UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-07692
Legg Mason Investors Trust, Inc.
Name of Registrant:
100 International Drive, Baltimore, MD 21202
Address of Principal Executive Offices:
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:
Funds Investor Services 1-800-822-5544
Or
Institutional Shareholder Services 1-888-425-6432
Date of fiscal year-end: March 31
Date of reporting period: September 30, 2009
| Item 1. | Report to Shareholders. |
The Semi-Annual Report to Stockholders is filed herewith.
Legg Mason
Investors Trust, Inc.
Investment Commentary and
Semi-Annual Report to Shareholders
September 30, 2009
Legg Mason Capital Management American Leading Companies Trust
Legg Mason U.S. Small-Capitalization Value Trust
Funds’ Objectives
Legg Mason Capital Management American Leading Companies Trust seeks long-term capital appreciation and current income consistent with prudent investment risk.
Legg Mason U.S. Small-Capitalization Value Trust seeks long-term capital appreciation.
Fund Name Change
Prior to October 5, 2009, Legg Mason Capital Management American Leading Companies Trust was known as Legg Mason American Leading Companies Trust. There was no change in the Fund’s investment objective or investment policies as a result of the name change.
Legg Mason Capital Management American Leading Companies Trust
Market Commentary
It has been six months since our last letter to shareholders. And what a six months it was! As illustrated in the table below, every major U.S. market index was up at least 30% for the six months ended September 30, 2009, save for the Dow Jones Industrial Average (“DJIA”)A, which only missed by a fraction, gaining 29.68%. The Fund produced strong returns during the period, outperforming the S&P 500 IndexB (the “Index”). For a more complete discussion of Fund performance, please refer to the Investment Results section that follows.
| | | | | | |
| | | Total ReturnsC |
| | | Three Months Ended 9/30/09 | | Three Months Ended 6/30/09 | | Six Months Ended 9/30/09 |
S&P 500 Index | | 15.61% | | 15.93% | | 34.02% |
DJIA | | 15.82% | | 11.96% | | 29.68% |
NASDAQ Composite IndexD | | 15.91% | | 20.34% | | 39.48% |
S&P MidCap 400 IndexE | | 19.98% | | 18.75% | | 42.47% |
Russell 2000 IndexF | | 19.28% | | 20.69% | | 43.95% |
Dow Jones U.S. Total Stock Market IndexG | | 16.32% | | 16.79% | | 35.85% |
S&P 100 IndexH | | 14.33% | | 14.59% | | 31.02% |
Russell 1000 Growth IndexI | | 13.97% | | 16.32% | | 32.57% |
Russell 1000 Value IndexJ | | 18.24% | | 16.70% | | 37.99% |
All ten industry sectors of the Index participated in the rally, but five were materially stronger than average, while the other five were materially weaker. Leading on the upside were the Financials (+70.29%), followed by the Industrials (+45.03%), Materials (+41.27%), Consumer Discretionary (+40.94%) and Information Technology (“IT”) (+40.05%) stocks. The traditionally more defensive sectors of the market, such as Telecommunication Services (+9.17%), Utilities (+16.95%), Health Care (+19.26%), Energy (+21.91%) and Consumer Staples (+22.29%), lagged the market. Unlike 2008, the six months ended September 30, 2009 was a period during which it paid to be positioned aggressively.
Strong stock market returns during the last six months were not confined to the U.S. alone. In fact, of the nine major foreign developed and emerging market indices listed on the following page, eight posted better returns in dollar terms than the Index, with the exception being China’s Shanghai Stock Exchange Composite IndexK (“Shanghai SE Composite Index”), which was up only 18.94% for the period. We think China’s underperformance in the last six months is likely a rest period following a very strong first calendar quarter of 2009, when the Shanghai SE Composite Index was up over 30%, while the U.S. and most other foreign markets were down sharply.
The Investment Commentary is not a part of the Semi-Annual Report to Shareholders.
| | |
Investment Commentary | | iii |
For the nine-months ended September 30th, the Shanghai SE Composite Index is the fourth best performing foreign market we follow closely, up 54.84%.
| | | | | | |
| | | Total ReturnsL (in U.S. dollars) |
| | | Three Months Ended 9/30/09 | | Three Months Ended 6/30/09 | | Six Months Ended 9/30/09 |
FTSE 100 IndexM (UK) | | 18.69% | | 26.48% | | 50.12% |
DAX IndexN (Germany) | | 23.01% | | 25.03% | | 53.79% |
CAC 40 IndexO (France) | | 26.28% | | 22.96% | | 55.28% |
MICEX IndexP (Russia) | | 27.92% | | 39.24% | | 78.11% |
NIKKEI 225 IndexQ (Japan) | | 9.86% | | 26.71% | | 39.21% |
Hang Seng IndexR (Hong Kong) | | 14.78% | | 37.68% | | 58.02% |
Kospi IndexS (South Korea) | | 30.27% | | 23.85% | | 61.34% |
Shanghai Stock Exchange Composite Index (China) | | –5.69% | | 26.11% | | 18.94% |
BSE Sensex 30 IndexT (India) | | 18.33% | | 58.65% | | 87.73% |
With the U.S. equity market having shown such remarkable resilience, it is logical to wonder who has been stepping in to stem market declines. This is a difficult question to answer, but one thing is crystal clear from the data we’ve seen: it hasn’t been the general public. The public’s main contribution to the advance is that they’ve stopped selling stocks, but their activity on the buy-side has been anemic given that the Index is up nearly 20% calendar year-to-date through September, and over 58% from its March low. Despite the powerful move off the bottom, investors are still sitting on $3.5 trillion in money market funds, assets which are yielding them a return somewhere in the range of five to ten basis pointsU (“bps”), annualized. The decline in money fund assets from the $3.9 trillion peak in January 2009 has been largely directed to bonds and bond mutual funds. Bond funds have attracted net deposits of $209.1 billion year-to-date through August, according to Morningstar, and $249.8 billion through September 16th, according to Leuthold Group. In comparison, investors have purchased only $6 billion of U.S. equity funds through mid-September, according to Morningstar. Admittedly, this is a big turnaround from the $173.9 billion that investors pulled out of stock funds in 2008, but the comparatively modest sum speaks to the continuing skepticism with which the general public views stocks.
Investors’ reticence to embrace the stock market’s advance is reflected in the behavior of 401K participants as well. According to Lincolnshire, Illinois-based, Hewitt Associates, despite the spirited advance, investors have not shifted back into equities in a meaningful way thus far this year. The reason, says Pamela Hess, director of retirement research at Hewitt, is that people are still too traumatized by last year’s losses to summon the courage to increase their exposure to equities.
The Investment Commentary is not a part of the Semi-Annual Report to Shareholders.
So, if it’s not mutual fund investors and not 401K participants, who is stepping in to buy when the market sells off? Our candidate is the under-invested professional money manager. Obviously, any manager who is fully invested can’t be a net buyer of stocks in a decline because they have to sell something to buy something else. Only managers with cash reserves can be net buyers. What is their mindset right now? Praying for a correction would be our guess. All last year, cash reserves were a boon to performance. Ten percent cash boosted a manager’s relative performance nearly 400 bps versus the Index return of –37% for calendar year 2008, assuming the rest of the portfolio tracked the Index. If ten percent felt good, twenty percent probably felt better. Since March, however, cash reserves have gone from being a blessing to being an albatross. Any equity manager with 20% cash in March who still has it today has lost over a thousand bps of relative performance since then, again assuming the rest of the portfolio tracked the Index over that time frame.
We would imagine that the performance pressure on equity managers with “too much” cash is probably getting excruciating. The anecdotal evidence is that there are a good number of managers in this position. Veteran market technician, John Mendelson, now hanging his hat at Potomac Research Group, has reported on several occasions that a frequent comment from managers he sees on client visits is something to the effect that: “I have too much cash. When do you think we’ll see a meaningful correction, so I can put the money to work?” When the market pulls back, we suspect that under-invested managers are putting money to work. That suspicion is borne out by data from the Investment Company Institute which indicates that the composite cash-to-asset ratioV of stock mutual funds has dropped from 5.51% in February to a most recent reading of 3.96%.
Another phenomenon that Mendelson has observed, which probably helps explain the shallowness of corrections so far in the market advance since March, is the speed with which investors become bearish on any pullback. Mendelson has long measured investor sentiment by watching what investors do, rather than what they say. One indicator he monitors closely is the CBOE put/call data. In the dark days of March 2009, a period of deep investor pessimism that Mendelson called “one of the blackest ever,” the five-day average CBOE put/call ratio reached a high of 99.3 on March 5th. The Index bottomed two days later and rallied 40% into mid-June, whereupon a month-long –7.1% correction ensued. By July 10th, at what proved to be the end of the correction, the put/call ratio reached 101.3, exceeding the March low and suggesting that investors were even more bearish than they had been in March. On August 17th, after a two-day correction of –3.3%, the put/call ratio hit 99.4, again exceeding the March low. In early September and again in late September, the five-day average put/call ratio spiked over 90, hitting 93.3 on September 1st, and 98.5 on September 24th. Fascinatingly, on September 28th, a day when the Index rallied 1.8%, the put/call ratio hit 100.3, indicating heavy put buying into a strong rally.
The Investment Commentary is not a part of the Semi-Annual Report to Shareholders.
We have cited Mendelson’s work on the put/call ratio in such detail because we think it illustrates very dramatically how quickly and easily spooked investors are by any hint of a downturn. The Index has rallied over 380 bps (+58.25%) from its March low and investors are still incredibly jumpy. What this means is that at the first hint of trouble, investors are taking aggressive action to protect themselves on the downside, which, ironically, has the effect of mitigating the decline. As long as investors continue to react this way, corrections will likely continue to be moderate. When all the under-invested money managers get fully invested, and when investors stop fearing the downside, then we need to watch out.
The Investment Commentary is not a part of the Semi-Annual Report to Shareholders.
Investment Results
Total returns for the Fund for various periods ended September 30, 2009 are presented below, along with those of comparative indices:
| | | | | | | | | | | | |
| | | | | | | Average Annual Total Returns |
| | | Three Months | | Six Months | | One Year | | Five Years | | Ten Years | | Since Inception |
Without Sales Charges | | | | | | | | | | | | |
Class A | | 21.70% | | 50.96% | | N/A | | N/A | | N/A | | 35.92% |
Class C* | | 21.41% | | 50.37% | | –9.62% | | –4.03% | | –0.88% | | 4.53% |
Class I* | | 21.68% | | 51.07% | | –8.84% | | –3.08% | | N/A | | –1.03% |
S&P 500 Index | | 15.61% | | 34.02% | | –6.91% | | 1.01% | | –0.15% | | 7.28% |
Lipper Large-Cap Value Funds Category AverageW | | 16.26% | | 35.47% | | –7.92% | | 0.65% | | 2.04% | | 7.00% |
With Sales Charges | | | | | | | | | | | | |
Class A | | 14.71% | | 42.33% | | N/A | | N/A | | N/A | | 28.07% |
Class C* | | 20.41% | | 49.37% | | –10.52% | | –4.03% | | –0.88% | | 4.53% |
Class I* | | 21.68% | | 51.07% | | –8.84% | | –3.08% | | N/A | | –1.03% |
The performance data quoted represent past performance and do not guarantee future results. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website at www.leggmason.com/individualinvestors. The investment return and principal value of the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Calculations assume the reinvestment of dividends and capital gain distributions. Performance would have been lower if fees and expenses had not been waived and/or reimbursed in various periods. Performance figures for periods shorter than one year represent cumulative figures and are not annualized. Please note that Class A has been in existence for less than one year. Results for longer periods may differ, in some cases, substantially.
For performance data including the effects of sales charges, Class A shares reflect the deduction of a maximum initial sales charge of 5.75%, and Class C shares reflect the deduction of a contingent deferred sales charge of 1.00%, which applies if shares are redeemed within one year of purchase.
The inception dates of Classes A, C and I are February 3, 2009, September 1, 1993 and June 14, 2001, respectively. The Index return is for the period beginning September 1, 1993. The Lipper return is for the period beginning August 31, 1993. All Index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.
The gross expense ratios for Classes A, C and I were 1.34%, 1.89% and 0.87%, respectively, as indicated in the Fund’s most current prospectus dated
The Investment Commentary is not a part of the Semi-Annual Report to Shareholders.
| | |
Investment Commentary | | vii |
August 1, 2009. These expenses include management fees, 12b-1 distribution and/or service fees and other expenses. As a result of expense limitations, the ratio of expenses, other than interest, brokerage, taxes and extraordinary expenses, will not exceed 1.20% for Class A shares, 1.95% for Class C shares and 0.95% for Class I shares. These expense limitations may be reduced or terminated at any time.
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.
* Prior to February 1, 2009, Class C was known as the Primary Class. In addition, on February 1, 2009, the class began to charge a contingent deferred sales charge of 1.00% for shares purchased by investors on and after that date and redeemed within one year of purchase. Prior to October 5, 2009, Class I was known as the Institutional Class.
The Fund produced strong results for the three- and six-month periods ended September 30, 2009, outperforming the S&P 500 Index, the Fund’s unmanaged benchmark, and its Lipper peer group by a comfortable margin over both timeframes. The results are a welcome change from the poor results produced in calendar 2008 and for the first three months of calendar 2009. Much work remains to be done to repair the long-term record.
For the six-month period ended September 30, 2009, the best performing stocks in the portfolio included Hartford Financial Services Group Inc., CBS Corp., Capital One Financial Corp., Prudential Financial Inc., The AES Corp., Aflac Inc., United States Steel Corp., Wells Fargo & Co., UAL Corp. and Alcoa Inc. Laggards included Exxon Mobil Corp., AT&T Inc., Sprint Nextel Corp., Altria Group Inc., Lockheed Martin Corp., PepsiCo Inc., Aetna Inc., Amgen Inc., Kraft Foods Inc. and Costco Wholesale Corp.
