase was partially due to
increased private inventory and investment, higher federal government spending and a deceleration in imports.
The U.S. job market
remained weak. While there was some improvement during the reporting period, unemployment remained elevated. When the reporting period began, unemployment, as reported by the U.S. Department of Labor, was 8.9%. Unemployment then generally declined
and was 8.1% in April 2012, the lowest rate since January 2009, but still high by historical standards. The unemployment rate then moved higher, reaching 8.3% in July, before falling to 7.8% in September and ending the reporting period at 7.9% in
October. However, the recent moderation in unemployment was partially due to people leaving the workforce and an increase in part-time workers.
Meanwhile, the housing market brightened, as sales have started to improve of late and home prices continued to rebound. According to the National Association of Realtors (NAR),
existing-home sales rose 2.1% on a seasonally adjusted basis in October 2012 versus the previous month and they were 10.9% higher than in October 2011. In addition, the NAR reported that the median existing-home price for all housing types was
$178,600 in October 2012, up 11.1% from October 2011. This marked the eighth consecutive month that home prices rose compared to the same period a year earlier. Furthermore, the inventory of homes available for sale fell 1.4% in October, which
represents a 5.4 month supply at the current sales pace. This represents the lowest inventory since February 2006.
The manufacturing sector overcame a soft patch that occurred in the summer of 2012 and improved toward the end of the reporting
period. Based on the Institute for Supply Managements PMI (PMI)
ii
, after expanding 34 consecutive months, the PMI fell to 49.7 in June 2012, which represented the first contraction in the manufacturing sector since July 2009 (a reading below 50 indicates a
contraction, whereas a reading above 50 indicates an expansion). Manufacturing continued to contract in July and August before ticking up to 51.5 in September and 51.7 in October.
The Federal Reserve Board (Fed)
iii
took a number of actions as it sought to meet its dual mandate of fostering maximum employment and price
stability. As has been the case since December 2008, the Fed kept the federal funds rate
iv
at a historically low range between zero and 0.25%. In September 2011, prior to the beginning of the reporting period, the Fed announced its intention to purchase $400 billion of longer-term
Treasury securities and to sell an equal amount of shorter-term Treasury securities by June 2012 (often referred to as Operation Twist). In January 2012, the Fed extended the period it expects to keep rates on hold, saying economic
conditions including low rates of resource utilization and a subdued outlook for inflation over the medium run are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014. In June, the Fed
announced that it would
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IV
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ClearBridge Equity Fund
|
Investment commentary (contd)
extend Operation Twist until the end of 2012. Finally, in September the Fed announced a third round of quantitative easing, which involves purchasing $40 billion each month of agency
mortgage-backed securities on an open-end basis. In addition, the Fed said that Operation Twist would continue and that it will keep the federal funds rate on hold until at least mid-2015.
As always, thank you for your confidence in our stewardship of your assets.
Sincerely,
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
November 30, 2012
All investments are subject to risk including the possible loss of principal. Past performance is no guarantee of future results.
i
|
Gross domestic product (GDP) is the market value of all final goods and services produced within a country in a given period of time.
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ii
|
The Institute for Supply Management's PMI is based on a survey of purchasing executives who buy the raw materials for manufacturing at more than
350 companies. It offers an early reading on the health of the manufacturing sector.
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iii
|
The Federal Reserve Board ("Fed") is responsible for the formulation of policies designed to promote economic growth, full employment, stable
prices and a sustainable pattern of international trade and payments.
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iv
|
The federal funds rate is the rate charged by one depository institution on an overnight sale of immediately available funds (balances at the
Federal Reserve) to another depository institution; the rate may vary from depository institution to depository institution and from day to day.
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ClearBridge Equity Fund 2012 Annual Report
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1
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Fund overview
Q. What is the Funds investment strategy?
A.
The Fund seeks growth and conservation of capital. Income is a secondary investment objective. Under normal circumstances, the Fund invests at least 80% of its assets in equity securities.
The Fund invests primarily in common stock or securities convertible into common stock of companies in industries we believe have the potential to grow at a faster rate than the economy as a whole and that appear to have above-average earnings and
dividend growth potential.
The Fund emphasizes investments in U.S. stocks with large market capitalizations, but the Fund also invests
in stocks with small- and medium- capitalizations and may invest up to 25% of its assets in foreign securities, including up to 10% of its assets in securities of emerging market issuers. Foreign securities may be denominated and traded in foreign
currencies and may be traded in the U.S. or on international stock exchanges. The Funds foreign investments are typically equity securities.
In selecting securities for the Funds portfolio, we look for companies we believe are able to increase earnings and dividends at an above-average rate and still retain enough cash to finance
future growth in their businesses. We favor companies with above average growth in dividend yields because we believe this shows responsible use of capital on the part of the companies. We emphasize individual security selection while spreading the
Funds investments among industries and sectors for broad market exposure.
Q. What were the overall market conditions during the
Funds reporting period?
A.
During the year ended October 31, 2012 the U.S. stock market
experienced a significant rally, rising 15.21%, as measured by the S&P 500 Index
i
. The key catalysts for the rise were the European Central Bank (ECB) introduction of the Long-Term Refinancing Operations (LTRO) in December 2011, which alleviated much of
the concern about a potential European bank liquidity crisis and financial contagion, and improvements in U.S. housing, auto and retail sales that suggested that the U.S. was experiencing a self-sustaining economic recovery. The market increase came
despite a weakening in Chinese growth through the period, a European economy that flirted with recession and a disappointing set of earnings releases by U.S. corporations in the second and third quarters of 2012.
Q. How did we respond to these changing market conditions?
A.
In terms of sector allocation, during the reporting period we rotated toward a less cyclical posture, with reductions in our exposure to the Industrials, Energy and Materials sectors. In
contrast, we increased our holdings in the Health Care sector, particularly in the Pharmaceuticals industry, where we were attracted to a combination of low valuations, improving growth and strong capital return policies. Similarly, we increased our
weighting in the Financials sector to a more benchmark-neutral position after being underweight for a number of years. However, continued low interest rates, which keep profit margins skinny, as well as continued low levels of loan growth, kept us
from being more aggressive in this area.
Our focus has remained on owning a diversified portfolio of high-quality companies that we
think will benefit if economic trends continue or improve, but that we also believe can perform more defensively if needed in an environment where risks remain elevated. We have continued to place a high priority on capital allocation policies in
terms of stock selection. In our opinion, the combination of low interest rates, slow growth and limited reinvestment opportunities has been
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2
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ClearBridge Equity Fund 2012 Annual Report
|
Fund overview (contd)
creating a significant shift in company capital allocation policies. As a result, we expect the trend of increased dividend payments and large-scale share repurchases will likely continue for
many years. Equally important, we have been seeing an increase in spin-offs, divestments and sales of undervalued assets as a way for companies to maximize value for shareholders. This has benefitted many of our portfolio holdings over the reporting
period, and it disproportionately benefits the larger, higher-quality, asset-rich companies that remain the core of the Fund.
Performance review
For the twelve months ended October 31, 2012, Class A shares of ClearBridge Equity Fund, excluding sales charges, returned 14.07%. The Funds unmanaged benchmark, the S&P 500
Index, returned 15.21% for the same period. The Lipper Large-Cap Core Funds Category Average
1
returned 13.16% over the same time frame.
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Performance Snapshot
as of October 31, 2012
(unaudited)
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(excluding sales charges)
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6 months
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12 months
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ClearBridge Equity Fund:
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Class A
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2.43
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%
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14.07
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%
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Class C
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1.99
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%
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13.08
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%
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Class I
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2.61
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%
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14.32
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%
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Class O
|
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2.62
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%
|
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14.43
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%
|
S&P 500 Index
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|
2.16
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%
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15.21
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%
|
Lipper Large-Cap Core Funds Category Average
1
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1.43
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%
|
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13.16
|
%
|
The performance shown represents past performance. Past performance is no guarantee of future results and current
performance may be higher or lower than the performance shown above. Principal value and investment returns will fluctuate and
investors shares, when redeemed, may be worth more or less than their original cost. To obtain performance
data current to the most recent month-end, please visit our website at www.leggmason.com/individualinvestors.
All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all Fund expenses. Returns have not been
adjusted to include sales charges that may apply or the deduction of taxes that a shareholder would pay on Fund distributions. If sales charges were reflected, the performance quoted would be lower. Performance figures for periods shorter than one
year represent cumulative figures and are not annualized.
Fund performance figures reflect fee waivers and/or expense reimbursements, without which the performance would have been lower.
|
Total Annual Operating Expenses
(unaudited)
|
As of the Funds current prospectus dated February 29, 2012, the gross total
annual operating expense ratios for Class A, Class C, Class I and Class O shares were 1.19%, 2.08%, 0.97% and 0.72%, respectively.
Actual expenses may be higher. For example, expenses may be higher than those shown if
average net assets decrease. Net assets are more likely to decrease and Fund expense ratios are more likely to increase when markets are volatile.
As a result of expense limitation arrangements, the ratio of expenses, other than
brokerage, interest, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets is not expected to exceed 1.25% for Class A shares, 2.00% for Class C shares, 0.95% for Class I shares and 0.95% for Class O shares.
These expense limitation arrangements cannot be terminated prior to December 31, 2014 without the Board of Trustees consent.
1
|
Lipper, Inc., a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments. Returns are based on the
period ended October 31, 2012, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 975 funds for the six-month period and among the 947 funds for the twelve-month period in the Funds
Lipper category, and excluding sales charges.
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ClearBridge Equity Fund 2012 Annual Report
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3
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The manager is permitted to recapture amounts waived or reimbursed to a class during the same fiscal year if the class total annual operating expenses have fallen to a level below the expense
limitation (expense cap) in effect at the time the fees were earned or the expenses incurred. In no case will the manager recapture any amount that would result, on any particular business day of the Fund, in the class total annual
operating expenses exceeding the expense cap or any other lower limit then in effect.
Q. What were the leading contributors
to performance?
A.
On an absolute basis, the Fund had positive returns in all ten sectors for the period, with the greatest
contributions to returns coming from the Consumer Discretionary, Financials and Information Technology (IT) sectors. Relative to the benchmark, overall stock selection contributed to performance. In particular, selection in the Consumer
Discretionary, Utilities and Consumer Staples sectors helped performance for the period.
In terms of individual Fund holdings, leading
contributors to performance for the period included positions in Apple Inc. in the IT sector, Toll Brothers Inc. in the Consumer Discretionary sector, Wells Fargo & Co. in the Financials sector, Pfizer Inc. in the Health Care sector and
Philip Morris International Inc. in the Consumer Staples sector.
Q. What were the leading detractors from performance?
A.
Relative to the benchmark, the Funds overall sector allocation detracted from performance for the period, due primarily to the
Funds cash position. In terms of stock selection, the Health Care, Industrials and Energy sectors negatively impacted relative performance for the period.
In terms of individual Fund holdings, leading detractors from performance for the period included Newmont Mining Corp. in the Materials sector, Oracle Corp. and Facebook Inc. both in the IT sector,
Apache Corp. in the Energy sector and Kellogg Co. in the Consumer Staples sector.
Q. Were there any significant changes to the Fund
during the reporting period?
A.
There were a number of Fund positions sold and bought over the course of the period. The largest
additions to the Fund included holdings in Merck & Co. Inc. and Thermo Fisher Scientific Inc. in the Health Care sector, Target Corp. in the Consumer Discretionary sector, NV Energy Inc. in the Utilities sector and SunTrust Banks Inc. in
the Financials sector. The largest positions sold during the period included those in Moodys Corp. in the Financials sector, Novartis AG ADS in the Health Care sector, Autodesk Inc. in the IT sector, Total S.A. ADS in the Energy sector and
Celanese Corp. in the Materials sector.
Thank you for your investment in ClearBridge Equity Fund. As always, we appreciate that you have
chosen us to manage your assets and we remain focused on achieving the Funds investment goals.
Sincerely,
Michael A. Kagan
Portfolio Manager
ClearBridge Investments, LLC
November 21, 2012
RISKS:
Stock prices are
subject to market fluctuations. Investments in small- and mid-capitalization companies may involve a higher degree of risk and volatility than investments in larger, more established companies. The Fund may use derivatives, such as options and
futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. The Fund may invest in foreign securities which are subject to certain risks of
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4
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ClearBridge Equity Fund 2012 Annual Report
|
Fund overview (contd)
overseas investing, including currency fluctuations and changes in political and economic conditions, which could result in significant market fluctuations. These risks are magnified in emerging
markets. Lower-rated, higher-yielding securities are subject to greater credit risk, including the risk of default, than higher-rated obligations. Please see the Funds prospectus for more complete discussion of these and other risks, and the
Funds investment strategies.
