UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORMN-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number811-06444
Legg Mason Partners Equity Trust
(Exact name of registrant as specified in charter)
620 Eighth Avenue, 49th Floor, New York, NY 10018
(Address of principal executive offices) (Zip code)
Robert I. Frenkel, Esq.
Legg Mason & Co., LLC
100 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant’s telephone number, including area code:1-877-721-1926
Date of fiscal year end: November 30
Date of reporting period: November 30, 2019
| ITEM 1. | REPORT TO STOCKHOLDERS. |
TheAnnual Report to Stockholders is filed herewith.
| Annual Report | November 30, 2019 |
CLEARBRIDGE
LARGE CAP GROWTH FUND
Beginning in January 2021, as permitted by regulations adopted by the Securities and Exchange Commission, the Fund intends to no longer mail paper copies of the Fund’s shareholder reports like this one, unless you specifically request paper copies of the reports from the Fund or from your Service Agent or financial intermediary (such as a broker-dealer or bank). Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically(“e-delivery”), you will not be affected by this change and you need not take any action. If you have not already electede-delivery, you may elect to receive shareholder reports and other communications from the Fund electronically by contacting your Service Agent or, if you are a direct shareholder with the Fund, by calling1-877-721-1926.
You may elect to receive all future reports in paper free of charge. If you invest through a Service Agent, you can contact your Service Agent to request that you continue to receive paper copies of your shareholder reports. That election will apply to all Legg Mason Funds held in your account at that Service Agent. If you are a direct shareholder with the Fund, you can call the Fund at1-877-721-1926, or write to the Fund by regular mail at Legg Mason Funds, P.O. Box 9699, Providence, RI 02940-9699 or by express, certified or registered mail to Legg Mason Funds, 4400 Computer Drive, Westborough, MA 01581 to let the Fund know you wish to continue receiving paper copies of your shareholder reports. That election will apply to all Legg Mason Funds held in your account held directly with the fund complex.
| INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE |
The Fund seeks long-term capital growth.
Dear Shareholder,
We are pleased to provide the annual report of ClearBridge Large Cap Growth Fund for the twelve-month reporting period ended November 30, 2019. Please read on for a detailed look at prevailing economic and market conditions during the Fund’s 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. Here you can gain immediate access to market and investment information, including:
| • | Fund prices and performance, |
| • | Market insights and commentaries from our portfolio managers, and |
| • | A host of educational resources. |
We look forward to helping you meet your financial goals.
Sincerely,
Jane Trust, CFA
President and Chief Executive Officer
December 31, 2019
| II | ClearBridge Large Cap Growth Fund |
Q. What is the Fund’s investment strategy?
A. The Fund seeks long-term capital growth. Under normal circumstances, the Fund invests at least 80% of its net assets, plus borrowings for investment purposes, if any, in equity securities or other instruments with similar economic characteristics of U.S. companies with large market capitalizations. We emphasize individual security selection while diversifying the Fund’s investments across industries, which may help to reduce risk. We attempt to identify established large-capitalization companies with the highest growth potential. We then analyze each company in detail, ranking its management, strategy and competitive market position. Finally, we attempt to identify the best values available among the growth companies identified. The core holdings of the Fund will be large-capitalization companies that we believe to be dominant in their industries, global in scope and with a long-term history of performance.
Q. What were the overall market conditions during the Fund’s reporting period?
A. The major equity indices posted double-digit returns for the twelve-month reporting period ended November 30, 2019, as the S&P 500 Indexi gained 16.11%, the Russell 1000 Indexii added 16.10% and the Russell Midcap Indexiii rose 14.96%. Growth stocks maintained their leadership over value stocks, with the Russell 1000 Growth Indexiv gaining 21.01% compared to a return of 11.33% for the Russell 1000 Value Indexv. Volatility spiked several times during the year, with the Chicago Board Options Exchange (“CBOE”) Volatility Index (“VIX”)vi maintaining normalized levels over longer periods.
A sharp 9% market correction in December 2018, driven by fears of a slowing economy and rising interest rates, sent equities broadly lower to start the reporting period. While all sectors generated negative returns in the month, the more cyclical sectors including the Energy, Financials and Industrials sectors performed the worst. The broader market fully recovered these losses in the first quarter of 2019, when sentiment toward economic growth improved, driven by positive signs from U.S.-China trade negotiations and a more dovish stance from the Federal Reserve Board (the “Fed”)vii. Further signs of progress in trade negotiations and hints at more accommodative Fed policy supported positive equity returns in the second quarter of 2019.
In July 2019, the Fed cut the federal funds rateviii for the first time in a decade. The initial cut was followed by two more in August and October 2019 leaving the target rate at a range between 1.50% and 1.75% and bringing the Fed more in alignment with the accommodative stances of other global central banks. The Fed action, combined with a resilient U.S. consumer, helped the broad market advance moderately in the third quarter of 2019, in the face of ongoing U.S.-China trade tensions, slowing manufacturing and an inverted yield curveix. Defensive stocks performed well, with the Utilities, Real Estate and Consumer Staples sectors among market leaders.
Throughout most of the reporting period, trade tensions and slowing global growth threatened to curb energy demand, weighing on energy stocks. As the Democratic Party’s candidates kicked off campaigning for the 2020 U.S. presidential election primaries, the
| ClearBridge Large Cap Growth Fund 2019 Annual Report |
1 |
Fund overview (cont’d)
Health Care sector came under pressure due to growing concerns regarding potentially greater government involvement in health insurance and drug pricing. However, strong third-quarter 2019 earnings and attractive valuations helped some health care names rebound off lows.
Against this backdrop, momentum and growth-oriented stocks continued to lead the market, with Information Technology (“IT”) (+33.06%) and Communication Services (+23.75%) being the best performing sectors in the Fund’s benchmark, the Russell 1000 Growth Index, for the reporting period. The Materials (+23.15%) and Real Estate (+21.11%) sectors also outperformed. Despite a 6% rise in crude oil prices during the period, Energy(-15.67%) was the worst performing sector while the Health Care sector (+7.15%) also underperformed during the reporting period.
Q. How did we respond to these changing market conditions?
A. We have carefully constructed the Fund to thrive in a more volatile market environment, diversifying across three types of growth companies — stable, cyclical and select — that tend to do well at different stages of a market cycle and are driven more by their own execution than broad, macroeconomic forces.
This approach also helps to deliver differentiated performance from the market. Over time, stock selection has proven to be a strong contributor to the Fund’s results. But in the short-term, the active risk we take as stock pickers can work against us. This was the case during the reporting period as disappointing results from a handful of companies caused the Fund to lag the Russell 1000 Growth Index. Uber Technologies and GrubHub, two of the newest names in the Fund’s select bucket of higher-risk companies with above-average growth rates, struggled as they invested heavily to expand market share. GrubHub admitted late in the reporting period that greater than expected competition would require additional spending and push out its profitability timeline, causing us to exit the position. Meanwhile, we believe Uber, which dominates the global rideshare market and is a leading player in a fast-growing food delivery market, possesses a superior business model and is on the path to improved profitability.
The Health Care sector was also a headwind as political rhetoric heated up over potential changes to the U.S. health care system. Biotechnology companies in particular have been pressured by the risk of prescription drug pricing controls while several of the Fund’s biotech holdings, including Celgene and Alexion Pharmaceuticals, were also hurt by competitive threats. Given the lack of near-term visibility in the sector, we trimmed the Fund’s health care exposure through the sales of Celgene and Regeneron Pharmaceuticals into strength as well as exiting Biogen after the cancellation of a key clinical trial.
The robust performance of growth stocks for the year was well above our expectations. This strong run motivated profit-taking in some of the Fund’s better performers in the IT sector. We closed a position in online payment provider PayPal after a strong runup and software maker Red Hat ahead of its acquisition by a larger rival. These moves, as well as our
2 | ClearBridge Large Cap Growth Fund 2019 Annual Report |
concern that passive flows into the largest stocks in the market were causing growth benchmarks to become overly skewed toward IT stocks, caused the Fund to be underweight IT throughout the reporting period, which proved a headwind to performance.
As long-term investors, we will continue to be selective in adjusting the Fund’s positioning in the sector. This approach included adding financial and payment software maker Fidelity National Information Services and customer relationship management software maker salesforce.com during the year.
Performance review
For the twelve months ended November 30, 2019, Class A shares of ClearBridge Large Cap Growth Fund, excluding sales charges, returned 17.70%. The Fund’s unmanaged benchmark, the Russell 1000 Growth Index, returned 21.01% for the same period. The LipperLarge-Cap Growth Funds Category Averagex returned 18.92% over the same time frame.
| Performance Snapshotas of November 30, 2019 (unaudited) | ||||||||
| (excluding sales charges) | 6 months | 12 months | ||||||
| ClearBridge Large Cap Growth Fund: | ||||||||
Class A | 13.01 | % | 17.70 | % | ||||
Class C | 12.62 | % | 16.84 | % | ||||
Class R | 12.83 | % | 17.34 | % | ||||
Class I | 13.17 | % | 18.03 | % | ||||
Class IS | 13.22 | % | 18.15 | % | ||||
Class O1 | 13.20 | % | 18.11 | % | ||||
| Russell 1000 Growth Index | 16.46 | % | 21.01 | % | ||||
| LipperLarge-Cap Growth Funds Category Average | 13.70 | % | 18.92 | % | ||||
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 recentmonth-end, please visit our website at www.leggmason.com/mutualfunds.
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.
| 1 | Class O shares are offered only to former Class O shareholders of the ClearBridge Equity Fund. |
| ClearBridge Large Cap Growth Fund 2019 Annual Report |
3 |
Fund overview (cont’d)
| Total Annual Operating Expenses(unaudited) |
As of the Fund’s current prospectus dated March 31, 2019, the gross total annual fund operating expense ratios for Class A, Class C, Class R, Class I, Class IS and Class O shares were 1.05%, 1.74%, 1.36%, 0.76%, 0.66% and 0.71%, 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.
Q. What were the leading contributors to performance?
A. On an absolute basis, the Fund had positive returns in nine of the ten economic sectors in which it was invested (among eleven sectors in total) during the reporting period.
The greatest contributions to absolute returns came from the IT and Communication Services sectors. In terms of individual Fund holdings, leading contributors to performance for the period included Facebook, Inc. in the Communication Services sector, Microsoft Corp., Visa Inc. and Apple Inc., all in the IT sector as well as Chipotle Mexican Grill, Inc. in the Consumer Discretionary sector.
Relative to the benchmark, stock selection in the Communication Services and Real Estate sectors was the primary contributor to performance for the period. Stock selection in the Consumer Staples and Health Care sectors as well as an underweight to the Industrials sector also aided results.
Q. What were the leading detractors from performance?
A. In terms of individual Fund holdings, the leading detractors from performance for the reporting period were Biogen Inc. and BioMarin Pharmaceutical Inc., both in the Health Care sector, GrubHub, Inc. in the Consumer Discretionary sector, Uber Technologies, Inc. in the Industrials sector and Nutanix, Inc. in the IT sector.
Relative to the benchmark, overall stock selection and sector allocation had negative impacts on performance. In particular, stock selection in the Industrials, IT and Financials sectors, an underweight to the IT sector and an overweight to the Energy sector were the primary detractors from returns for the reporting period.
Q. Were there any significant changes to the Fund during the reporting period?
A. Significant changes to the Fund’s portfolio during the period included the initiation of new positions in Advance Auto Parts, Inc. and Booking Holdings Inc., both in the Consumer Discretionary sector, salesforce.com, Inc. and Fidelity National Information Services, Inc., both in the IT sector and Uber Technologies, Inc. in the Industrials sector. During the reporting period, we also closed a number of the Fund’s existing positions, the largest being Biogen Inc. and Celgene Corp., both in the Health Care sector, PayPal Holdings Inc. and Red Hat, Inc., both in the IT sector as well as Yum China Holdings, Inc. in the Consumer Discretionary sector.
4 | ClearBridge Large Cap Growth Fund 2019 Annual Report |
Thank you for your investment in ClearBridge Large Cap Growth Fund. As always, we appreciate that you have chosen us to manage your assets and we remain focused on achieving the Fund’s investment goals.
Sincerely,
Peter Bourbeau
Portfolio Manager
ClearBridge Investments, LLC
Margaret Vitrano
Portfolio Manager
ClearBridge Investments, LLC
December 11, 2019
RISKS: Common stocks are subject to market and price fluctuations. Large capitalization companies may fall out of favor with investors based on market and economic conditions. Growth stocks as a group may fall out of favor and underperform the overall equity market while the market concentrates on value stocks. Although the Fund will not concentrate its investments in any one industry or industry group, it may weight its investments toward certain industries, thus increasing its exposure to factors adversely affecting issuers within those industries. Diversification does not assure against market loss. Please see the Fund’s prospectus for a more complete discussion of these and other risks and the Fund’s investment strategies.