On a performance contribution basis, which takes into account both price performance and portfolio weighting, the biggest contributors to six-month performance were Capital One Financial Corp., JP Morgan Chase and Co., eBay Inc., Hartford Financial Services Group, UAL Corp., Prudential Financial Inc., The Goldman Sachs Group Inc., Hewlett-Packard Co., Texas Instruments Inc. and Microsoft Corp. Though none actually declined in price during the six-month period, the biggest detractors from performance by virtue of appreciating less than the market were Exxon Mobil Corp., PepsiCo Inc., Aetna Inc., The Procter & Gamble Co., Altria Group Inc., Pfizer Inc. and AT&T Inc. On a sector basis, the largest contribution to performance came from the portfolio’s overweighting in Financials, with strong contributions from Energy, Industrials and Consumer Discretionary stocks as well. Health Care, Telecommunication Services and Consumer Staples were lagging sectors in the portfolio, but we mitigated the negative effects by being underweight these groups relative to the benchmark.
The Investment Commentary is not a part of the Semi-Annual Report to Shareholders.
| | |
viii | | Investment Commentary |
Portfolio turnover for the six-month period dropped somewhat from late last year but was still a bit elevated relative to historic norms as we continued to reposition the portfolio for an expected economic recovery. During the period, we modestly reduced our exposure to Energy by selling Devon Energy Corp., ConocoPhillips and Anadarko Petroleum Corp., while purchasing a new position in Chesapeake Energy Corp., a U.S.-based independent oil and gas producer with major exposure to shale. We are now slightly underweight our benchmark in Energy, a position which balances the near-term risks of weak end demand against what we see as the high probability of rising oil and gas prices in the long-term.
In the Health Care area, we reduced our exposure to managed care by selling a long-time holding, Health Net Inc., and redirected the proceeds into Stryker Corp., a major manufacturer of orthopedic products including hip, knee, trauma, spinal and craniomaxillofacial implants. Stryker has an outstanding long-term record of product innovation, is currently debt-free and has consistently earned very high returns on capital. In IT, we sold electronic manufacturing services supplier, Jabil Circuit Inc., and started a new position in QUALCOMM Inc., a world leader in the development and marketing of CDMA-based integrated circuits for the telecommunications industry.
Other purchase activity during the period included new positions in defense and aerospace titan, The Boeing Co.; supermarket giant, Safeway Inc.; and banking behemoth, Bank of America Corp. Investor concern over multiple delays in the delivery of Boeing’s new 787 airliner provided an attractive entry point, in our view, as we believe this aircraft will ultimately provide decades of profit for the company. We bought Safeway to beef up our holdings in Consumer Staples. We believe the stock offers a very attractive combination of relatively limited downside risk and above average appreciation potential. Our repurchase of Bank of America was an admission that we made a mistake selling the stock in February. Having recognized our error, we felt the best course of action was to buy it back.
We continue to believe that the Fund is positioned for much improved results going forward and that the portfolio offers an attractive combination of good growth prospects and attractive valuation. According to data from Mellon Analytical Solutions, the Fund’s portfolio trades at a forward twelve-month price-to-earnings (“P/E”) ratioX of 13.9 as of September 30, 2009, compared to the Index’s P/E ratio of 16.0, despite having a comparable return on equity and, in our opinion, slightly better long-term growth prospects. We believe the portfolio continues to be positioned for a recovery with large overweights in IT, Financials and Industrials stocks. In an attempt to reduce the downside volatility of the portfolio, we have recently begun to reduce the portfolio’s betaY somewhat, but we still believe that a relatively aggressive posture is warranted.
The Investment Commentary is not a part of the Semi-Annual Report to Shareholders.
Outlook
We continue to be bullish on the outlook for U.S. equities over the next twelve to eighteen months, believing that the Index has the potential to reach the 1250 to 1350 range by the end of 2010. We also continue to believe that an intermediate market correction is increasingly likely. Our guess, and it’s obviously only a guess, is that a correction, when it comes, will likely be contained to the –5% to –10% level, implying risk in the Index down to the 975 to 1025 level. At worst, we think the Index could drop back to the low 900s before stabilizing. We believe the proper mindset for investors will be to remain constructive through any correction because the risk/reward ratio becomes increasingly favorable as the market declines.
Our bullish outlook over the next twelve to eighteen months is based on the following reasoning: credit markets continue to normalize with credit spreads back to levels that prevailed prior to the bankruptcy of Lehman Brothers; every meaningful leading economic indicator is pointing to recovery; the recession appears to be ending or over; real gross domestic product (“GDP”)Z growth should be meaningfully positive (3% or more) in the third quarter; corporate profits are poised to snap back sharply and appear to be continuing to surprise on the upside; inflation remains well contained; and the Federal Reserve Board (“Fed”)AA will likely not begin tightening until the latter half of 2010. In short, all of the pieces necessary for a constructive backdrop for equities are falling into place.
Our bullishness over the next year or so is based principally upon our belief that the market will return to more normal valuation levels as the economy and corporate profitability recover from the severe economic downturn that we believe is bottoming out. Despite our optimism with respect to the next year or two, on a longer-term basis, we believe the challenges of funding the health care and retirement needs of the baby boom generation within the context of a generally deleveraging economy may create strong enough secular headwinds that the major market indices do not reach new all-time highs before the next bear market sets in. If true, the current bull will have proven to be cyclical, rather than secular, in nature.
Probably the most significant, and least avoidable, headwind we see is the “global aging” wave that will transform the demographic structure of the developed world’s population over the next several decades as a result of falling fertility rates and rising longevity worldwide. Throughout most of history, the elderly (aged 65 and over) comprised a relatively small percentage of the population — never more than three or four percent in any country until very recently. In the developed world today, they comprise sixteen percent of the population, according to data from a recently (2008) published book entitled The Graying of the Great Powers by Richard Jackson and Neil Howe. By 2030, according to Jackson and Howe, the elderly will comprise twenty-three percent of the developed world’s population, rising to twenty-six percent by 2050.
The Investment Commentary is not a part of the Semi-Annual Report to Shareholders.
The age wave will hit all developed economies hard, but some harder than others. Because of its higher expected fertility rate (2.0%) and more liberal immigration policies, the U.S.’s total population is expected to continue to grow 40% by 2050, while the population of Western Europe is expected to stagnate at current levels, and the population of Japan is expected to fall by more than 20%. Jackson and Howe project that the U.S.’s relatively better population growth outlook will lead to faster real GDP growth rates than Europe or Japan, as well. They forecast baseline real GDP growth of a little over 2% between now and 2050 in the U.S., while they expect the growth rates in Western Europe and Japan over the same time period to average about 1.1% and 0.7%, respectively. As good as it is expected to be in a relative sense, the forecasted real GDP growth rate of 2% is still more than a full percentage point lower than the U.S.’s post-WWII average growth rate of more than 3%.
In addition to its implications for likely future GDP growth rates, the age wave has major implications for the projected costs of two of the “Big Three” entitlement programs — Social Security and Medicare. Jackson and Howe project that the cost of government Medicare and Social Security benefits (what they call the “current deal”) will rise from 9.3% of GDP in 2005 to 17.9% in 2030 and 21.4% in 2050. These increases will obviously put considerable strain on U.S. government finances and make running anything even close to a balanced federal budget a real challenge.
As always, we thank you for your support and welcome your comments.
David E. Nelson, CFA
Chairman, Investment Policy Committee
Legg Mason Capital Management
October 21, 2009
All investments are subject to risk including possible loss of principal. Past performance is no guarantee of future results.
Portfolio holdings and breakdowns are as of September 30, 2009 and are subject to change and may not be representative of the portfolio manager’s current or future investments. The Fund’s top ten holdings (as a percentage of net assets) as of this date were: Hewlett-Packard Co. (3.6%), eBay Inc. (3.4%), Microsoft Corp. (3.4%), UAL Corp. (3.2%), JP Morgan Chase and Co. (3.2%), International Business Machines Corp. (3.0%), UnitedHealth Group Inc. (3.0%), Nokia Oyj — ADR (2.9%), Texas Instruments Inc. (2.7%) and The Goldman Sachs Group Inc. (2.6%). Please refer to pages 14 through 18 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
The Investment Commentary is not a part of the Semi-Annual Report to Shareholders.
which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. The Fund’s top five sector holdings (as a percentage of net assets) as of September 30, 2009 were: Information Technology (24.9%), Financials (20.3%), Industrials (14.0%), Health Care (11.4%) and Energy (8.8%). The Fund’s portfolio composition is subject to change at any time.
The value approach to investing involves the risk that those stocks deemed to be undervalued by the portfolio manager may remain undervalued. The Fund may focus its investments in certain regions or industries, thereby increasing its potential vulnerability to market volatility. Please see the Fund’s prospectus for more information on these and other risks.
The views expressed in this commentary reflect those solely of the portfolio manager as of the date of this commentary and may differ from those of Legg Mason, Inc. as a whole or the other portfolio managers of its affiliates. Any such views are subject to change at any time based on market or other conditions, and the portfolio manager, Legg Mason Investors Trust, Inc. and Legg Mason Investor Services, LLC disclaim any responsibility to update such views. These views are not intended to be a forecast of future events, a guarantee of future results or investment advice. Because investment decisions for the Legg Mason Funds are based on numerous factors, these views may not be relied upon as an indication of trading intent on behalf of any Legg Mason Fund. The information contained herein has been prepared from sources believed to be reliable, but is not guaranteed by the portfolio manager, Legg Mason Investors Trust, Inc. or Legg Mason Investor Services, LLC as to its accuracy or completeness. Predictions are inherently limited and should not be relied upon as an indication of actual or future performance.
References to particular securities are intended only to explain the rationales for the portfolio manager’s action with respect to such securities. Such references do not include all material information about such securities, including risks, and are not intended to be recommendations to take any action with respect to such securities.
| A | The Dow Jones Industrial Average (“DJIA”) is a widely followed measurement of the stock market. The average is comprised of thirty stocks that represent leading companies in major industries. These stocks, widely held by both individual and institutional investors, are considered to be all blue-chip companies. |
| B | 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. |
| C | Source: Wilshire, Russell®, NASDAQ® via Bloomberg, S&P via Bloomberg. |
| D | The NASDAQ Composite Index is a market-value weighted index, which measures all securities listed on the NASDAQ stock market. |
| E | The S&P MidCap 400 Index is a market value weighted index which consists of 400 domestic stocks chosen for market size, liquidity and industry group representation. |
| F | The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index. 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. |
The Investment Commentary is not a part of the Semi-Annual Report to Shareholders.
| | |
xii | | Investment Commentary |
| G | The Dow Jones U.S. Total Stock Market Index measures the performance of all U.S. equity securities with readily available prices. |
| H | The S&P 100 Index is a market-capitalization weighted index consisting of 100 large blue-chip stocks covering a broad range of industries. |
| I | The Russell 1000 Growth Index measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. (A price-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities.) The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. |
| J | The Russell 1000 Value Index measures the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values. |
| K | The Shanghai Stock Exchange Composite Index is a capitalization-weighted index. The Index tracks the daily price performance of all A-shares and B-shares listed on the Shanghai Stock Exchange. |
| M | The FTSE 100 Index comprises the 100 most highly capitalized blue-chip companies, representing approximately 81% of the UK market. It is used extensively as a basis for investment products, such as derivatives and exchange-traded funds. |
| N | The DAX Index is a total return index of thirty selected German blue-chip stocks traded on the Frankfurt Stock Exchange. The equities use free float shares in the index calculation. The Index has a base value of 1,000 as of December 31, 1987. As of June 18, 1999 only XETRA equity prices are used to calculate all DAX indices. |
| O | The CAC 40 Index is a narrow-based, modified capitalization-weighted index of forty companies listed on the Paris Bourse. The Index was developed with a base level of 1,000 as of December 31, 1987. As of December 1, 2003, the Index has become a free float weighted index. |
| P | The MICEX Index is the real-time cap-weighted Russian composite index. It comprises thirty most liquid stocks of Russia’s largest and most developed companies from ten main economy sectors. |
| Q | The NIKKEI 225 Index is a price-weighted average of 225 top-rated Japanese companies listed in the First Section of the Tokyo Stock Exchange. |
| R | The Hang Seng Index is a free-float capitalization-weighted index of a selection of companies from the Stock Exchange of Hong Kong. The components of the Index are divided into four sub-indices: Commerce and Industry, Finance, Utilities and Properties. |
| S | The Kospi Index is a capitalization-weighted index of all common shares on the Korean Stock Exchanges. |
| T | The Bombay Stock Exchange Sensitive Index (Sensex) is a cap-weighted index. The selection of the index members has been made on the basis of liquidity, depth, and floating-stock-adjustment depth and industry representation. Sensex has a base date and value of 100 in 1978-1979. The Index uses free float. |
| U | A basis point is one one-hundredth (1/100 or 0.01) of one percent. |
| V | The cash-to-asset ratio is the current value of marketable securities and cash divided by the company’s current liabilities. |
| W | Lipper, Inc., a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments. The Lipper Large-Cap Value Funds Category Average is comprised of the Fund’s peer group of mutual funds. |
| X | The price-to-earnings (“P/E”) ratio is a stock’s price divided by its earnings per share. |
| Y | Beta measures the sensitivity of the investment to the movements of its benchmark. A beta higher than 1.0 indicates the investment has been more volatile than the benchmark and a beta of less than 1.0 indicates that the investment has been less volatile than the benchmark. |
| Z | Gross domestic product (“GDP”) is the market value of all final goods and services produced within a country in a given period of time. |
| AA | The Federal Reserve Board (“Fed”) is responsible for the formulation of policies designed to promote economic growth, full employment, stable prices and a sustainable pattern of international trade and payments. |
The Investment Commentary is not a part of the Semi-Annual Report to Shareholders.
| | |
Investment Commentary | �� | xiii |
Legg Mason U.S. Small–Capitalization Value Trust
Total returns for the Fund for various periods ended September 30, 2009 are presented below, along with those of comparative indices:
| | | | | | | | | | |
| | | | | Average Annual Total Returns |
| | | Six Months | | One Year | | Five Years | | Ten Years | | Since Inception |
Without Sales Charges | | | | | | | | | | |
Class A | | 39.85% | | N/A | | N/A | | N/A | | 29.31% |
Class C* | | 39.38% | | –14.95% | | –2.62% | | 4.75% | | 2.59% |
Institutional Class | | 40.03% | | –14.23% | | –1.64% | | 5.80% | | 3.70% |
Russell 2000 IndexA | | 43.95% | | –9.55% | | 2.41% | | 4.88% | | 4.33% |
Lipper Small-Cap Value Funds Category AverageB | | 49.80% | | –6.28% | | 2.31% | | 8.13% | | 6.03% |
With Sales Charges | | | | | | | | | | |
Class A | | 31.74% | | N/A | | N/A | | N/A | | 21.96% |
Class C* | | 38.38% | | –15.80% | | –2.62% | | 4.75% | | 2.59% |
Institutional Class | | 40.03% | | –14.23% | | –1.64% | | 5.80% | | 3.70% |
The performance data quoted represent past performance and do not guarantee future results. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, please visit our website at www.leggmason.com/individualinvestors. The investment return and principal value of the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Calculations assume the reinvestment of dividends and capital gain distributions. Performance would have been lower if fees and expenses had not been waived and/or reimbursed in various periods. Performance figures for periods shorter than one year represent cumulative figures and are not annualized. Please note that Class A has been in existence for less than one year. Results for longer periods may differ, in some cases, substantially.