Portfolio holdings and breakdowns are as of October 31, 2012 and are subject to
change and may not be representative of the portfolio managers current or future investments. The Funds top ten holdings (as a percentage of net assets) as of October 31, 2012 were: Apple Inc. (4.7%), Exxon Mobil Corp. (3.9%), Wells
Fargo & Co. (3.4%), Pfizer Inc. (3.4%), Google Inc., Class A Shares (2.9%), Philip Morris International Inc. (2.8%), McCormick & Co. Inc., Non Voting Shares (2.8%), Johnson & Johnson (2.4%), Microsoft Corp.
(2.1%) and News Corp., Class B Shares (2.1%). Please refer to pages 9 through 13 for a list and percentage breakdown of the Funds holdings.
The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such
sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial
professional. The Funds top five sector holdings (as a percentage of net assets) as of October 31, 2012 were: Information Technology (19.1%), Financials (15.3%), Health Care (12.6%), Consumer Discretionary (12.1%) and Consumer
Staples (11.0%). The Funds portfolio composition is subject to change at any time.
All investments are subject to risk including
the possible loss of principal. Past performance is no guarantee of future results. All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.
The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may
differ from those of the firm as a whole.
i
|
The S&P 500 Index is an unmanaged index of 500 stocks and is generally representative of the performance of larger companies in the U.S.
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ClearBridge Equity Fund 2012 Annual Report
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5
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Fund at a glance
(unaudited)
Investment breakdown
(%) as a percent of total investments
|
The bar graph above represents the composition of the Funds investments as of October 31, 2012 and October 31, 2011. The Fund is actively managed. As a
result, the composition of the Funds investments is subject to change at any time.
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6
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ClearBridge Equity Fund 2012 Annual Report
|
Fund expenses
(unaudited)
Example
As a shareholder of the
Fund, you may incur two types of costs: (1) transaction costs, including front-end and back-end sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; service and/or distribution fees (12b-1) fees;
and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This example is based on an investment of $1,000 invested on May 1, 2012 and held for the six months ended October 31, 2012.
Actual expenses
The table below
titled Based on Actual Total Return provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid
over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled
Expenses Paid During the Period.
Hypothetical example for comparison purposes
The table below titled Based on Hypothetical Total Return provides information about hypothetical account values and hypothetical
expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Funds actual return. The hypothetical account values and expenses may not be used to estimate the actual ending
account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund with
the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in
the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as front-end or back-end sales charges (loads). Therefore, the table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
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Based on actual total return
1
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Based on hypothetical total return
1
|
|
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Actual
Total Return
Without
Sales
Charge
2
|
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|
Beginning
Account
Value
|
|
|
Ending
Account
Value
|
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Annualized
Expense
Ratio
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|
Expenses
Paid
During
the
Period
3
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|
Hypothetical
Annualized
Total
Return
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|
Beginning
Account
Value
|
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|
Ending
Account
Value
|
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|
Annualized
Expense
Ratio
|
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|
Expenses
Paid
During
the
Period
3
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|
Class A
|
|
|
2.43
|
%
|
|
$
|
1,000.00
|
|
|
$
|
1,024.30
|
|
|
|
1.16
|
%
|
|
$
|
5.90
|
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|
Class A
|
|
|
5.00
|
%
|
|
$
|
1,000.00
|
|
|
$
|
1,019.30
|
|
|
|
1.16
|
%
|
|
$
|
5.89
|
|
Class C
|
|
|
1.99
|
|
|
|
1,000.00
|
|
|
|
1,019.90
|
|
|
|
1.96
|
|
|
|
9.95
|
|
|
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|
Class C
|
|
|
5.00
|
|
|
|
1,000.00
|
|
|
|
1,015.28
|
|
|
|
1.96
|
|
|
|
9.93
|
|
Class I
|
|
|
2.61
|
|
|
|
1,000.00
|
|
|
|
1,026.10
|
|
|
|
0.91
|
|
|
|
4.63
|
|
|
|
|
Class I
|
|
|
5.00
|
|
|
|
1,000.00
|
|
|
|
1,020.56
|
|
|
|
0.91
|
|
|
|
4.62
|
|
Class O
|
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|
2.62
|
|
|
|
1,000.00
|
|
|
|
1,026.20
|
|
|
|
0.76
|
|
|
|
3.87
|
|
|
|
|
Class O
|
|
|
5.00
|
|
|
|
1,000.00
|
|
|
|
1,021.32
|
|
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|
0.76
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|
|
|
3.86
|
|
1
|
For the six months ended October 31, 2012.
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2
|
Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value and does not reflect the deduction of the
applicable sales charge with respect to Class A shares or the applicable contingent deferred sales charge (CDSC) with respect to Class C shares. Total return is not annualized, as it may not be representative of the total return for
the year. Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been
lower. Past performance is no guarantee of future results.
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3
|
Expenses (net of compensating balance arrangements, fee waivers and/or expense reimbursements) are equal to each class respective
annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), then divided by 366.
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ClearBridge Equity Fund 2012 Annual Report
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7
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Fund performance
(unaudited)
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Average annual total returns
|
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|
|
|
|
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|
Without sales charges
1
|
|
Class A
|
|
|
Class C
|
|
|
Class I
|
|
|
Class O
|
|
Twelve Months Ended 10/31/12
|
|
|
14.07
|
%
|
|
|
13.08
|
%
|
|
|
14.32
|
%
|
|
|
14.43
|
%
|
Five Years Ended 10/31/12
|
|
|
-0.96
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
-0.60
|
|
Ten Years Ended 10/31/2012
|
|
|
N/A
|
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|
N/A
|
|
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|
N/A
|
|
|
|
6.46
|
|
Inception* through 10/31/2012
|
|
|
1.23
|
|
|
|
5.89
|
|
|
|
1.28
|
|
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N/A
|
|
|
|
|
|
|
With sales charges
2
|
|
Class A
|
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Class C
|
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|
Class I
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Class O
|
|
Twelve Months Ended 10/31/12
|
|
|
7.51
|
%
|
|
|
12.08
|
%
|
|
|
14.32
|
%
|
|
|
14.43
|
%
|
Five Years Ended 10/31/12
|
|
|
-2.12
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
-0.60
|
|
Ten Years Ended 10/31/12
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
6.46
|
|
Inception* through 10/31/12
|
|
|
0.21
|
|
|
|
5.89
|
|
|
|
1.28
|
|
|
|
N/A
|
|
|
|
|
|
|
Cumulative total returns
|
|
|
|
Without sales charges
1
|
|
|
|
Class A (Inception date of 12/28/06 through 10/31/12)
|
|
|
7.43
|
%
|
Class C (Inception date of 1/6/10 through 10/31/12)
|
|
|
17.52
|
|
Class I (Inception date of 4/30/08 through 10/31/12)
|
|
|
5.91
|
|
Class O (10/31/02 through 10/31/12)
|
|
|
87.03
|
|
All
figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investors shares, when redeemed, may be worth more or less than their original cost.
The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance figures may reflect compensating balance arrangements, fee waivers and/or expense
reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower.
1
|
Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value and does not reflect the deduction of the
applicable sales charge with respect to Class A shares or the applicable CDSC with respect to Class C shares.
|
2
|
Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value. In addition, Class A shares reflect
the deduction of the maximum initial sales charge of 5.75%. Class C shares reflect the deduction of a 1.00% CDSC, which applies if shares are redeemed within one year from purchase payment.
|
*
|
Inception dates for Class A, C, I and O shares are December 28, 2006, January 6, 2010, April 30, 2008 and September 24, 1929,
respectively.
|
|
|
|
8
|
|
ClearBridge Equity Fund 2012 Annual Report
|
Fund performance
(unaudited)
(contd)
Historical performance
Value of $10,000 invested in
Class O Shares of ClearBridge Equity Fund vs. S&P 500 Index October 2002 - October 2012
All
figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investors shares, when redeemed, may be worth more or less than their original cost.
The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance figures may reflect compensating balance arrangements, fee waivers and/or expense
reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower.
|
Hypothetical illustration of $10,000 invested in Class O shares of ClearBridge Equity Fund on October 31, 2002, assuming the reinvestment of all distributions,
including returns of capital, if any, at net asset value through October 31, 2012. The hypothetical illustration also assumes a $10,000 investment in the S&P 500 Index. The S&P 500 Index is an unmanaged index of 500 stocks and is generally
representative of the performance of larger companies in the U.S. The Index is unmanaged and is not subject to the same management and trading expenses as a mutual fund. Please note that an investor cannot invest directly in an index. The
performance of the Funds other classes may be greater or less than the Class O shares performance indicated on this chart, depending on whether greater or lesser sales charges and fees were incurred by shareholders investing in the other
classes.
|
|
|
|
|
|
ClearBridge Equity Fund 2012 Annual Report
|
|
|
9
|
|
Schedule of investments
October 31, 2012
ClearBridge Equity Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
Common Stocks
99.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Discretionary
12.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobiles 1.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford Motor Co.
|
|
|
|
|
|
|
246,420
|
|
|
$
|
2,750,047
|
|
Harley-Davidson Inc.
|
|
|
|
|
|
|
99,940
|
|
|
|
4,673,195
|
|
Total Automobiles
|
|
|
|
|
|
|
|
|
|
|
7,423,242
|
|
Hotels, Restaurants & Leisure 1.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
Starwood Hotels & Resorts Worldwide Inc.
|
|
|
|
|
|
|
62,700
|
|
|
|
3,250,995
|
|
Yum! Brands Inc.
|
|
|
|
|
|
|
51,170
|
|
|
|
3,587,529
|
|
Total Hotels, Restaurants & Leisure
|
|
|
|
|
|
|
|
|
|
|
6,838,524
|
|
Household Durables 2.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Lennar Corp., Class A Shares
|
|
|
|
|
|
|
67,800
|
|
|
|
2,540,466
|
|
Toll Brothers Inc.
|
|
|
|
|
|
|
248,300
|
|
|
|
8,196,383
|
*
|
Total Household Durables
|
|
|
|
|
|
|
|
|
|
|
10,736,849
|
|
Internet & Catalog Retail 0.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Amazon.com Inc.
|
|
|
|
|
|
|
5,310
|
|
|
|
1,236,274
|
*
|
Media 3.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
News Corp., Class B Shares
|
|
|
|
|
|
|
391,390
|
|
|
|
9,534,260
|
|
Walt Disney Co.
|
|
|
|
|
|
|
176,430
|
|
|
|
8,657,420
|
|
Total Media
|
|
|
|
|
|
|
|
|
|
|
18,191,680
|
|
Multiline Retail 1.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Target Corp.
|
|
|
|
|
|
|
94,630
|
|
|
|
6,032,662
|
|
Specialty Retail 1.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
TJX Cos. Inc.
|
|
|
|
|
|
|
127,730
|
|
|
|
5,317,400
|
|
Total Consumer Discretionary
|
|
|
|
|
|
|
|
|
|
|
55,776,631
|
|
Consumer Staples
11.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Beverages 2.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Coca-Cola Co.
|
|
|
|
|
|
|
103,240
|
|
|
|
3,838,463
|
|
PepsiCo Inc.
|
|
|
|
|
|
|
90,570
|
|
|
|
6,271,067
|
|
Total Beverages
|
|
|
|
|
|
|
|
|
|
|
10,109,530
|
|
Food & Staples Retailing 1.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
CVS Caremark Corp.
|
|
|
|
|
|
|
51,960
|
|
|
|
2,410,944
|
|
Wal-Mart Stores Inc.
|
|
|
|
|
|
|
65,250
|
|
|
|
4,895,055
|
|
Total Food & Staples Retailing
|
|
|
|
|
|
|
|
|
|
|
7,305,999
|
|
Food Products 3.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Kellogg Co.
