UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-06444

Legg Mason Partners Equity Trust

(Exact name of registrant as specified in charter)

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

(Address of principal executive offices) (Zip code)

Robert I. Frenkel, Esq.

Legg Mason & Co., LLC

100 First Stamford Place

Stamford, CT 06902

(Name and address of agent for service)

Registrant’s telephone number, including area code: 1-877-721-1926

Date of fiscal year end: October 31

Date of reporting period: January 31, 2013

 

 

 

 

ITEM 1. SCHEDULE OF INVESTMENTS.

LEGG MASON PARTNERS EQUITY TRUST

LEGG MASON BATTERYMARCH GLOBAL EQUITY FUND

FORM N-Q

JANUARY 31, 2013

LEGG MASON BATTERYMARCH GLOBAL EQUITY FUND

 

Schedule of Investments (unaudited)    January 31, 2013

 

 

SECURITY

   SHARES      VALUE  
COMMON STOCKS - 97.6%      
CONSUMER DISCRETIONARY - 10.0%      

Automobiles - 1.3%

     

Hyundai Motor Co.

     2,242       $ 422,077   

Toyota Motor Corp.

     23,600         1,126,513   
     

 

 

 

Total Automobiles

        1,548,590   
     

 

 

 

Hotels, Restaurants & Leisure - 1.1%

     

Brinker International Inc.

     40,600         1,329,244   
     

 

 

 

Media - 4.2%

     

Comcast Corp., Class A Shares

     23,200         883,456   

ITV PLC

     583,466         1,062,333   

Naspers Ltd.

     4,766         308,409   

Rightmove PLC

     15,925         423,308   

Time Warner Cable Inc.

     16,100         1,438,374   

WPP PLC

     64,381         1,012,404   
     

 

 

 

Total Media

        5,128,284   
     

 

 

 

Multiline Retail - 1.4%

     

Macy’s Inc.

     19,800         782,298   

Next PLC

     9,968         641,539   

Target Corp.

     3,600         217,476   
     

 

 

 

Total Multiline Retail

        1,641,313   
     

 

 

 

Specialty Retail - 1.1%

     

Nitori Co., Ltd.

     2,850         217,852   

PetSmart Inc.

     3,400         222,394   

TJX Cos. Inc.

     19,400         876,492   
     

 

 

 

Total Specialty Retail

        1,316,738   
     

 

 

 

Textiles, Apparel & Luxury Goods - 0.9%

     

Christian Dior SA

     3,446         602,185   

Coach Inc.

     10,000         510,000   
     

 

 

 

Total Textiles, Apparel & Luxury Goods

        1,112,185   
     

 

 

 

TOTAL CONSUMER DISCRETIONARY

        12,076,354   
     

 

 

 
CONSUMER STAPLES - 9.4%      

Beverages - 0.7%

     

Heineken NV

     11,401         801,724   
     

 

 

 

Food & Staples Retailing - 4.1%

     

CVS Caremark Corp.

     22,000         1,126,400   

Distribuidora Internacional de Alimentacion SA

     128,820         952,220   

FamilyMart Co., Ltd.

     15,800         635,836   

Koninklijke Ahold NV

     57,864         850,104   

Metro Inc., Class A Shares

     4,400         273,158   

Wal-Mart Stores Inc.

     16,800         1,175,160   
     

 

 

 

Total Food & Staples Retailing

        5,012,878   
     

 

 

 

Food Products - 1.1%

     

Suedzucker AG

     29,669         1,269,770   
     

 

 

 

Household Products - 1.9%

     

Kimberly-Clark Corp.

     11,600         1,038,316   

Procter & Gamble Co.

     16,800         1,262,688   
     

 

 

 

Total Household Products

        2,301,004   
     

 

 

 

Tobacco - 1.6%

     

Altria Group Inc.

     10,200         343,536   

Imperial Tobacco Group PLC

     23,628         878,766   

Japan Tobacco Inc.

     24,000         747,203   
     

 

 

 

Total Tobacco

        1,969,505   
     

 

 

 

TOTAL CONSUMER STAPLES

        11,354,881   
     

 

 

 

 

See Notes to Schedule of Investments.