For performance data including the effects of sales charges, Class A shares reflect the deduction of a maximum initial sales charge of 5.75%, and Class C shares reflect the deduction of a contingent deferred sales charge of 1.00%, which applies if shares are redeemed within one year of purchase.
The inception dates of the A, C and Institutional Classes are February 3, 2009, June 15, 1998 and June 19, 1998, respectively. The Index return is for the period beginning June 15, 1998. The Lipper return is for the period beginning June 30, 1998. All Index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.
The gross expense ratios for the A, C and Institutional Classes were 1.80%, 2.30% and 1.29%, respectively, as indicated in the Fund’s most current prospectus dated August 1, 2009. These expenses include management fees,
The Investment Commentary is not a part of the Semi-Annual Report to Shareholders.
| | |
xiv | | Investment Commentary |
12b-1 distribution and/or service fees and other expenses. As a result of expense limitations, the ratio of expenses, other than interest, brokerage, taxes and extraordinary expenses, to average net assets will not exceed 1.25% for Class A shares, 2.00% per Class C shares and 1.00% for Institutional Class shares. These expense limitations may be reduced or terminated at any time.
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.
* Prior to February 1, 2009, Class C was known as the Primary Class. In addition, on February 1, 2009, the class began to charge a contingent deferred sales charge of 1.00% for shares purchased by investors on and after that date and redeemed within one year of purchase.
For the six months ended September 30, 2009, Class C shares of Legg Mason U.S. Small-Capitalization Value Trust, excluding sales charges, returned 39.38%. The Fund’s unmanaged benchmark, the Russell 2000 Index, returned 43.95% for the same period. The Lipper Small-Cap Value Funds Category Average returned 49.80% over the same time frame.
Market Commentary
U.S. equity markets continued their strong rebound off the bottoms touched in early March and posted impressive gains for the third quarter of 2009. The gains came from tentative signs of economic recovery and a clear consensus that the downturn would not reach investors’ worst fears. There were signs that the housing market may be bottoming as consumers attempted to take advantage of the $8,000 tax credit for purchases. Retail sales came in stronger than expected on robust back-to-school sales and Federal Reserve Board (“Fed”)C Chairman Ben Bernanke signaled that the recession could be over. All the positive news led to strong returns in the equity markets. The U.S. government has extended a tremendous effort to support the economy, including continuing to keep short-term interest rates at or near zero percent. This has led to concern that the Fed may be too slow to react to inflationary pressures when the economy turns around, thus causing the rebound to stall. Fears that the economic recovery would be a jobless one caused the markets to pause slightly in September as unemployment continued to rise, reaching 9.8%.
While small-caps lagged the overall market as equities fell early in the year, they have rebounded since March 9th and are now ahead of the large-caps calendar year-to-date. For the year, mid-cap stocks are by far the best performing group, having held up well early in 2009 and also having rallied along with other stocks in recent months. Value stocks lagged growth stocks thus far in 2009 across the capitalization spectrum although they were stronger during the third quarter. The best performing stocks in all capitalization ranges during the last six months were the stocks that fell the most
The Investment Commentary is not a part of the Semi-Annual Report to Shareholders.
during the market decline in 2008 and early 2009, as well as the stocks with the weakest fundamentals. Of course, these two groups have considerable overlap. Many companies with significant competitive or financial challenges, whose survival was most threatened by the recession, experienced powerful rallies since March 9th. With investors discarding their depression concerns, the cyclical sectors were the better performers, including Auto Parts, Retailing, Apparel, Commodities and Materials, Industrial Manufacturing and Technology. The more defensive sectors, not surprisingly, trailed in the up market, with Utilities, Health Care and Food and Beverage stocks producing smaller gains.
The Fund lagged its benchmark for the six months ended September 30, 2009. One of the main factors contributing to our underperformance has been our avoidance of stocks with severe fundamental challenges as well as those with the worst recent stock performance. These stocks had the biggest returns over the past six months and our underweight in this group of stocks was the largest detractor from relative performance over the period. This low-quality rally hurt in certain sectors as well, especially Consumer Discretionary. Our below benchmark weighting in distressed Auto Parts and Apparel stocks hurt performance as these groups had strong rebounds in the third quarter. Finally, within the Financials sector, our overweight position in insurance companies hurt relative performance as these stocks lagged the overall market. On the positive side, the combination of our underweight position as well as the outperformance of our names in the more defensive sectors helped relative performance. Our below benchmark weighting in the Consumer Staples and Utilities sectors helped as these stocks failed to keep pace with the market rally. Within the Industrials sector, our overweight position in Manufacturing and Trucking stocks also helped performance as economic prospects improved from their deeply negative levels.
During the six-month period, we increased our exposure to the Utilities and Consumer Discretionary sectors, with purchases most notably in Consumer Durable and Retailing positions. Over this time period, we reduced our Financials and Industrials weights as well, selling bank holdings and building product companies. We continued to be overweight in Industrials and Insurance stocks and have a below benchmark weighting in Materials, Oil Services and Utilities. Overall, our sector weights have not changed dramatically in 2009.
With the current sector weightings, the portfolio appears to provide a relatively balanced stand between benefiting from improved economic conditions and offering defensive protection if the economy and the market again worsen. Our underweight positions in Utilities and Health Care along with our overweights in Retailers, Industrials and Technology tend to be pro-cyclical, while the below benchmark weighting in Materials provides a defensive leaning. Over the last six months, the impact of these weightings was overshadowed by our disciplined avoidance of stocks with the worst recent stock returns and with severely challenged fundamentals. These
The Investment Commentary is not a part of the Semi-Annual Report to Shareholders.
| | |
xvi | | Investment Commentary |
lower-quality stocks have dominated market gains since March 9th, and our underweighting among this group was a strong contributor to the portfolio’s lagging return.
Outlook
A great deal of uncertainty remains for the economy and the stock market. While most investors feel certain that the worst case scenarios envisioned last year are now unlikely, the path and speed of economy recovery are very much in doubt. In addition, a lively debate remains as to how vigorous a recovery is already reflected in the stock market’s strong rebound. Regardless of the economic recovery’s pace or the stock market’s direction, we believe the powerful rally in the lower-quality stocks may have run its course. Such a rally sometimes follows sharp market declines such as the one experienced in 2008 and early 2009. Of course, the recent decline was greater than most and the subsequent rally among the lower-quality stocks was also greater than typical. However, the rally by these stocks tends to be of limited duration as investors recognize the fundamental hurdles that remain for these companies despite an improving economy. We remain committed to maintaining the quality characteristics in the portfolio and we believe we are well positioned for strong returns when the low-quality rally reaches its inevitable end. We thank you for your support.
Henry F. Otto
Steven M. Tonkovich
October 16, 2009
All investments are subject to risk, including possible loss of principal. Past performance is no guarantee of future results.
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 September 30, 2009 were: Financials (24.4%), Industrials (20.0%), Consumer Discretionary (16.2%), Information Technology (12.8%) and Energy (5.9%). The Fund’s portfolio composition is subject to change at any time.
Investment risks: A fund that invests in small companies may involve higher risk than a fund that invests in larger, more established companies. Small companies may have limited product lines, markets or financial resources.
The Investment Commentary is not a part of the Semi-Annual Report to Shareholders.
| | |
Investment Commentary | | xvii |
Therefore, the Fund may involve considerably more risk of loss and its returns may differ significantly from funds investing in large-cap companies or other asset classes.
The value approach to investing involves the risk that those stocks deemed to be undervalued by the portfolio manager may remain undervalued. Please see the Fund’s prospectus for more information on these and other risks.
The views expressed in this commentary reflect those solely of the portfolio managers as of the date of this commentary and may differ from those of Legg Mason, Inc. as a whole or the other portfolio managers of its affiliates. Any such views are subject to change at any time based on market or other conditions, and the portfolio managers, Legg Mason Investors Trust, Inc. and Legg Mason Investor Services, LLC disclaim any responsibility to update such views. These views are not intended to be a forecast of future events, a guarantee of future results or investment advice. Because investment decisions for the Legg Mason Funds are based on numerous factors, these views may not be relied upon as an indication of trading intent on behalf of any Legg Mason Fund. The information contained herein has been prepared from sources believed to be reliable, but is not guaranteed by the portfolio managers, Legg Mason Investors Trust, Inc. and Legg Mason Investor Services, LLC as to its accuracy or completeness. Predictions are inherently limited and should not be relied upon as an indication of actual or future performance.
| A | The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index. 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. |
| B | Lipper, Inc., a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments. The Lipper Small-Cap Value Funds Category Average is comprised of the Fund’s peer group of mutual funds. |
| C | The Federal Reserve Board (“Fed”) is responsible for the formulation of policies designed to promote economic growth, full employment, stable prices and a sustainable pattern of international trade and payments. |
The Investment Commentary is not a part of the Semi-Annual Report to Shareholders.
| | |
Semi-Annual Report to Shareholders | | 1 |
To Our Shareholders
We are pleased to provide you with Legg Mason Investors Trust, Inc.’s semi-annual report for Legg Mason Capital Management American Leading Companies Trust and Legg Mason U.S. Small-Capitalization Value Trust for the six months ended September 30, 2009.
Total returns, excluding sales charges, for the six-month period ended September 30, 2009 were:
| | |
| | | Total Returns (unaudited)
Six Months |
Legg Mason Capital Management American Leading
Companies Trust: | | |
Class A | | 50.96% |
Class C* | | 50.37% |
Class I* | | 51.07% |
Legg Mason U.S. Small-Capitalization Value Trust: | | |
Class A | | 39.85% |
Class C* | | 39.38% |
Institutional Class | | 40.03% |
The performance data quoted represent past performance and do not guarantee future results. The performance stated may have been due to extraordinary market conditions, which may not be duplicated in the future. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month end, please visit our website at www.leggmason.com/individualinvestors. The investment return and principal value of the Funds will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Calculations assume the reinvestment of dividends and capital gain distributions. 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 would have been lower if fees and expenses had not been waived and/or reimbursed in various periods. Performance figures for periods shorter than one year represent cumulative figures and are not annualized.
* Prior to February 1, 2009, Class C was known as the Primary Class. In addition, on February 1, 2009, the class began to charge a contingent deferred sales charge of 1.00% for shares purchased by investors on and after that date and redeemed within one year of purchase. Prior to October 5, 2009, Class I was known as the Institutional Class.
Dramatically higher volatility in the financial markets has been very challenging for many investors. Market movements have been rapid — sometimes in reaction to economic news, and sometimes creating the news. In the midst of this evolving market environment, we at Legg Mason want to do everything we can to help you reach your
| | |
2 | | Semi-Annual Report to Shareholders |
financial goals. Now, as always, we remain committed to providing you with excellent service and a full spectrum of investment choices. Rest assured, we will continue to work hard to ensure that our investment managers make every effort to deliver strong long-term results.
We also remain committed to supplementing the support you receive from your financial advisor. One way we accomplish this is through our enhanced website, www.leggmason.com/individualinvestors. Here you can gain immediate access to many special features to help guide you through difficult times, including:
| | • | | Fund prices and performance, |
| | • | | Market insights and commentaries from our portfolio managers, and |
| | • | | A host of educational resources. |
During periods of market unrest, it is especially important to work closely with your financial advisor and remember that reaching one’s investment goals unfolds over time and through multiple market cycles. Time and again, history has shown that, over the long run, the markets have eventually recovered and grown.
Information about each Fund’s performance over longer periods of time is shown in the respective Performance Information sections within this report. For more information about the Funds’ share classes included in this report, please contact your financial advisor.
Many Class A and Class C shareholders invest regularly in Fund shares on a dollar cost averaging basis. Most do so by authorizing automatic, monthly transfers of $50 or more from their bank checking or brokerage accounts. Dollar cost averaging is a convenient and sensible way to invest, as it encourages continued purchases over time regardless of fluctuating price levels. Of course, it does not ensure a profit nor protect against declines in the value of your investment. Your financial advisor will be happy to help you establish a dollar cost averaging account should you wish to do so.
On behalf of the Board and the entire team at Legg Mason, we appreciate your support.
| | |
Sincerely, 
| | 
|
Mark R. Fetting Chairman | | David R. Odenath President |
October 30, 2009
| | |
Semi-Annual Report to Shareholders | | 3 |
Special Shareholder Notice
The Board of Directors of Legg Mason U.S. Small-Capitalization Value Trust (the “Fund”) recently approved an Agreement and Plan of Reorganization (the “Plan”) pursuant to which the Fund’s assets would be acquired, and its liabilities would be assumed, by Legg Mason ClearBridge Small Cap Value Fund (the “Acquiring Fund”) in exchange for shares of the Acquiring Fund. The Fund would then be liquidated, and shares of the Acquiring Fund would be distributed to Fund shareholders. Under the reorganization, Fund shareholders would receive shares of the Acquiring Fund equal in aggregate value to their Fund shares on the date of the reorganization. The reorganization is subject to the satisfaction of certain conditions, including approval by Fund shareholders.
Proxy materials describing the reorganization were sent to shareholders in October 2009. If the reorganization is approved by Fund shareholders, it is expected to occur during December 2009.
Prior to the reorganization, shareholders can continue to purchase, redeem and exchange shares subject to the limitations described in the Fund’s prospectus.
| | |
4 | | Semi-Annual Report to Shareholders |
Expense Example (Unaudited)
Legg Mason Capital Management American Leading Companies Trust
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including front-end and back-end sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees, distribution and/or service (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 April 1, 2009 and held through September 30, 2009. The ending values assume dividends were reinvested at the time they were paid.
Actual Expenses
The first line for each class in the table on the next page provides information about actual account values and actual expenses for each class. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account if your shares were held through the entire period.