Portfolio holdings and breakdowns are as of November 30, 2019 and are subject to change and may not be representative of the portfolio managers’ current or future investments. The Fund’s top ten holdings (as a percentage of net assets) as of November 30, 2019 were: Amazon.com Inc. (6.8%), Facebook Inc., Class A Shares (5.2%), Microsoft Corp. (5.1%), Visa Inc., Class A Shares (4.4%), UnitedHealth Group Inc. (3.4%), Alphabet Inc., Class C Shares (3.1%), Apple Inc. (3.0%), Adobe Inc. (2.9%), Walt Disney Co. (2.8%) and Thermo Fisher Scientific Inc. (2.6%). Please refer to pages 12 through 14 for a list and percentage breakdown of the Fund’s 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. Portfolio holdings are subject to change at any time and may not be representative of the portfolio managers’ current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of November 30, 2019 were: Information Technology (32.3%), Communication Services (14.2%), Consumer Discretionary (13.3%), Health Care (12.6%) and Industrials (10.1%). The Fund’s portfolio composition is subject to change at any time.
| ClearBridge Large Cap Growth Fund 2019 Annual Report |
5 |
Fund overview (cont’d)
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. |
| ii | The Russell 1000 Index measures the performance of thelarge-cap segment of the U.S. equity universe. It is a subset of the Russell 3000 Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 90% of the U.S. market. The Russell 3000 Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the U.S. equity market. |
| iii | The Russell Midcap Index measures the performance of themid-cap segment of the U.S. equity universe. The Russell Midcap is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap represents approximately 31% of the total market capitalization of the Russell 1000 companies. |
| iv | The Russell 1000 Growth Index measures the performance of those Russell 1000 Index companies with higherprice-to-book ratios and higher forecasted growth values. (Aprice-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities.) |
| v | The Russell 1000 Value Index measures the performance of thelarge-cap value segment of the U.S. equity universe. It includes those Russell 1000 Index companies with lowerprice-to-book ratios and lower expected growth values. |
| vi | The Chicago Board Options Exchange (“CBOE”) Volatility Index (“VIX”) is a measure of market expectations of near-term volatility as conveyed by S&P 500 stock index option prices. |
| vii | The Federal Reserve Board (the “Fed”) is responsible for the formulation of U.S. policies designed to promote economic growth, full employment, stable prices and a sustainable pattern of international trade and payments. |
| viii | 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. |
| ix | The yield curve is the graphical depiction of the relationship between the yield on bonds of the same credit quality but different maturities. |
| x | Lipper, Inc., a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments. Returns are based on the period ended November 30, 2019, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 641 funds for thesix-month period and among the 634 funds for the twelve-month period in the Fund’s Lipper category, and excluding sales charges, if any. |
6 | ClearBridge Large Cap Growth Fund 2019 Annual Report |
Investment breakdown(%) as a percent of total investments
| † | The bar graph above represents the composition of the Fund’s investments as of November 30, 2019 and November 30, 2018. The Fund is actively managed. As a result, the composition of the Fund’s investments is subject to change at any time. |
| ClearBridge Large Cap Growth Fund 2019 Annual Report |
7 |
Example
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, includingfront-end andback-end sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; service and/or distribution(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 June 1, 2019 and held for the six months ended November 30, 2019.
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 Fund’s 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 asfront-end orback-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.
| Based on actual total return1 | Based on hypothetical total return1 | |||||||||||||||||||||||||||||||||||||||||||||
| Actual Total Return Without Sales Charge2 | Beginning Account Value | Ending Account Value | Annualized Expense Ratio | Expenses Paid During the Period3 | Hypothetical Annualized Total Return | Beginning Account Value | Ending Account Value | Annualized Expense Ratio | Expenses Paid During the Period3 | |||||||||||||||||||||||||||||||||||||
| Class A | 13.01 | % | $ | 1,000.00 | $ | 1,130.10 | 1.02 | % | $ | 5.45 | Class A | 5.00 | % | $ | 1,000.00 | $ | 1,019.95 | 1.02 | % | $ | 5.16 | |||||||||||||||||||||||||
| Class C | 12.62 | 1,000.00 | 1,126.20 | 1.72 | 9.17 | Class C | 5.00 | 1,000.00 | 1,016.44 | 1.72 | 8.69 | |||||||||||||||||||||||||||||||||||
| Class R | 12.83 | 1,000.00 | 1,128.30 | 1.33 | 7.10 | Class R | 5.00 | 1,000.00 | 1,018.40 | 1.33 | 6.73 | |||||||||||||||||||||||||||||||||||
| Class I | 13.17 | 1,000.00 | 1,131.70 | 0.74 | 3.95 | Class I | 5.00 | 1,000.00 | 1,021.36 | 0.74 | 3.75 | |||||||||||||||||||||||||||||||||||
| Class IS | 13.22 | 1,000.00 | 1,132.20 | 0.63 | 3.37 | Class IS | 5.00 | 1,000.00 | 1,021.91 | 0.63 | 3.19 | |||||||||||||||||||||||||||||||||||
| Class O | 13.20 | 1,000.00 | 1,132.00 | 0.67 | 3.58 | Class O | 5.00 | 1,000.00 | 1,021.71 | 0.67 | 3.40 | |||||||||||||||||||||||||||||||||||
8 | ClearBridge Large Cap Growth Fund 2019 Annual Report |
| 1 | For the six months ended November 30, 2019. |
| 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. |
| 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 (183), then divided by 365. |
| ClearBridge Large Cap Growth Fund 2019 Annual Report |
9 |
| Average annual total returns | ||||||||||||||||||||||||
| Without sales charges1 | Class A | Class C | Class R | Class I | Class IS | Class O | ||||||||||||||||||
| Twelve Months Ended 11/30/19 | 17.70 | % | 16.84 | % | 17.34 | % | 18.03 | % | 18.15 | % | 18.11 | % | ||||||||||||
| Five Years Ended 11/30/19 | 13.28 | 12.47 | 12.96 | 13.63 | 13.72 | N/A | ||||||||||||||||||
| Ten Years Ended 11/30/19 | 14.62 | 13.86 | 14.28 | 15.03 | N/A | N/A | ||||||||||||||||||
| Inception* through 11/30/19 | — | — | — | — | 15.96 | 13.68 | ||||||||||||||||||
| With sales charges2 | Class A | Class C | Class R | Class I | Class IS | Class O | ||||||||||||||||||
| Twelve Months Ended 11/30/19 | 10.93 | % | 15.84 | % | 17.34 | % | 18.03 | % | 18.15 | % | 18.11 | % | ||||||||||||
| Five Years Ended 11/30/19 | 11.95 | 12.47 | 12.96 | 13.63 | 13.72 | N/A | ||||||||||||||||||
| Ten Years Ended 11/30/19 | 13.94 | 13.86 | 14.28 | 15.03 | N/A | N/A | ||||||||||||||||||
| Inception* through 11/30/19 | — | — | — | — | 15.96 | 13.68 | ||||||||||||||||||
| Cumulative total returns | ||||
| Without sales charges1 | ||||
| Class A (11/30/09 through 11/30/19) | 291.30 | % | ||
| Class C (11/30/09 through 11/30/19) | 266.21 | |||
| Class R (11/30/09 through 11/30/19) | 279.78 | |||
| Class I (11/30/09 through 11/30/19) | 305.47 | |||
| Class IS (Inception date of 3/15/13 through 11/30/19) | 170.16 | |||
| Class O (Inception date of 12/19/14 through 11/30/19) | 88.62 | |||
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 investor’s 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 contingent deferred sales charge (“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 date for Class A and C shares is August 29, 1997. Inception dates for Class R, I, IS and O shares are December 28, 2006, October 15, 1997, March 15, 2013 and December 19, 2014, respectively. |
10 | ClearBridge Large Cap Growth Fund 2019 Annual Report |
Historical performance
Value of $10,000 invested in
Class A and C Shares of ClearBridge Large Cap Growth Fund vs. Russell 1000 Growth Index† — November2009 - November 2019
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 investor’s 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 A and C shares of ClearBridge Large Cap Growth Fund on November 30, 2009, assuming the deduction of the maximum initial sales charge of 5.75% at the time of investment for Class A shares and the reinvestment of all distributions, including returns of capital, if any, at net asset value through November 30, 2019. The hypothetical illustration also assumes a $10,000 investment in the Russell 1000 Growth Index. The Russell 1000 Growth Index measures the performance of those Russell 1000 Index companies with higherprice-to-book ratios and higher forecasted growth values. The index is unmanaged and 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 Fund’s other classes may be greater or less than the Class A and C 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 Large Cap Growth Fund 2019 Annual Report |
11 |
November 30, 2019
ClearBridge Large Cap Growth Fund
| Security | Shares | Value | ||||||||||||||
| Common Stocks — 98.2% | ||||||||||||||||
| Communication Services — 14.2% | ||||||||||||||||
Entertainment — 2.8% | ||||||||||||||||
Walt Disney Co. | 2,835,709 | $ | 429,836,770 | |||||||||||||
Interactive Media & Services — 9.5% | ||||||||||||||||
Alphabet Inc., Class A Shares | 144,717 | 188,723,992 | * | |||||||||||||
Alphabet Inc., Class C Shares | 364,686 | 475,900,643 | * | |||||||||||||
Facebook Inc., Class A Shares | 3,998,045 | 806,165,794 | * | |||||||||||||
Total Interactive Media & Services | 1,470,790,429 | |||||||||||||||
Media — 1.9% | ||||||||||||||||
Comcast Corp., Class A Shares | 6,872,378 | 303,415,489 | ||||||||||||||
Total Communication Services | 2,204,042,688 | |||||||||||||||
| Consumer Discretionary — 13.3% | ||||||||||||||||
Internet & Direct Marketing Retail — 9.8% | ||||||||||||||||
Alibaba Group Holding Ltd., ADR | 1,438,858 | 287,771,600 | * | |||||||||||||
Amazon.com Inc. | 586,170 | 1,055,574,936 | * | |||||||||||||
Booking Holdings Inc. | 92,856 | 176,800,609 | * | |||||||||||||
Total Internet & Direct Marketing Retail | 1,520,147,145 | |||||||||||||||
Specialty Retail — 3.5% | ||||||||||||||||
Advance Auto Parts Inc. | 1,557,152 | 244,597,436 | ||||||||||||||
Home Depot Inc. | 1,366,960 | 301,428,350 | ||||||||||||||
Total Specialty Retail | 546,025,786 | |||||||||||||||
Total Consumer Discretionary | 2,066,172,931 | |||||||||||||||
| Consumer Staples — 4.4% | ||||||||||||||||
Beverages — 1.6% | ||||||||||||||||
Anheuser-Busch InBev SA/NV, ADR | 3,175,532 | 251,978,464 | ||||||||||||||
Food & Staples Retailing — 1.8% | ||||||||||||||||
Costco Wholesale Corp. | 905,018 | 271,333,447 | ||||||||||||||
Food Products — 1.0% | ||||||||||||||||
McCormick & Co. Inc., Non Voting Shares | 946,149 | 160,135,718 | ||||||||||||||
Total Consumer Staples | 683,447,629 | |||||||||||||||
| Energy — 1.0% | ||||||||||||||||
Oil, Gas & Consumable Fuels — 1.0% | ||||||||||||||||
Pioneer Natural Resources Co. | 1,252,511 | 160,121,006 | ||||||||||||||
| Financials — 5.5% | ||||||||||||||||
Capital Markets — 3.5% | ||||||||||||||||
BlackRock Inc. | 481,886 | 238,490,200 | ||||||||||||||
Charles Schwab Corp. | 6,277,709 | 310,746,596 | ||||||||||||||
Total Capital Markets | 549,236,796 | |||||||||||||||
Consumer Finance — 2.0% | ||||||||||||||||
American Express Co. | 2,503,453 | 300,714,774 | ||||||||||||||
Total Financials | 849,951,570 | |||||||||||||||
See Notes to Financial Statements.