 

1

LEGG MASON BATTERYMARCH GLOBAL EQUITY FUND

 

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

 

 

SECURITY

   SHARES      VALUE  
ENERGY - 11.1%      

Energy Equipment & Services - 1.7%

     

Petroleum Geo-Services ASA

     48,400       $ 858,511   

Polarcus Ltd.

     288,343         364,196 * 

ShawCor Ltd., Class A Shares

     12,200         490,495   

TGS Nopec Geophysical Co. ASA

     10,186         380,374   
     

 

 

 

Total Energy Equipment & Services

        2,093,576   
     

 

 

 

Oil, Gas & Consumable Fuels - 9.4%

     

Canadian Natural Resources Ltd.

     21,100         637,189   

Eni SpA

     38,547         967,751   

Exxon Mobil Corp.

     27,125         2,440,436   

JX Holdings Inc.

     42,900         253,333   

Phillips 66

     14,350         869,180   

Royal Dutch Shell PLC, Class B Shares

     62,915         2,289,026   

Suncor Energy Inc.

     25,100         853,108   

Total SA

     18,384         996,725   

Valero Energy Corp.

     46,300         2,024,699   
     

 

 

 

Total Oil, Gas & Consumable Fuels

        11,331,447   
     

 

 

 

TOTAL ENERGY

        13,425,023   
     

 

 

 
FINANCIALS - 21.8%      

Commercial Banks - 11.1%

     

Agricultural Bank of China Ltd., Class H Shares

     470,000         255,138   

Axis Bank Ltd., GDR

     13,148         372,483   

Bank of China Ltd.

     1,369,000         676,080   

Bank of Hawaii Corp.

     10,100         485,709   

Bank of Montreal

     3,800         239,986   

Bank of Nova Scotia

     11,400         670,353   

China Construction Bank Corp., Class H Shares

     505,000         435,625   

HSBC Holdings PLC

     47,167         536,141   

ICICI Bank Ltd., ADR

     12,800         586,240   

Industrial & Commercial Bank of China Ltd., Class H Shares

     449,000         338,108   

Kasikornbank Public Co., Ltd., NVDR

     99,400         661,667   

Mizuho Financial Group Inc.

     645,500         1,291,776   

National Bank of Canada

     8,200         652,120   

Nordea Bank AB

     63,685         702,675   

Oversea-Chinese Banking Corp. Ltd.

     103,000         813,913   

Royal Bank of Canada

     13,600         847,034   

Sumitomo Mitsui Financial Group Inc.

     23,600         947,149   

Turkiye Is Bankasi, Class C Shares

     208,234         769,593   

U.S. Bancorp

     30,600         1,012,860   

Wells Fargo & Co.

     31,100         1,083,213   
     

 

 

 

Total Commercial Banks

        13,377,863   
     

 

 

 

Diversified Financial Services - 1.1%

     

JPMorgan Chase & Co.

     28,900         1,359,745   
     

 

 

 

Insurance - 9.6%

     

Admiral Group PLC

     22,636         439,066   

AFLAC Inc.

     26,500         1,406,090   

Allianz AG, Registered Shares

     7,524         1,076,265   

Allied World Assurance Co. Holdings AG

     2,900         246,007   

Allstate Corp.

     27,300         1,198,470   

American Financial Group Inc.

     8,800         374,528   

Assurant Inc.

     8,300         317,392   

AXA SA

     48,324         894,980   

Hannover Rueckversicherung AG

     12,298         992,877   

HCC Insurance Holdings Inc.

     7,400         286,232   

Muenchener Rueckversicherungs-Gesellschaft AG (MunichRe), Registered Shares

     8,415         1,546,495   

Prudential Financial Inc.

     7,300         422,524   

Prudential PLC

     43,528         661,359   

Swiss Re AG

     13,078         973,611 * 

T&D Holdings Inc.

     42,600         525,949   

 

See Notes to Schedule of Investments.

 

2

LEGG MASON BATTERYMARCH GLOBAL EQUITY FUND

 

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

 

 

SECURITY

   SHARES      VALUE  

Insurance - 9.6% (continued)

     

Validus Holdings Ltd.

     8,500       $ 309,485   
     

 

 

 

Total Insurance

        11,671,330   
     

 

 

 

TOTAL FINANCIALS

        26,408,938   
     

 

 

 
HEALTH CARE - 9.7%      

Biotechnology - 1.6%

     

Amgen Inc.