Hypothetical Example for Comparison Purposes
The second line for each class in the table on the next page provides information about hypothetical account values and hypothetical expenses based on the relevant class’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the class’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 this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples for the relevant class that appear in the shareholder reports of other funds. Because the example is intended to be comparable to the examples provided by other funds, it is based on a hypothetical investment of $1,000 invested on April 1, 2009 and held through September 30, 2009. The ending values assume dividends were reinvested at the time they were paid.
| | |
Semi-Annual Report to Shareholders | | 5 |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as front-end or back-end sales charges (loads). Therefore the second line for each class of 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 transactional costs were included, your costs would have been higher.
| | | | | | | | | |
| | | Beginning
Account
Value
4/1/09 | | Ending
Account
Value
9/30/09 | | Expenses Paid
During the Period1
4/1/09-9/30/09 |
Class A | | | | | | | | | |
Actual | | $ | 1,000.00 | | $ | 1,509.60 | | $ | 6.98 |
Hypothetical (5% return before expenses) | | | 1,000.00 | | | 1,019.50 | | | 5.62 |
Class C | | | | | | | | | |
Actual | | $ | 1,000.00 | | $ | 1,503.70 | | $ | 11.93 |
Hypothetical (5% return before expenses) | | | 1,000.00 | | | 1,015.54 | | | 9.60 |
Class I2 | | | | | | | | | |
Actual | | $ | 1,000.00 | | $ | 1,510.70 | | $ | 5.98 |
Hypothetical (5% return before expenses) | | | 1,000.00 | | | 1,020.31 | | | 4.81 |
| 1 | These calculations are based on expenses incurred in the most recent fiscal half-year. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratios of 1.11%, 1.90% and 0.95% for Class A, Class C and Class I shares respectively, multiplied by the average values over the period, multiplied by the number of days in the most recent fiscal half-year (183) and divided by 365. |
| 2 | Effective October 5, 2009, Institutional Class shares were renamed Class I shares. |
| | |
6 | | Semi-Annual Report to Shareholders |
Performance Information (Unaudited)
Fund Performance
| | | | | | | | | |
Average Annual Total Returns1 | | | | | | | | | |
| | | Without Sales Charges2 | |
| | | Class A | | | Class C | | | Class I3 | |
Six Months Ended 9/30/09 | | 50.96 | %† | | 50.37 | %† | | 51.07 | %† |
Twelve Months Ended 9/30/09 | | N/A | | | –9.62 | | | –8.84 | |
Five Years Ended 9/30/09 | | N/A | | | –4.03 | | | –3.08 | |
Ten Years Ended 9/30/09 | | N/A | | | –0.88 | | | N/A | |
Inception* through 9/30/09 | | 35.92 | † | | 4.53 | | | –1.03 | |
| | | | |
| | | With Sales Charges4 | |
| | | Class A | | | Class C | | | Class I3 | |
Six Months Ended 9/30/09 | | 42.33 | %† | | 49.37 | %† | | 51.07 | %† |
Twelve Months Ended 9/30/09 | | N/A | | | –10.52 | | | –8.84 | |
Five Years Ended 9/30/09 | | N/A | | | –4.03 | | | –3.08 | |
Ten Years Ended 9/30/09 | | N/A | | | –0.88 | | | N/A | |
Inception* through 9/30/09 | | 28.07 | † | | 4.53 | | | –1.03 | |
| | | | | | | | | |
Cumulative Total Returns1 | | | | | | | | | |
| | | Without Sales Charges2 | |
Class A (Inception date of 2/3/09 through 9/30/09) | | | | | 35.92 | % | | | |
Class C (9/30/99 through 9/30/09) | | | | | –8.47 | | | | |
Class I3 (Inception date of 6/14/01 through 9/30/09) | | | | | –8.27 | | | | |
| 1 | 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 fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower. |
| 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. On February 1, 2009, Class C shares began to charge a CDSC for shares bought by investors on and after that date and redeemed within one year of purchase. |
| 3 | Effective October 5, 2009, Institutional Class shares were renamed Class I shares. |
| 4 | Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value. In addition, Class A shares reflect the deduction of the maximum initial sales charge of 5.75%. Class C shares reflect the deduction of a 1.00% CDSC, which applies if shares are redeemed within one year from purchase payment. |
| * | Inception dates for Class A, Class C and Class I shares are February 3, 2009, September 1, 1993 and June 14, 2001, respectively. |
| | |
Semi-Annual Report to Shareholders | | 7 |
Legg Mason Capital Management American Leading Companies Trust
The graphs on the following pages compare the Fund’s total returns to those of the S&P 500 Index. The graphs illustrate the cumulative total return of an initial $10,000 investment in Class A and Class C shares and an initial $1,000,000 investment in Class I1 shares, for the periods indicated. The lines for the Fund represent the total return after deducting all Fund investment management and other administrative expenses and the transaction costs of buying and selling portfolio securities. The lines representing the securities market index do not take into account any transaction costs associated with buying and selling portfolio securities in the index or other administrative expenses.
Total return measures investment performance in terms of appreciation or depreciation in a fund’s net asset value per share, plus dividends and any capital gain distributions. Both the Fund’s results and the index’s results assume the reinvestment of all dividends and distributions at the time they were paid. Average annual returns tend to smooth out variations in a fund’s return, so that they differ from actual year-to-year results.
| 1 | Effective October 5, 2009, Institutional Class shares were renamed Class I shares. |
| | |
8 | | Semi-Annual Report to Shareholders |
Performance Information (Unaudited) — Continued
Growth of a $10,000 Investment — Class A Shares
Hypothetical illustration of $10,000 invested in Class A shares on February 3, 2009 (commencement of operations), assuming the deduction of the maximum initial sales charge of 5.75% at the time of investment and the reinvestment of all distributions, including returns of capital, if any, at net asset value through September 30, 2009. The performance data quoted represent past performance and do not guarantee future results. The performance stated may have been due to extraordinary market conditions, which may not be duplicated in the future. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month-end performance information, please visit www.leggmason.com/individualinvestors. The investment return and principal value of the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Performance would have been lower if fees and expenses had not been waived and/or reimbursed in various periods. Performance for other share classes will vary due to differences in sales charge structure and class expenses.
The graph does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
| | |
Semi-Annual Report to Shareholders | | 9 |
Growth of a $10,000 Investment — Class C Shares
Hypothetical illustration of $10,000 invested in Class C shares on September 30, 1999, assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value through September 30, 2009. The performance data quoted represent past performance and do not guarantee future results. The performance stated may have been due to extraordinary market conditions, which may not be duplicated in the future. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month-end performance information, please visit www.leggmason.com/individualinvestors. The investment return and principal value of the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Performance would have been lower if fees and expenses had not been waived and/or reimbursed in various periods. Performance for other share classes will vary due to differences in sales charge structure and class expenses.
The graph does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
| | |
10 | | Semi-Annual Report to Shareholders |
Performance Information (Unaudited) — Continued
Growth of a $1,000,000 Investment — Class I1 Shares
Hypothetical illustration of $1,000,000 invested in Class I shares on June 14, 2001 (commencement of operations), assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value through September 30, 2009. The performance data quoted represent past performance and do not guarantee future results. The performance stated may have been due to extraordinary market conditions, which may not be duplicated in the future. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month-end performance information, please visit www.leggmason.com/individualinvestors. The investment return and principal value of the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Performance would have been lower if fees and expenses had not been waived and/or reimbursed in various periods. Performance for other share classes will vary due to differences in sales charge structure and class expenses.
The graph does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
| 1 | On October 5, 2009, Institutional Class shares were renamed Class I shares. |
| | |
Semi-Annual Report to Shareholders | | 11 |
Portfolio Composition (as of September 30, 2009)1
(As a percentage of the portfolio)
Top 10 Holdings (as of September 30, 2009)1
| | |
| Security | | % of
Net Assets |
Hewlett-Packard Co. | | 3.6% |
eBay Inc. | | 3.4% |
Microsoft Corp. | | 3.4% |
UAL Corp. | | 3.2% |
JP Morgan Chase and Co. | | 3.2% |
International Business Machines Corp. | | 3.0% |
UnitedHealth Group Inc. | | 3.0% |
Nokia Oyj — ADR | | 2.9% |
Texas Instruments Inc. | | 2.7% |
The Goldman Sachs Group Inc. | | 2.6% |
| 1 | The Fund is actively managed. As a result, the composition of its portfolio holdings and sectors is subject to change at any time. |
| | |
12 | | Semi-Annual Report to Shareholders |
Legg Mason Capital Management American Leading Companies Trust
Selected Portfolio Performance2
| | | | |
| Strongest performers for the six months ended September 30, 2009 |
1. | | Hartford Financial Services Group Inc. | | 239.5% |
2. | | CBS Corp. | | 217.1% |
3. | | Capital One Financial Corp. | | 192.9% |
4. | | Prudential Financial Inc. | | 162.4% |
5. | | The AES Corp. | | 155.1% |
6. | | Bank of America Corp.* | | 148.5% |
7. | | Aflac Inc. | | 124.1% |
8. | | United States Steel Corp. | | 110.6% |
9. | | UAL Corp. | | 105.8% |
10. | | Wells Fargo & Co. | | 98.6% |
| | | | |
| Weakest performers for the six months ended September 30, 2009 |
1. | | Safeway Inc.* | | –1.4% |
2. | | Exxon Mobil Corp. | | 2.0% |
3. | | Sprint Nextel Corp. | | 10.6% |
4. | | AT&T Inc. | | 10.8% |
5. | | Aetna Inc. | | 14.4% |
6. | | Lockheed Martin Corp. | | 14.8% |
7. | | Altria Group Inc. | | 15.4% |
8. | | PepsiCo Inc. | | 15.8% |
9. | | QUALCOMM Inc.* | | 16.5% |
10. | | Johnson & Johnson | | 17.7% |
| 2 | Individual security performance is measured by the change in the security’s price; for stocks, dividends are assumed to be reinvested at the time they were paid. |
| * | Securities not held for entire period. |
| | |
Semi-Annual Report to Shareholders | | 13 |
Portfolio Changes
| | |
New positions established during
the six months ended
September 30, 2009 | | Positions completely sold during
the six months ended
September 30, 2009 |
Bank of America Corp. The Boeing Co. Chesapeake Energy Corp. QUALCOMM Inc. Safeway Inc. Stryker Corp. | | Anadarko Petroleum Corp. ConocoPhillips Devon Energy Corp. Health Net Inc. Jabil Circuit Inc. |
| | |
14 | | Semi-Annual Report to Shareholders |
Portfolio of Investments
Legg Mason Capital Management American Leading Companies Trust
September 30, 2009 (Unaudited)
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Common Stocks and Equity Interests — 100.3% | | | | |
| | |
Consumer Discretionary — 6.2% | | | | | | |
Media — 4.8% | | | | | | |
CBS Corp. | | 320,000 | | $ | 3,856,000 | |
Time Warner Cable Inc. | | 47,608 | | | 2,051,429 | |
Time Warner Inc. | | 200,000 | | | 5,756,000 | |
| | | | | | |
| | | | | 11,663,429 | |
| | | | | | |
| | |
Specialty Retail — 1.4% | | | | | | |
The TJX Cos. Inc. | | 90,000 | | | 3,343,500 | |
| | | | | | |
| | |
Consumer Staples — 6.5% | | | | | | |
Beverages — 0.4% | | | | | | |
PepsiCo Inc. | | 18,000 | | | 1,055,880 | |
| | | | | | |
| | |
Food and Staples Retailing — 2.3% | | | | | | |
Costco Wholesale Corp. | | 55,000 | | | 3,105,300 | |
Safeway Inc. | | 120,000 | | | 2,366,400 | |
| | | | | | |
| | | | | 5,471,700 | |
| | | | | | |
| | |
Food Products — 0.3% | | | | | | |
Kraft Foods Inc. | | 30,000 | | | 788,100 | |
| | | | | | |
| | |
Household Products — 0.5% | | | | | | |
Procter and Gamble Co. | | 19,000 | | | 1,100,480 | |
| | | | | | |
| | |
Tobacco — 3.0% | | | | | | |