12 | ClearBridge Large Cap Growth Fund 2019 Annual Report |
ClearBridge Large Cap Growth Fund
| Security | Shares | Value | ||||||||||||||
| Health Care — 12.6% | ||||||||||||||||
Biotechnology — 2.5% | ||||||||||||||||
Alexion Pharmaceuticals Inc. | 2,022,089 | $ | 230,396,821 | * | ||||||||||||
BioMarin Pharmaceutical Inc. | 1,933,435 | 156,047,539 | * | |||||||||||||
Total Biotechnology | 386,444,360 | |||||||||||||||
Health Care Providers & Services — 3.3% | ||||||||||||||||
UnitedHealth Group Inc. | 1,862,543 | 521,269,909 | ||||||||||||||
Life Sciences Tools & Services — 2.6% | ||||||||||||||||
Thermo Fisher Scientific Inc. | 1,278,771 | 401,470,155 | ||||||||||||||
Pharmaceuticals — 4.2% | ||||||||||||||||
Johnson & Johnson | 1,959,299 | 269,384,020 | ||||||||||||||
Zoetis Inc. | 3,173,937 | 382,522,887 | ||||||||||||||
Total Pharmaceuticals | 651,906,907 | |||||||||||||||
Total Health Care | 1,961,091,331 | |||||||||||||||
| Industrials — 10.1% | ||||||||||||||||
Air Freight & Logistics — 3.0% | ||||||||||||||||
CH Robinson Worldwide Inc. | 1,415,773 | 108,802,155 | ||||||||||||||
United Parcel Service Inc., Class B Shares | 2,999,022 | 359,072,904 | ||||||||||||||
Total Air Freight & Logistics | 467,875,059 | |||||||||||||||
Industrial Conglomerates — 2.1% | ||||||||||||||||
Honeywell International Inc. | 1,844,223 | 329,286,017 | ||||||||||||||
Professional Services — 1.8% | ||||||||||||||||
IHS Markit Ltd. | 3,859,091 | 280,362,961 | * | |||||||||||||
Road & Rail — 1.3% | ||||||||||||||||
Uber Technologies Inc. | 6,538,863 | 193,550,345 | * | |||||||||||||
Trading Companies & Distributors — 1.9% | ||||||||||||||||
W.W. Grainger Inc. | 947,870 | 300,427,396 | ||||||||||||||
Total Industrials | 1,571,501,778 | |||||||||||||||
| Information Technology — 32.3% | ||||||||||||||||
IT Services — 7.7% | ||||||||||||||||
Akamai Technologies Inc. | 3,527,183 | 307,288,183 | * | |||||||||||||
Fidelity National Information Services Inc. | 1,383,301 | 191,103,033 | ||||||||||||||
Visa Inc., Class A Shares | 3,742,417 | 690,513,361 | ||||||||||||||
Total IT Services | 1,188,904,577 | |||||||||||||||
Semiconductors & Semiconductor Equipment — 4.8% | ||||||||||||||||
NVIDIA Corp. | 1,235,587 | 267,801,126 | ||||||||||||||
QUALCOMM Inc. | 3,386,417 | 282,935,140 | ||||||||||||||
Texas Instruments Inc. | 1,688,107 | 202,927,343 | ||||||||||||||
Total Semiconductors & Semiconductor Equipment | 753,663,609 | |||||||||||||||
Software — 16.8% | ||||||||||||||||
Adobe Inc. | 1,461,870 | 452,492,621 | * | |||||||||||||
Microsoft Corp. | 5,272,652 | 798,174,060 | ||||||||||||||
Nutanix Inc., Class A Shares | 4,106,325 | 153,371,239 | * | |||||||||||||
Oracle Corp. | 5,673,158 | 318,491,090 | ||||||||||||||
Palo Alto Networks Inc. | 1,073,344 | 243,885,224 | * | |||||||||||||
See Notes to Financial Statements.
| ClearBridge Large Cap Growth Fund 2019 Annual Report |
13 |
Schedule of investments (cont’d)
November 30, 2019
ClearBridge Large Cap Growth Fund
| Security | Shares | Value | ||||||||||||||
Software — continued | ||||||||||||||||
salesforce.com Inc. | 1,221,984 | $ | 199,048,974 | * | ||||||||||||
Splunk Inc. | 1,834,310 | 273,715,738 | * | |||||||||||||
VMware Inc., Class A Shares | 1,072,360 | 166,880,663 | ||||||||||||||
Total Software | 2,606,059,609 | |||||||||||||||
Technology Hardware, Storage & Peripherals — 3.0% | ||||||||||||||||
Apple Inc. | 1,732,725 | 463,070,756 | ||||||||||||||
Total Information Technology | 5,011,698,551 | |||||||||||||||
| Materials — 3.1% | ||||||||||||||||
Chemicals — 3.1% | ||||||||||||||||
Ecolab Inc. | 1,347,910 | 251,614,360 | ||||||||||||||
Linde PLC | 1,119,576 | 230,867,767 | ||||||||||||||
Total Materials | 482,482,127 | |||||||||||||||
| Real Estate — 1.7% | ||||||||||||||||
Equity Real Estate Investment Trusts (REITs) — 1.7% | ||||||||||||||||
Equinix Inc. | 474,249 | 268,828,046 | ||||||||||||||
Total Investments before Short-Term Investments (Cost — $11,139,867,952) |
| 15,259,337,657 | ||||||||||||||
| Rate | ||||||||||||||||
| Short-Term Investments — 1.8% | ||||||||||||||||
JPMorgan 100% U.S. Treasury Securities Money Market Fund, Institutional Class (Cost — $270,704,832) | 1.470 | % | 270,704,832 | 270,704,832 | ||||||||||||
Total Investments — 100.0% (Cost — $11,410,572,784) |
| 15,530,042,489 | ||||||||||||||
Other Assets in Excess of Liabilities — 0.0% | 5,863,332 | |||||||||||||||
Total Net Assets — 100.0% | $15,535,905,821 | |||||||||||||||
| * | Non-income producing security. |
Abbreviation used in this | ||
| ADR | — American Depositary Receipts | |
See Notes to Financial Statements.
14 | ClearBridge Large Cap Growth Fund 2019 Annual Report |
Statement of assets and liabilities
November 30, 2019
| Assets: | ||||
Investments, at value (Cost — $11,410,572,784) | $ | 15,530,042,489 | ||
Dividends and interest receivable | 16,372,223 | |||
Receivable for Fund shares sold | 15,446,208 | |||
Prepaid expenses | 397,878 | |||
Total Assets | 15,562,258,798 | |||
| Liabilities: | ||||
Payable for Fund shares repurchased | 15,600,383 | |||
Investment management fee payable | 7,563,667 | |||
Service and/or distribution fees payable | 888,092 | |||
Trustees’ fees payable | 99,711 | |||
Accrued expenses | 2,201,124 | |||
Total Liabilities | 26,352,977 | |||
| Total Net Assets | $ | 15,535,905,821 | ||
| Net Assets: | ||||
Par value (Note 7) | $ | 2,865 | ||
Paid-in capital in excess of par value | 10,682,461,812 | |||
Total distributable earnings (loss) | 4,853,441,144 | |||
| Total Net Assets | $ | 15,535,905,821 | ||
See Notes to Financial Statements.
| ClearBridge Large Cap Growth Fund 2019 Annual Report |
15 |
Statement of assets and liabilities (cont’d)
November 30, 2019
| Net Assets: | ||||
Class A | $2,326,403,693 | |||
Class C | $446,066,065 | |||
Class R | $139,213,950 | |||
Class I | $8,855,182,498 | |||
Class IS | $3,171,086,346 | |||
Class O | $597,953,269 | |||
| Shares Outstanding: | ||||
Class A | 46,409,300 | |||
Class C | 11,280,330 | |||
Class R | 2,910,022 | |||
Class I | 158,549,647 | |||
Class IS | 56,686,115 | |||
Class O | 10,693,052 | |||
| Net Asset Value: | ||||
Class A (and redemption price) | $50.13 | |||
Class C* | $39.54 | |||
Class R (and redemption price) | $47.84 | |||
Class I (and redemption price) | $55.85 | |||
Class IS (and redemption price) | $55.94 | |||
Class O (and redemption price) | $55.92 | |||
| Maximum Public Offering Price Per Share: | ||||
Class A (based on maximum initial sales charge of 5.75%) | $53.19 | |||
| * | 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 (Note 2). |
See Notes to Financial Statements.
16 | ClearBridge Large Cap Growth Fund 2019 Annual Report |
For the Year Ended November 30, 2019
| Investment Income: | ||||
Dividends | $ | 148,219,758 | ||
Interest | 8,885,509 | |||
Less: Foreign taxes withheld | (928,399) | |||
Total Investment Income | 156,176,868 | |||
| Expenses: | ||||
Investment management fee (Note 2) | 82,435,620 | |||
Transfer agent fees (Note 5) | 12,277,495 | |||
Service and/or distribution fees (Notes 2 and 5) | 10,696,581 | |||
Trustees’ fees | 949,127 | |||
Registration fees | 654,245 | |||
Fund accounting fees | 207,029 | |||
Insurance | 125,855 | |||
Shareholder reports | 121,193 | |||
Custody fees | 82,024 | |||
Legal fees | 52,767 | |||
Audit and tax fees | 47,829 | |||
Miscellaneous expenses | 58,091 | |||
Total Expenses | 107,707,856 | |||
Less: Fee waivers and/or expense reimbursements (Notes 2 and 5) | (1,250) | |||
Net Expenses | 107,706,606 | |||
| Net Investment Income | 48,470,262 | |||
| Realized and Unrealized Gain on Investments (Notes 1 and 3): | ||||
Net Realized Gain From Investment Transactions | 804,813,462 | |||
Change in Net Unrealized Appreciation (Depreciation) From Investments | 1,423,958,312 | |||
| Net Gain on Investments | 2,228,771,774 | |||
| Increase in Net Assets From Operations | $ | 2,277,242,036 | ||
See Notes to Financial Statements.
| ClearBridge Large Cap Growth Fund 2019 Annual Report |
17 |
Statements of changes in net assets
| For the Years Ended November 30, | 2019 | 2018 | ||||||
| Operations: | ||||||||
Net investment income | $ | 48,470,262 | $ | 25,580,464 | ||||
Net realized gain | 804,813,462 | 385,494,722 | ||||||
Change in net unrealized appreciation (depreciation) | 1,423,958,312 | 576,383,667 | ||||||
Increase in Net Assets From Operations | 2,277,242,036 | 987,458,853 | ||||||
| Distributions to Shareholders From (Notes 1 and 6): | ||||||||
Total distributable earnings | (404,753,147) | (393,396,246) | ||||||
Decrease in Net Assets From Distributions to Shareholders | (404,753,147) | (393,396,246) | ||||||
| Fund Share Transactions (Note 7): | ||||||||
Net proceeds from sale of shares | 5,643,188,283 | 4,129,790,491 | ||||||
Reinvestment of distributions | 329,009,304 | 328,162,672 | ||||||
Cost of shares repurchased | (3,616,842,184) | (2,946,788,033) | ||||||
Cost of shares redeemedin-kind (Note 9) | (191,922,402) | — | ||||||
In-kind capital contributions (Note 8) | — | 65,882,403 | ||||||
Increase in Net Assets From Fund Share Transactions | 2,163,433,001 | 1,577,047,533 | ||||||
Increase in Net Assets | 4,035,921,890 | 2,171,110,140 | ||||||
| Net Assets: | ||||||||
Beginning of year | 11,499,983,931 | 9,328,873,791 | ||||||
End of year | $ | 15,535,905,821 | $ | 11,499,983,931 | ||||
See Notes to Financial Statements.
18 | ClearBridge Large Cap Growth Fund 2019 Annual Report |
| For a share of each class of beneficial interest outstanding throughout each year ended November 30: | ||||||||||||||||||||
| Class A Shares1 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
| Net asset value, beginning of year | $44.22 | $41.91 | $34.46 | $33.78 | $32.66 | |||||||||||||||
| Income from operations: | ||||||||||||||||||||
Net investment income | 0.07 | 0.01 | 0.02 | 0.07 | 0.04 | |||||||||||||||
Net realized and unrealized gain | 7.40 | 4.09 | 8.14 | 1.57 | 3.08 | |||||||||||||||
Total income from operations | 7.47 | 4.10 | 8.16 | 1.64 | 3.12 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
Net investment income | (0.00) | 2 | (0.00) | 2 | (0.03) | (0.01) | — | |||||||||||||
Net realized gains | (1.56) | (1.79) | (0.68) | (0.95) | (2.00) | |||||||||||||||
Total distributions | (1.56) | (1.79) | (0.71) | (0.96) | (2.00) | |||||||||||||||
| Net asset value, end of year | $50.13 | $44.22 | $41.91 | $34.46 | $33.78 | |||||||||||||||
Total return3 | 17.70 | % | 10.25 | % | 24.14 | % | 5.02 | % | 10.26 | % | ||||||||||
| Net assets, end of year (millions) | $2,326 | $1,865 | $1,794 | $1,253 | $834 | |||||||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
Gross expenses | 1.02 | % | 1.04 | % | 1.11 | % | 1.15 | % | 1.18 | %4 | ||||||||||
Net expenses5,6 | 1.02 | 1.04 | 1.08 | 1.09 | 1.14 | 4 | ||||||||||||||
Net investment income | 0.14 | 0.03 | 0.05 | 0.22 | 0.13 | |||||||||||||||
| Portfolio turnover rate | 25 | %7 | 20 | %8 | 24 | % | 13 | % | 17 | % | ||||||||||
| 1 | Per share amounts have been calculated using the average shares method. |
| 2 | Amount represents less than $0.005 per share. |
| 3 | 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. |
| 4 | Included in the expense ratios are certainnon-recurring restructuring (and reorganization, if applicable) fees that were incurred by the Fund during the period. Without these fees, the gross and net expense ratios would not have changed for the year ended November 30, 2015. |
| 5 | As a result of an expense limitation arrangement, effective March 31, 2016, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class A shares did not exceed 1.10%. This expense limitation arrangement cannot be terminated prior to December 31, 2021 without the Board of Trustees’ consent. During the period August 3, 2015 through March 30, 2016, as a result of an expense limitation arrangement, the ratio of total annual fund operating expenses to average net assets of Class A shares did not exceed 1.15%. During the period December 19, 2014 through August 2, 2015, as a result of an expense limitation arrangement, the ratio of total annual fund operating expenses to average net assets of Class A shares did not exceed 1.18%. |
| 6 | Reflects fee waivers and/or expense reimbursements. |
| 7 | Excludes securities delivered as a result of a redemptionin-kind. |
| 8 | Excludes securities received as a result of a contributionin-kind. |
See Notes to Financial Statements.