|
|
|
|
|
|
|
45,520
|
|
|
|
2,381,606
|
|
McCormick & Co. Inc., Non Voting Shares
|
|
|
|
|
|
|
208,080
|
|
|
|
12,821,890
|
|
Total Food Products
|
|
|
|
|
|
|
|
|
|
|
15,203,496
|
|
See Notes to Financial Statements.
|
|
|
10
|
|
ClearBridge Equity Fund 2012 Annual Report
|
Schedule of investments (contd)
October 31, 2012
ClearBridge Equity Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
Household Products 1.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Procter & Gamble Co.
|
|
|
|
|
|
|
74,840
|
|
|
$
|
5,181,922
|
|
Tobacco 2.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
Philip Morris International Inc.
|
|
|
|
|
|
|
146,970
|
|
|
|
13,015,663
|
|
Total Consumer Staples
|
|
|
|
|
|
|
|
|
|
|
50,816,610
|
|
Energy
10.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy Equipment & Services 3.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
Cameron International Corp.
|
|
|
|
|
|
|
22,000
|
|
|
|
1,114,080
|
*
|
Diamond Offshore Drilling Inc.
|
|
|
|
|
|
|
70,340
|
|
|
|
4,870,342
|
|
National-Oilwell Varco Inc.
|
|
|
|
|
|
|
90,150
|
|
|
|
6,644,055
|
|
Schlumberger Ltd.
|
|
|
|
|
|
|
47,090
|
|
|
|
3,274,168
|
|
Total Energy Equipment & Services
|
|
|
|
|
|
|
|
|
|
|
15,902,645
|
|
Oil, Gas & Consumable Fuels 7.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Apache Corp.
|
|
|
|
|
|
|
41,050
|
|
|
|
3,396,887
|
|
Chevron Corp.
|
|
|
|
|
|
|
52,000
|
|
|
|
5,730,920
|
|
Devon Energy Corp.
|
|
|
|
|
|
|
67,480
|
|
|
|
3,928,011
|
|
Exxon Mobil Corp.
|
|
|
|
|
|
|
195,430
|
|
|
|
17,817,353
|
|
Hess Corp.
|
|
|
|
|
|
|
46,780
|
|
|
|
2,444,723
|
|
Total Oil, Gas & Consumable Fuels
|
|
|
|
|
|
|
|
|
|
|
33,317,894
|
|
Total Energy
|
|
|
|
|
|
|
|
|
|
|
49,220,539
|
|
Exchange-Traded Funds
0.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange Traded Funds 0.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
SPDR Gold Trust
|
|
|
|
|
|
|
17,020
|
|
|
|
2,839,957
|
*
|
Financials
15.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Banks 4.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
SunTrust Banks Inc.
|
|
|
|
|
|
|
154,380
|
|
|
|
4,199,136
|
|
Wells Fargo & Co.
|
|
|
|
|
|
|
471,190
|
|
|
|
15,874,391
|
|
Total Commercial Banks
|
|
|
|
|
|
|
|
|
|
|
20,073,527
|
|
Consumer Finance 2.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
American Express Co.
|
|
|
|
|
|
|
100,280
|
|
|
|
5,612,672
|
|
Capital One Financial Corp.
|
|
|
|
|
|
|
63,990
|
|
|
|
3,850,278
|
|
Total Consumer Finance
|
|
|
|
|
|
|
|
|
|
|
9,462,950
|
|
Diversified Financial Services 3.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
Citigroup Inc.
|
|
|
|
|
|
|
250,004
|
|
|
|
9,347,650
|
|
JPMorgan Chase & Co.
|
|
|
|
|
|
|
187,680
|
|
|
|
7,822,502
|
|
Total Diversified Financial Services
|
|
|
|
|
|
|
|
|
|
|
17,170,152
|
|
Insurance 3.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Berkshire Hathaway Inc., Class A Shares
|
|
|
|
|
|
|
47
|
|
|
|
6,086,735
|
*
|
MetLife Inc.
|
|
|
|
|
|
|
225,520
|
|
|
|
8,003,705
|
|
Total Insurance
|
|
|
|
|
|
|
|
|
|
|
14,090,440
|
|
See Notes to Financial Statements.
|
|
|
|
|
ClearBridge Equity Fund 2012 Annual Report
|
|
|
11
|
|
ClearBridge Equity Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
Real Estate Investment Trusts (REITs) 2.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
American Tower Corp.
|
|
|
|
|
|
|
96,910
|
|
|
$
|
7,296,354
|
|
Annaly Capital Management Inc.
|
|
|
|
|
|
|
132,810
|
|
|
|
2,143,553
|
|
Total Real Estate Investment Trusts (REITs)
|
|
|
|
|
|
|
|
|
|
|
9,439,907
|
|
Total Financials
|
|
|
|
|
|
|
|
|
|
|
70,236,976
|
|
Health Care
12.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care Equipment & Supplies 2.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Covidien PLC
|
|
|
|
|
|
|
85,960
|
|
|
|
4,723,502
|
|
Thermo Fisher Scientific Inc.
|
|
|
|
|
|
|
84,070
|
|
|
|
5,133,314
|
|
Total Health Care Equipment & Supplies
|
|
|
|
|
|
|
|
|
|
|
9,856,816
|
|
Pharmaceuticals 10.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
Bristol-Myers Squibb Co.
|
|
|
|
|
|
|
178,100
|
|
|
|
5,921,825
|
|
GlaxoSmithKline PLC, ADR
|
|
|
|
|
|
|
121,300
|
|
|
|
5,446,370
|
|
Johnson & Johnson
|
|
|
|
|
|
|
154,210
|
|
|
|
10,921,152
|
|
Merck & Co. Inc.
|
|
|
|
|
|
|
139,350
|
|
|
|
6,358,541
|
|
Pfizer Inc.
|
|
|
|
|
|
|
637,520
|
|
|
|
15,855,122
|
|
Roche Holding AG, ADR
|
|
|
|
|
|
|
71,480
|
|
|
|
3,432,470
|
|
Total Pharmaceuticals
|
|
|
|
|
|
|
|
|
|
|
47,935,480
|
|
Total Health Care
|
|
|
|
|
|
|
|
|
|
|
57,792,296
|
|
Industrials
8.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace & Defense 2.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
Honeywell International Inc.
|
|
|
|
|
|
|
118,650
|
|
|
|
7,266,126
|
|
Orbital Sciences Corp.
|
|
|
|
|
|
|
380,070
|
|
|
|
5,092,938
|
*
|
Total Aerospace & Defense
|
|
|
|
|
|
|
|
|
|
|
12,359,064
|
|
Air Freight & Logistics 1.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
United Parcel Service Inc., Class B Shares
|
|
|
|
|
|
|
64,750
|
|
|
|
4,742,937
|
|
Industrial Conglomerates 2.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
General Electric Co.
|
|
|
|
|
|
|
410,520
|
|
|
|
8,645,551
|
|
Tyco International Ltd.
|
|
|
|
|
|
|
121,430
|
|
|
|
3,262,824
|
|
Total Industrial Conglomerates
|
|
|
|
|
|
|
|
|
|
|
11,908,375
|
|
Machinery 2.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Deere & Co.
|
|
|
|
|
|
|
43,420
|
|
|
|
3,709,805
|
|
Eaton Corp.
|
|
|
|
|
|
|
50,470
|
|
|
|
2,383,193
|
|
Flowserve Corp.
|
|
|
|
|
|
|
18,130
|
|
|
|
2,456,434
|
|
Pentair Ltd., Registered Shares
|
|
|
|
|
|
|
29,136
|
|
|
|
1,230,705
|
|
Total Machinery
|
|
|
|
|
|
|
|
|
|
|
9,780,137
|
|
Total Industrials
|
|
|
|
|
|
|
|
|
|
|
38,790,513
|
|
Information Technology
19.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Communications Equipment 1.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
Cisco Systems Inc.
|
|
|
|
|
|
|
146,390
|
|
|
|
2,509,124
|
|
See Notes to Financial Statements.
|
|
|
12
|
|
ClearBridge Equity Fund 2012 Annual Report
|
Schedule of investments (contd)
October 31, 2012
ClearBridge Equity Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
Communications Equipment continued
|
|
|
|
|
|
|
|
|
|
|
|
|
QUALCOMM Inc.
|
|
|
|
|
|
|
83,370
|
|
|
$
|
4,883,398
|
|
Total Communications Equipment
|
|
|
|
|
|
|
|
|
|
|
7,392,522
|
|
Computers & Peripherals 4.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
Apple Inc.
|
|
|
|
|
|
|
36,250
|
|
|
|
21,572,375
|
|
SanDisk Corp.
|
|
|
|
|
|
|
26,590
|
|
|
|
1,110,398
|
*
|
Total Computers & Peripherals
|
|
|
|
|
|
|
|
|
|
|
22,682,773
|
|
Internet Software & Services 4.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
eBay Inc.
|
|
|
|
|
|
|
74,550
|
|
|
|
3,600,020
|
*
|
Facebook Inc., Class A Shares
|
|
|
|
|
|
|
79,970
|
|
|
|
1,688,567
|
*
|
Google Inc., Class A Shares
|
|
|
|
|
|
|
19,920
|
|
|
|
13,541,018
|
*
|
Total Internet Software & Services
|
|
|
|
|
|
|
|
|
|
|
18,829,605
|
|
IT Services 2.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
Automatic Data Processing Inc.
|
|
|
|
|
|
|
64,280
|
|
|
|
3,714,741
|
|
International Business Machines Corp.
|
|
|
|
|
|
|
44,880
|
|
|
|
8,730,507
|
|
Total IT Services
|
|
|
|
|
|
|
|
|
|
|
12,445,248
|
|
Semiconductors & Semiconductor Equipment
2.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
ASML Holding NV, New York Registered Shares
|
|
|
|
|
|
|
131,671
|
|
|
|
7,237,955
|
|
Broadcom Corp., Class A Shares
|
|
|
|
|
|
|
126,020
|
|
|
|
3,974,041
|
*
|
Total Semiconductors & Semiconductor
Equipment
|
|
|
|
|
|
|
|
|
|
|
11,211,996
|
|
Software 3.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
BMC Software Inc.
|
|
|
|
|
|
|
28,620
|
|
|
|
1,164,834
|
*
|
Microsoft Corp.
|
|
|
|
|
|
|
334,948
|
|
|
|
9,557,741
|
|
Oracle Corp.
|
|
|
|
|
|
|
37,340
|
|
|
|
1,159,407
|
|
SAP AG, ADR
|
|
|
|
|
|
|
49,630
|
|
|
|
3,618,027
|
|
Total Software
|
|
|
|
|
|
|
|
|
|
|
15,500,009
|
|
Total Information Technology
|
|
|
|
|
|
|
|
|
|
|
88,062,153
|
|
Materials
4.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemicals 2.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Ecolab Inc.
|
|
|
|
|
|
|
77,640
|
|
|
|
5,403,744
|
|
LyondellBasell Industries NV, Class A Shares
|
|
|
|
|
|
|
68,290
|
|
|
|
3,646,003
|
|
Total Chemicals
|
|
|
|
|
|
|
|
|
|
|
9,049,747
|
|
Metals & Mining 0.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
Newmont Mining Corp.
|
|
|
|
|
|
|
63,880
|
|
|
|
3,484,654
|
|
Paper & Forest Products 1.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
International Paper Co.
|
|
|
|
|
|
|
162,900
|
|
|
|
5,836,707
|
|
Total Materials
|
|
|
|
|
|
|
|
|
|
|
18,371,108
|
|
See Notes to Financial Statements.
|
|
|
|
|
ClearBridge Equity Fund 2012 Annual Report
|
|
|
13
|
|
ClearBridge Equity Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
Telecommunication Services
2.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diversified Telecommunication Services 2.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Verizon Communications Inc.
|
|
|
|
|
|
|
|
|
213,370
|
|
|
$
|
9,524,837
|
|
Utilities
3.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric Utilities 0.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NV Energy Inc.
|
|
|
|
|
|
|
|
|
225,180
|
|
|
|
4,280,672
|
|
Multi-Utilities 2.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sempra Energy
|
|
|
|
|
|
|
|
|
101,500
|
|
|
|
7,079,625
|
|
Wisconsin Energy Corp.