Altria Group Inc. | | 125,000 | | | 2,226,250 | |
Philip Morris International Inc. | | 105,000 | | | 5,117,700 | |
| | | | | | |
| | | | | 7,343,950 | |
| | | | | | |
| | |
Energy — 8.8% | | | | | | |
Energy Equipment and Services — 6.4% | | | | | | |
Baker Hughes Inc. | | 73,000 | | | 3,114,180 | |
National Oilwell Varco Inc. | | 70,000 | | | 3,019,100 | A |
Noble Corp. | | 88,000 | | | 3,340,480 | |
Transocean Ltd. | | 70,000 | | | 5,987,100 | A |
| | | | | | |
| | | | | 15,460,860 | |
| | | | | | |
| | |
Semi-Annual Report to Shareholders | | 15 |
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Energy — Continued | | | | | | |
Oil, Gas and Consumable Fuels — 2.4% | | | | | | |
Apache Corp. | | 34,000 | | $ | 3,122,220 | |
Chesapeake Energy Corp. | | 50,000 | | | 1,420,000 | |
Exxon Mobil Corp. | | 20,000 | | | 1,372,200 | |
| | | | | | |
| | | | | 5,914,420 | |
| | | | | | |
| | |
Financials — 20.3% | | | | | | |
Capital Markets — 5.4% | | | | | | |
Morgan Stanley | | 100,000 | | | 3,088,000 | |
State Street Corp. | | 70,000 | | | 3,682,000 | |
The Goldman Sachs Group Inc. | | 33,500 | | | 6,175,725 | |
| | | | | | |
| | | | | 12,945,725 | |
| | | | | | |
Commercial Banks — 1.0% | | | | | | |
Wells Fargo & Co. | | 87,500 | | | 2,465,750 | |
| | | | | | |
| | |
Consumer Finance — 2.3% | | | | | | |
Capital One Financial Corp. | | 155,000 | | | 5,538,150 | |
| | | | | | |
| | |
Diversified Financial Services — 4.6% | | | | | | |
Bank of America Corp. | | 105,000 | | | 1,776,600 | |
JP Morgan Chase and Co. | | 175,000 | | | 7,668,500 | |
NYSE Euronext | | 60,000 | | | 1,733,400 | |
| | | | | | |
| | | | | 11,178,500 | |
| | | | | | |
| | |
Insurance — 7.0% | | | | | | |
Aflac Inc. | | 75,000 | | | 3,205,500 | |
Hartford Financial Services Group Inc. | | 200,000 | | | 5,300,000 | |
MetLife Inc. | | 93,000 | | | 3,540,510 | |
Prudential Financial Inc. | | 95,500 | | | 4,766,405 | |
| | | | | | |
| | | | | 16,812,415 | |
| | | | | | |
| | |
Health Care — 11.4% | | | | | | |
Biotechnology — 1.8% | | | | | | |
Amgen Inc. | | 73,000 | | | 4,396,790 | A |
| | | | | | |
| |
Health Care Equipment and Supplies — 1.1% | | | | |
Stryker Corp. | | 60,000 | | | 2,725,800 | |
| | | �� | | | |
| | |
16 | | Semi-Annual Report to Shareholders |
Portfolio of Investments — Continued
Legg Mason Capital Management American Leading Companies Trust — Continued
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Health Care — Continued | | | | | | |
Health Care Providers and Services — 5.7% | | | | |
Aetna Inc. | | 40,000 | | $ | 1,113,200 | |
UnitedHealth Group Inc. | | 290,000 | | | 7,261,600 | |
WellPoint Inc. | | 112,500 | | | 5,328,000 | A |
| | | | | | |
| | | | | 13,702,800 | |
| | | | | | |
| | |
Pharmaceuticals — 2.8% | | | | | | |
Johnson and Johnson | | 82,000 | | | 4,992,980 | |
Pfizer Inc. | | 100,000 | | | 1,655,000 | |
| | | | | | |
| | | | | 6,647,980 | |
| | | | | | |
| | |
Industrials — 14.0% | | | | | | |
Aerospace and Defense — 5.0% | | | | | | |
General Dynamics Corp. | | 62,000 | | | 4,005,200 | |
Lockheed Martin Corp. | | 42,000 | | | 3,279,360 | |
The Boeing Co. | | 40,000 | | | 2,166,000 | |
United Technologies Corp. | | 45,000 | | | 2,741,850 | |
| | | | | | |
| | | | | 12,192,410 | |
| | | | | | |
| | |
Airlines — 4.4% | | | | | | |
Delta Air Lines Inc. | | 300,000 | | | 2,688,000 | A |
UAL Corp. | | 850,000 | | | 7,837,000 | A |
| | | | | | |
| | | | | 10,525,000 | |
| | | | | | |
| | |
Electrical Equipment — 0.7% | | | | | | |
Emerson Electric Co. | | 40,000 | | | 1,603,200 | |
| | | | | | |
| | |
Industrial Conglomerates — 1.8% | | | | | | |
General Electric Co. | | 265,000 | | | 4,351,300 | |
| | | | | | |
| | |
Machinery — 2.1% | | | | | | |
Caterpillar Inc. | | 100,000 | | | 5,133,000 | |
| | | | | | |
| | |
Information Technology — 24.9% | | | | | | |
Communications Equipment — 4.4% | | | | | | |
Cisco Systems Inc. | | 110,000 | | | 2,589,400 | A |
Nokia Oyj — ADR | | 485,000 | | | 7,090,700 | |
QUALCOMM Inc. | | 25,000 | | | 1,124,500 | |
| | | | | | |
| | | | | 10,804,600 | |
| | | | | | |
| | |
Semi-Annual Report to Shareholders | | 17 |
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Information Technology — Continued | | | | | | |
Computers and Peripherals — 8.7% | | | | | | |
EMC Corp. | | 290,000 | | $ | 4,941,600 | A |
Hewlett-Packard Co. | | 185,000 | | | 8,733,850 | |
International Business Machines Corp. | | 60,800 | | | 7,272,288 | |
| | | | | | |
| | | | | 20,947,738 | |
| | | | | | |
| | |
Internet Software and Services — 4.8% | | | | | | |
eBay Inc. | | 350,000 | | | 8,263,500 | A |
Yahoo! Inc. | | 186,000 | | | 3,312,660 | A |
| | | | | | |
| | | | | 11,576,160 | |
| | | | | | |
| | |
IT Services — 0.9% | | | | | | |
Accenture PLC | | 57,000 | | | 2,124,390 | |
| | | | | | |
| | |
Semiconductors and Semiconductor Equipment — 2.7% | | | | | | |
Texas Instruments Inc. | | 278,000 | | | 6,585,820 | |
| | | | | | |
| | |
Software — 3.4% | | | | | | |
Microsoft Corp. | | 318,000 | | | 8,233,020 | |
| | | | | | |
| | |
Materials — 3.8% | | | | | | |
Metals and Mining — 3.8% | | | | | | |
Alcoa Inc. | | 125,000 | | | 1,640,000 | |
Freeport-McMoRan Copper and Gold Inc. | | 38,000 | | | 2,607,180 | |
United States Steel Corp. | | 110,000 | | | 4,880,700 | |
| | | | | | |
| | | | | 9,127,880 | |
| | | | | | |
| | |
Telecommunication Services — 2.7% | | | | | | |
Diversified Telecommunication
Services — 1.2% | | | | | | |
AT&T Inc. | | 110,000 | | | 2,971,100 | |
| | | | | | |
| |
Wireless Telecommunication Services — 1.5% | | | | |
Sprint Nextel Corp. | | 900,000 | | | 3,555,000 | A |
| | | | | | |
| | |
Utilities — 1.7% | | | | | | |
Independent Power Producers and Energy Traders — 1.7% | | | | | | |
The AES Corp. | | 275,000 | | | 4,075,500 | A |
| | | | | | |
Total Common Stocks and Equity Interests (Cost — $185,059,270) | | | | | 242,362,347 | |
| | |
18 | | Semi-Annual Report to Shareholders |
Portfolio of Investments — Continued
Legg Mason Capital Management American Leading Companies Trust — Continued
| | | | | | | |
| | | Shares/Par | | Value | |
| | | | | | | |
Repurchase Agreements — 0.1% | | | | | | | |
Bank of America 0.01%, dated
9/30/09, to be repurchased at $88,595 on 10/1/09 (Collateral: $95,000 Federal Home Loan Bank Bonds, 0.500% due 10/18/10, value $94,949) | | $ | 88,595 | | $ | 88,595 | |
JPMorgan Chase & Co. 0.01% dated 9/30/09, to be repurchased at $88,596 on 10/1/09 (Collateral: $90,000 Freddie Mac Notes, 2.200%, due 4/20/12, valued $91,254) | | | 88,596 | | | 88,596 | |
| | | | | | | |
Total Repurchase Agreements (Cost — $177,191) | | | 177,191 | |
Total Investments — 100.4% (Cost — $185,236,461)B | | | 242,539,538 | |
Other Assets Less Liabilities — (0.4)% | | | | | | (1,040,817 | ) |
| | | | | | | |
| | |
Net Assets — 100.0% | | | | | $ | 241,498,721 | |
| | | | | | | |
| B | Aggregate cost for federal income tax purposes is substantially the same as book cost. At September 30, 2009, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows: |
| | | | |
| Gross unrealized appreciation | | $ | 79,112,013 | |
| Gross unrealized depreciation | | | (21,808,936 | ) |
| | | | |
| Net unrealized appreciation | | $ | 57,303,077 | |
| | | | |
ADR — American Depositary Receipt
See notes to financial statements.
| | |
Semi-Annual Report to Shareholders | | 19 |
Statement of Assets and Liabilities
Legg Mason Capital Management American Leading Companies Trust
September 30, 2009 (Unaudited)
| | | | | | | |
Assets: | | | | | | | |
Investment securities at value
(Cost – $185,236,461) | | | | | $ | 242,539,538 | |
Receivable for securities sold | | | | | | 3,317,449 | |
Dividends receivable | | | | | | 227,391 | |
Receivable for fund shares sold | | | | | | 69,614 | |
| | | | | | | |
Total assets | | | | | | 246,153,992 | |
Liabilities: | | | | | | | |
Payable for securities purchased | | $ | 2,376,115 | | | | |
Payable for fund shares repurchased | | | 1,683,102 | | | | |
Accrued distribution and service fees | | | 179,186 | | | | |
Accrued management fee | | | 140,508 | | | | |
Accrued expenses | | | 276,360 | | | | |
| | | | | | | |
Total liabilities | | | | | | 4,655,271 | |
| | | | | | | |
Net Assets | | | | | $ | 241,498,721 | |
| | | | | | | |
Net assets consist of: | | | | | | | |
Accumulated paid-in-capital | | | | | $ | 263,186,523 | |
Accumulated net investment loss | | | | | | (110,513 | ) |
Accumulated net realized loss on investments | | | | | | (78,880,366 | ) |
Net unrealized appreciation of investments | | | | | | 57,303,077 | |
| | | | | | | |
Net Assets | | | | | $ | 241,498,721 | |
| | | | | | | |
Net Asset Value Per Share: | | | | | | | |
Class A (and redemption price) (978,027 shares outstanding) | | | | | | $14.19 | |
Class C1 (15,229,034 shares outstanding) | | | | | | $14.12 | |
Class I2 (and redemption price) (847,806 shares outstanding) | | | | | | $14.82 | |
Maximum Public Offering Price Per Share: | | | | | | | |
Class A (based on maximum initial sales charge of 5.75%) | | | | | | $15.06 | |
| | | | | | | | |
| 1 | Redemption price per share is NAV of Class C shares reduced by 1.00% CDSC, if shares are redeemed within one year from purchase payment. |
| 2 | Effective October 5, 2009, Institutional Class shares were renamed Class I shares. |
See notes to financial statements.
| | |
20 | | Semi-Annual Report to Shareholders |
Statement of Operations
Legg Mason Capital Management American Leading Companies Trust
For the Six Months Ended September 30, 2009 (Unaudited)
| | | | | | | | |
Investment Income: | | | | | | | | |
Dividends | | $ | 1,876,106 | | | | | |
Interest | | | 317 | | | | | |
Less: Foreign taxes withheld | | | (40,202 | ) | | | | |
| | | | | | | | |
Total income | | | | | | $ | 1,836,221 | |
Expenses: | | | | | | | | |
Distribution and service fees (Notes 3 and 5) | | | 990,808 | | | | | |
Management fees (Note 3) | | | 765,494 | | | | | |
Transfer agent and shareholder servicing expenses (Note 5) | | | 90,175 | | | | | |
Directors’ fees and expenses | | | 35,587 | | | | | |
Audit and legal fees | | | 34,564 | | | | | |
Shareholder reports expenses (Note 5) | | | 24,332 | | | | | |
Registration fees | | | 21,730 | | | | | |
Custodian fees | | | 11,648 | | | | | |
Other expenses | | | 1,119 | | | | | |
| | | | | | | | |
| | | 1,975,457 | | | | | |
Less: Fee waivers and/or expense reimbursements (Notes 3 and 5) | | | (88 | ) | | | | |
| | | | | | | | |
Net expenses | | | | | | | 1,975,369 | |
| | | | | | | | |
Net Investment Loss | | | | | | | (139,148 | ) |
Net Realized and Unrealized Gain/(Loss) on Investments: | | | | | | | | |
Net realized gain on investments | | | 1,598,572 | | | | | |
Change in unrealized appreciation/(depreciation) on investments | | | 84,860,284 | | | | | |
| | | | | | | | |
Net Realized and Unrealized Gain on Investments | | | | | | | 86,458,856 | |
Change in Net Assets Resulting From Operations | | | | | | $ | 86,319,708 | |
See notes to financial statements.
| | |
Semi-Annual Report to Shareholders | | 21 |
Statement of Changes in Net Assets
Legg Mason Capital Management American Leading Companies Trust
| | | | | | | | |
| | | For the Six
Months Ended
September 30, 2009 | | | For the
Year Ended
March 31, 2009 | |
Change in Net Assets: | | | (Unaudited) | | | | | |
Net investment income/(loss) | | $ | (139,148 | ) | | $ | 2,591,726 | |
Net realized gain/(loss) | | | 1,598,572 | | | | (61,929,002 | ) |
Change in unrealized appreciation/(depreciation) | | | 84,860,284 | | | | (177,335,018 | ) |
Change in net assets resulting from operations | | | 86,319,708 | | | | (236,672,294 | ) |
Distributions to shareholders from: | | | | | | | | |
Net investment income: | | | | | | | | |
Class C1 | | | — | | | | (2,036,660 | ) |
Class I2 | | | — | | | | (640,229 | ) |
Net realized gain on investments: | | | | | | | | |
Class C1 | | | — | | | | (1,224,154 | ) |
Class I2 | | | — | | | | (159,648 | ) |
Change in net assets from fund share transactions: | | | | | | | | |
Class A | | | (859,385 | ) | | | 11,074,428 | 3 |
Class C1 | | | (21,814,916 | ) | | | (149,544,854 | ) |
Class I2 | | | (1,393,688 | ) | | | (41,294,536 | ) |
Change in net assets | | | 62,251,719 | | | | (420,497,947 | ) |
Net Assets: | | | | | | | | |
Beginning of period | | | 179,247,002 | | | | 599,744,949 | |
End of period | | $ | 241,498,721 | | | $ | 179,247,002 | |
Accumulated net investment loss and undistributed net investment income, respectively | | | $(110,513 | ) | | | $28,635 | |
| 1 | On February 1, 2009, Primary Class shares were renamed Class C shares. |
| 2 | Effective October 5, 2009, Institutional Class shares were renamed Class I shares. |
| 3 | For the period February 3, 2009 (commencement of operations) to March 31, 2009. |
See notes to financial statements.