     8,200         700,772   

Celgene Corp.

     12,200         1,207,312 * 
     

 

 

 

Total Biotechnology

        1,908,084   
     

 

 

 

Health Care Equipment & Supplies - 0.7%

     

Abbott Laboratories

     14,000         474,320   

Baxter International Inc.

     5,800         393,472   
     

 

 

 

Total Health Care Equipment & Supplies

        867,792   
     

 

 

 

Health Care Providers & Services - 3.3%

     

Aetna Inc.

     15,900         766,857   

LifePoint Hospitals Inc.

     13,600         594,456 * 

McKesson Corp.

     12,900         1,357,467   

Suzuken Co., Ltd.

     7,600         232,874   

UnitedHealth Group Inc.

     20,400         1,126,284   
     

 

 

 

Total Health Care Providers & Services

        4,077,938   
     

 

 

 

Pharmaceuticals - 4.1%

     

AbbVie Inc.

     14,000         513,660   

Bayer AG, Registered Shares

     4,191         413,589   

Novo Nordisk A/S, Class B Shares

     7,329         1,348,503   

Orion OYJ, Class B Shares

     26,193         731,925   

Roche Holding AG

     6,407         1,417,911   

Shire PLC

     16,379         548,896   
     

 

 

 

Total Pharmaceuticals

        4,974,484   
     

 

 

 

TOTAL HEALTH CARE

        11,828,298   
     

 

 

 
INDUSTRIALS - 11.4%      

Aerospace & Defense - 5.2%

     

Alliant Techsystems Inc.

     4,700         304,184   

BAE Systems PLC

     137,143         738,660   

Boeing Co.

     21,500         1,588,205   

Cobham PLC

     27,884         93,622   

Lockheed Martin Corp.

     14,200         1,233,554   

Northrop Grumman Corp.

     16,000         1,040,640   

Raytheon Co.

     25,700         1,353,876   
     

 

 

 

Total Aerospace & Defense

        6,352,741   
     

 

 

 

Air Freight & Logistics - 1.0%

     

Deutsche Post AG

     24,418         573,412   

United Parcel Service Inc., Class B Shares

     7,800         618,462   
     

 

 

 

Total Air Freight & Logistics

        1,191,874   
     

 

 

 

Airlines - 0.5%

     

Alaska Air Group Inc.

     13,700         631,981 * 
     

 

 

 

Construction & Engineering - 0.3%

     

Vinci SA

     5,651         287,927   
     

 

 

 

Industrial Conglomerates - 0.3%

     

NWS Holdings Ltd.

     215,000         384,235   
     

 

 

 

Machinery - 1.1%

     

Duerr AG

     7,060         691,539   

Tata Motors Ltd., ADR

     22,050         609,242   
     

 

 

 

Total Machinery

        1,300,781   
     

 

 

 

Marine - 0.5%

     

AP Moller - Maersk A/S

     79         630,884   
     

 

 

 

 

See Notes to Schedule of Investments.

 

3

LEGG MASON BATTERYMARCH GLOBAL EQUITY FUND

 

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

 

 

SECURITY

   SHARES      VALUE  

Road & Rail - 1.7%

     

Central Japan Railway Co.

     7,300       $ 638,635   

East Japan Railway Co.

     21,500         1,453,005   
     

 

 

 

Total Road & Rail

        2,091,640   
     

 

 

 

Trading Companies & Distributors - 0.8%

     

Itochu Corp.

     55,300         625,296   

Sumitomo Corp.

     29,600         382,604   
     

 

 

 

Total Trading Companies & Distributors

        1,007,900   
     

 

 

 

TOTAL INDUSTRIALS

        13,879,963   
     

 

 

 
INFORMATION TECHNOLOGY - 12.8%      

Communications Equipment - 3.0%

     

Brocade Communications Systems Inc.

     150,500         860,860 * 

Cisco Systems Inc.

     112,300         2,310,011   

QUALCOMM Inc.

     4,500         297,135   

Riverbed Technolgoy Inc.

     12,800         248,320 * 
     

 

 

 

Total Communications Equipment

        3,716,326   
     

 

 

 

Computers & Peripherals - 2.7%

     

Apple Inc.

     5,500         2,504,205   

Western Digital Corp.