|
|
|
|
|
|
|
|
|
127,980
|
|
|
|
4,923,390
|
|
Total Multi-Utilities
|
|
|
|
|
|
|
|
|
|
|
|
|
12,003,015
|
|
Total Utilities
|
|
|
|
|
|
|
|
|
|
|
|
|
16,283,687
|
|
Total Investments before Short-Term Investments (Cost
$323,320,597)
|
|
|
|
457,715,307
|
|
|
|
|
|
|
|
|
Rate
|
|
|
Maturity
Date
|
|
Face
Amount
|
|
|
|
|
Short-Term Investments
0.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase Agreements 0.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest in $552,780,000 joint tri-party repurchase agreement dated 10/31/12 with Deutsche Bank
Securities Inc.; Proceeds at maturity $2,145,019; (Fully collateralized by various U.S. government agency obligations, 0.000% to 6.250% due 11/23/12 to 11/2/40; Market value $2,187,901) (Cost $2,145,000)
|
|
|
0.320
|
%
|
|
11/1/12
|
|
$
|
2,145,000
|
|
|
|
2,145,000
|
|
Total Investments 99.9% (Cost $325,465,597#)
|
|
|
|
|
|
|
|
|
|
|
|
|
459,860,307
|
|
Other Assets in Excess of Liabilities 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
486,564
|
|
Total Net Assets 100.0%
|
|
|
|
|
|
|
|
|
|
|
|
$
|
460,346,871
|
|
*
|
Non-income producing security.
|
#
|
Aggregate cost for federal income tax purposes is $327,212,050.
|
|
|
|
Abbreviations used in this schedule:
|
ADR
|
|
American Depositary Receipts
|
SPDR
|
|
Standard & Poors Depositary Receipts
|
See Notes to Financial
Statements.
|
|
|
14
|
|
ClearBridge Equity Fund 2012 Annual Report
|
Statement of assets and liabilities
October 31, 2012
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
Investments, at value (Cost $325,465,597)
|
|
$
|
459,860,307
|
|
Receivable for securities sold
|
|
|
2,303,224
|
|
Dividends and interest receivable
|
|
|
553,271
|
|
Receivable for Fund shares sold
|
|
|
32,831
|
|
Prepaid expenses
|
|
|
50,401
|
|
Total Assets
|
|
|
462,800,034
|
|
|
|
Liabilities:
|
|
|
|
|
Payable for securities purchased
|
|
|
1,223,630
|
|
Payable for Fund shares repurchased
|
|
|
726,026
|
|
Investment management fee payable
|
|
|
248,420
|
|
Due to custodian
|
|
|
30,630
|
|
Service and/or distribution fees payable
|
|
|
343
|
|
Accrued expenses
|
|
|
224,114
|
|
Total Liabilities
|
|
|
2,453,163
|
|
Total Net Assets
|
|
$
|
460,346,871
|
|
|
|
Net
Assets:
|
|
|
|
|
Par value (Note 7)
|
|
$
|
342
|
|
Paid-in capital in excess of par value
|
|
|
331,147,411
|
|
Undistributed net investment income
|
|
|
255,297
|
|
Accumulated net realized loss on investments
|
|
|
(5,450,889)
|
|
Net unrealized appreciation on investments
|
|
|
134,394,710
|
|
Total Net Assets
|
|
$
|
460,346,871
|
|
|
|
Shares
Outstanding:
|
|
|
|
|
Class A
|
|
|
82,279
|
|
Class C
|
|
|
10,983
|
|
Class I
|
|
|
79,826
|
|
Class O
|
|
|
34,023,046
|
|
|
|
Net Asset
Value:
|
|
|
|
|
Class A (and redemption price)
|
|
|
$13.51
|
|
Class C*
|
|
|
$13.47
|
|
Class I (and redemption price)
|
|
|
$13.54
|
|
Class O (and redemption price)
|
|
|
$13.46
|
|
Maximum Public Offering
Price Per Share:
|
|
|
|
|
Class A (based on maximum initial sales charge of 5.75%)
|
|
|
$14.33
|
|
*
|
Redemption price per share is NAV of Class C shares reduced by a 1.00% CDSC, if shares are redeemed within one year from purchase payment (See Note 2).
|
See Notes to Financial
Statements.
|
|
|
|
|
ClearBridge Equity Fund 2012 Annual Report
|
|
|
15
|
|
Statement of operations
For the Year Ended October 31, 2012
|
|
|
|
|
|
|
Investment
Income:
|
|
|
|
|
Dividends
|
|
$
|
9,940,278
|
|
Interest
|
|
|
5,235
|
|
Less: Foreign taxes withheld
|
|
|
(68,142)
|
|
Total Investment Income
|
|
|
9,877,371
|
|
|
|
Expenses:
|
|
|
|
|
Investment management fee (Note 2)
|
|
|
2,755,022
|
|
Transfer agent fees (Note 5)
|
|
|
419,887
|
|
Registration fees
|
|
|
59,455
|
|
Legal fees
|
|
|
44,050
|
|
Fund accounting fees
|
|
|
42,937
|
|
Trustees fees
|
|
|
36,441
|
|
Shareholder reports
|
|
|
32,868
|
|
Audit and tax
|
|
|
31,245
|
|
Insurance
|
|
|
11,506
|
|
Service and/or distribution fees (Notes 2 and 5)
|
|
|
3,727
|
|
Custody fees
|
|
|
3,442
|
|
Miscellaneous expenses
|
|
|
5,622
|
|
Total Expenses
|
|
|
3,446,202
|
|
Less: Fee waivers and/or expense reimbursements (Notes 2 and 5)
|
|
|
(1,188)
|
|
Net Expenses
|
|
|
3,445,014
|
|
Net Investment Income
|
|
|
6,432,357
|
|
|
|
Realized and Unrealized
Gain on Investments (Notes 1 and 3):
|
|
|
|
|
Net Realized Gain from Investment Transactions
|
|
|
17,519,956
|
|
Change in Net Unrealized Appreciation (Depreciation) from
Investments
|
|
|
38,901,540
|
|
Net Gain on Investments
|
|
|
56,421,496
|
|
Increase in Net Assets from Operations
|
|
$
|
62,853,853
|
|
See Notes to Financial
Statements.
|
|
|
16
|
|
ClearBridge Equity Fund 2012 Annual Report
|
Statements of changes in net assets
|
|
|
|
|
|
|
|
|
For the Years Ended October 31,
|
|
2012
|
|
|
2011
|
|
|
|
|
Operations:
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
6,432,357
|
|
|
$
|
6,119,927
|
|
Net realized gain
|
|
|
17,519,956
|
|
|
|
26,429,897
|
|
Change in net unrealized appreciation (depreciation)
|
|
|
38,901,540
|
|
|
|
(13,102,542)
|
|
Increase in Net Assets From Operations
|
|
|
62,853,853
|
|
|
|
19,447,282
|
|
|
|
|
Distributions to
Shareholders From (Notes 1 and 6):
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(6,579,889)
|
|
|
|
(5,982,010)
|
|
Decrease in Net Assets From Distributions to
Shareholders
|
|
|
(6,579,889)
|
|
|
|
(5,982,010)
|
|
|
|
|
Fund Share Transactions
(Note 7):
|
|
|
|
|
|
|
|
|
Net proceeds from sale of shares
|
|
|
1,354,780
|
|
|
|
1,051,875
|
|
Reinvestment of distributions
|
|
|
4,734,806
|
|
|
|
4,239,428
|
|
Cost of shares repurchased
|
|
|
(58,866,846)
|
|
|
|
(59,759,666)
|
|
Decrease in Net Assets From Fund Share Transactions
|
|
|
(52,777,260)
|
|
|
|
(54,468,363)
|
|
Increase (Decrease) in Net Assets
|
|
|
3,496,704
|
|
|
|
(41,003,091)
|
|
|
|
|
Net
Assets:
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
456,850,167
|
|
|
|
497,853,258
|
|
End of year*
|
|
$
|
460,346,871
|
|
|
$
|
456,850,167
|
|
* Includes undistributed net investment income of:
|
|
|
$255,297
|
|
|
|
$402,829
|
|
See Notes to Financial
Statements.
|
|
|
|
|
ClearBridge Equity Fund 2012 Annual Report
|
|
|
17
|
|
Financial highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For a share of each class of beneficial interest outstanding throughout each year ended October 31, unless
otherwise noted:
|
|
Class A Shares
1
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
2
|
|
|
2008
3
|
|
|
2007
3
|
|
|
|
|
|
|
|
|
Net asset value, beginning
of year
|
|
|
$11.97
|
|
|
|
$11.69
|
|
|
|
$10.33
|
|
|
|
$9.08
|
|
|
|
$14.54
|
|
|
|
$15.59
|
|
|
|
|
|
|
|
|
Income (loss) from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
0.13
|
|
|
|
0.10
|
|
|
|
0.06
|
|
|
|
0.08
|
|
|
|
0.11
|
|
|
|
0.12
|
|
Net realized and unrealized gain (loss)
|
|
|
1.55
|
|
|
|
0.27
|
|
|
|
1.37
|
|
|
|
1.26
|
|
|
|
(5.08)
|
|
|
|
1.14
|
|
Total income (loss) from operations
|
|
|
1.68
|
|
|
|
0.37
|
|
|
|
1.43
|
|
|
|
1.34
|
|
|
|
(4.97)
|
|
|
|
1.26
|
|
|
|
|
|
|
|
|
Less distributions from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(0.14)
|
|
|
|
(0.09)
|
|
|
|
(0.07)
|
|
|
|
(0.09)
|
|
|
|
(0.10)
|
|
|
|
(0.13)
|
|
Net realized gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.39)
|
|
|
|
(2.18)
|
|
Total distributions
|
|
|
(0.14)
|
|
|
|
(0.09)
|
|
|
|
(0.07)
|
|
|
|
(0.09)
|
|
|
|
(0.49)
|
|
|
|
(2.31)
|
|
|
|
|
|
|
|
|
Net asset value, end of
year
|
|
|
$13.51
|
|
|
|
$11.97
|
|
|
|
$11.69
|
|
|
|
$10.33
|
|
|
|
$9.08
|
|
|
|
$14.54
|
|
Total return
4
|
|
|
14.07
|
%
|
|
|
3.19
|
%
|
|
|
13.86
|
%
|
|
|
14.96
|
%
|
|
|
(35.17)
|
%
|
|
|
8.04
|
%
|
|
|
|
|
|
|
|
Net assets, end of year
(000s)
|
|
|
$1,112
|
|
|
|
$351
|
|
|
|
$377
|
|
|
|
$244
|
|
|
|
$205
|
|
|
|
$497
|
|
|
|
|
|
|
|
|
Ratios to average net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross expenses
|
|
|
1.19
|
%
|
|
|
1.19
|
%
|
|
|
1.21
|
%
|
|
|
1.21
|
%
5
|
|
|
1.07
|
%
|
|
|
0.98
|
%
|
Net expenses
6
|
|
|
1.09
|
7,8
|
|
|
1.17
|
7,8
|
|
|
1.19
|
7,8
|
|
|
1.17
|
5,7,8
|
|
|
1.07
|
|
|
|
0.98
|
|
Net investment income
|
|
|
1.00
|
|
|
|
0.79
|
|
|
|
0.58
|
|
|
|
0.99
|
5
|
|
|
0.80
|
|
|
|
0.76
|
|
|
|
|
|
|
|
|
Portfolio turnover rate
|
|
|
37
|
%
|
|
|
33
|
%
|
|
|
25
|
%
|
|
|
31
|
%
|
|
|
39
|
%
|
|
|
32
|
%
|
1
|
Per share amounts have been calculated using the average shares method.
|
2
|
For the period January 1, 2009 through October 31, 2009.
|
3
|
For the year ended December 31.
|
4
|
Performance figures, exclusive of sales charges, may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the
absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.
|
6
|
The impact of compensating balance arrangements, if any, was less than 0.01%.
|
7
|
As a result of an expense limitation arrangement, effective September 18, 2009, the ratio of expenses, other than brokerage, interest, taxes,
extraordinary expenses and acquired fund fees and expenses, to average net assets of Class A shares did not exceed 1.25%. This expense limitation arrangement cannot be terminated prior to December 31, 2014 without the Board of
Trustees consent.
|
8
|
Reflects fee waivers and/or expense reimbursements.
|
See Notes to Financial Statements.