| | |
22 | | Semi-Annual Report to Shareholders |
Financial Highlights
Legg Mason Capital Management American Leading Companies Trust
For a share of each class of capital stock outstanding:
Class A:
| | | | | | |
| | | Six Months
Ended
September 30, 2009 | | | Period Ended
March 31, 2009A | |
| | | (Unaudited) | | | | |
Net asset value, beginning of period | | $9.40 | | | $10.44 | |
Investment operations: | | | | | | |
Net investment incomeB | | .03 | | | .03 | |
Net realized and unrealized gain/(loss) | | 4.76 | | | (1.07 | ) |
Total from investment operations | | 4.79 | | | (1.04 | ) |
Net asset value, end of period | | $14.19 | | | $9.40 | |
Total returnC | | 50.96 | % | | (9.96 | )% |
Ratios to Average Net Assets:D | | | | | | |
Total expensesE | | 1.11 | % | | 1.34 | % |
Expenses net of waivers and/or expense reimbursements, if anyE | | 1.11 | % | | 1.10 | % |
Expenses net of all reductionsE | | 1.11 | % | | 1.10 | % |
Net investment income | | .56 | % | | 1.93 | % |
Supplemental Data: | | | | | | |
Portfolio turnover rate | | 8.8 | % | | 33.4 | % |
Net assets, end of period (in thousands) | | $13,875 | | | $9,877 | |
| A | For the period February 3, 2009 (commencement of operations) to March 31, 2009. |
| B | Computed using average daily shares outstanding. |
| C | Performance figures, exclusive of sales charges, may reflect compensating balance credits, fee waivers and/or expense reimbursements. In the absence of compensating balance credits, 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. |
| E | Total expenses reflects operating expenses prior to any voluntary expense waivers, expense reimbursements and/or compensating balance credits. Expenses net of waivers and/or expense reimbursements reflects total expenses before compensating balance credits but net of any voluntary expense waivers and/or expense reimbursements. Expenses net of all reductions reflects expenses less any compensating balance credits, voluntary expense waivers and/or expense reimbursements. |
See notes to financial statements.
| | |
Semi-Annual Report to Shareholders | | 23 |
For a share of each class of capital stock outstanding:
Class CA:
| | | | | | | | | | | | | | | | | | |
| | | Six Months
Ended
September 30, 2009 | | | Years Ended March 31, | |
| | | 2009 | | | 2008 | | | 2007 | | | 2006 | | | 2005 | |
| | | (Unaudited) | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $9.39 | | | $19.52 | | | $24.87 | | | $24.59 | | | $21.85 | | | $19.85 | |
Investment operations: | | | | | | | | | | | | | | | | | | |
Net investment income/(loss) | | (.01 | )B | | .09 | B | | .03 | B | | (.06 | )B | | .01 | | | — | C |
Net realized and unrealized gain/(loss) | | 4.74 | | | (10.07 | ) | | (3.81 | ) | | 1.64 | | | 2.73 | | | 2.01 | |
Total from investment operations | | 4.73 | | | (9.98 | ) | | (3.78 | ) | | 1.58 | | | 2.74 | | | 2.01 | |
Distributions from: | | | | | | | | | | | | | | | | | | |
Net investment income | | — | | | (.10 | ) | | — | | | (.01 | ) | | — | | | (.01 | ) |
Net realized gain on investments | | — | | | (.05 | ) | | (1.57 | ) | | (1.29 | ) | | — | | | — | |
Total distributions | | — | | | (.15 | ) | | (1.57 | ) | | (1.30 | ) | | — | | | (.01 | ) |
Net asset value, end of period | | $14.12 | | | $9.39 | | | $19.52 | | | $24.87 | | | $24.59 | | | $21.85 | |
Total returnD | | 50.37 | % | | (51.32 | )% | | (16.24 | )% | | 6.68 | % | | 12.54 | % | | 10.12 | % |
Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | |
Total expensesE | | 1.90 | %F | | 1.89 | % | | 1.83 | % | | 1.85 | % | | 1.86 | % | | 1.88 | % |
Expenses net of waivers and/or expense reimbursements, if anyE | | 1.90 | %F | | 1.88 | % | | 1.83 | % | | 1.85 | % | | 1.86 | % | | 1.88 | % |
Expenses net of all reductionsE | | 1.90 | %F | | 1.88 | % | | 1.83 | % | | 1.85 | % | | 1.86 | % | | 1.88 | % |
Net investment income (loss) | | (.22 | )%F | | .62 | % | | .12 | % | | (.23 | )% | | .04 | % | | (.01 | )% |
Supplemental Data: | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | 8.8 | % | | 33.4 | % | | 28.4 | % | | 19.0 | % | | 14.3 | % | | 19.4 | % |
Net assets, end of period (in thousands) | | $215,056 | | | $159,944 | | | $531,186 | | | $765,000 | | | $757,630 | | | $654,019 | |
| A | On February 1, 2009, Primary Class shares were renamed Class C shares. |
| B | Computed using average daily shares outstanding. |
| C | Amount less than $.01 per share. |
| D | Performance figures, exclusive of CDSC, may reflect compensating balance credits, fee waivers and/or expense reimbursements. In the absence of compensating balance credits, 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. |
| E | Total expenses reflects operating expenses prior to any voluntary expense waivers, expense reimbursements and/or compensating balance credits. Expenses net of waivers and/or expense reimbursements reflects total expenses before compensating balance credits but net of any voluntary expense waivers and/or expense reimbursements. Expenses net of all reductions reflects expenses less any compensating balance credits, voluntary expense waivers and/or expense reimbursements. |
See notes to financial statements.
| | |
24 | | Semi-Annual Report to Shareholders |
Financial Highlights — Continued
Legg Mason Capital Management American Leading Companies Trust
For a share of each class of capital stock outstanding:
Class IA:
| | | | | | | | | | | | | | | | | | |
| | | Six Months
Ended
September 30, 2009 | | | Years Ended March 31, | |
| | | 2009 | | | 2008 | | | 2007 | | | 2006 | | | 2005 | |
| | | (Unaudited) | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $9.81 | | | $20.57 | | | $25.86 | | | $25.33 | | | $22.34 | | | $20.28 | |
Investment operations: | | | | | | | | | | | | | | | | | | |
Net investment income | | .05 | B | | .28 | B | | .31 | B | | .23 | B | | .22 | | | .21 | |
Net realized and unrealized gain/(loss) | | 4.96 | | | (10.63 | ) | | (4.03 | ) | | 1.67 | | | 2.82 | | | 2.06 | |
Total from investment operations | | 5.01 | | | (10.35 | ) | | (3.72 | ) | | 1.90 | | | 3.04 | | | 2.27 | |
Distributions from: | | | | | | | | | | | | | | | | | | |
Net investment income | | — | | | (.36 | ) | | — | | | (.08 | ) | | (.05 | ) | | (.21 | ) |
Net realized gain on investments | | — | | | (.05 | ) | | (1.57 | ) | | (1.29 | ) | | — | | | — | |
Total distributions | | — | | | (.41 | ) | | (1.57 | ) | | (1.37 | ) | | (.05 | ) | | (.21 | ) |
Net asset value, end of period | | $14.82 | | | $9.81 | | | $20.57 | | | $25.86 | | | $25.33 | | | $22.34 | |
Total returnC | | 51.07 | % | | (50.86 | )% | | (15.37 | )% | | 7.77 | % | | 13.63 | % | | 11.21 | % |
Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | |
Total expensesD | | .95 | %E | | .87 | % | | .79 | % | | .82 | % | | .84 | % | | .90 | % |
Expenses net of waivers and/or expense reimbursements, if anyD | | .95 | %E | | .86 | % | | .79 | % | | .82 | % | | .84 | % | | .90 | % |
Expenses net of all reductionsD | | .95 | %E | | .86 | % | | .79 | % | | .82 | % | | .84 | % | | .90 | % |
Net investment income | | .73 | %E | | 1.61 | % | | 1.22 | % | | .90 | % | | 1.09 | % | | .99 | % |
Supplemental Data: | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | 8.8 | % | | 33.4 | % | | 28.4 | % | | 19.0 | % | | 14.3 | % | | 19.4 | % |
Net assets, end of period (in thousands) | | $12,568 | | | $9,426 | | | $68,559 | | | $72,546 | | | $41,476 | | | $21,386 | |
| A | Effective October 5, 2009, Institutional Class shares were renamed Class I shares. |
| B | Computed using average daily shares outstanding. |
| C | Performance figures may reflect compensating balance credits, fee waivers and/or expense reimbursements. In the absence of compensating balance credits, 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. |
| D | Total expenses reflects operating expenses prior to any voluntary expense waivers, expense reimbursements and/or compensating balance credits. Expenses net of waivers and/or expense reimbursements reflects total expenses before compensating balance credits but net of any voluntary expense waivers and/or expense reimbursements. Expenses net of all reductions reflects expenses less any compensating balance credits, voluntary expense waivers and/or expense reimbursements. |
See notes to financial statements.
| | |
Semi-Annual Report to Shareholders | | 25 |
Expense Example (Unaudited)
Legg Mason U.S. Small-Capitalization Value Trust
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including front-end and back-end sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees, distribution and/or service (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 April 1, 2009, and held through September 30, 2009. The ending values assume dividends were reinvested at the time they were paid.
Actual Expenses
The first line for each class in the table on the next page provides information about actual account values and actual expenses for each class. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account if your shares were held through the entire period.
Hypothetical Example for Comparison Purposes
The second line for each class in the table on the next page provides information about hypothetical account values and hypothetical expenses based on the relevant class’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the class’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 this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples for the relevant class that appear in the shareholder reports of other funds. Because the example is intended to be comparable to the examples provided by other funds, it is based on a hypothetical investment of $1,000 invested on April 1, 2009 and held through September 30, 2009. The ending values assume dividends were reinvested at the time they were paid.
| | |
26 | | Semi-Annual Report to Shareholders |
Expense Example (Unaudited) — Continued
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as front-end or back-end sales charges (loads). Therefore the second line for each class of 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 transactional costs were included, your costs would have been higher.
| | | | | | | | | |
| | | Beginning
Account
Value
4/1/09 | | Ending
Account
Value
9/30/09 | | Expenses Paid
During the Period1
4/1/09-9/30/09 |
Class A | | | | | | | | | |
Actual | | $ | 1,000.00 | | $ | 1,398.50 | | $ | 7.52 |
Hypothetical (5% return before expenses) | | | 1,000.00 | | | 1,018.80 | | | 6.33 |
Class C | | | | | | | | | |
Actual | | $ | 1,000.00 | | $ | 1,393.80 | | $ | 12.00 |
Hypothetical (5% return before expenses) | | | 1,000.00 | | | 1,015.04 | | | 10.10 |
Institutional Class | | | | | | | | | |
Actual | | $ | 1,000.00 | | $ | 1,400.30 | | $ | 6.02 |
Hypothetical (5% return before expenses) | | | 1,000.00 | | | 1,020.05 | | | 5.06 |
| 1 | These calculations are based on expenses incurred in the most recent fiscal half-year. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratios of 1.25%, 2.00% and 1.00% for Class A, Class C and Institutional Class shares, respectively, multiplied by the average values over the period, multiplied by the number of days in the most recent fiscal half-year (183) and divided by 365. |
| | |
Semi-Annual Report to Shareholders | | 27 |
Performance Information (Unaudited)
Fund Performance
| | | | | | | | | |
Average Annual Total Returns1 | | | |
| | | Without Sales Charges2 | |
| | | Class A | | | Class C | | | Institutional Class | |
Six Months Ended 9/30/09 | | 39.85 | %† | | 39.38 | %† | | 40.03 | %† |
Twelve Months Ended 9/30/09 | | N/A | | | –14.95 | | | –14.23 | |
Five Years Ended 9/30/09 | | N/A | | | –2.62 | | | –1.64 | |
Ten Years Ended 9/30/09 | | N/A | | | 4.75 | | | 5.80 | |
Inception* through 9/30/09 | | 29.31 | † | | 2.59 | | | 3.70 | |
| | | | |
| | | With Sales Charges3 | |
| | | Class A | | | Class C | | | Institutional Class | |
Six Months Ended 9/30/09 | | 31.74 | %† | | 38.38 | %† | | 40.03 | %† |
Twelve Months Ended 9/30/09 | | N/A | | | –15.80 | | | –14.23 | |
Five Years Ended 9/30/09 | | N/A | | | –2.62 | | | –1.64 | |
Ten Years Ended 9/30/09 | | N/A | | | 4.75 | | | 5.80 | |
Inception* through 9/30/09 | | 21.96 | † | | 2.59 | | | 3.70 | |
| | | | | | | | | |
Cumulative Total Returns1 | | | |
| | | Without Sales Charges2 | |
Class A (Inception date of 2/3/09 through 9/30/09) | | | | | 29.31 | % | | | |
Class C (9/30/99 through 9/30/09) | | | | | 59.03 | | | | |
Institutional Class (9/30/99 through 9/30/09) | | | | | 75.81 | | | | |
| 1 | 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 fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower. |
| 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 CDSC with respect to Class C shares. On February 1, 2009, Class C shares began to charge a CDSC for shares bought by investors on and after that date and redeemed within one year of purchase. |
| 3 | Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value. In addition, Class A shares reflect the deduction of the maximum initial sales charge of 5.75%. Class C shares reflect the deduction of a 1.00% CDSC, which applies if shares are redeemed within one year from purchase payment. |
| * | Inception dates for the A, C and Institutional Classes shares are February 3, 2009, June 15, 1998 and June 19, 1998, respectively. |
| | |
28 | | Semi-Annual Report to Shareholders |
Performance Information (Unaudited) — Continued
Legg Mason U.S. Small-Capitalization Value Trust
The graphs on the following pages compare the Fund’s total returns to those of the Russell 2000 Index. The graphs illustrate the cumulative total return of an initial $10,000 investment in Class A and Class C shares and an initial $1,000,000 investment in Institutional Class shares, for the periods indicated. The lines for the Fund represent the total return after deducting all Fund investment management and other administrative expenses and the transaction costs of buying and selling portfolio securities. The lines representing the securities market index do not take into account any transaction costs associated with buying and selling portfolio securities in the index or other administrative expenses.
Total return measures investment performance in terms of appreciation or depreciation in a fund’s net asset value per share, plus dividends and any capital gain distributions. Both the Fund’s results and the index’s results assume the reinvestment of all dividends and distributions at the time they were paid. Average annual returns tend to smooth out variations in a fund’s return, so that they differ from actual year-to-year results.
| | |
Semi-Annual Report to Shareholders | | 29 |
Growth of a $10,000 Investment — Class A Shares
Hypothetical illustration of $10,000 invested in Class A shares on February 3, 2009 (commencement of operations), assuming the deduction of the maximum initial sales charge of 5.75% at the time of investment and the reinvestment of all distributions, including returns of capital, if any, at net asset value through September 30, 2009. The performance data quoted represent past performance and do not guarantee future results. The performance stated may have been due to extraordinary market conditions, which may not be duplicated in the future. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month-end performance information, please visit www.leggmason.com/individualinvestors. The investment return and principal value of the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Performance would have been lower if fees and expenses had not been waived and/or reimbursed in various periods. Performance for other share classes will vary due to differences in sales charge structure and class expenses.