| ClearBridge Large Cap Growth Fund 2019 Annual Report |
19 |
Financial highlights (cont’d)
| For a share of each class of beneficial interest outstanding throughout each year ended November 30: | ||||||||||||||||||||
| Class C Shares1 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
| Net asset value, beginning of year | $35.47 | $34.19 | $28.42 | $28.22 | $27.80 | |||||||||||||||
| Income (loss) from operations: | ||||||||||||||||||||
Net investment loss | (0.19) | (0.23) | (0.21) | (0.14) | (0.15) | |||||||||||||||
Net realized and unrealized gain | 5.82 | 3.30 | 6.66 | 1.29 | 2.57 | |||||||||||||||
Total income from operations | 5.63 | 3.07 | 6.45 | 1.15 | 2.42 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
Net realized gains | (1.56) | (1.79) | (0.68) | (0.95) | (2.00) | |||||||||||||||
Total distributions | (1.56) | (1.79) | (0.68) | (0.95) | (2.00) | |||||||||||||||
| Net asset value, end of year | $39.54 | $35.47 | $34.19 | $28.42 | $28.22 | |||||||||||||||
Total return2 | 16.84 | % | 9.51 | % | 23.22 | % | 4.26 | % | 9.49 | % | ||||||||||
| Net assets, end of year (millions) | $446 | $553 | $515 | $384 | $274 | |||||||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
Gross expenses | 1.72 | % | 1.73 | % | 1.84 | % | 1.88 | % | 1.91 | %3 | ||||||||||
Net expenses4,5 | 1.72 | 1.73 | 1.81 | 1.82 | 1.87 | 3 | ||||||||||||||
Net investment loss | (0.53) | (0.66) | (0.68) | (0.51) | (0.58) | |||||||||||||||
| Portfolio turnover rate | 25 | %6 | 20 | %7 | 24 | % | 13 | % | 17 | % | ||||||||||
| 1 | Per share amounts have been calculated using the average shares method. |
| 2 | 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. |
| 3 | Included in the expense ratios are certainnon-recurring restructuring (and reorganization, if applicable) fees that were incurred by the Fund during the period. Without these fees, the gross and net expense ratios would not have changed for the year ended November 30, 2015. |
| 4 | As a result of an expense limitation arrangement, effective August 3, 2015, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class C shares did not exceed 1.90%. This expense limitation arrangement cannot be terminated prior to December 31, 2021 without the Board of Trustees’ consent. |
| 5 | Reflects fee waivers and/or expense reimbursements. |
| 6 | Excludes securities delivered as a result of a redemptionin-kind. |
| 7 | Excludes securities received as a result of a contributionin-kind. |
See Notes to Financial Statements.
20 | ClearBridge Large Cap Growth Fund 2019 Annual Report |
| For a share of each class of beneficial interest outstanding throughout each year ended November 30: | ||||||||||||||||||||
| Class R Shares1 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
| Net asset value, beginning of year | $42.40 | $40.37 | $33.31 | $32.76 | $31.81 | |||||||||||||||
| Income (loss) from operations: | ||||||||||||||||||||
Net investment loss | (0.07) | (0.11) | (0.09) | (0.01) | (0.04) | |||||||||||||||
Net realized and unrealized gain | 7.07 | 3.93 | 7.85 | 1.51 | 2.99 | |||||||||||||||
Total income from operations | 7.00 | 3.82 | 7.76 | 1.50 | 2.95 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
Net investment income | — | — | (0.02) | — | — | |||||||||||||||
Net realized gains | (1.56) | (1.79) | (0.68) | (0.95) | (2.00) | |||||||||||||||
Total distributions | (1.56) | (1.79) | (0.70) | (0.95) | (2.00) | |||||||||||||||
| Net asset value, end of year | $47.84 | $42.40 | $40.37 | $33.31 | $32.76 | |||||||||||||||
Total return2 | 17.34 | % | 9.93 | % | 23.77 | % | 4.75 | % | 9.99 | % | ||||||||||
| Net assets, end of year (000s) | $139,214 | $126,653 | $95,961 | $38,823 | $9,936 | |||||||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
Gross expenses | 1.33 | % | 1.35 | % | 1.42 | % | 1.43 | % | 1.44 | %3 | ||||||||||
Net expenses4 | 1.33 | 1.35 | 5 | 1.38 | 5 | 1.37 | 5 | 1.39 | 3,5 | |||||||||||
Net investment loss | (0.16) | (0.27) | (0.24) | (0.05) | (0.12) | |||||||||||||||
| Portfolio turnover rate | 25 | %6 | 20 | %7 | 24 | % | 13 | % | 17 | % | ||||||||||
| 1 | Per share amounts have been calculated using the average shares method. |
| 2 | 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. |
| 3 | Included in the expense ratios are certainnon-recurring restructuring (and reorganization, if applicable) fees that were incurred by the Fund during the period. Without these fees, the gross and net expense ratios would not have changed for the year ended November 30, 2015. |
| 4 | As a result of an expense limitation arrangement, effective August 3, 2015, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class R shares did not exceed 1.40%. This expense limitation arrangement cannot be terminated prior to December 31, 2021 without the Board of Trustees’ consent. Prior to August 3, 2015, as a result of an expense limitation arrangement, the ratio of total annual fund operating expenses to average net assets of Class R shares did not exceed 1.60%. |
| 5 | Reflects fee waivers and/or expense reimbursements. |
| 6 | Excludes securities delivered as a result of a redemptionin-kind. |
| 7 | Excludes securities received as a result of a contributionin-kind. |
See Notes to Financial Statements.
| ClearBridge Large Cap Growth Fund 2019 Annual Report |
21 |
Financial highlights (cont’d)
| For a share of each class of beneficial interest outstanding throughout each year ended November 30: | ||||||||||||||||||||
| Class I Shares1 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
| Net asset value, beginning of year | $49.08 | $46.30 | $37.97 | $37.11 | $35.56 | |||||||||||||||
| Income from operations: | ||||||||||||||||||||
Net investment income | 0.21 | 0.16 | 0.15 | 0.20 | 0.16 | |||||||||||||||
Net realized and unrealized gain | 8.25 | 4.52 | 8.98 | 1.71 | 3.39 | |||||||||||||||
Total income from operations | 8.46 | 4.68 | 9.13 | 1.91 | 3.55 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
Net investment income | (0.13) | (0.11) | (0.12) | (0.10) | — | |||||||||||||||
Net realized gains | (1.56) | (1.79) | (0.68) | (0.95) | (2.00) | |||||||||||||||
Total distributions | (1.69) | (1.90) | (0.80) | (1.05) | (2.00) | |||||||||||||||
| Net asset value, end of year | $55.85 | $49.08 | $46.30 | $37.97 | $37.11 | |||||||||||||||
Total return2 | 18.03 | % | 10.56 | % | 24.52 | % | 5.34 | % | 10.66 | % | ||||||||||
| Net assets, end of year (millions) | $8,855 | $6,376 | $5,128 | $2,128 | $457 | |||||||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
Gross expenses | 0.74 | % | 0.75 | % | 0.83 | % | 0.84 | % | 0.87 | %3 | ||||||||||
Net expenses4 | 0.74 | 0.75 | 0.78 | 5 | 0.78 | 5 | 0.79 | 3,5 | ||||||||||||
Net investment income | 0.42 | 0.33 | 0.35 | 0.54 | 0.45 | |||||||||||||||
| Portfolio turnover rate | 25 | %6 | 20 | %7 | 24 | % | 13 | % | 17 | % | ||||||||||
| 1 | Per share amounts have been calculated using the average shares method. |
| 2 | 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. |
| 3 | Included in the expense ratios are certainnon-recurring restructuring (and reorganization, if applicable) fees that were incurred by the Fund during the period. Without these fees, the gross and net expense ratios would not have changed for the year ended November 30, 2015. |
| 4 | As a result of an expense limitation arrangement, effective August 3, 2015, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class I shares did not exceed 0.80%. This expense limitation arrangement cannot be terminated prior to December 31, 2021 without the Board of Trustees’ consent. Prior to August 3, 2015, as a result of an expense limitation arrangement, the ratio of total annual fund operating expenses to average net assets of Class I shares did not exceed 1.05%. |
| 5 | Reflects fee waivers and/or expense reimbursements. |
| 6 | Excludes securities delivered as a result of a redemptionin-kind. |
| 7 | Excludes securities received as a result of a contributionin-kind. |
See Notes to Financial Statements.
22 | ClearBridge Large Cap Growth Fund 2019 Annual Report |
| For a share of each class of beneficial interest outstanding throughout each year ended November 30: | ||||||||||||||||||||
| Class IS Shares1 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
| Net asset value, beginning of year | $49.16 | $46.35 | $38.00 | $37.13 | $35.57 | |||||||||||||||
| Income from operations: | ||||||||||||||||||||
Net investment income | 0.26 | 0.21 | 0.19 | 0.24 | 0.18 | |||||||||||||||
Net realized and unrealized gain | 8.26 | 4.53 | 8.97 | 1.70 | 3.38 | |||||||||||||||
Total income from operations | 8.52 | 4.74 | 9.16 | 1.94 | 3.56 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
Net investment income | (0.18) | (0.14) | (0.13) | (0.12) | — | |||||||||||||||
Net realized gains | (1.56) | (1.79) | (0.68) | (0.95) | (2.00) | |||||||||||||||
Total distributions | (1.74) | (1.93) | (0.81) | (1.07) | (2.00) | |||||||||||||||
| Net asset value, end of year | $55.94 | $49.16 | $46.35 | $38.00 | $37.13 | |||||||||||||||
Total return2 | 18.15 | % | 10.69 | % | 24.61 | % | 5.42 | % | 10.68 | % | ||||||||||
| Net assets, end of year (000s) | $3,171,086 | $2,032,529 | $1,264,630 | $256,322 | $55,404 | |||||||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
Gross expenses | 0.63 | % | 0.65 | % | 0.73 | % | 0.76 | % | 0.78 | %3 | ||||||||||
Net expenses4 | 0.63 | 0.65 | 0.70 | 5 | 0.70 | 5 | 0.72 | 3,5 | ||||||||||||
Net investment income | 0.52 | 0.44 | 0.46 | 0.68 | 0.52 | |||||||||||||||
| Portfolio turnover rate | 25 | %6 | 20 | %7 | 24 | % | 13 | % | 17 | % | ||||||||||
| 1 | Per share amounts have been calculated using the average shares method. |
| 2 | 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. |
| 3 | Included in the expense ratios are certainnon-recurring restructuring (and reorganization, if applicable) fees that were incurred by the Fund during the period. Without these fees, the gross and net expense ratios would not have changed for the year ended November 30, 2015. |
| 4 | As a result of an expense limitation arrangement, effective August 3, 2015, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class IS shares did not exceed 0.70%. In addition, the ratio of total annual fund operating expenses for Class IS shares did not exceed the ratio of total annual fund operating expenses for Class I shares. These expense limitation arrangements cannot be terminated prior to December 31, 2021 without the Board of Trustees’ consent. Prior to August 3, 2015, the ratio of total annual fund operating expenses for Class IS shares did not exceed the ratio of total annual fund operating expenses for Class I shares. |
| 5 | Reflects fee waivers and/or expense reimbursements. |
| 6 | Excludes securities delivered as a result of a redemptionin-kind. |
| 7 | Excludes securities received as a result of a contributionin-kind. |
See Notes to Financial Statements.