|
|
|
18
|
|
ClearBridge Equity Fund 2012 Annual Report
|
Financial highlights (contd)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For a share of each class of beneficial interest outstanding throughout each year ended October 31, unless
otherwise noted:
|
|
Class C Shares
1
|
|
2012
|
|
|
2011
|
|
|
2010
2
|
|
|
2009
3
|
|
|
2009
4
|
|
|
2008
5
|
|
|
|
|
|
|
|
|
Net asset value, beginning
of year
|
|
|
$11.94
|
|
|
|
$11.68
|
|
|
|
$11.50
|
|
|
|
$10.33
|
|
|
|
$9.09
|
|
|
|
$13.85
|
|
|
|
|
|
|
|
|
Income (loss) from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
|
0.02
|
|
|
|
(0.00)
|
6
|
|
|
(0.02)
|
|
|
|
(0.00)
|
6
|
|
|
0.02
|
|
|
|
0.02
|
|
Net realized and unrealized gain (loss)
|
|
|
1.54
|
|
|
|
0.27
|
|
|
|
0.21
|
|
|
|
0.13
|
|
|
|
1.27
|
|
|
|
(4.38)
|
|
Total income (loss) from operations
|
|
|
1.56
|
|
|
|
0.27
|
|
|
|
0.19
|
|
|
|
0.13
|
|
|
|
1.29
|
|
|
|
(4.36)
|
|
|
|
|
|
|
|
|
Less distributions from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(0.03)
|
|
|
|
(0.01)
|
|
|
|
(0.01)
|
|
|
|
|
|
|
|
(0.05)
|
|
|
|
(0.01)
|
|
Net realized gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.39)
|
|
Total distributions
|
|
|
(0.03)
|
|
|
|
(0.01)
|
|
|
|
(0.01)
|
|
|
|
|
|
|
|
(0.05)
|
|
|
|
(0.40)
|
|
|
|
|
|
|
|
|
Net asset value, end of
year
|
|
|
$13.47
|
|
|
|
$11.94
|
|
|
|
$11.68
|
|
|
|
$10.46
|
|
|
|
$10.33
|
|
|
|
$9.09
|
|
Total return
7
|
|
|
13.08
|
%
|
|
|
2.27
|
%
|
|
|
1.61
|
%
|
|
|
1.26
|
%
|
|
|
14.36
|
%
|
|
|
(32.40)
|
%
|
|
|
|
|
|
|
|
Net assets, end of year
(000s)
|
|
|
$148
|
|
|
|
$96
|
|
|
|
$44
|
|
|
|
$76
|
|
|
|
$75
|
|
|
|
$65
|
|
|
|
|
|
|
|
|
Ratios to average net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross expenses
|
|
|
2.09
|
%
|
|
|
2.08
|
%
|
|
|
2.08
|
%
8
|
|
|
2.47
|
%
8
|
|
|
1.91
|
%
8
|
|
|
1.75
|
%
8
|
Net expenses
9
|
|
|
1.94
|
10,11
|
|
|
1.99
|
10,11
|
|
|
1.92
|
8,10,11
|
|
|
1.98
|
8,10,11
|
|
|
1.86
|
8,10,11
|
|
|
1.75
|
8
|
Net investment income (loss)
|
|
|
0.18
|
|
|
|
(0.04)
|
|
|
|
(0.26)
|
8
|
|
|
(1.98)
|
8
|
|
|
0.27
|
8
|
|
|
0.28
|
8
|
|
|
|
|
|
|
|
Portfolio turnover rate
|
|
|
37
|
%
|
|
|
33
|
%
|
|
|
25
|
%
|
|
|
|
|
|
|
31
|
%
|
|
|
39
|
%
|
1
|
Per share amounts have been calculated using the average shares method.
|
2
|
For the period January 6, 2010 to October 31, 2010.
|
3
|
For the period November 1, 2009 through November 3, 2009.
|
4
|
For the period January 1, 2009 through October 31, 2009.
|
5
|
For the period April 30, 2008 (inception date) to December 31, 2008.
|
6
|
Amount represents less than $0.01 per share.
|
7
|
Performance figures, exclusive of CDSC, may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence
of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.
|
9
|
The impact of compensating balance arrangements, if any, was less than 0.01%.
|
10
|
As a result of an expense limitation arrangement, effective September 18, 2009, the ratio of expenses, other than brokerage, interest,
taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class C shares did not exceed 2.00%. This expense limitation arrangement cannot be terminated prior to December 31, 2014 without the Board of
Trustees consent.
|
11
|
Reflects fee waivers and/or expense reimbursements.
|
See Notes to Financial Statements.
|
|
|
|
|
ClearBridge Equity Fund 2012 Annual Report
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For a share of each class of beneficial interest outstanding throughout each year ended October 31, unless
otherwise noted:
|
|
Class I Shares
1
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
2
|
|
|
2008
3
|
|
|
|
|
|
|
|
Net asset value, beginning
of year
|
|
|
$11.99
|
|
|
|
$11.72
|
|
|
|
$10.36
|
|
|
|
$9.10
|
|
|
|
$13.85
|
|
|
|
|
|
|
|
Income (loss) from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
0.15
|
|
|
|
0.13
|
|
|
|
0.09
|
|
|
|
0.10
|
|
|
|
0.10
|
|
Net realized and unrealized gain (loss)
|
|
|
1.56
|
|
|
|
0.26
|
|
|
|
1.37
|
|
|
|
1.28
|
|
|
|
(4.39)
|
|
Total income (loss) from operations
|
|
|
1.71
|
|
|
|
0.39
|
|
|
|
1.46
|
|
|
|
1.38
|
|
|
|
(4.29)
|
|
|
|
|
|
|
|
Less distributions from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(0.16)
|
|
|
|
(0.12)
|
|
|
|
(0.10)
|
|
|
|
(0.12)
|
|
|
|
(0.07)
|
|
Net realized gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.39)
|
|
Total distributions
|
|
|
(0.16)
|
|
|
|
(0.12)
|
|
|
|
(0.10)
|
|
|
|
(0.12)
|
|
|
|
(0.46)
|
|
|
|
|
|
|
|
Net asset value, end of
year
|
|
|
$13.54
|
|
|
|
$11.99
|
|
|
|
$11.72
|
|
|
|
$10.36
|
|
|
|
$9.10
|
|
Total return
4
|
|
|
14.32
|
%
|
|
|
3.35
|
%
|
|
|
14.13
|
%
|
|
|
15.37
|
%
|
|
|
(31.92)
|
%
|
|
|
|
|
|
|
Net assets, end of year
(000s)
|
|
|
$1,081
|
|
|
|
$910
|
|
|
|
$1,073
|
|
|
|
$638
|
|
|
|
$477
|
|
|
|
|
|
|
|
Ratios to average net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross expenses
|
|
|
0.93
|
%
|
|
|
0.97
|
%
|
|
|
0.98
|
%
|
|
|
0.88
|
%
5
|
|
|
0.72
|
%
5
|
Net expenses
6
|
|
|
0.92
|
7,8
|
|
|
0.93
|
7,8
|
|
|
0.92
|
7,8
|
|
|
0.82
|
5,7,8
|
|
|
0.72
|
5
|
Net investment income
|
|
|
1.20
|
|
|
|
1.01
|
|
|
|
0.84
|
|
|
|
1.25
|
5
|
|
|
1.29
|
5
|
|
|
|
|
|
|
Portfolio turnover rate
|
|
|
37
|
%
|
|
|
33
|
%
|
|
|
25
|
%
|
|
|
31
|
%
|
|
|
39
|
%
|
1
|
Per share amounts have been calculated using the average shares method.
|
2
|
For the period January 1, 2009 through October 31, 2009.
|
3
|
For the period April 30, 2008 (inception date) to December 31, 2008.
|
4
|
Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating
balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.
|
6
|
The impact of compensating balance arrangements, if any, was less than 0.01%.
|
7
|
As a result of an expense limitation arrangement, effective September 18, 2009, the ratio of expenses, other than brokerage, interest,
taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class I shares did not exceed 0.95%. This expense limitation arrangement cannot be terminated prior to December 31, 2014 without the Board of
Trustees consent.
|
8
|
Reflects fee waivers and/or expense reimbursements.
|
See Notes to Financial Statements.
|
|
|
20
|
|
ClearBridge Equity Fund 2012 Annual Report
|
Financial highlights (contd)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For a share of each class of beneficial interest outstanding throughout each year ended October 31, unless
otherwise noted:
|
|
Class O Shares
1
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
2
|
|
|
2008
3
|
|
|
2007
3
|
|
|
|
|
|
|
|
|
Net asset value, beginning
of year
|
|
|
$11.93
|
|
|
|
$11.66
|
|
|
|
$10.30
|
|
|
|
$9.04
|
|
|
|
$14.49
|
|
|
|
$15.53
|
|
|
|
|
|
|
|
|
Income (loss) from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
0.18
|
|
|
|
0.15
|
|
|
|
0.12
|
|
|
|
0.10
|
|
|
|
0.14
|
|
|
|
0.15
|
|
Net realized and unrealized gain (loss)
|
|
|
1.53
|
|
|
|
0.27
|
|
|
|
1.36
|
|
|
|
1.28
|
|
|
|
(5.08)
|
|
|
|
1.16
|
|
Total income (loss) from operations
|
|
|
1.71
|
|
|
|
0.42
|
|
|
|
1.48
|
|
|
|
1.38
|
|
|
|
(4.94)
|
|
|
|
1.31
|
|
|
|
|
|
|
|
|
Less distributions from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(0.18)
|
|
|
|
(0.15)
|
|
|
|
(0.12)
|
|
|
|
(0.12)
|
|
|
|
(0.12)
|
|
|
|
(0.17)
|
|
Net realized gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.39)
|
|
|
|
(2.18)
|
|
Total distributions
|
|
|
(0.18)
|
|
|
|
(0.15)
|
|
|
|
(0.12)
|
|
|
|
(0.12)
|
|
|
|
(0.51)
|
|
|
|
(2.35)
|
|
|
|
|
|
|
|
|
Net asset value, end of
year
|
|
|
$13.46
|
|
|
|
$11.93
|
|
|
|
$11.66
|
|
|
|
$10.30
|
|
|
|
$9.04
|
|
|
|
$14.49
|
|
Total return
4
|
|
|
14.43
|
%
|
|
|
3.57
|
%
|
|
|
14.39
|
%
|
|
|
15.47
|
%
|
|
|
(35.09)
|
%
|
|
|
8.39
|
%
|
|
|
|
|
|
|
|
Net assets, end of year
(millions)
|
|
|
$458
|
|
|
|
$455
|
|
|
|
$496
|
|
|
|
$484
|
|
|
|
$458
|
|
|
|
$807
|
|
|
|
|
|
|
|
|
Ratios to average net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross expenses
|
|
|
0.74
|
%
|
|
|
0.72
|
%
|
|
|
0.75
|
%
|
|
|
0.81
|
%
5
|
|
|
0.78
|
%
|
|
|
0.69
|
%
|
Net expenses
6
|
|
|
0.74
|
7
|
|
|
0.72
|
7
|
|
|
0.75
|
7
|
|
|
0.80
|
5,7,8
|
|
|
0.78
|
|
|
|
0.69
|
|
Net investment income
|
|
|
1.39
|
|
|
|
1.23
|
|
|
|
1.04
|
|
|
|
1.37
|
5
|
|
|
1.14
|
|
|
|
0.95
|
|
|
|
|
|
|
|
|
Portfolio turnover rate
|
|
|
37
|
%
|
|
|
33
|
%
|
|
|
25
|
%
|
|
|
31
|
%
|
|
|
39
|
%
|
|
|
32
|
%
|
1
|
Per share amounts have been calculated using the average shares method.
|
2
|
For the period January 1, 2009 through October 31, 2009.
|
3
|
For the year ended December 31.
|
4
|
Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating
balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.
|
6
|
The impact of compensating balance arrangements, if any, was less than 0.01%.
|
7
|
As a result of an expense limitation arrangement, effective September 18, 2009, the ratio of expenses, other than brokerage, interest,
taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class O shares did not exceed 0.95%. This expense limitation arrangement cannot be terminated prior to December 31, 2014 without the Board of
Trustees consent.
|
8
|
Reflects fee waivers and/or expense reimbursements.
|
See Notes to Financial Statements.
|
|
|
|
|
ClearBridge Equity Fund 2012 Annual Report
|
|
|
21
|
|
Notes to financial statements
1. Organization and significant accounting policies
Legg Mason ClearBridge Equity Fund (effective January 1, 2013, the Fund will be known as ClearBridge Equity 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,
diversified 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). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are
prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. Subsequent events have been evaluated through the date the financial statements were
issued.