The graph does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
| | |
30 | | Semi-Annual Report to Shareholders |
Performance Information (Unaudited) — Continued
Growth of a $10,000 Investment — Class C Shares
Hypothetical illustration of $10,000 invested in Class C shares on September 30, 1999, assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value through September 30, 2009. The performance data quoted represent past performance and do not guarantee future results. The performance stated may have been due to extraordinary market conditions, which may not be duplicated in the future. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month-end performance information, please visit www.leggmason.com/individualinvestors. The investment return and principal value of the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Performance would have been lower if fees and expenses had not been waived and/or reimbursed in various periods. Performance for other share classes will vary due to differences in sales charge structure and class expenses.
The graph does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
| | |
Semi-Annual Report to Shareholders | | 31 |
Growth of a $1,000,000 Investment — Institutional Class Shares
Hypothetical illustration of $1,000,000 invested in Institutional Class shares on September 30, 1999, assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value through September 30, 2009. The performance data quoted represent past performance and do not guarantee future results. The performance stated may have been due to extraordinary market conditions, which may not be duplicated in the future. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month-end performance information, please visit www.leggmason.com/individualinvestors. The investment return and principal value of the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Performance would have been lower if fees and expenses had not been waived and/or reimbursed in various periods. Performance for other share classes will vary due to differences in sales charge structure and class expenses.
The graph does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
| | |
32 | | Semi-Annual Report to Shareholders |
Performance Information (Unaudited) — Continued
Portfolio Composition (as of September 30, 2009)1
(As a percentage of the portfolio)
Top 10 Holdings (as of September 30, 2009)1
| | |
| Security | | % of
Net Assets |
Benchmark Electronics Inc. | | 1.4% |
SYNNEX Corp. | | 1.3% |
Olin Corp. | | 1.2% |
SkyWest Inc. | | 1.1% |
LifePoint Hospitals Inc. | | 1.1% |
PNM Resources Inc. | | 1.0% |
United Stationers Inc. | | 1.0% |
Piper Jaffray Cos. Inc. | | 1.0% |
CNA Surety Corp. | | 1.0% |
Argo Group International Holdings Ltd. | | 0.9% |
| 1 | The Fund is actively managed. As a result, the composition of its portfolio holdings and sectors is subject to change at any time. |
| | |
Semi-Annual Report to Shareholders | | 33 |
Legg Mason U.S. Small-Capitalization Value Trust1
Selected Portfolio Performance2
| | | | |
| Strongest performers for the six months ended September 30, 2009 |
| 1. | | Lithia Motors Inc. (Class A) | | 239.65% |
| 2. | | Armstrong World Industries Inc. | | 205.45% |
| 3. | | Encore Capital Group Inc. | | 180.79% |
| 4. | | Books-A-Million Inc. | | 158.00% |
| 5. | | Methode Electronics Inc. | | 147.82% |
| 6. | | Hi-Tech Pharmacal Co. Inc. | | 143.86% |
| 7. | | AmeriCredit Corp. | | 134.13% |
| 8. | | Wintrust Financial Corp. | | 128.07% |
| 9. | | Vishay Intertechnology Inc. | | 127.01% |
| 10. | | Gymboree Corp. | | 126.60% |
| | | | |
| Weakest performers for the six months ended September 30, 2009 |
| 1. | | Green Bankshares Inc. | | –58.86% |
| 2. | | Susquehanna Bancshares Inc. | | –51.04% |
| 3. | | BancTrust Financial Group Inc. | | –47.41% |
| 4. | | National Penn Bancshares Inc. | | –43.54% |
| 5. | | First BanCorp (Puerto Rico) | | –39.68% |
| 6. | | Spartan Motors Inc. | | –36.86% |
| 7. | | Stewart Information Services Corp. | | –36.56% |
| 8. | | MedCath Corp. | | –29.73% |
| 9. | | Pacific Capital Bancorp | | –28.66% |
| 10. | | First Busey Corp. | | –28.36% |
| 1 | Portfolio changes are not reported for Legg Mason U.S. Small-Cap due to the Fund’s high volume of trading. |
| 2 | Individual security performance is measured by the change in the security’s price; for stocks, dividends are assumed to be reinvested at the time they were paid. |
| | |
34 | | Semi-Annual Report to Shareholders |
Portfolio of Investments
Legg Mason U.S. Small-Capitalization Value Trust
September 30, 2009 (Unaudited)
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Common Stocks and Equity Interests — 97.9% | | | | |
| | |
Consumer Discretionary — 16.2% | | | | | | |
Auto Components — 0.5% | | | | | | |
Hawk Corp. | | 3,400 | | $ | 46,648 | A |
Spartan Motors Inc. | | 8,000 | | | 41,120 | |
Superior Industries International Inc. | | 16,795 | | | 238,489 | |
| | | | | | |
| | | | | 326,257 | |
| | | | | | |
| | |
Distributors — 0.3% | | | | | | |
Audiovox Corp. | | 3,650 | | | 25,003 | A |
Core-Mark Holding Co. Inc. | | 5,770 | | | 165,022 | A |
| | | | | | |
| | | | | 190,025 | |
| | | | | | |
| | |
Diversified Consumer Services — 1.2% | | | | | | |
Pre-Paid Legal Services Inc. | | 11,100 | | | 563,880 | A |
Regis Corp. | | 9,963 | | | 154,426 | |
| | | | | | |
| | | | | 718,306 | |
| | | | | | |
| | |
Hotels, Restaurants and Leisure — 3.2% | | | | | | |
Benihana Inc. | | 3,000 | | | 17,190 | A |
Bluegreen Corp. | | 6,200 | | | 18,910 | A |
Boyd Gaming Corp. | | 20,000 | | | 218,600 | A |
Carrols Restaurant Group Inc. | | 9,400 | | | 71,064 | A |
CEC Entertainment Inc. | | 4,000 | | | 103,440 | A |
Century Casinos Inc. | | 7,400 | | | 21,460 | A |
Cracker Barrel Old Country Store Inc. | | 8,210 | | | 282,424 | |
Domino’s Pizza Inc. | | 11,990 | | | 105,992 | A |
Dover Downs Gaming and Entertainment Inc. | | 5,390 | | | 30,723 | |
Einstein Noah Restaurant Group Inc. | | 5,400 | | | 65,016 | A |
Great Wolf Resorts Inc. | | 15,500 | | | 55,335 | A |
Luby’s Inc. | | 12,366 | | | 51,937 | A |
McCormick and Schmick’s Seafood Restaurants Inc. | | 3,000 | | | 22,320 | A |
Multimedia Games Inc. | | 8,200 | | | 41,984 | A |
O’Charleys Inc. | | 4,200 | | | 39,354 | A |
Pinnacle Entertainment Inc. | | 30,000 | | | 305,700 | A |
Red Lion Hotels Corp. | | 3,200 | | | 18,400 | A |
| | |
Semi-Annual Report to Shareholders | | 35 |
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Consumer Discretionary — Continued | | | | | | |
Hotels, Restaurants and Leisure — Continued | |
Red Robin Gourmet Burgers Inc. | | 2,800 | | $ | 57,176 | A |
Speedway Motorsports Inc. | | 18,050 | | | 259,739 | |
The Steak n Shake Co. | | 16,100 | | | 189,497 | A |
| | | | | | |
| | | | | 1,976,261 | |
| | | | | | |
| | |
Household Durables — 1.5% | | | | | | |
Brookfield Homes Corp. | | 4,700 | | | 31,396 | A |
CSS Industries Inc. | | 10,980 | | | 217,075 | |
Ethan Allen Interiors Inc. | | 4,540 | | | 74,910 | |
Helen of Troy Ltd. | | 16,900 | | | 328,367 | A |
Hooker Furniture Corp. | | 2,780 | | | 37,530 | |
M/I Homes Inc. | | 8,300 | | | 112,797 | A |
National Presto Industries Inc. | | 1,200 | | | 103,812 | |
| | | | | | |
| | | | | 905,887 | |
| | | | | | |
| | |
Internet and Catalog Retail — 0.4% | | | | | | |
dELiA*s Inc. | | 10,600 | | | 22,790 | A |
Gaiam Inc. | | 3,100 | | | 21,638 | A |
NutriSystem Inc. | | 14,800 | | | 225,848 | |
| | | | | | |
| | | | | 270,276 | |
| | | | | | |
| | |
Leisure Equipment and Products — 0.7% | | | | | | |
JAKKS Pacific Inc. | | 5,190 | | | 74,321 | A |
Polaris Industries Inc. | | 9,060 | | | 369,467 | |
Sport Supply Group Inc. | | 2,100 | | | 21,399 | |
| | | | | | |
| | | | | 465,187 | |
| | | | | | |
| | |
Media — 0.9% | | | | | | |
Alloy Inc. | | 7,400 | | | 50,098 | A |
Ascent Media Corp. | | 2,300 | | | 58,880 | A |
Belo Corp. | | 16,700 | | | 90,347 | |
Harte-Hanks Inc. | | 4,000 | | | 55,320 | |
Lakes Entertainment Inc. | | 10,200 | | | 34,272 | A |
Scholastic Corp. | | 10,190 | | | 248,025 | |
| | | | | | |
| | | | | 536,942 | |
| | | | | | |
| | |
36 | | Semi-Annual Report to Shareholders |
Portfolio of Investments — Continued
Legg Mason U.S. Small-Capitalization Value Trust — Continued
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Consumer Discretionary — Continued | | | | | | |
Multiline Retail — 0.7% | | | | | | |
Dillard’s Inc. | | 19,500 | | $ | 274,950 | |
Retail Ventures Inc. | | 2,007 | | | 10,577 | A |
Saks Inc. | | 15,200 | | | 103,664 | A |
Tuesday Morning Corp. | | 15,500 | | | 64,480 | A |
| | | | | | |
| | | | | 453,671 | |
| | | | | | |
| | |
Specialty Retail — 5.7% | | | | | | |
A.C. Moore Arts and Crafts Inc. | | 4,400 | | | 15,840 | A |
America’s Car-Mart Inc. | | 2,550 | | | 61,072 | A |
Books-A-Million Inc. | | 7,100 | | | 85,484 | |
Build-A-Bear Workshop Inc. | | 8,500 | | | 41,395 | A |
Cabela’s Inc. | | 29,275 | | | 390,528 | A |
Cache Inc. | | 2,600 | | | 12,896 | A |
Conn’s Inc. | | 17,990 | | | 203,107 | A |
Genesco Inc. | | 10,700 | | | 257,549 | A |
Group 1 Automotive Inc. | | 5,560 | | | 149,286 | |
Gymboree Corp. | | 8,300 | | | 401,554 | A |
Haverty Furniture Cos. Inc. | | 7,600 | | | 89,756 | A |
Jos. A Bank Clothiers Inc. | | 2,300 | | | 102,971 | A |
Lithia Motors Inc. (Class A) | | 8,100 | | | 126,279 | |
Pacific Sunwear of California Inc. | | 13,800 | | | 71,070 | A |
Pep Boys- Manny, Moe & Jack | | 14,100 | | | 137,757 | |
Rent-A-Center Inc. | | 9,800 | | | 185,024 | A |
REX Stores Corp. | | 3,995 | | | 43,546 | A |
Shoe Carnival Inc. | | 6,910 | | | 106,552 | A |
Stage Stores Inc. | | 23,085 | | | 299,182 | |
Systemax Inc. | | 19,900 | | | 241,387 | A |
The Buckle Inc. | | 2,400 | | | 81,936 | |
The Finish Line Inc. | | 28,250 | | | 287,020 | |
The Wet Seal Inc. | | 9,600 | | | 36,288 | A |
West Marine Inc. | | 9,600 | | | 75,456 | A |
Zale Corp. | | 1,400 | | | 10,010 | A |
| | | | | | |
| | | | | 3,512,945 | |
| | | | | | |
| | |
Semi-Annual Report to Shareholders | | 37 |
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Consumer Discretionary — Continued | | | | | | |
Textiles, Apparel and Luxury Goods — 1.1% | |
Brown Shoe Co. Inc. | | 7,600 | | $ | 60,952 | |
Kenneth Cole Productions Inc. | | 1,900 | | | 19,057 | |
Maidenform Brands Inc. | | 16,540 | | | 265,632 | A |
Movado Group Inc. | | 1,600 | | | 23,248 | |
Quiksilver Inc. | | 23,200 | | | 63,800 | A |
R.G. Barry Corp. | | 4,600 | | | 35,788 | |
Skechers U.S.A. Inc. | | 4,500 | | | 77,130 | A |
UniFirst Corp. | | 2,500 | | | 111,125 | |
| | | | | | |
| | | | | 656,732 | |
| | | | | | |
| | |
Consumer Staples — 4.1% | | | | | | |
Food and Staples Retailing — 0.7% | | | | | | |
Ingles Markets Inc. | | 7,100 | | | 112,393 | |
Winn-Dixie Stores Inc. | | 22,800 | | | 299,136 | A |
| | | | | | |
| | | | | 411,529 | |
| | | | | | |
| | |
Food Products — 1.4% | | | | | | |
American Italian Pasta Co. | | 3,700 | | | 100,566 | A |
Cal-Maine Foods Inc. | | 12,800 | | | 342,656 | |
Chiquita Brands International Inc. | | 5,900 | | | 95,344 | A |
Fresh Del Monte Produce Inc. | | 10,700 | | | 241,927 | A |
John B. Sanfilippo and Son Inc. | | 4,400 | | | 51,128 | A |
Omega Protein Corp. | | 3,300 | | | 16,005 | A |