     16,300         766,100   
     

 

 

 

Total Computers & Peripherals

        3,270,305   
     

 

 

 

Electronic Equipment, Instruments & Components - 0.1%

     

Avnet Inc.

     3,100         109,616 * 
     

 

 

 

Internet Software & Services - 1.0%

     

AOL Inc.

     26,400         809,160 * 

Google Inc., Class A Shares

     500         377,845 * 
     

 

 

 

Total Internet Software & Services

        1,187,005   
     

 

 

 

IT Services - 2.1%

     

Accenture PLC, Class A Shares

     14,500         1,042,405   

Computer Sciences Corp.

     11,000         459,800   

Total System Services Inc.

     29,600         688,200   

Western Union Co.

     22,800         324,444   
     

 

 

 

Total IT Services

        2,514,849   
     

 

 

 

Semiconductors & Semiconductor Equipment - 0.8%

     

Intel Corp.

     48,700         1,024,648   
     

 

 

 

Software - 3.1%

     

Microsoft Corp.

     38,400         1,054,848   

Oracle Corp.

     64,300         2,283,293   

Symantec Corp.

     19,000         413,630 * 
     

 

 

 

Total Software

        3,751,771   
     

 

 

 

TOTAL INFORMATION TECHNOLOGY

        15,574,520   
     

 

 

 
MATERIALS - 6.7%      

Chemicals - 4.6%

     

Air Water Inc.

     18,000         230,105   

BASF SE

     17,213         1,744,941   

CF Industries Holdings Inc.

     1,600         366,672   

Daicel Corp.

     49,000         342,402   

Monsanto Co.

     6,900         699,315   

Nissan Chemical Industries Ltd.

     34,500         416,890   

Syngenta AG

     3,275         1,413,931   

Yara International ASA

     6,593         351,802   
     

 

 

 

Total Chemicals

        5,566,058   
     

 

 

 

Metals & Mining - 1.4%

     

BHP Billiton PLC

     20,543         702,777   

Grupo Mexico SA de CV, Series B Shares

     213,246         793,303   

 

See Notes to Schedule of Investments.

 

4

LEGG MASON BATTERYMARCH GLOBAL EQUITY FUND

 

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

 

 

SECURITY

   SHARES      VALUE  

Metals & Mining - 1.4% (continued)

     

Nevsun Resources Ltd.

     67,400       $ 285,170   
     

 

 

 

Total Metals & Mining

        1,781,250   
     

 

 

 

Paper & Forest Products - 0.7%

     

Mondi PLC

     70,919         840,207   
     

 

 

 

TOTAL MATERIALS

        8,187,515   
     

 

 

 
TELECOMMUNICATION SERVICES - 2.8%      

Diversified Telecommunication Services - 0.6%

     

Nippon Telegraph & Telephone Corp.

     16,500         691,071   
     

 

 

 

Wireless Telecommunication Services - 2.2%

     

America Movil SAB de CV, Series L Shares, ADR

     31,100         782,476   

KDDI Corp.

     18,000         1,338,509   

Softbank Corp.

     15,600         556,138   
     

 

 

 

Total Wireless Telecommunication Services

        2,677,123   
     

 

 

 

TOTAL TELECOMMUNICATION SERVICES

        3,368,194   
     

 

 

 
UTILITIES - 1.9%      

Electric Utilities - 0.7%

     

Enel SpA

     177,601         774,564   
     

 

 

 

Multi-Utilities - 1.2%

     

Centrica PLC

     52,729         292,866   

GDF Suez

     58,094         1,191,878   
     

 

 

 

Total Multi-Utilities

        1,484,744   
     

 

 

 

TOTAL UTILITIES

        2,259,308   
     

 

 

 
TOTAL COMMON STOCKS
(Cost - $101,303,385) 		        118,362,994   
     

 

 

 
PREFERRED STOCKS - 0.8%      
FINANCIALS - 0.3%      

Commercial Banks - 0.3%

     

Itau Unibanco Holding SA

     24,300         419,165   
     

 

 

 
MATERIALS - 0.5%      

Metals & Mining - 0.5%

     

Metalurgica Gerdau SA

     51,600         577,580   
     

 

 

 
TOTAL PREFERRED STOCKS
(Cost - $899,170) 		        996,745   
     

 

 

 
TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS
(Cost - $102,202,555) 		        119,359,739   
     