(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 investments 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 Funds 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 Funds pricing policies, and reporting to the Board of Trustees. When determining the reliability of third party
|
|
|
22
|
|
ClearBridge Equity Fund 2012 Annual Report
|
Notes to financial statements (contd)
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 issuers 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:
|
|
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 Funds 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.
|
|
|
|
|
ClearBridge Equity Fund 2012 Annual Report
|
|
|
23
|
|
The following is a summary of the inputs used in valuing the Funds 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
|
|
$
|
457,715,307
|
|
|
|
|
|
|
|
|
|
|
$
|
457,715,307
|
|
Short-term investments
|
|
|
|
|
|
$
|
2,145,000
|
|
|
|
|
|
|
|
2,145,000
|
|
Total investments
|
|
$
|
457,715,307
|
|
|
$
|
2,145,000
|
|
|
|
|
|
|
$
|
459,860,307
|
|
|
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 Funds holding period. When entering into repurchase agreements, it is the Funds policy that its
custodian or a third party custodian, acting on the Funds 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.
The Fund does not isolate that portion of the results of operations resulting from fluctuations in foreign exchange rates on investments from the fluctuations arising from changes in market prices
of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized
foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, and the
difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the
|
|
|
24
|
|
ClearBridge Equity Fund 2012 Annual Report
|
Notes to financial statements (contd)
amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, other than investments in securities, on the date
of valuation, resulting from changes in exchange rates.
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 Funds 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 and investment income.
Security transactions are accounted for on a trade date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date. Foreign dividend income is recorded on the ex-dividend date or as soon as practicable after the Fund determines the existence of a dividend declaration after exercising reasonable due diligence. The cost of
investments sold is determined by use of the specific identification method. To the extent any issuer defaults or a credit event occurs that impacts the issuer, the Fund may halt any additional interest income accruals and consider the realizability
of interest accrued up to the date of default or credit event.
(f)
REIT distributions.
The character of distributions received from Real Estate Investment Trusts (REITs) held by the Fund is generally comprised of net investment income,
capital gains, and return of capital. It is the policy of the Fund to estimate the character of distributions received from underlying REITs based on historical data provided by the REITs. After each calendar year end, REITs report the actual tax
character of these distributions. Differences between the estimated and actual amounts reported by the REITs are reflected in the Funds records in the year in which they are reported by the REITs by adjusting related investment cost basis,
capital gains and income, as necessary.
(g) Distributions to
shareholders.
Distributions from net investment income of the Fund, if any, are declared and paid on a quarterly basis. Distributions of net realized gains, if any, are declared at
least annually. Distributions to shareholders of the Fund are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.
|
|
|
|
|
ClearBridge Equity Fund 2012 Annual Report
|
|
|
25
|
|
(h) Share class
accounting.
Investment income, common expenses and realized/unrealized gains (losses) on investments are allocated to the various classes of the Fund on the basis of daily net
assets of each class. Fees relating to a specific class are charged directly to that share class.
(i) Compensating balance arrangements.
The Fund has an arrangement with its custodian bank whereby a portion of the
custodians fees is paid indirectly by credits earned on the Funds cash on deposit with the bank.
(j) Federal and other taxes.
It is the Funds policy to comply with the federal income and excise tax requirements of the
Internal Revenue Code of 1986 (the Code), as amended, applicable to regulated investment companies. Accordingly, the Fund intends to distribute its taxable income and net realized gains, if any, to shareholders in accordance with timing
requirements imposed by the Code. Therefore, no federal or state income tax provision is required in the Funds financial statements.
Management has analyzed the Funds tax positions taken on income tax returns for all open tax years and has concluded that as of
October 31, 2012, no provision for income tax is required in the Funds financial statements. The Funds federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not
expired are subject to examination by Internal Revenue Service and state departments of revenue.
Under the applicable foreign tax laws,
a withholding tax may be imposed on interest, dividends and capital gains at various rates.
(k) Reclassification.
GAAP requires that certain components of net assets be reclassified to reflect permanent differences
between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. During the current year, no reclassifications have been made.
2. Investment management agreement and other transactions with affiliates
Legg
Mason Partners Fund Advisor, LLC (LMPFA) is the Funds investment manager and ClearBridge Investments, LLC (formerly ClearBridge Advisors, LLC) (ClearBridge) is the Funds subadviser. Western Asset Management
Company (Western Asset) manages the Funds cash and short-term instruments. LMPFA, ClearBridge and Western Asset are wholly-owned subsidiaries of Legg Mason, Inc. (Legg Mason).
Under the investment management agreement, the Fund pays a base investment management fee subject to an increase or decrease depending on the
extent, if any, to which the investment performance of the Funds Class O shares exceeds or is exceeded by the investment record of the S&P 500 Index. The base fee is paid quarterly based on the following breakpoint schedule:
|
|
|
|
|
Average Daily Net Assets
|
|
Annual Rate
|
|
First $350 million
|
|
|
0.650
|
%
|
Next $150 million
|
|
|
0.550
|
|
Next $250 million
|
|
|
0.525
|
|
Next $250 million
|
|
|
0.500
|
|
Over $1 billion
|
|
|
0.450
|
|
|
|
|
26
|
|
ClearBridge Equity Fund 2012 Annual Report
|
Notes to financial statements (contd)
The performance adjustment of the base fee paid at the end of each calendar quarter is based on a rolling one-year
period. A performance adjustment will only be made after the investment performance of the Funds Class O shares exceeds or is exceeded by the investment record of the S&P 500 Index by at least one percentage point. For each percentage
point by which the investment performance of the Funds Class O shares exceeds or is exceeded by the investment record of the S&P 500 Index, the base fee will be adjusted upward or downward by 0.01% (annualized). The maximum annual
adjustment is 0.10% which would occur if the Funds Class O shares performance exceeds or is exceeded by the S&P 500 Index by ten or more percentage points. For this purpose, the performance fee calculation is based on the total
return value of the S&P 500 Index versus the Funds Class O shares total return calculated based on net asset value and assuming all distributions are reinvested at net asset value on the record date of the distribution. For the
rolling one-year periods ended December 31, 2011, March 31, 2012, June 30, 2012 and September 30, 2012 and the rolling ten-month period ended October 31, 2012, the Funds Class O shares performance varied from
that of the S&P 500 Index by (5.01)%, (5.37)%, (3.16)%, (0.59)% and (0.10)%, respectively. This resulted in a total decrease of the base management fee of $143,001.
LMPFA provides administrative and certain oversight services to the Fund. LMPFA delegates to the subadviser the day-to-day portfolio management of the Fund, except for the management of cash and
short-term instruments, which is provided by Western Asset. For its services, LMPFA pays ClearBridge and Western Asset an aggregate fee equal to 70% of the net management fee it receives from the Fund.
As a result of expense limitation arrangements between the Fund and LMPFA, the ratio of expenses other than brokerage, interest, taxes,
extraordinary expenses and acquired fund fees and expenses, to average net assets of Class A, Class C, Class I and Class O shares did not exceed 1.25%, 2.00%, 0.95% and 0.95%, respectively. These expense limitation arrangements cannot be
terminated prior to December 31, 2014 without the Board of Trustees consent.
During the year ended October 31, 2012,
fees waived and/or expenses reimbursed amounted to $1,188.
The investment manager is permitted to recapture amounts waived or reimbursed
to a class during the same fiscal year if the class total annual operating expenses have fallen to a level below the expense limitation (expense cap) in effect at the time the fees were earned or the expenses incurred. In no case
will the investment manager recapture any amount that would result, on any particular business day of the Fund, in the class total annual operating expenses exceeding the expense cap or any other lower limit then in effect.
Legg Mason Investor Services, LLC (LMIS), a wholly-owned broker-dealer subsidiary of Legg Mason, serves as the Funds sole and
exclusive distributor.
There is a maximum initial sales charge of 5.75% for Class A shares. There is a contingent deferred sales
charge (CDSC) of 1.00% on Class C shares, which applies if redemption occurs within 12 months from purchase payment. In certain cases,
|
|
|
|
|
ClearBridge Equity Fund 2012 Annual Report
|
|
|
27
|
|
Class A shares have a 1.00% CDSC, which applies if redemption occurs within 18 months from purchase payment (or within 12 months for shares purchased prior to August 1, 2012). This
CDSC only applies to those purchases of Class A shares, which, when combined with current holdings of other shares of funds sold by LMIS, equal or exceed $1,000,000 in the aggregate. These purchases do not incur an initial sales charge.
For the year ended October 31, 2012, LMIS and its affiliates received sales charges of $60 on sales of the Funds Class A
shares. In addition, there were no CDSCs paid to LMIS and its affiliates for the year ended October 31, 2012.
All officers and one
Trustee of the Trust are employees of Legg Mason or its affiliates and do not receive compensation from the Trust.
3. Investments
During the year ended October 31, 2012, the aggregate cost of purchases and proceeds from sales of investments (excluding
short-term investments) were as follows:
|
|
|
|
|
Purchases
|
|
$
|
171,624,689
|
|
Sales
|
|
|
225,877,056
|
|
At October 31, 2012, the aggregate gross unrealized appreciation and depreciation of investments for federal
income tax purposes were as follows:
|
|
|
|
|
Gross unrealized appreciation
|
|
$
|
141,356,769
|
|
Gross unrealized depreciation
|
|
|
(8,708,512)
|
|
Net unrealized appreciation
|
|
$
|
132,648,257
|
|
4. Derivative instruments and hedging activities
Financial Accounting Standards Board Codification Topic 815 requires enhanced disclosure about an entitys derivative and hedging activities.
During the year ended
October 31, 2012, the Fund did not invest in any derivative instruments.
5. Class specific expenses, waivers and/or expense reimbursements
The Fund has adopted a Rule 12b-1 distribution plan and under that plan the Fund pays a service fee with respect to its Class A and Class C shares calculated at the annual rate of 0.25% of the
average daily net assets of each respective class. The Fund also pays a distribution fee with respect to its Class C shares calculated at an annual rate of 0.75% of the average net assets of its Class C shares. Service and distribution fees are
accrued daily and paid monthly.
|
|
|
28
|
|
ClearBridge Equity Fund 2012 Annual Report
|
Notes to financial statements (contd)
For the year ended October 31, 2012, class specific expenses were as follows:
|
|
|
|
|
|
|
|
|
|
|
Service and/or
Distribution Fees
|
|
|
Transfer Agent
Fees
|
|
Class A
|
|
$
|
2,571
|
|
|
$
|
2,908
|
|
Class C
|
|
|
1,156
|
|
|
|
502
|
|
Class I
|
|
|
|
|
|
|
2,734
|
|
Class O
|
|
|
|
|
|
|
413,743
|
|
Total
|
|
$
|
3,727
|
|
|
$
|
419,887
|
|
For the year ended October 31, 2012, waivers and/or expense reimbursements by class were as follows:
|
|
|
|
|
|
|
Waivers/Expense
Reimbursements
|
|
Class A
|
|
$
|
963
|
|
Class C
|
|
|
166
|
|
Class I
|
|
|
59
|
|
Class O
|
|
|
|
|
Total
|
|
$
|
1,188
|
|
6. Distributions to shareholders by class
|
|
|
|
|
|
|
|
|
|
|
Year Ended
October 31, 2012
|
|
|
Year Ended
October 31, 2011
|
|
Net Investment
Income:
|
|
|
|
|
|
|
|
|
Class A
|
|
$
|
11,528
|
|
|
$
|
3,225
|
|
Class C
|
|
|
275
|
|
|
|
36
|
|
Class I
|
|
|
12,514
|
|
|
|
10,547
|
|
Class O
|
|
|
6,555,572
|
|
|
|
5,968,202
|
|
Total
|
|
$
|
6,579,889
|
|
|
$
|
5,982,010
|
|
7. Shares of beneficial interest
At October 31, 2012, the Trust had an unlimited number of shares of beneficial interest authorized with a par value of $0.00001 per share. The Fund has the ability to issue multiple classes of
shares. Each class of shares represents an identical interest and has the same rights, except that each class bears certain direct expenses, including those specifically related to the distribution of its shares.