| ClearBridge Large Cap Growth Fund 2019 Annual Report |
23 |
Financial highlights (cont’d)
| For a share of each class of beneficial interest outstanding throughout each year ended November 30, unless otherwise noted: | ||||||||||||||||||||
| Class O Shares1 | 2019 | 2018 | 2017 | 2016 | 20152 | |||||||||||||||
| Net asset value, beginning of year | $49.13 | $46.34 | $37.99 | $37.12 | $33.75 | |||||||||||||||
| Income from operations: | ||||||||||||||||||||
Net investment income | 0.25 | 0.18 | 0.16 | 0.21 | 0.15 | |||||||||||||||
Net realized and unrealized gain | 8.25 | 4.52 | 8.99 | 1.72 | 3.22 | |||||||||||||||
Total income from operations | 8.50 | 4.70 | 9.15 | 1.93 | 3.37 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
Net investment income | (0.15) | (0.12) | (0.12) | (0.11) | — | |||||||||||||||
Net realized gains | (1.56) | (1.79) | (0.68) | (0.95) | — | |||||||||||||||
Total distributions | (1.71) | (1.91) | (0.80) | (1.06) | — | |||||||||||||||
| Net asset value, end of year | $55.92 | $49.13 | $46.34 | $37.99 | $37.12 | |||||||||||||||
Total return3 | 18.11% | 10.60 | % | 24.56 | % | 5.40 | % | 9.99 | % | |||||||||||
| Net assets, end of year (millions) | $598 | $546 | $531 | $457 | $465 | |||||||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
Gross expenses | 0.68 | % | 0.70 | % | 0.78 | % | 0.82 | % | 0.83 | %4 | ||||||||||
Net expenses5 | 0.68 | 0.70 | 0.74 | 6 | 0.74 | 6 | 0.74 | 4,6 | ||||||||||||
Net investment income | 0.49 | 0.36 | 0.38 | 0.57 | 0.47 | 4 | ||||||||||||||
| Portfolio turnover rate | 25%7 | 20 | %8 | 24 | % | 13 | % | 17 | %9 | |||||||||||
| 1 | Per share amounts have been calculated using the average shares method. |
| 2 | For the period December 19, 2014 (inception date) to November 30, 2015. |
| 3 | 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. |
| 4 | Annualized. |
| 5 | As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class O shares did not exceed 0.74%. This expense limitation arrangement cannot be terminated prior to December 31, 2021 without the Board of Trustees’ consent. |
| 6 | Reflects fee waivers and/or expense reimbursements. |
| 7 | Excludes securities delivered as a result of a redemptionin-kind. |
| 8 | Excludes securities received as a result of a contributionin-kind. |
| 9 | For the year ended November 30, 2015. |
See Notes to Financial Statements.
24 | ClearBridge Large Cap Growth Fund 2019 Annual Report |
1. Organization and significant accounting policies
ClearBridge Large Cap Growth 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 anopen-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”). 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. Investments inopen-end funds are valued at the closing net asset value per share of each fund on the day of valuation. 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 Atlantic 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
| ClearBridge Large Cap Growth Fund 2019 Annual Report |
25 |
Notes to financial statements (cont’d)
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:
| • | 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.
26 | ClearBridge Large Cap Growth Fund 2019 Annual Report |
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 (Level 3) | Total | ||||||||||||
| Common Stocks† | $ | 15,259,337,657 | — | — | $ | 15,259,337,657 | ||||||||||
| Short-Term Investments† | 270,704,832 | — | — | 270,704,832 | ||||||||||||
| Total Investments | $ | 15,530,042,489 | — | — | $ | 15,530,042,489 | ||||||||||
| † | See Schedule of Investments for additional detailed categorizations. |
(b) 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 Fund’s books and the U.S. dollar equivalent of the 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.
(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
| ClearBridge Large Cap Growth Fund 2019 Annual Report |
27 |
Notes to financial statements (cont’d)
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) Security transactions and investment income. Security transactions are accounted for on a trade date basis. Interest income (including interest income frompayment-in-kind securities), adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is recorded on theex-dividend date for dividends received in cash and/or securities. Foreign dividend income is recorded on theex-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.
(e) Distributions to shareholders. Distributions from net investment income and distributions of net realized gains, if any, are declared at least annually. Distributions to shareholders of the Fund are recorded on theex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.
(f) 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.
(g) Compensating balance arrangements. The Fund has an arrangement with its custodian bank whereby a portion of the custodian’s fees is paid indirectly by credits earned on the Fund’s cash on deposit with the bank.
(h) Federal and other taxes. It is the Fund’s 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 Fund’s financial statements.
Management has analyzed the Fund’s tax positions taken on income tax returns for all open tax years and has concluded that as of November 30, 2019, no provision for income tax is required in the Fund’s financial statements. The Fund’s 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 the Internal Revenue Service and state departments of revenue.
28 | ClearBridge Large Cap Growth Fund 2019 Annual Report |
Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates.
(i) 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 value per share. During the current year, the following reclassifications have been made:
| Total Distributable Earnings (Loss) | Paid-in Capital | |||||||
| (a) | $ | (109,294,106) | $ | 109,294,106 | ||||
| (a) | Reclassifications are due to book/tax differences in the treatment of anin-kind distribution of securities. |
2. Investment management agreement and other transactions with affiliates
Legg Mason Partners Fund Advisor, LLC (“LMPFA”) is the Fund’s investment manager and ClearBridge Investments, LLC (“ClearBridge”) is the Fund��s subadviser. Western Asset Management Company, LLC (“Western Asset”) manages the portion of the Fund’s cash and short-term instruments allocated to it. LMPFA, ClearBridge and Western Asset are wholly-owned subsidiaries of Legg Mason, Inc. (“Legg Mason”).
Under the investment management agreement, the Fund pays an investment management fee, calculated daily and paid monthly, in accordance with the following breakpoint schedule:
| Average Daily Net Assets | Annual Rate | |||
| First $1 billion | 0.700 | % | ||
| Next $1 billion | 0.680 | |||
| Next $3 billion | 0.650 | |||
| Next $5 billion | 0.600 | |||
| Over $10 billion | 0.550 | |||
LMPFA provides administrative and certain oversight services to the Fund. LMPFA delegates to the subadviser theday-to-day portfolio management of the Fund, except for the management of the portion of the cash and short-term instruments allocated to Western Asset. For their services, LMPFA pays ClearBridge and Western Asset monthly 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 total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class A, Class C, Class R, Class I, Class IS and Class O shares did not exceed 1.10%, 1.90%, 1.40%, 0.80%, 0.70% and 0.74%, respectively. In addition, the ratio of total annual fund operating expenses for Class IS shares did not exceed the ratio of total annual fund operating expenses for Class I shares. These expense limitation arrangements cannot be terminated prior to December 31, 2021 without the Board of Trustees’ consent.
| ClearBridge Large Cap Growth Fund 2019 Annual Report |
29 |
Notes to financial statements (cont’d)
During the year ended November 30, 2019, fees waived and/or expenses reimbursed amounted to $1,250.
LMPFA is permitted to recapture amounts waived and/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 LMPFA 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 Fund’s 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, Class A shares have a 1.00% CDSC, which applies if redemption occurs within 18 months from purchase payment. 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 November 30, 2019, sales charges retained by and CDSCs paid to LMIS and its affiliates, if any, were as follows:
| Class A | Class C | |||||||
| Sales charges | $ | 744,024 | — | |||||
| CDSCs | 8,583 | $ | 41,221 | |||||
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 November 30, 2019, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) were as follows:
| Purchases | $ | 5,383,748,014 | ||
| Sales | 3,271,177,459 | * |
| * | Excludes value of securities delivered as a result of redemptionsin-kind totaling $191,922,402 (Note 9). |
At November 30, 2019, the aggregate cost of investments and the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:
| Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation | |||||||||||||
| Securities | $ | 11,417,896,204 | $ | 4,138,189,277 | $ | (26,042,992) | $ | 4,112,146,285 | ||||||||
30 | ClearBridge Large Cap Growth Fund 2019 Annual Report |
4. Derivative instruments and hedging activities
During the year ended November 30, 2019, the Fund did not invest in derivative instruments.
5. Class specific expenses, waivers and/or expense reimbursements
The Fund has adopted a Rule12b-1 shareholder services and distribution plan and under that plan the Fund pays service and/or distribution fees with respect to its Class A, Class C and Class R shares calculated at the annual rate of 0.25%, 1.00% and 0.50% of the average daily net assets of each class, respectively. Service and/or distribution fees are accrued daily and paid monthly.
For the year ended November 30, 2019, class specific expenses were as follows:
| Service and/or Distribution Fees | Transfer Agent Fees | |||||||
| Class A | $ | 5,196,472 | ‡ | $ | 2,942,799 | |||
| Class C | 4,849,297 | ‡ | 460,213 | |||||
| Class R | 650,812 | 261,626 | ||||||
| Class I | — | 8,239,970 | ||||||
| Class IS | — | 80,705 | ||||||
| Class O | — | 292,182 | ||||||
| Total | $ | 10,696,581 | $ | 12,277,495 | ||||
| ‡ | Amounts shown are exclusive of expense reimbursements. For the year ended November 30, 2019, the service and/or distribution fees reimbursed amounted to $1,249 for Class A and $1 for Class C shares, respectively. |
For the year ended November 30, 2019, waivers and/or expense reimbursements by class were as follows:
| Waivers/Expense Reimbursements | ||||
| Class A | $ | 1,249 | ||
| Class C | 1 | |||
| Class R | — | |||
| Class I | — | |||
| Class IS | — | |||
| Class O | — | |||
| Total | $ | 1,250 | ||
| ClearBridge Large Cap Growth Fund 2019 Annual Report |
31 |
Notes to financial statements (cont’d)
6. Distributions to shareholders by class
| Year Ended November 30, 2019 | Year Ended November 30, 2018 | |||||||
| Net Investment Income: | ||||||||
| Class A | $ | 68,855 | $ | 32,415 | ||||
| Class C | — | — | ||||||
| Class R | — | — | ||||||
| Class I | 16,857,801 | 11,933,733 | ||||||
| Class IS | 7,408,921 | 3,862,207 | ||||||
| Class O | 1,665,655 | 1,371,724 | ||||||
| Total | $ | 26,001,232 | $ | 17,200,079 | ||||
| Net Realized Gains: | ||||||||
| Class A | $ | 65,609,747 | $ | 76,296,224 | ||||
| Class C | 24,282,583 | 26,906,085 | ||||||
| Class R | 4,631,936 | 4,284,580 | ||||||
| Class I | 202,116,601 | 198,557,070 | ||||||
| Class IS | 64,781,416 | 49,632,366 | ||||||
| Class O | 17,329,632 | 20,519,842 | ||||||
| Total | $ | 378,751,915 | $ | 376,196,167 | ||||
7. Shares of beneficial interest
At November 30, 2019, 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 November 30, 2019 | Year Ended November 30, 2018 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
| Class A | ||||||||||||||||
| Shares sold | 13,748,590 | $ | 629,354,385 | 10,449,393 | $ | 453,459,380 | ||||||||||
| Shares issued on reinvestment | 1,390,618 | 56,723,298 | 1,630,739 | 65,115,364 | ||||||||||||
| Shares repurchased | (10,686,783) | (486,709,789) | (12,721,941) | (551,034,061) | ||||||||||||
| Shares redeemedin-kind | (219,536) | (10,812,174) | — | — | ||||||||||||
| Net increase (decrease) | 4,232,889 | $ | 188,555,720 | (641,809) | $ | (32,459,317) | ||||||||||
| Class C | ||||||||||||||||
| Shares sold | 2,680,778 | $ | 93,693,544 | 2,949,070 | $ | 102,887,320 | ||||||||||
| Shares issued on reinvestment | 673,555 | 21,823,184 | 766,821 | 24,722,304 | ||||||||||||
| Shares repurchased | (7,669,642) | (280,023,046) | (3,170,492) | (110,620,385) | ||||||||||||
| Net increase (decrease) | (4,315,309) | $ | (164,506,318) | 545,399 | $ | 16,989,239 | ||||||||||
32 | ClearBridge Large Cap Growth Fund 2019 Annual Report |
| Year Ended November 30, 2019 | Year Ended November 30, 2018 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
| Class R | ||||||||||||||||
| Shares sold | 799,828 | $ | 34,494,721 | 1,525,477 | $ | 63,082,666 | ||||||||||
| Shares issued on reinvestment | 98,753 | 3,856,298 | 78,882 | 3,029,086 | ||||||||||||
| Shares repurchased | (975,757) | (42,087,929) | (993,965) | (41,764,378) | ||||||||||||
| Net increase (decrease) | (77,176) | $ | (3,736,910) | 610,394 | $ | 24,347,374 | ||||||||||
| Class I | ||||||||||||||||
| Shares sold | 69,434,613 | $ | 3,449,560,097 | 50,863,078 | $ | 2,451,394,933 | ||||||||||
| Shares issued on reinvestment | 3,627,947 | 164,418,549 | 3,742,036 | 165,360,581 | ||||||||||||
| Shares repurchased | (41,299,182) | (2,076,044,000) | (35,451,351) | (1,707,790,548) | ||||||||||||
| Shares redeemedin-kind | (3,130,669) | (152,251,381) | — | — | ||||||||||||
| Net increase | 28,632,709 | $ | 1,385,683,265 | 19,153,763 | $ | 908,964,966 | ||||||||||
| Class IS | ||||||||||||||||
| Shares sold | 28,146,116 | $ | 1,434,399,661 | 21,915,122 | $ | 1,056,276,110 | ||||||||||
| Shares issued on reinvestment | 1,470,270 | 66,676,817 | 1,180,047 | 52,169,863 | ||||||||||||
| Shares repurchased | (13,678,850) | (691,872,426) | (10,315,283) | (497,006,936) | ||||||||||||
| Shares redeemedin-kind | (598,985) | (28,858,847) | — | — | ||||||||||||
| In-kind capital contribution | — | — | 1,284,257 | 65,882,403 | ||||||||||||
| Net increase | 15,338,551 | $ | 780,345,205 | 14,064,143 | $ | 677,321,440 | ||||||||||
| Class O | ||||||||||||||||
| Shares sold | 33,000 | $ | 1,685,875 | 56,094 | $ | 2,690,082 | ||||||||||
| Shares issued on reinvestment | 342,032 | 15,511,158 | 401,752 | 17,765,474 | ||||||||||||
| Shares repurchased | (801,649) | (40,104,994) | (807,888) | (38,571,725) | ||||||||||||
| Net decrease | (426,617) | $ | (22,907,961) | (350,042) | $ | (18,116,169) | ||||||||||
8.In-kind transfer of securities
On September 6, 2018, the Fund’s Class IS shares received a contributionin-kind of investment securities in the amount of $65,882,403. This contribution was determined to betax-free under the Internal Revenue Code Section 351 and no gain or loss was realized.