 

 

 

 

           MATURITY
DATE 		     FACE
AMOUNT 		        
SHORT-TERM INVESTMENTS - 0.0%           

Repurchase Agreements - 0.0%

          

Interest in $675,000,000 joint tri-party repurchase agreement dated 1/31/13 with RBS Securities Inc.; Proceeds at maturity - $4,000; (Fully collateralized by various U.S. government obligations, 0.000% to 11.250% due 2/15/15 to 8/15/41; Market value - $4,080) (Cost - $4,000)

     0.130 %      2/1/13       $ 4,000         4,000   
          

 

 

 
TOTAL INVESTMENTS - 98.4 %
(Cost - $102,206,555#) 		             119,363,739   

Other Assets in Excess of Liabilities - 1.6%

             1,986,412   
          

 

 

 
TOTAL NET ASSETS - 100.0%            $ 121,350,151   
          

 

 

 

 

* Non-income producing security.

 

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

Abbreviations used in this schedule:

ADR    — American Depositary Receipts

 

See Notes to Schedule of Investments.

 

5

LEGG MASON BATTERYMARCH GLOBAL EQUITY FUND

 

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

 

GDR    — Global Depositary Receipts
NVDR    — Non Voting Depositary Receipt

 

Summary of Investments by Country**

 

United States

     45.2 % 

Japan

     10.6   

United Kingdom

     8.0   

Germany

     7.0   

Canada

     4.1   

Switzerland

     3.4   

France

     3.3   

Denmark

     1.7   

Italy

     1.5   

China

     1.4   

Netherlands

     1.4   

Norway

     1.3   

Mexico

     1.3   

India

     1.3   

Jersey

     1.3   

Ireland

     0.9   

Brazil

     0.8   

Spain

     0.8   

Singapore

     0.7   

Turkey

     0.6   

Finland

     0.6   

Sweden

     0.6   

Bermuda

     0.6   

Thailand

     0.6   

South Korea

     0.4   

Cayman Islands

     0.3   

South Africa

     0.3   

Short - Term Investments

     0.0 † 

 

 
     100.0 % 

 

 

 

** As a percentage of total investments. Please note that Fund holdings are as of January 31, 2013 and are subject to change.

 

† Represents less than 0.1%.

 

See Notes to Schedule of Investments.

 

6

Notes to Schedule of Investments (unaudited)

 

1. Organization and significant accounting policies

Legg Mason Batterymarch Global 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 management investment company.

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

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

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

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

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

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

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

 

7

Notes to Schedule of Investments (unaudited) (continued)

 

  •  

Level 1 – quoted prices in active markets for identical investments

 

  •  

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

 

  •  

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

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

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

 

ASSETS

 

DESCRIPTION

   QUOTED PRICES
(LEVEL  1) 		     OTHER SIGNIFICANT
OBSERVABLE  INPUTS
(LEVEL 2) 		     SIGNIFICANT
UNOBSERVABLE
INPUTS
(LEVEL 3) 		     TOTAL  

Long-term investments†:

           

Common stocks

   $ 118,362,994         —           —         $ 118,362,994   

Preferred stocks

     996,745         —           —           996,745   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total long-term investments

   $ 119,359,739         —           —         $ 119,359,739   
  

 

 

    

 

 

    

 

 

    

 

 

 

Short-term investments†

     —         $ 4,000         —           4,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total investments

   $ 119,359,739       $ 4,000         —         $ 119,363,739   
  

 

 

    

 

 

    

 

 

    

 

 

 

Other financial instruments:

           

Forward foreign currency contracts

     —         $ 64,940         —           64,940   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 119,359,739       $ 68,940         —         $ 119,428,679   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

† See Schedule of Investments for additional detailed categorizations.

(b) Repurchase agreements. The Fund may enter into repurchase agreements with institutions that its investment adviser has determined are creditworthy. Each repurchase agreement is recorded at cost. Under the terms of a typical repurchase agreement, the Fund acquires a debt security subject to an obligation of the seller to repurchase, and of the Fund to resell, the security at an agreed-upon price and time, thereby determining the yield during the Fund’s holding period. When entering into repurchase agreements, it is the Fund’s policy that its custodian or a third party custodian, acting on the Fund’s behalf, take possession of the underlying collateral securities, the market value of which, at all times, at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction maturity exceeds one business day, the value of the collateral is marked-to-market and measured against the value of the agreement in an effort to ensure the adequacy of the collateral. If the counterparty defaults, the Fund generally has the right to use the collateral to satisfy the terms of the repurchase transaction. However, if the market value of the collateral declines during the period in which the Fund seeks to assert its rights or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited.