Transactions in shares of each class were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
October 31, 2012
|
|
|
Year Ended
October 31, 2011
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
Class
A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares sold
|
|
|
61,227
|
|
|
$
|
707,243
|
|
|
|
5,948
|
|
|
$
|
70,904
|
|
Shares issued on reinvestment
|
|
|
888
|
|
|
|
11,528
|
|
|
|
264
|
|
|
|
3,225
|
|
Shares repurchased
|
|
|
(9,152)
|
|
|
|
(119,336)
|
|
|
|
(9,133)
|
|
|
|
(107,062)
|
|
Net increase (decrease)
|
|
|
52,963
|
|
|
$
|
599,435
|
|
|
|
(2,921)
|
|
|
$
|
(32,933)
|
|
|
|
|
|
|
ClearBridge Equity Fund 2012 Annual Report
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
October 31, 2012
|
|
|
Year Ended
October 31, 2011
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
Class
C
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares sold
|
|
|
4,698
|
|
|
$
|
61,866
|
|
|
|
4,743
|
|
|
$
|
54,271
|
|
Shares issued on reinvestment
|
|
|
21
|
|
|
|
275
|
|
|
|
3
|
|
|
|
36
|
|
Shares repurchased
|
|
|
(1,793)
|
|
|
|
(23,645)
|
|
|
|
(471)
|
|
|
|
(5,870)
|
|
Net increase
|
|
|
2,926
|
|
|
$
|
38,496
|
|
|
|
4,275
|
|
|
$
|
48,437
|
|
|
|
|
|
|
Class
I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares sold
|
|
|
10,090
|
|
|
$
|
127,323
|
|
|
|
13,505
|
|
|
$
|
172,527
|
|
Shares issued on reinvestment
|
|
|
601
|
|
|
|
7,834
|
|
|
|
373
|
|
|
|
4,541
|
|
Shares repurchased
|
|
|
(6,725)
|
|
|
|
(88,870)
|
|
|
|
(29,555)
|
|
|
|
(383,614)
|
|
Net increase (decrease)
|
|
|
3,966
|
|
|
$
|
46,287
|
|
|
|
(15,677)
|
|
|
$
|
(206,546)
|
|
|
|
|
|
|
Class
O
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares sold
|
|
|
36,113
|
|
|
$
|
458,348
|
|
|
|
58,946
|
|
|
$
|
754,173
|
|
Shares issued on reinvestment
|
|
|
365,408
|
|
|
|
4,715,169
|
|
|
|
346,710
|
|
|
|
4,231,626
|
|
Shares repurchased
|
|
|
(4,569,308)
|
|
|
|
(58,634,995)
|
|
|
|
(4,793,150)
|
|
|
|
(59,263,120)
|
|
Net decrease
|
|
|
(4,167,787)
|
|
|
$
|
(53,461,478)
|
|
|
|
(4,387,494)
|
|
|
$
|
(54,277,321)
|
|
8. Income tax information and distributions to shareholders
The tax character of distributions paid during the fiscal years ended
October 31, was as follows:
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
Distributions Paid
From:
|
|
|
|
|
|
|
|
|
Ordinary income
|
|
$
|
6,579,889
|
|
|
$
|
5,982,010
|
|
As of October 31, 2012, the components of accumulated earnings on a tax basis were as follows:
|
|
|
|
|
Undistributed ordinary income net
|
|
$
|
289,581
|
|
Capital loss carryforward*
|
|
|
(3,692,618)
|
|
Other book/tax temporary differences
(a)
|
|
|
(46,102)
|
|
Unrealized appreciation (depreciation)
(b)
|
|
|
132,648,257
|
|
Total accumulated earnings (losses) net
|
|
$
|
129,199,118
|
|
*
|
During the taxable year ended October 31, 2012, the Fund utilized $ 16,447,958 of its capital loss carryforward available from prior years. As of
October 31, 2012, the Fund had the following net capital loss carryforward remaining:
|
|
|
|
|
|
Year of Expiration
|
|
Amount
|
|
10/31/2017
|
|
$
|
(1,461,256
|
)
|
10/31/2018
|
|
|
(2,231,362
|
)
|
|
|
$
|
(3,692,618
|
)
|
These amounts will be available to offset any future taxable capital gains.
(a)
|
Other book/tax temporary differences are attributable primarily to book/tax differences in the timing of the deductibility of various expenses.
|
(b)
|
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on
wash sales.
|
|
|
|
30
|
|
ClearBridge Equity Fund 2012 Annual Report
|
Report of independent registered public accounting firm
The Board of Trustees and Shareholders
Legg Mason Partners Equity Trust:
We have audited the accompanying statement of assets and liabilities of Legg Mason ClearBridge Equity Fund, a series of Legg Mason Partners Equity
Trust, including the schedule of investments, as of October 31, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the three-year period then ended, for the period from January 1, 2009 to October 31, 2009, and for each of the years or periods in the two-year period ended December 31, 2008. 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.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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. Our procedures included confirmation of securities owned as of October 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures. 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 Legg Mason ClearBridge Equity Fund as of October 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of
the years in the three-year period then ended, for the period from January 1, 2009 to October 31, 2009, and for each of the years or periods in the two-year period ended December 31, 2008, in conformity with U.S. generally accepted
accounting principles.
New York, New York
December 18, 2012
|
|
|
|
|
ClearBridge Equity Fund
|
|
|
31
|
|
Additional information
(unaudited)
Information about Trustees and Officers
The business and affairs of ClearBridge Equity Fund (the Fund) are conducted by management under the supervision and subject to the
direction of its Board of Trustees. The business address of each Trustee is c/o R. Jay Gerken, 620 Eighth Avenue, 49th Floor, New York, New York 10018. Information pertaining to the Trustees and officers of the Fund is set forth
below.
The Statement of Additional Information includes additional information about Trustees and is available, without charge, upon
request by calling the Fund at 1-877-721-1926.
|
|
|
Independent Trustees:
|
Paul R. Ades
|
Year of birth
|
|
1940
|
Position(s) with Trust
|
|
Trustee
|
Term of office
1
and length of time served
2
|
|
Since 1983
|
Principal occupation(s) during past five years
|
|
Paul R. Ades, PLLC (law firm) (since 2000)
|
Number of funds in fund complex overseen by Trustee
|
|
49
|
Other board memberships held by Trustee during past five years
|
|
None
|
Andrew L. Breech
|
Year of birth
|
|
1952
|
Position(s) with Trust
|
|
Trustee
|
Term of office
1
and length of time served
2
|
|
Since 1991
|
Principal occupation(s) during past five years
|
|
President, Dealer Operating Control Service, Inc. (automotive retail management) (since 1985)
|
Number of funds in fund complex overseen by Trustee
|
|
49
|
Other board memberships held by Trustee during past five years
|
|
None
|
Dwight B. Crane
|
Year of birth
|
|
1937
|
Position(s) with Trust
|
|
Trustee
|
Term of office
1
and length of time served
2
|
|
Since 1981
|
Principal occupation(s) during past five years
|
|
Professor Emeritus, Harvard Business School (since 2007); formerly, Professor, Harvard Business School (1969 to 2007); Independent
Consultant (since 1969)
|
Number of funds in fund complex overseen by Trustee
|
|
49
|
Other board memberships held by Trustee during past five years
|
|
None
|
|
|
|
32
|
|
ClearBridge Equity Fund
|
Additional information
(unaudited)
(contd)
Information about Trustees and Officers
|
|
|
Independent Trustees contd
|
Frank G. Hubbard
|
Year of birth
|
|
1937
|
Position(s) with Trust
|
|
Trustee
|
Term of office
1
and length of time served
2
|
|
Since 1993
|
Principal occupation(s) during past five years
|
|
President, Avatar International Inc. (business development) (since 1998)
|
Number of funds in fund complex overseen by Trustee
|
|
49
|
Other board memberships held by Trustee during past five years
|
|
None
|
Howard J. Johnson
|
Year of birth
|
|
1938
|
Position(s) with Trust
|
|
Trustee
|
Term of office
1
and length of time served
2
|
|
From 1981 to 1998 and since 2000
|
Principal occupation(s) during past five years
|
|
Chief Executive Officer, Genesis Imaging LLC (technology company) (since 2003)
|
Number of funds in fund complex overseen by Trustee
|
|
49
|
Other board memberships held by Trustee during past five years
|
|
None
|
Jerome H. Miller
|
Year of birth
|
|
1938
|
Position(s) with Trust
|
|
Trustee
|
Term of office
1
and length of time served
2
|
|
Since 1995
|
Principal occupation(s) during past five years
|
|
Retired
|
Number of funds in fund complex overseen by Trustee
|
|
49
|
Other board memberships held by Trustee during past five years
|
|
None
|
Ken Miller
|
Year of birth
|
|
1942
|
Position(s) with Trust
|
|
Trustee
|
Term of office
1
and length of time served
2
|
|
Since 1983
|
Principal occupation(s) during past five years
|
|
President, Young Stuff Apparel Group, Inc. (apparel manufacturer), division of Li & Fung (since 1963)
|
Number of funds in fund complex overseen by Trustee
|
|
49
|
Other board memberships held by Trustee during past five years
|
|
None
|
|
|
|
|
|
ClearBridge Equity Fund
|
|
|
33
|
|
|
|
|
Independent Trustees contd
|
John J. Murphy
|
Year of birth
|
|
1944
|
Position(s) with Trust
|
|
Trustee
|
Term of office
1
and length of time served
2
|
|
Since 2002
|
Principal occupation(s) during past five years
|
|
Founder and Senior Principal, Murphy Capital Management (investment management) (since 1983)
|
Number of funds in fund complex overseen by Trustee
|
|
49
|
Other board memberships held by Trustee during past five years
|
|
Trustee, UBS Funds (52 funds) (since 2008); Trustee, Consulting Group Capital Markets Funds (11 funds) (since 2002); formerly, Director, Nicholas Applegate Institutional Funds
(12 funds) (2005 to 2010); formerly, Director, Atlantic Stewardship Bank (2004 to 2005); formerly, Director, Barclays International Funds Group Ltd. and affiliated companies (1983 to 2003)
|
Thomas F. Schlafly
|
Year of birth
|
|
1948
|
Position(s) with Trust
|
|
Trustee
|
Term of office
1
and length of time served
2
|
|
Since 1983
|
Principal occupation(s) during past five years
|
|
President, The Saint Louis Brewery, Inc. (brewery) (since 1989); Partner, Thompson Coburn LLP (law firm) (since 2009); formerly, Of
Counsel, Husch Blackwell Sanders LLP (law firm) and its predecessor firms (1984 to 2009)
|
Number of funds in fund complex overseen by Trustee
|
|
49
|
Other board memberships held by Trustee during past five years
|
|
Director, Citizens National Bank of Greater St. Louis (since 2006)
|
Jerry A. Viscione
|
Year of birth
|
|
1944
|
Position(s) with Trust
|
|
Trustee
|
Term of office
1
and length of time served
2
|
|
Since 1993
|
Principal occupation(s) during past five years
|
|
Retired
|
Number of funds in fund complex overseen by Trustee
|
|
49
|
Other board memberships held by Trustee during past five years
|
|
None
|
|
|
|
34
|
|
ClearBridge Equity Fund
|
Additional information
(unaudited)
(contd)
Information about Trustees and Officers
|
|
|
Interested Trustee and Officer:
|
|
|
R. Jay Gerken
3
|
|
|
Year of birth
|
|
1951
|
Position(s) with Trust
|
|
Trustee, President, Chairman and Chief Executive Officer
|
Term of office
1
and length of time served
2
|
|
Since 2002
|
Principal occupation(s) during past five years
|
|
Managing Director of Legg Mason & Co., LLC (Legg Mason & Co.) (since 2005); Officer and Trustee/Director of 157
funds associated with Legg Mason Partners Fund Advisor, LLC (LMPFA) or its affiliates (since 2006) and Legg Mason & Co. predecessors (prior to 2006); President and Chief Executive Officer (CEO) of LMPFA (since 2006);
President and CEO of Smith Barney Fund Management LLC (SBFM) (formerly a registered investment adviser) (since 2002)
|
Number of funds in fund complex overseen by Trustee
|
|
157
|
Other board memberships held by Trustee during past five years
|
|
None
|
Additional Officers
|
|
|
Ted P. Becker
Legg
Mason
620 Eighth Avenue, New York, NY 10018
|
|
|
Year of birth
|
|
1951
|
Position(s) with Trust
|
|
Chief Compliance Officer
|
Term of office
1
and length of time served
2
|
|
Since 2007
|
Principal occupation(s) during past five years
|
|
Director of Global Compliance at Legg Mason (since 2006); Chief Compliance Officer of LMPFA (since 2006); Managing Director of Compliance of Legg Mason & Co. (since 2005);
Chief Compliance Officer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2006)
|
Vanessa A. Williams
Legg Mason
100 First Stamford Place, Stamford, CT 06902
|
|
|
Year of birth
|
|
1979
|
Position(s) with Trust
|
|
Chief Anti-Money Laundering Compliance Officer and Identity Theft Prevention Officer
|
Term of office
1
and length of time served
2
|
|
Since 2011
|
Principal occupation(s) during past five years
|
|
Vice President of Legg Mason & Co. (since 2012); Identity Theft Prevention Officer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since
2011); Chief Anti-Money Laundering Compliance Officer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2011); formerly, Senior Compliance Officer of Legg Mason & Co. (2008 to 2011); formerly, Compliance
Analyst of Legg Mason & Co. (2006 to 2008) and Legg Mason & Co. predecessors (prior to 2006)