9. Redemptionsin-kind
The Fund may make payment for Fund shares redeemed wholly or in part by distributing portfolio securities to shareholders. For the year ended November 30, 2019, the Fund had redemptionsin-kind with total proceeds in the amount of $191,922,402. The net realized gain on these redemptionsin-kind amounted to $111,278,750, which was not realized for tax purposes.
| ClearBridge Large Cap Growth Fund 2019 Annual Report |
33 |
Notes to financial statements (cont’d)
10. Income tax information and distributions to shareholders
The tax character of distributions paid during the fiscal years ended November 30, was as follows:
| 2019 | 2018 | |||||||
| Distributions paid from: | ||||||||
| Ordinary income | $ | 127,633,421 | $ | 38,366,600 | ||||
| Net long-term capital gains | 277,119,726 | 355,029,646 | ||||||
| Total distributions paid | $ | 404,753,147 | $ | 393,396,246 | ||||
As of November 30, 2019, the components of distributable earnings (loss) on a tax basis were as follows:
| Undistributed ordinary income — net | $ | 47,897,960 | ||
| Undistributed long-term capital gains — net | 693,474,116 | |||
| Total undistributed earnings | $ | 741,372,076 | ||
| Other book/tax temporary differences(a) | (77,217) | |||
| Unrealized appreciation (depreciation)(b) | 4,112,146,285 | |||
| Total distributable earnings (loss) — net | $ | 4,853,441,144 |
| (a) | Other book/tax temporary differences are attributable to book/tax differences in the timing of the deductibility of various expenses. |
| (b) | The difference between book-basis andtax-basis unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales. |
11. Recent accounting pronouncement
The Fund has adopted the disclosure provisions of the Financial Accounting Standards Board Accounting Standards UpdateNo. 2018-13,Fair Value Measurement (Topic 820)— Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement(“ASU2018-13”) which introduces new fair value disclosure requirements as well as eliminates and modifies certain existing fair value disclosure requirements. ASU2018-13 would be effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years; however, management has elected to early adopt ASU2018-13. The impact of the Fund’s adoption was limited to changes in the Fund’s financial statement disclosures regarding fair value, primarily those disclosures related to transfers between levels of the fair value hierarchy.
34 | ClearBridge Large Cap Growth Fund 2019 Annual Report |
Report of independent registered public accounting firm
To the Board of Trustees of Legg Mason Partners Equity Trust and Shareholders of ClearBridge Large Cap Growth Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of ClearBridge Large Cap Growth Fund (one of the funds constituting Legg Mason Partners Equity Trust, referred to hereafter as the “Fund”) as of November 30, 2019, the related statement of operations for the year ended November 30, 2019, the statement of changes in net assets for each of the two years in the period ended November 30, 2019, including the related notes, and the financial highlights for each of the three years in the period ended November 30, 2019 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of November 30, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended November 30, 2019 and the financial highlights for each of the three years in the period ended November 30, 2019 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended November 30, 2016 and the financial highlights for each of the periods ended on or prior to November 30, 2016 (not presented herein, other than the financial highlights) were audited by other auditors whose report dated January 17, 2017 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of November 30, 2019 by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Baltimore, Maryland
January 17, 2020
We have served as the auditor of one or more investment companies in Legg Mason investment company group since at least 1973. We have not been able to determine the specific year we began serving as auditor.
| ClearBridge Large Cap Growth Fund 2019 Annual Report |
35 |
Board approval of management and subadvisory agreements(unaudited)
At a meeting of the Trust’s Board of Trustees, the Board considered there-approval for an annual period of the management agreement pursuant to which Legg Mason Partners Fund Advisor, LLC (the “Manager”) provides the Fund with investment advisory and administrative services, thesub-advisory agreement pursuant to which ClearBridge Investments, LLC (“ClearBridge”) providesday-to-day management of the Fund’s portfolio, and thesub-advisory agreement pursuant to which Western Asset Management Company, LLC (“Western Asset” and, together with ClearBridge, the“Sub-Advisers”) providesday-to-day management of the Fund’s cash and short-term instruments allocated to it by the Manager. (The management agreement andsub-advisory agreements are collectively referred to as the “Agreements.”) The Manager and theSub-Advisers are wholly-owned subsidiaries of Legg Mason, Inc. The Trustees who are not “interested persons” (as defined in the Investment Company Act of 1940, as amended (the “Independent Trustees”)) of the Fund were assisted in their review by Fund counsel and independent legal counsel and met with independent legal counsel in executive sessions separate from representatives of the Manager and theSub-Advisers. The Independent Trustees requested and received information from the Manager and theSub-Advisers they deemed reasonably necessary for their review of the Agreements and the performance of the Manager and theSub-Advisers. Included was information about the Manager, theSub-Advisers and the Fund’s distributor, as well as the management,sub-advisory and distribution arrangements and services provided to the Fund and other funds overseen by the Board. This information was initially reviewed by a special committee of the Independent Trustees and then by the full Board.
In voting to approve the Agreements, the Independent Trustees considered whether the approval of the Agreements would be in the best interests of the Fund and its shareholders, an evaluation based on several factors including those discussed below.
Nature, Extent and Quality of the Services provided to the Fund under the Management Agreement andSub-Advisory Agreements
The Board received and considered information regarding the nature, extent and quality of services provided to the Fund by the Manager and theSub-Advisers under the Management Agreement andSub-Advisory Agreements, respectively, during the past year. The Trustees also considered the Manager’s supervisory activities over theSub-Advisers. In addition, the Independent Trustees received and considered other information regarding the administrative and other services rendered to the Fund and its shareholders by the Manager. The Board noted information received at regular meetings throughout the year related to the services rendered by the Manager in its management of the Fund’s affairs and the Manager’s role in coordinating the activities of theSub-Advisers and the Fund’s other service providers. The Board’s evaluation of the services provided by the Manager and theSub-Advisers took into account the Board’s knowledge and familiarity gained as Trustees of funds in the Legg Mason fund complex, including the scope and quality of the investment management and other capabilities of the Manager and theSub-Advisers and the quality of
36 | ClearBridge Large Cap Growth Fund |
the Manager’s administrative and other services. The Board observed that the scope of services provided by the Manager had expanded over time as a result of regulatory and other developments, including maintaining and monitoring its own and the Fund’s compliance programs. The Board reviewed information received from the Manager and the Fund’s Chief Compliance Officer regarding the Fund’s compliance policies and procedures established pursuant to Rule38a-1 under the Investment Company Act of 1940, as amended.
The Board reviewed the qualifications, backgrounds and responsibilities of the Fund’s senior personnel and the portfolio management team primarily responsible for theday-to-day portfolio management of the Fund. The Board considered the services provided to the Legg Mason fund complex and the Manager’s commitment to continue to provide effective and efficient investment management and shareholder services. The Board also considered, based on its knowledge of the Manager and the Manager’s affiliates, the financial resources available to the Manager’s parent organization, Legg Mason, Inc.
The Board considered the division of responsibilities among the Manager and theSub-Advisers and the oversight provided by the Manager. The Board also considered the Manager’s and ClearBridge’s brokerage policies and practices, the standards applied in seeking best execution, their policies and practices regarding soft dollars, and the existence of quality controls applicable to brokerage allocation procedures. In addition, management also reported to the Board on, among other things, its business plans, recent organizational changes, portfolio manager compensation plan and policy regarding portfolio managers’ ownership of fund shares.
The Board concluded that, overall, it was satisfied with the nature, extent and quality of services provided (and expected to be provided) under the respective Agreement by the Manager and theSub-Advisers.
Fund Performance
The Board received and reviewed performance information for the Fund and for all retail and institutionallarge-cap growth funds (the “Performance Universe”) selected by Broad-ridge Financial Solutions Inc. (“Broadridge”), an independent provider of investment company data. The Board was provided with a description of the methodology Broadridge used to determine the similarity of the Fund with the funds included in the Performance Universe. The Trustees noted that they also had received and discussed with management at periodic intervals information on the investment performance of the Fund in comparison to similar mutual funds and benchmark performance indices. The information comparing the Fund’s performance to that of the Performance Universe was for theone-, three-, five- andten-year periods ended June 30, 2019. The Fund performed better than the median performance of the funds in the Performance Universe for theone-, five- andten-year periods and was ranked in the first quintile of the funds in the Performance Universe for each such period,
| ClearBridge Large Cap Growth Fund |
37 |
Board approval of management and subadvisory agreements(unaudited) (cont’d)
and performed slightly below the median performance of the funds in the Performance Universe for the three-year period. The Board also reviewed performance information provided by the Manager for periods ended September 30, 2019, which showed that the Fund’s performance was slightly below the Broadridge category average during the third quarter. The Board also reviewed information prepared by Broadridge comparing the Fund’s annualized total return for the three-year period ended June 30, 2019 in relation to the Fund’s standard deviation to that of the funds in the Performance Universe. The Trustees noted that the Manager and ClearBridge were committed to providing the resources necessary to assist the Fund’s portfolio managers. Based on its review, the Board was satisfied with the Fund’s performance. The Board determined to continue to evaluate the Fund’s performance and directed the Independent Trustees’ performance committee to continue to periodically review Fund performance with the Manager and report to the full Board during periods between Board meetings.
Management Fees and Expense Ratios
The Board reviewed and considered the contractual management fee rate (the “Contractual Management Fee”) payable by the Fund to the Manager in light of the nature, extent and quality of the management andsub-advisory services provided by the Manager and theSub-Advisers, respectively. The Board noted that the Manager, and not the Fund, pays thesub-advisory fees to theSub-Advisers and, accordingly, that the retention of theSub-Advisers does not increase the fees and expenses incurred by the Fund. In addition, the Board also reviewed and considered the actual management fee rate (the “Actual Management Fee”) paid by the Fund over the Fund’s last fiscal year which included reductions, if any, for fee waiver and/or expense reimbursement arrangements that may have been in effect for the Fund.
The Board also reviewed information regarding the fees the Manager and ClearBridge charged any of their U.S. clients investing primarily in an asset class similar to that of the Fund including, where applicable, institutional separate and commingled accounts and retail managed accounts. The Manager reviewed with the Board the significant differences in the scope of services provided to the Fund and to such other clients, noting that the Fund is provided with regulatory compliance and administrative services, office facilities and Fund officers (including the Fund’s chief financial, chief legal and chief compliance officers), and that the Manager coordinates and oversees the provision of services to the Fund by other fund service providers, including theSub-Advisers. The Board considered the fee comparisons in light of the scope of services required to manage these different types of accounts.
The Board received an analysis of complex-wide management fees provided by the Manager, which, among other things, set out a framework of fees based on asset classes. Management also discussed with the Board the Fund’s distribution arrangements, including how
38 | ClearBridge Large Cap Growth Fund |
amounts received by the Fund’s distributor are expended, and the fees received and expenses incurred in connection with such arrangements by affiliates of the Manager.
Additionally, the Board received and considered information comparing the Fund’s Contractual Management Fee and Actual Management Fee and the Fund’s overall expense ratio with those of a group of 13 institutionallarge-cap growth funds selected by Broadridge as comparable to the Fund (the “Expense Group”), and a broader group of funds selected by Broadridge consisting of all institutionallarge-cap growth funds (the “Expense Universe”). This information showed that the Fund’s Contractual Management Fee and Actual Management Fee were higher than the median of management fees paid by the funds in the Expense Group and the Fund’s Actual Management Fee was slightly higher than the median of management fees paid by the funds in the Expense Universe. This information also showed that the Fund’s total expense ratio was higher than the median of the total expense ratios of the funds in the Expense Group, but was lower than the median of the total expense ratios of the funds in the Expense Universe.