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

(d) Forward foreign currency contracts. The Fund enters into a forward foreign currency contract to hedge against foreign currency exchange rate risk on its non-U.S. dollar denominated securities or to facilitate settlement of a foreign currency denominated portfolio transaction. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price with delivery and settlement at a future date. The contract is marked-to-market daily and the change in value is recorded by the Fund as an unrealized gain or loss. When a forward foreign currency

 

8

Notes to Schedule of Investments (unaudited) (continued)

 

contract is closed, through either delivery or offset by entering into another forward foreign currency contract, the Fund recognizes a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it is closed.

When entering into a forward foreign currency contract, the Fund bears the risk of an unfavorable change in the foreign exchange rate underlying the forward foreign currency contract. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.

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

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

(f) Counterparty risk and credit-risk-related contingent features of derivative instruments. The Fund may invest in certain securities or engage in other transactions, where the Fund is exposed to counterparty credit risk in addition to broader market risks. The Fund may invest in securities of issuers, which may also be considered counterparties as trading partners in other transactions. This may increase the risk of loss in the event of default or bankruptcy by the counterparty or if the counterparty otherwise fails to meet its contractual obligations. The Fund’s investment manager attempts to mitigate counterparty risk by (i) periodically assessing the creditworthiness of its trading partners, (ii) monitoring and/or limiting the amount of its net exposure to each individual counterparty based on its assessment and (iii) requiring collateral from the counterparty for certain transactions. Market events and changes in overall economic conditions may impact the assessment of such counterparty risk by the investment manager. In addition, declines in the values of underlying collateral received may expose the Fund to increased risk of loss.

The Fund has entered into master agreements with certain of its derivative counterparties that provide for general obligations, representations, agreements, collateral, events of default or termination and credit related contingent features. The credit related contingent features include, but are not limited to, a percentage decrease in the Fund’s net assets or NAV over a specified period of time. If these credit related contingent features were triggered, the derivatives counterparty could terminate the positions and demand payment or require additional collateral.

As of January 31, 2013, the Fund did not have any open derivative transactions with credit related contingent features in a net liability position.

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

2. Investments

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

 

Gross unrealized appreciation

   $ 18,237,557   

Gross unrealized depreciation

     (1,080,373 ) 
  

 

 

 

Net unrealized appreciation

   $ 17,157,184   
  

 

 

 

At January 31, 2013, the Fund had the following open forward foreign currency contracts:

 

FOREIGN CURRENCY

  

COUNTERPARTY

   LOCAL
CURRENCY 		     MARKET
VALUE 		     SETTLEMENT
DATE 		     UNREALIZED
GAIN 		 
Contracts to Sell:               

Japanese Yen

   State Street Bank & Trust Co.      120,626,000       $ 1,319,195         2/14/13       $ 64,940   

3. Derivative instruments and hedging activities

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

 

9

Notes to Schedule of Investments (unaudited) (continued)

 

The following is a summary of the Fund’s derivative instruments categorized by risk exposure at January 31, 2013.

 

     Forward Foreign
Currency  Contracts 		 

Primary Underlying Risk

   Unrealized
Appreciation 		 

Foreign Exchange Risk

   $ 64,940   

During the period ended January 31, 2013, the volume of derivative activity for the Fund was as follows:

 

     Average market value  

Forward foreign currency contracts (to sell)

   $ 1,233,739   

 

10

 

ITEM 2. CONTROLS AND PROCEDURES.

 

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

 

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

 

ITEM 3. EXHIBITS.

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

SIGNATURES

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

 

Legg Mason Partners Equity Trust
By   /s/    R. J AY G ERKEN      
  R. Jay Gerken
  Chief Executive Officer

Date:

 

March 26, 2013

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

 

By   /s/    R. J AY G ERKEN        
  R. Jay Gerken
  Chief Executive Officer

Date:

 

March 26, 2013

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

Date:

 

March 26, 2013