|
|
|
|
|
|
ClearBridge Equity Fund
|
|
|
35
|
|
|
|
|
Additional Officers contd
|
|
|
Robert I. Frenkel
Legg Mason
100 First Stamford Place, Stamford, CT 06902
|
|
|
Year of birth
|
|
1954
|
Position(s) with Trust
|
|
Secretary and Chief Legal Officer
|
Term of office
1
and length of time served
2
|
|
Since 2007
|
Principal occupation(s) during past five years
|
|
Vice President and Deputy General Counsel of Legg Mason (since 2006); Managing Director and General Counsel of Global Mutual Funds for Legg Mason & Co. (since 2006) and
Legg Mason & Co. predecessors (since 1994); Secretary and Chief Legal Officer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2006) and Legg Mason & Co. predecessors (prior to 2006)
|
Thomas C. Mandia
Legg Mason
100 First Stamford Place, Stamford, CT 06902
|
|
|
Year of birth
|
|
1962
|
Position(s) with Trust
|
|
Assistant Secretary
|
Term of office
1
and length of time served
2
|
|
Since 2007
|
Principal occupation(s) during past five years
|
|
Managing Director and Deputy General Counsel of Legg Mason & Co. (since 2005) and Legg Mason & Co. predecessors (prior to 2005); Secretary of LMPFA (since 2006);
Assistant Secretary of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2006) and Legg Mason & Co. predecessors (prior to 2006); Secretary to SBFM (since 2002)
|
Richard F. Sennett
Legg Mason
100 International Drive, Baltimore, MD 21202
|
|
|
Year of birth
|
|
1970
|
Position(s) with Trust
|
|
Principal Financial Officer
|
Term of office
1
and length of time served
2
|
|
Since 2011
|
Principal occupation(s) during past five years
|
|
Principal Financial Officer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2011); Managing Director of Legg Mason & Co. and Senior
Manager of the Treasury Policy group for Legg Mason & Co.s Global Fiduciary Platform (since 2011); formerly, Chief Accountant within the SECs Division of Investment Management (2007 to 2011); formerly, Assistant Chief Accountant
within the SECs Division of Investment Management (2002 to 2007)
|
|
|
|
36
|
|
ClearBridge Equity Fund
|
Additional information
(unaudited)
(contd)
Information about Trustees and Officers
|
|
|
Additional Officers contd
|
|
|
Albert Laskaj
Legg
Mason
55 Water Street, New York, NY 10041
|
|
|
Year of birth
|
|
1977
|
Position(s) with Trust
|
|
Treasurer
|
Term of office
1
and length of time served
2
|
|
Since 2010
|
Principal occupation(s) during past five years
|
|
Vice President of Legg Mason & Co. (since 2008); Treasurer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2010); formerly,
Controller of certain mutual funds associated with Legg Mason & Co. or its affiliates (prior to 2010)
|
Jeanne M. Kelly
Legg Mason
620 Eighth Avenue, New York, NY 10018
|
|
|
Year of birth
|
|
1951
|
Position(s) with Trust
|
|
Senior Vice President
|
Term of office
1
and length of time served
2
|
|
Since 2007
|
Principal occupation(s) during past five years
|
|
Senior Vice President of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2007); Senior Vice President of LMPFA (since 2006); Managing
Director of Legg Mason & Co. (since 2005) and Legg Mason & Co. predecessors (prior to 2005)
|
|
Trustees who are not interested persons of the Fund within the meaning of Section 2(a)(19) of the 1940 Act.
|
1
|
Each Trustee and officer serves until his or her respective successor has been duly elected and qualified or until his or her earlier death,
resignation, retirement or removal.
|
2
|
Indicates the earliest year in which the Trustee became a board member for a fund in the Legg Mason fund complex or the officer took such office.
|
3
|
Mr. Gerken is an interested person of the Fund, as defined in the 1940 Act, because of his position with LMPFA and/or certain of
its affiliates.
|
|
|
|
|
|
ClearBridge Equity Fund
|
|
|
37
|
|
Important tax information
(unaudited)
The following information is provided with respect to the distributions paid during the taxable year ended October 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Record date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable date:
|
|
|
12/27/2011
|
|
|
|
3/29/2012
|
|
|
|
6/28/2012
|
|
|
|
9/27/2012
|
|
Ordinary income:
|
|
|
12/28/2011
|
|
|
|
3/30/2012
|
|
|
|
6/29/2012
|
|
|
|
9/28/2012
|
|
Qualified dividend income for individuals
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
Dividends qualifying for the dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
received deduction for corporations
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
Please retain this information for your records.
ClearBridge
Equity Fund
Trustees
Paul R. Ades
Andrew L. Breech
Dwight B. Crane
R. Jay Gerken
Chairman
Frank
G. Hubbard
Howard J. Johnson
Jerome H. Miller
Ken Miller
John J. Murphy
Thomas F. Schlafly
Jerry A. Viscione
Investment
manager
Legg Mason Partners Fund Advisor, LLC
Subadviser
ClearBridge Investments, LLC
Distributor
Legg Mason Investor
Services, LLC
Custodian
State Street Bank and Trust Company
Transfer agent
Boston Financial Data Services, Inc.
2000 Crown Colony Drive
Quincy, MA
02169
Independent registered public accounting firm
KPMG LLP
345 Park Avenue
New York, NY 10154
ClearBridge Equity Fund
The Fund is a separate investment series of Legg Mason
Partners Equity Trust, a Maryland statutory trust.
ClearBridge Equity Fund
Legg Mason Funds
55 Water Street
New York, NY 10041
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third
quarters of each fiscal year on Form N-Q. The Funds Forms N-Q are available on the SECs website at www.sec.gov. The Funds Forms N-Q may be reviewed and copied at the SECs Public Reference Room in Washington, D.C., and
information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. To obtain information on Form N-Q, shareholders can call the Fund at 1-877-721-1926.
Information on how the Fund voted proxies relating to
portfolio securities during the prior 12-month period ended June 30th of each year and a description of the policies and procedures that the Fund uses to determine how to vote proxies related to portfolio transactions are available (1) without
charge, upon request, by calling the Fund at 1-877-721-1926, (2) on the Funds website at www.leggmason.com/individualinvestors and (3) on the SECs website at www.sec.gov.
This report is submitted for the general information of the shareholders of ClearBridge Equity Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded or accompanied by a current prospectus.
Investors should consider the Funds investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and
other important information about the Fund. Please read the prospectus carefully before investing.
www.leggmason.com/individualinvestors
©2012 Legg Mason Investor Services, LLC
Member FINRA, SIPC
Legg Mason Funds Privacy and Security Notice
Your Privacy and the Security of Your Personal Information is Very Important to the Legg Mason Funds
This Privacy and Security Notice (the Privacy Notice) addresses the Legg Mason Funds privacy and data protection practices with
respect to nonpublic personal information the Funds receive. The Legg Mason Funds include any funds sold by the Funds distributor, Legg Mason Investor Services, LLC, as well as Legg Mason-sponsored closed-end funds and certain closed-end funds
managed or sub-advised by Legg Mason or its affiliates. The provisions of this Privacy Notice apply to your information both while you are a shareholder and after you are no longer invested with the Funds.
The Type of Nonpublic Personal Information the Funds Collect About You
The Funds collect and maintain nonpublic personal information about you in connection with your shareholder account. Such information may include, but is not limited to:
|
|
Personal information included on applications or other forms;
|
|
|
Account balances, transactions, and mutual fund holdings and positions;
|
|
|
Online account access user IDs, passwords, security challenge question responses; and
|
|
|
Information received from consumer reporting agencies regarding credit history and creditworthiness (such as the amount of an individuals
total debt, payment history, etc.).
|
How the Funds Use Nonpublic Personal Information About You
The Funds do not sell or share your nonpublic personal information with third parties or with affiliates for their marketing purposes, or with
other financial institutions or affiliates for joint marketing purposes, unless you have authorized the Funds to do so. The Funds do not disclose any nonpublic personal information about you except as may be required to perform transactions or
services you have authorized or as permitted or required by law. The Funds may disclose information about you to:
|
|
Employees, agents, and affiliates on a need to know basis to enable the Funds to conduct ordinary business or comply with obligations
to government regulators;
|
|
|
Service providers, including the Funds affiliates, who assist the Funds as part of the ordinary course of business (such as printing,
mailing services, or processing or servicing your account with us) or otherwise perform services on the Funds behalf, including companies that may perform marketing services solely for the Funds;
|
|
|
The Funds representatives such as legal counsel, accountants and auditors; and
|
|
|
Fiduciaries or representatives acting on your behalf, such as an IRA custodian or trustee of a grantor trust.
|
|
NOT PART OF THE ANNUAL REPORT
|
Legg Mason Funds Privacy and Security Notice (contd)
Except as otherwise permitted by applicable law, companies acting on
the Funds behalf are contractually obligated to keep nonpublic personal information the Funds provide to them confidential and to use the information the Funds share only to provide the services the Funds ask them to perform.
The Funds may disclose nonpublic personal information about you when necessary to enforce their rights or protect against fraud, or as permitted or
required by applicable law, such as in connection with a law enforcement or regulatory request, subpoena, or similar legal process. In the event of a corporate action or in the event a Fund service provider changes, the Funds may be required to
disclose your nonpublic personal information to third parties. While it is the Funds practice to obtain protections for disclosed information in these types of transactions, the Funds cannot guarantee their privacy policy will remain
unchanged.
Keeping You Informed of the Funds Privacy and Security Practices
The Funds will notify you annually of their privacy policy as required by federal law. While the Funds reserve the right to modify this policy at
any time they will notify you promptly if this privacy policy changes.
The Funds Security Practices
The Funds maintain appropriate physical, electronic and procedural safeguards designed to guard your nonpublic personal information. The
Funds internal data security policies restrict access to your nonpublic personal information to authorized employees, who may use your nonpublic personal information for Fund business purposes only.
Although the Funds strive to protect your nonpublic personal information, they cannot ensure or warrant the security of any information you provide
or transmit to them, and you do so at your own risk. In the event of a breach of the confidentiality or security of your nonpublic personal information, the Funds will attempt to notify you as necessary so you can take appropriate protective steps.
If you have consented to the Funds using electronic communications or electronic delivery of statements, they may notify you under such circumstances using the most current email address you have on record with them.
In order for the Funds to provide effective service to you, keeping your account information accurate is very important. If you believe that your
account information is incomplete, not accurate or not current, or if you have questions about the Funds privacy practices, write the Funds using the contact information on your account statements, email the Funds by clicking on the Contact Us
section of the Funds website at www.leggmason.com, or contact the Fund at 1-877-721-1926.
Revised April 2011
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NOT PART OF THE ANNUAL REPORT
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www.leggmason.com/individualinvestors
©2012 Legg Mason Investor Services, LLC Member FINRA, SIPC
FD04093 12/12 SR12-1808
The
registrant has adopted a code of ethics that applies to the registrants principal executive officer, principal financial officer, principal accounting officer or controller.