Manager Profitability
The Board received and considered a profitability analysis of the Manager and its affiliates in providing services to the Fund. The Board also received profitability information with respect to the Legg Mason fund complex as a whole. In addition, the Board received information with respect to the Manager’s allocation methodologies used in preparing this profitability data as well as a report from an outside consultant that had reviewed the Manager’s methodology. The Board noted the profitability percentage ranges determined by appropriate court cases to be reasonable given the services rendered to investment companies. The Board determined that the Manager’s profitability was not excessive in light of the nature, extent and quality of the services provided to the Fund.
Economies of Scale
The Board received and considered information regarding whether there have been economies of scale with respect to the management of the Fund as the Fund’s assets grow, whether the Fund has appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered whether economies of scale in the provision of services to the Fund were being passed along to the shareholders.
The Board noted that the Manager instituted breakpoints in the Fund’s Contractual Management Fee, reflecting the potential for reducing the Contractual Management Fee as the Fund’s assets grow. The Board noted that the Fund’s assets exceeded the specified asset level at which one or more breakpoints to its Contractual Management Fee are triggered. Accordingly, the Fund and its shareholders realized economies of scale because the total expense ratio of the Fund was lower than it would have been if no breakpoints were in place. The Board also noted that to the extent the Fund’s assets increase over time, the
| ClearBridge Large Cap Growth Fund |
39 |
Board approval of management and subadvisory agreements(unaudited) (cont’d)
Fund and its shareholders should realize other economies of scale as certain expenses, such as fixed fund fees, become a smaller percentage of overall assets. The Board noted that it appeared that the benefits of any economies of scale also would be appropriately shared with shareholders through increased investment in fund management and administration resources.
Taking all of the above into consideration, the Board determined that the management fee was reasonable in light of the comparative performance and expense information and the nature, extent and quality of the services provided to the Fund under the Agreements.
Other Benefits to the Manager
The Board considered other benefits received by the Manager and its affiliates, including theSub-Advisers, as a result of the Manager’s relationship with the Fund, including the opportunity to offer additional products and services such as 529 College Savings Plans and retail managed accounts.
In light of the costs of providing investment management and other services to the Fund and the Manager’s ongoing commitment to the Fund, the profits and other ancillary benefits that the Manager and its affiliates received were considered reasonable.
Based on their discussions and considerations, including those described above, the Trustees approved the Management Agreement and theSub-Advisory Agreements to continue for another year.
No single factor reviewed by the Board was identified by the Board as the principal factor in determining whether to approve the Management Agreement and theSub-Advisory Agreements.
40 | ClearBridge Large Cap Growth Fund |
Additional information(unaudited)
Information about Trustees and Officers
The business and affairs of ClearBridge Large Cap Growth 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 Jane Trust, Legg Mason, 100 International Drive, 11th Floor, Baltimore, Maryland 21202. 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 at1-877-721-1926.
| Independent Trustees† | ||
| Paul R. Ades | ||
| Year of birth | 1940 | |
| Position(s) with Trust | Trustee | |
| Term of office1and length of time served2 | Since 1983 | |
| Principal occupation(s) during the past five years | Paul R. Ades, PLLC (law firm) (since 2000) | |
| Number of funds in fund complex overseen by Trustee | 44 | |
| Other board memberships held by Trustee during the past five years | None | |
| Andrew L. Breech | ||
| Year of birth | 1952 | |
| Position(s) with Trust | Trustee | |
| Term of office1and length of time served2 | Since 1991 | |
| Principal occupation(s) during the past five years | President, Dealer Operating Control Service, Inc. (automotive retail management) (since 1985) | |
| Number of funds in fund complex overseen by Trustee | 44 | |
| Other board memberships held by Trustee during the past five years | None | |
| Dwight B. Crane | ||
| Year of birth | 1937 | |
| Position(s) with Trust | Trustee | |
| Term of office1and length of time served2 | Since 1981 | |
| Principal occupation(s) during the 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 | 44 | |
| Other board memberships held by Trustee during the past five years | None | |
| ClearBridge Large Cap Growth Fund |
41 |
Additional information(unaudited) (cont’d)
Information about Trustees and Officers
| Independent Trustees† (cont’d) | ||
| Althea L. Duersten | ||
| Year of birth | 1951 | |
| Position(s) with Trust | Trustee | |
| Term of office1and length of time served2 | Since 2014 | |
| Principal occupation(s) during the past five years | Retired (since 2011); formerly, Chief Investment Officer, North America, JPMorgan Chase (investment bank) and member of JPMorgan Executive Committee (2007 to 2011) | |
| Number of funds in fund complex overseen by Trustee | 44 | |
| Other board memberships held by Trustee during the past five years | Non-Executive Director, Rokos Capital Management LLP (since 2019) | |
| Stephen R. Gross* | ||
| Year of birth | 1947 | |
| Position(s) with Trust | Trustee | |
| Term of office1and length of time served2 | Since 1986 | |
| Principal occupation(s) during the past five years | Chairman Emeritus (since 2011) and formerly, Chairman, HLB Gross Collins, P.C. (accounting and consulting firm) (1979 to 2011); Executive Director of Business Builders Team, LLC (since 2005); Principal, Gross Consulting Group, LLC (since 2011); CEO, Gross Capital Partners, LLC (since 2014); CEO, Trusted CFO Solutions, LLC (since 2011) | |
| Number of funds in fund complex overseen by Trustee | 44 | |
| Other board memberships held by Trustee during the past five years | None | |
| Susan M. Heilbron* | ||
| Year of birth | 1945 | |
| Position(s) with Trust | Trustee | |
| Term of office1and length of time served2 | Since 1991 | |
| Principal occupation(s) during the past five years | Retired; formerly, President, Lacey & Heilbron (communications consulting) (1990 to 2002); General Counsel and Executive Vice President, The Trump Organization (1986 to 1990); Senior Vice President, New York State Urban Development Corporation (1984 to 1986); Associate, Cravath, Swaine & Moore LLP (1980 to 1984) and (1977 to 1979) | |
| Number of funds in fund complex overseen by Trustee | 44 | |
| Other board memberships held by Trustee during the past five years | Formerly, Director, Lincoln Savings Bank, FSB (1991 to 1994); Director, Trump Shuttle, Inc. (air transportation) (1989 to 1990); Director, Alexander’s Inc. (department store) (1987 to 1990) | |
42 | ClearBridge Large Cap Growth Fund |
| Independent Trustees†(cont’d) | ||
| Frank G. Hubbard | ||
| Year of birth | 1937 | |
| Position(s) with Trust | Trustee | |
| Term of office1and length of time served2 | Since 1993 | |
| Principal occupation(s) during the past five years | President, Fealds, Inc. (business development) (since 2016); formerly, President, Avatar International Inc. (business development) (1998 to 2015) | |
| Number of funds in fund complex overseen by Trustee | 44 | |
| Other board memberships held by Trustee during the past five years | None | |
| Howard J. Johnson | ||
| Year of birth | 1938 | |
| Position(s) with Trust | Trustee and Chairman | |
| Term of office1and length of time served2 | From 1981 to 1998 and since 2000 (Chairman since 2013) | |
| Principal occupation(s) during the past five years | Retired; formerly, Chief Executive Officer, Genesis Imaging LLC (technology company) (2003 to 2012) | |
| Number of funds in fund complex overseen by Trustee | 44 | |
| Other board memberships held by Trustee during the past five years | None | |
| Jerome H. Miller | ||
| Year of birth | 1938 | |
| Position(s) with Trust | Trustee | |
| Term of office1and length of time served2 | Since 1995 | |
| Principal occupation(s) during the past five years | Retired; formerly, Vice Chairman, Shearson Lehman Hutton Inc. (1989 to 1992) and Senior Executive Vice President, E.F. Hutton Group Inc. (1986 to 1989) | |
| Number of funds in fund complex overseen by Trustee | 44 | |
| Other board memberships held by Trustee during the past five years | None | |
| Ken Miller | ||
| Year of birth | 1942 | |
| Position(s) with Trust | Trustee | |
| Term of office1and length of time served2 | Since 1983 | |
| Principal occupation(s) during the past five years | Retired; formerly, President, Young Stuff Apparel Group, Inc. (apparel manufacturer), division of Li & Fung (1963 to 2012) | |
| Number of funds in fund complex overseen by Trustee | 44 | |
| Other board memberships held by Trustee during the past five years | None | |
| ClearBridge Large Cap Growth Fund |
43 |
Additional information(unaudited) (cont’d)
Information about Trustees and Officers
| Independent Trustees†(cont’d) | ||
| Thomas F. Schlafly | ||
| Year of birth | 1948 | |
| Position(s) with Trust | Trustee | |
| Term of office1and length of time served2 | Since 1983 | |
| Principal occupation(s) during the past five years | Chairman, The Saint Louis Brewery, LLC (brewery) (since 2012); formerly, President, The Saint Louis Brewery, Inc. (1989 to 2012); Senior Counsel (since 2017) and formerly, Partner (2009 to 2016), Thompson Coburn LLP (law firm) | |
| Number of funds in fund complex overseen by Trustee | 44 | |
| Other board memberships held by Trustee during the past five years | Director, Citizens National Bank of Greater St. Louis (since 2006) | |
| Interested Trustee and Officer | ||
| Jane Trust, CFA3 | ||
| Year of birth | 1962 | |
| Position(s) with Trust | Trustee, President and Chief Executive Officer | |
| Term of office1and length of time served2 | Since 2015 | |
| Principal occupation(s) during the past five years | Senior Managing Director of Legg Mason & Co., LLC (“Legg Mason & Co.”) (since 2018); Managing Director of Legg Mason & Co. (2016 to 2018); Officer and/or Trustee/Director of 145 funds associated with Legg Mason Partners Fund Advisor, LLC (“LMPFA”) or its affiliates (since 2015); President and Chief Executive Officer of LMPFA (since 2015); formerly, Senior Vice President of LMPFA (2015); Director of ClearBridge, LLC (formerly, Legg Mason Capital Management, LLC) (2007 to 2014); Managing Director of Legg Mason Investment Counsel & Trust Co. (2000 to 2007) | |
| Number of funds in fund complex overseen by Trustee | 142 | |
| Other board memberships held by Trustee during the past five years | None | |
| Additional Officers | ||
| Ted P. Becker Legg Mason 620 Eighth Avenue, 49th Floor, New York, NY 10018 | ||
| Year of birth | 1951 | |
| Position(s) with Trust | Chief Compliance Officer | |
| Term of office1and length of time served2 | Since 2007 | |
| Principal occupation(s) during the past five years | Director of Global Compliance at Legg Mason, Inc. (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) | |
44 | ClearBridge Large Cap Growth Fund |
| Additional Officers (cont’d) | ||
| Susan Kerr Legg Mason 620 Eighth Avenue, 49th Floor, New York, NY 10018 | ||
| Year of birth | 1949 | |
| Position(s) with Trust | Chief Anti-Money Laundering Compliance Officer | |
| Term of office1and length of time served2 | Since 2013 | |
| Principal occupation(s) during the past five years | Assistant Vice President of Legg Mason & Co. and Legg Mason Investor Services, LLC (“LMIS”) (since 2010); Chief Anti-Money Laundering Compliance Officer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2013) and Anti-Money Laundering Compliance Officer of LMIS (since 2012); Senior Compliance Officer of LMIS (since 2011); formerly, AML Consultant, DTCC (2010); AML Consultant, Rabobank Netherlands, (2009); First Vice President, Director of Marketing & Advertising Compliance and Manager of Communications Review Group at Citigroup Inc. (1996 to 2008) | |
| Jenna Bailey Legg Mason 100 First Stamford Place, 5th Floor, Stamford, CT 06902 | ||
| Year of birth | 1978 | |
| Position(s) with Trust | Identity Theft Prevention Officer | |
| Term of office1and length of time served2 | Since 2015 | |
| Principal occupation(s) during the past five years | Identity Theft Prevention Officer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2015); Compliance Officer of Legg Mason & Co. (since 2013); Assistant Vice President of Legg Mason & Co. (since 2011); formerly, Associate Compliance Officer of Legg Mason & Co. (2011 to 2013) | |
| Robert I. Frenkel Legg Mason 100 First Stamford Place, 6th Floor, Stamford, CT 06902 | ||
| Year of birth | 1954 | |
| Position(s) with Trust | Secretary and Chief Legal Officer | |
| Term of office1and length of time served2 | Since 2007 | |
| Principal occupation(s) during the past five years | Vice President and Deputy General Counsel of Legg Mason, Inc. (since 2006); Managing Director and General Counsel — U.S. 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) | |
| ClearBridge Large Cap Growth Fund |
45 |
Additional information(unaudited) (cont’d)
Information about Trustees and Officers
| Additional Officers (cont’d) | ||
Thomas C. Mandia Legg Mason | ||
| Year of birth | 1962 | |
| Position(s) with Trust | Assistant Secretary | |
| Term of office1and length of time served2 | Since 2007 | |
| Principal occupation(s) during the 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 of LM Asset Services, LLC (“LMAS”) (since 2002) and Legg Mason Fund Asset Management, Inc. (“LMFAM”) (since 2013) (formerly registered investment advisers) | |
Christopher Berarducci** Legg Mason | ||
| Year of birth | 1974 | |
| Position(s) with Trust | Treasurer and Principal Financial Officer | |
| Term of office1and length of time served2 | Since 2014 and 2019 | |
| Principal occupation(s) during the past five years | Treasurer (since 2010) and Principal Financial Officer (since 2019) of certain mutual funds associated with Legg Mason & Co. or its affiliates; Director of Legg Mason & Co. (since 2015); formerly, Vice President of Legg Mason & Co. (2011 to 2015); Assistant Controller of certain mutual funds associated with Legg Mason & Co. or its affiliates (prior to 2010) | |
Jeanne M. Kelly Legg Mason | ||
| Year of birth | 1951 | |
| Position(s) with Trust | Senior Vice President | |
| Term of office1and length of time served2 | Since 2007 | |
| Principal occupation(s) during the 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); President and Chief Executive Officer of LMAS and LMFAM (since 2015); Managing Director of Legg Mason & Co. (since 2005) and Legg Mason & Co. predecessors (prior to 2005); formerly, Senior Vice President of LMFAM (2013 to 2015) | |
| † | Trustees who are not “interested persons” of the Fund within the meaning of Section 2(a)(19) of the Investment Company Act of 1940, as amended (the “1940 Act”). |
| * | Effective February 6, 2019, Mr. Gross and Ms. Heilbron became Trustees. |
| ** | Effective September 27, 2019, Mr. Berarducci became Treasurer and Principal Financial Officer. |
46 | ClearBridge Large Cap Growth Fund |
| 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 | Ms. Trust is an “interested person” of the Fund, as defined in the 1940 Act, because of her position with LMPFA and/or certain of its affiliates. |
| ClearBridge Large Cap Growth Fund |
47 |
Important tax information(unaudited)
The following information is provided with respect to the distributions paid during the taxable year ended November 30, 2019:
| Record date: | 12/6/2018 | |||
| Payable date: | 12/7/2018 | |||
| Ordinary Income: | ||||
Qualified Dividend Income for Individuals | 79.23 | % | ||
Dividends Qualifying for the Dividends | ||||
received Deduction for Corporations | 74.54 | % | ||
| Long-Term Capital Gain Dividend | $1.140630 | |||
| Qualified Short-Term Capital Gain Dividend* | $0.418320 |
| * | Qualified Short-Term Capital Gain dividend is eligible for exemption from U.S. withholding tax for nonresident shareholders and foreign corporations. |
48 | ClearBridge Large Cap Growth Fund |
ClearBridge
Large Cap Growth Fund
Trustees
Paul R. Ades
Andrew L. Breech
Dwight B. Crane
Althea L. Duersten
Stephen R. Gross*
Susan M. Heilbron*
Frank G. Hubbard
Howard J. Johnson
Chairman
Jerome H. Miller
Ken Miller
Thomas F. Schlafly
Jane Trust
| * | Effective February 6, 2019, Mr. Gross and Ms. Heilbron became Trustees. |
Investment manager
Legg Mason Partners Fund Advisor, LLC
Subadviser
ClearBridge Investments, LLC
Distributor
Legg Mason Investor Services, LLC
Custodian
The Bank of New York Mellon
Transfer agent
BNY Mellon Investment Servicing (US) Inc.
4400 Computer Drive
Westborough, MA 01581
Independent registered public accounting firm
PricewaterhouseCoopers LLP
Baltimore, MD
ClearBridge Large Cap Growth Fund
The Fund is a separate investment series of Legg Mason Partners Equity Trust, a Maryland statutory trust.
ClearBridge Large Cap Growth Fund
Legg Mason Funds
620 Eighth Avenue, 49th Floor
New York, NY 10018
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 as an exhibit to its reports on FormN-PORT. Previously, the Fund filed a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on FormN-Q. The Fund’s FormsN-PORT andN-Q are available on the SEC’s website at www.sec.gov. To obtain information on FormsN-PORT andN-Q, shareholders can call the Fund at1-877-721-1926.
Information on how the Fund voted proxies relating to portfolio securities during the prior12-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 at1-877-721-1926, (2) at www.leggmason.com/mutualfunds and (3) on the SEC’s website at www.sec.gov.
This report is submitted for the general information of the shareholders of ClearBridge Large Cap Growth 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 Fund’s 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
© 2020 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-sponsoredclosed-end funds. 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; |
| • | Bank account information, legal documents, and identity verification documentation; |
| • | 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 individual’s 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 to 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 statistical analysis, market research and marketing services solely for the Funds; |
| • | Permit access to transfer, whether in the United States or countries outside of the United States to such Funds’ employees, agents and affiliates and service providers as required to enable the Funds to conduct ordinary business, or to comply with obligations to government regulators; |
| • | The Funds’ representatives such as legal counsel, accountants and auditors to enable the Funds to conduct ordinary business, or to comply with obligations to government regulators; |
| • | 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 (cont’d)
Except as otherwise permitted by applicable law, companies acting on the Funds’ behalf, including those outside the United States, 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, if you have questions about the Funds’ privacy practices, or our use of your nonpublic personal information, 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 Funds at1-877-721-1926.
Revised April 2018
| NOT PART OF THE ANNUAL REPORT |
www.leggmason.com
© 2020 Legg Mason Investor Services, LLC Member FINRA, SIPC
FD1380 1/20 SR19-3779
| ITEM 2. | CODE OF ETHICS. |
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller.
| ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
The Board of Trustees of the registrant has determined that Dwight B. Crane possesses the technical attributes identified in Instruction 2(b) of Item 3 to FormN-CSR to qualify as an “audit committee financial expert,” and has designated Dwight B. Crane as the Audit Committee’s financial expert Dwight B. Crane is an “independent” Trustees pursuant to paragraph (a)(2) of Item 3 to FormN-CSR.
| ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
a)Audit Fees. The aggregate fees billed in the last two fiscal years ending November 30, 2018 and November 30, 2019 (the “Reporting Periods”) for professional services rendered by the Registrant’s principal accountant (the “Auditor”) for the audit of the Registrant’s annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $38,234 in November 30, 2018 and $71,785 in November 30, 2019.
b)Audit-Related Fees. The aggregate fees billed in the Reporting Period for assurance and related services by the Auditor that are reasonably related to the performance of the Registrant’s financial statements were $0 in November 30, 2018 and $0 in November 30, 2019.
(c)Tax Fees. The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax advice and tax planning (“Tax Services”) were $0 in November 30, 2018 and $0 in November 30, 2019. These services consisted of (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory, regulatory or administrative developments, and (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired or held.
There were no fees billed for tax services by the Auditors to service affiliates during the Reporting Periods that requiredpre-approval by the Audit Committee.
d)All Other Fees.
The aggregate fees billed in the Reporting Periods for products and services provided by the Auditor, other than the services reported in paragraphs (a) through (c) for the Item 4 for the Legg Mason Partners Equity Trust., were $0 in November 30, 2018 and $0 in November 30, 2019.
All Other Fees. There were no othernon-audit services rendered by the Auditor to Legg Mason Partners Fund Advisors, LLC (“LMPFA”), and any entity controlling, controlled by
or under common control with LMPFA that provided ongoing services to Legg Mason Partners Equity Trust requiringpre-approval by the Audit Committee in the Reporting Period.
(e) Audit Committee’s pre–approval policies and procedures described in paragraph (c) (7) of Rule2-01 of RegulationS-X.
(1) The Charter for the Audit Committee (the “Committee”) of the Board of each registered investment company (the “Fund”) advised by LMPFA or one of their affiliates (each, an “Adviser”) requires that the Committee shall approve (a) all audit and permissiblenon-audit services to be provided to the Fund and (b) all permissiblenon-audit services to be provided by the Fund’s independent auditors to the Adviser and any Covered Service Providers if the engagement relates directly to the operations and financial reporting of the Fund. The Committee may implement policies and procedures by which such services are approved other than by the full Committee.
The Committee shall not approvenon-audit services that the Committee believes may impair the independence of the auditors. As of the date of the approval of this Audit Committee Charter, permissiblenon-audit services include any professional services (including tax services), that are not prohibited services as described below, provided to the Fund by the independent auditors, other than those provided to the Fund in connection with an audit or a review of the financial statements of the Fund. Permissiblenon-audit services may not include: (i) bookkeeping or other services related to the accounting records or financial statements of the Fund; (ii) financial information systems design and implementation; (iii) appraisal or valuation services, fairness opinions orcontribution-in-kind reports; (iv) actuarial services; (v) internal audit outsourcing services; (vi) management functions or human resources; (vii) broker or dealer, investment adviser or investment banking services; (viii) legal services and expert services unrelated to the audit; and (ix) any other service the Public Company Accounting Oversight Board determines, by regulation, is impermissible.
Pre-approval by the Committee of any permissiblenon-audit services is not required so long as: (i) the aggregate amount of all such permissiblenon-audit services provided to the Fund, the Adviser and any service providers controlling, controlled by or under common control with the Adviser that provide ongoing services to the Fund (“Covered Service Providers”) constitutes not more than 5% of the total amount of revenues paid to the independent auditors during the fiscal year in which the permissiblenon-audit services are provided to (a) the Fund, (b) the Adviser and (c) any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Fund during the fiscal year in which the services are provided that would have to be approved by the Committee; (ii) the permissiblenon-audit services were not recognized by the Fund at the time of the engagement to benon-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved by the Committee (or its delegate(s)) prior to the completion of the audit.
(2) For the Legg Mason Partners Equity Trust, the percentage of fees that were approved by the audit committee, with respect to: Audit-Related Fees were 100% and 100% for November 30, 2018 and November 30, 2019; Tax Fees were 100% and 100% for November 30, 2018 and November 30, 2019; and Other Fees were 100% and 100% for November 30, 2018 and November 30, 2019.
(f) N/A
(g)Non-audit fees billed by the Auditor for services rendered to Legg Mason Partners Equity Trust, LMPFA and any entity controlling, controlled by, or under common control with LMPFA that provides ongoing services to Legg Mason Partners Equity Trust during the reporting period were $678,000 in November 30, 2018 and $347,570 in November 30, 2019.
(h) Yes. Legg Mason Partners Equity Trust’s Audit Committee has considered whether the provision ofnon-audit services that were rendered to Service Affiliates, which were notpre-approved (not requiringpre-approval), is compatible with maintaining the Accountant’s independence. All services provided by the Auditor to the Legg Mason Partners Equity Trust or to Service Affiliates, which were required to bepre-approved, werepre-approved as required.
| ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
| a) | The independent board members are acting as the registrant’s audit committee as specified in Section 3(a)(58)(B) of the Exchange Act. The Audit Committee consists of the following Board members: |
Paul R. Ades
Andrew L. Breech
Dwight B. Crane
Althea L. Duersten
Stephen R. Gross*
Susan M. Heilbron*
Frank G. Hubbard
Howard J. Johnson
Jerome H. Miller
Ken Miller
Thomas F. Schlafly
* Effective February 6, 2019, Mr. Gross and Ms. Heilbron became Trustees.
| b) | Not applicable. |
| ITEM 6. | SCHEDULE OF INVESTMENTS. |
Included herein under Item 1.
| ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FORCLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 8. | PORTFOLIO MANAGERS OFCLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 9. | PURCHASES OF EQUITY SECURITIES BYCLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable.
| ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
Not applicable.
| ITEM 11. | 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 Rule30a- 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 Rule30a-3(b) under the 1940 Act and15d-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 Rule30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting. |
| ITEM 12. | DISCLOSURE OF SECURITIES LENDING ACTIVITIES FORCLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 13. | EXHIBITS. |
(a) (1) Code of Ethics attached hereto.
Exhibit 99.CODE ETH
(a) (2) Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 attached hereto.
Exhibit 99.CERT
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto.
Exhibit 99.906CERT
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, there unto duly authorized.
| Legg Mason Partners Equity Trust | ||
| By: | /s/ Jane Trust | |
| Jane Trust | ||
| Chief Executive Officer | ||
| Date: | January 23, 2020 | |
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/ Jane Trust | |
| Jane Trust | ||
| Chief Executive Officer | ||
| Date: | January 23, 2020 | |
| By: | /s/ Christopher Berarducci | |
| Christopher Berarducci | ||
| Principal Financial Officer | ||
| Date: | January 23, 2020 | |