Overhill Farms Inc. | | 6,800 | | | 41,140 | A |
| | | | | | |
| | | | | 888,766 | |
| | | | | | |
| | |
Personal Products — 0.9% | | | | | | |
Bare Escentuals Inc. | | 21,400 | | | 254,446 | A |
Nutraceutical International Corp. | | 8,390 | | | 94,555 | A |
Prestige Brands Holdings Inc. | | 27,200 | | | 191,488 | A |
Schiff Nutrition International Inc. | | 3,140 | | | 16,360 | |
| | | | | | |
| | | | | 556,849 | |
| | | | | | |
| | |
Tobacco — 1.1% | | | | | | |
Alliance One International Inc. | | 42,600 | | | 190,848 | A |
Universal Corp. | | 10,860 | | | 454,165 | |
| | | | | | |
| | | | | 645,013 | |
| | | | | | |
| | |
38 | | Semi-Annual Report to Shareholders |
Portfolio of Investments — Continued
Legg Mason U.S. Small-Capitalization Value Trust — Continued
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Energy — 5.9% | | | | | | |
Energy Equipment and Services — 3.8% | | | | | | |
Bolt Technology Corp. | | 2,100 | | $ | 26,397 | A |
Bristow Group Inc. | | 7,840 | | | 232,770 | A |
Cal Dive International Inc. | | 42,095 | | | 416,319 | A |
Complete Production Services Inc. | | 6,500 | | | 73,450 | A |
Dawson Geophysical Co. | | 1,900 | | | 52,022 | A |
Global Industries Ltd. | | 22,700 | | | 215,650 | A |
Gulfmark Offshore Inc. | | 12,090 | | | 395,827 | A |
Helix Energy Solutions Group Inc. | | 16,900 | | | 253,162 | A |
Hornbeck Offshore Services Inc. | | 4,300 | | | 118,508 | A |
Key Energy Services Inc. | | 8,100 | | | 70,470 | A |
Matrix Service Co. | | 5,600 | | | 60,872 | A |
Natural Gas Services Group Inc. | | 4,500 | | | 79,290 | A |
Parker Drilling Co. | | 18,700 | | | 102,102 | A |
PHI Inc. | | 2,500 | | | 50,700 | A |
Pioneer Drilling Co. | | 4,800 | | | 35,232 | A |
T-3 Energy Services Inc. | | 2,500 | | | 49,250 | A |
TGC Industries Inc. | | 5,600 | | | 27,160 | A |
Union Drilling Inc. | | 5,700 | | | 43,548 | A |
Willbros Group Inc. | | 4,700 | | | 71,581 | A |
| | | | | | |
| | | | | 2,374,310 | |
| | | | | | |
| | |
Oil, Gas and Consumable Fuels — 2.1% | | | | | | |
Adams Resources and Energy Inc. | | 1,300 | | | 26,065 | |
Approach Resources Inc. | | 3,700 | | | 33,596 | A |
CVR Energy Inc. | | 17,900 | | | 222,676 | A |
Delek US Holdings Inc. | | 13,400 | | | 114,838 | |
GeoResources Inc. | | 2,700 | | | 29,835 | A |
Holly Corp. | | 9,600 | | | 245,952 | |
Patriot Coal Corp. | | 1,900 | | | 22,344 | A |
USEC Inc. | | 67,500 | | | 316,575 | A |
World Fuel Services Corp. | | 5,800 | | | 278,806 | |
| | | | | | |
| | | | | 1,290,687 | |
| | | | | | |
| | |
Semi-Annual Report to Shareholders | | 39 |
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Financials — 24.4% | | | | | | |
Capital Markets — 2.8% | | | | | | |
BGC Partners Inc. | | 11,900 | | $ | 50,932 | |
Cowen Group Inc. | | 6,600 | | | 46,992 | A |
Evercore Partners Inc. | | 3,120 | | | 91,166 | |
FBR Capital Markets Corp. | | 33,500 | | | 198,655 | A |
Investment Technology Group Inc. | | 4,700 | | | 131,224 | A |
LaBranche Co. Inc. | | 4,057 | | | 13,794 | A |
MF Global Ltd. | | 41,800 | | | 303,886 | A |
Penson Worldwide Inc. | | 14,200 | | | 138,308 | A |
Piper Jaffray Cos. Inc. | | 12,400 | | | 591,728 | A |
Sanders Morris Harris Group Inc. | | 15,260 | | | 90,187 | |
Thomas Weisel Partners Group Inc. | | 14,000 | | | 74,760 | A |
| | | | | | |
| | | | | 1,731,632 | |
| | | | | | |
| | |
Commercial Banks — 2.3% | | | | | | |
1st Source Corp. | | 4,100 | | | 66,830 | |
Bancorp Inc. | | 4,900 | | | 28,028 | A |
Boston Private Financial Holdings Inc. | | 13,000 | | | 84,630 | |
Camden National Corp. | | 4,340 | | | 143,394 | |
Columbia Banking System Inc. | | 8,400 | | | 139,020 | |
Community Bank System Inc. | | 3,000 | | | 54,810 | |
Merchants Bancshares Inc. | | 1,940 | | | 41,438 | |
Northrim BanCorp Inc. | | 5,960 | | | 90,890 | |
Peoples Bancorp Inc. | | 10,568 | | | 137,912 | |
Renasant Corp. | | 6,062 | | | 90,021 | |
Sandy Spring Bancorp Inc. | | 5,600 | | | 91,168 | |
Southwest Bancorp Inc. | | 4,160 | | | 58,406 | |
StellarOne Corp. | | 7,700 | | | 113,575 | |
Wintrust Financial Corp. | | 10,290 | | | 287,709 | |
| | | | | | |
| | | | | 1,427,831 | |
| | | | | | |
| | |
Consumer Finance — 2.2% | | | | | | |
Cash America International Inc. | | 8,500 | | | 256,360 | |
CompuCredit Holdings Corp. | | 5,800 | | | 27,318 | A |
Credit Acceptance Corp. | | 14,660 | | | 471,906 | A |
Dollar Financial Corp. | | 6,760 | | | 108,295 | A |
Nelnet Inc. | | 16,470 | | | 204,887 | A |
| | |
40 | | Semi-Annual Report to Shareholders |
Portfolio of Investments — Continued
Legg Mason U.S. Small-Capitalization Value Trust — Continued
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Financials — Continued | | | | | | |
Consumer Finance — Continued | | | | | | |
The Student Loan Corp. | | 2,000 | | $ | 92,800 | |
World Acceptance Corp. | | 7,940 | | | 200,167 | A |
| | | | | | |
| | | | | 1,361,733 | |
| | | | | | |
| | |
Diversified Financial Services — 0.9% | | | | | | |
Asset Acceptance Capital Corp. | | 11,010 | | | 79,822 | A |
ASTA Funding Inc. | | 3,500 | | | 26,460 | |
Medallion Financial Corp. | | 9,520 | | | 79,587 | |
PHH Corp. | | 18,500 | | | 367,040 | A |
Resource America Inc. | | 3,300 | | | 15,873 | |
| | | | | | |
| | | | | 568,782 | |
| | | | | | |
| | |
Insurance — 14.4% | | | | | | |
American Equity Investment Life Holding Co. | | 36,480 | | | 256,090 | |
American Physicians Capital Inc. | | 3,853 | | | 111,005 | |
American Physicians Service Group Inc. | | 4,724 | | | 108,841 | |
American Safety Insurance Holdings Ltd. | | 5,600 | | | 88,480 | A |
Amerisafe Inc. | | 10,200 | | | 175,950 | A |
Amtrust Financial Services Inc. | | 35,300 | | | 402,773 | |
Argo Group International Holdings Ltd. | | 16,792 | | | 565,554 | A |
Baldwin and Lyons Inc. | | 4,230 | | | 99,193 | |
CNA Surety Corp. | | 36,370 | | | 589,194 | A |
Delphi Financial Group Inc. | | 23,255 | | | 526,261 | |
Donegal Group Inc. | | 572 | | | 8,946 | |
Eastern Insurance Holdings Inc. | | 2,680 | | | 25,540 | |
EMC Insurance Group Inc. | | 3,852 | | | 81,393 | |
Employers Holdings Inc. | | 26,600 | | | 411,768 | |
Enstar Group Ltd. | | 1,000 | | | 62,270 | A |
First Acceptance Corp. | | 21,200 | | | 57,240 | A |
First Mercury Financial Corp. | | 7,700 | | | 102,564 | |
Flagstone Reinsurance Holdings Ltd. | | 43,500 | | | 490,680 | |
Hallmark Financial Services Inc. | | 11,350 | | | 91,367 | A |
Hilltop Holdings Inc. | | 10,200 | | | 125,052 | A |
Horace Mann Educators Corp. | | 17,770 | | | 248,247 | |
Infinity Property and Casualty Corp. | | 9,240 | | | 392,515 | |
Max Capital Group Ltd. | | 20,040 | | | 428,255 | |
| | |
Semi-Annual Report to Shareholders | | 41 |
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Financials — Continued | | | | | | |
Insurance — Continued | | | | | | |
Meadowbrook Insurance Group Inc. | | 43,060 | | $ | 318,644 | |
Mercer Insurance Group Inc. | | 1,730 | | | 31,261 | |
Montpelier Re Holdings Ltd. | | 20,070 | | | 327,542 | |
National Western Life Insurance Co. | | 1,520 | | | 267,490 | |
Navigators Group Inc. | | 6,670 | | | 366,850 | A |
Nymagic Inc. | | 5,780 | | | 99,763 | |
OneBeacon Insurance Group Ltd. | | 6,500 | | | 89,310 | |
PMA Capital Corp. | | 17,410 | | | 99,063 | A |
Presidential Life Corp. | | 20,860 | | | 216,110 | |
Safety Insurance Group Inc. | | 11,605 | | | 382,037 | |
SeaBright Insurance Holdings | | 11,680 | | | 133,386 | A |
Specialty Underwriters’ Alliance Inc. | | 5,850 | | | 38,610 | A |
Stewart Information Services Corp. | | 7,900 | | | 97,723 | |
Tower Group Inc. | | 10,000 | | | 243,900 | |
Unico American Corp. | | 4,750 | | | 47,072 | |
United Fire and Casualty Co. | | 12,576 | | | 225,110 | |
Unitrin Inc. | | 4,100 | | | 79,909 | |
Universal Insurance Holdings Inc. | | 16,925 | | | 85,133 | |
Zenith National Insurance Corp. | | 9,700 | | | 299,730 | |
| | | | | | |
| | | | | 8,897,821 | |
| | | | | | |
| |
Real Estate Management and Development — 0.2% | | | | |
Forestar Group Inc. | | 6,500 | | | 111,670 | A |
Market Leader Inc. | | 7,400 | | | 15,984 | A |
| | | | | | |
| | | | | 127,654 | |
| | | | | | |
Thrifts and Mortgage Finance — 1.6% | | | | | | |
Abington Bancorp Inc. | | 9,970 | | | 77,168 | |
BankFinancial Corp. | | 5,300 | | | 50,774 | |
Berkshire Hills Bancorp Inc. | | 6,670 | | | 146,340 | |
Home Federal Bancorp Inc. | | 4,830 | | | 55,158 | |
Legacy Bancorp Inc. | | 2,500 | | | 26,250 | |
Meridian Interstate Bancorp Inc. | | 4,600 | | | 39,100 | A |
NewAlliance Bancshares Inc. | | 13,200 | | | 141,240 | |
Provident Financial Services Inc. | | 13,010 | | | 133,873 | |
Washington Federal Inc. | | 16,837 | | | 283,872 | |
| | | | | | |
| | | | | 953,775 | |
| | | | | | |
| | |
42 | | Semi-Annual Report to Shareholders |
Portfolio of Investments — Continued
Legg Mason U.S. Small-Capitalization Value Trust — Continued
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Health Care — 4.6% | | | | | | |
Biotechnology — 0.2% | | | | | | |
Cubist Pharmaceuticals Inc. | | 6,800 | | $ | 137,360 | A |
| | | | | | |
|
Health Care Equipment and Supplies — 0.8% | |
AngioDynamics Inc. | | 10,700 | | | 147,446 | A |
Cutera Inc. | | 5,800 | | | 50,170 | A |
Cynosure Inc. | | 2,000 | | | 23,300 | A |
HealthTronics Inc. | | 8,000 | | | 19,680 | A |
Home Diagnostics Inc. | | 3,000 | | | 20,280 | A |
Osteotech Inc. | | 6,400 | | | 28,480 | A |
RTI Biologics Inc. | | 11,300 | | | 49,155 | A |
The Cooper Cos. Inc. | | 4,800 | | | 142,704 | |
TomoTherapy Inc. | | 10,800 | | | 46,764 | A |
| | | | | | |
| | | | | 527,979 | |
| | | | | | |
| |
Health Care Providers and Services — 3.5% | | | | |
Allion Healthcare Inc. | | 8,800 | | | 51,480 | A |
Capital Senior Living Corp. | | 5,600 | | | 34,160 | A |
Cross Country Healthcare Inc. | | 16,800 | | | 156,408 | A |
Ensign Group Inc. | | 3,200 | | | 44,896 | |
Five Star Quality Care Inc. | | 7,400 | | | 27,084 | A |
Gentiva Health Services Inc. | | 4,400 | | | 110,044 | A |
Healthways Inc. | | 7,000 | | | 107,240 | A |
inVentiv Health Inc. | | 4,800 | | | 80,304 | A |
Kindred Healthcare Inc. | | 7,000 | | | 113,610 | A |
LifePoint Hospitals Inc. | | 24,830 | | | 671,900 | A |
Medcath Corp. | | 4,500 | | | 39,465 | A |
Metropolitan Health Networks Inc. | | 11,600 | | | 25,288 | A |
Molina Healthcare Inc. | | 5,500 | | | 113,795 | A |
NovaMed Inc. | | 10,300 | | | 46,659 | A |
PDI Inc. | | 2,900 | | | 13,282 | A |
Triple-S Management Corp. | | 5,100 | | | 85,527 | A |
Universal American Financial Corp. | | 47,000 | | | 442,740 | A |
| | | | | | |
| | | | | 2,163,882 | |
| | | | | | |
| | |
Life Sciences Tools and Services — 0.1% | | | | | | |
Cambrex Corp. | | 5,100 | | | 32,130 | A |
| | | | | | |
| | |
Semi-Annual Report to Shareholders | | 43 |
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Industrials — 20.0% | | | | | | |
Aerospace and Defense — 1.9% | | | | | | |
AAR Corp. | | 17,700 | | $ | 388,338 | A |
Astronics Corp. | | 3,800 | | | 35,720 | A |
Ceradyne Inc. | | 11,200 | | | 205,296 | A |
Ducommun Inc. | | 2,600 | | | 49,166 | |
Herley Industries Inc. | | 3,380 | | | 44,109 | A |
Triumph Group Inc. | | 9,700 | | | 465,503 | |
| | | | | | |
| | | | | 1,188,132 | |
| | | | | | |
| | |
Air Freight and Logistics — 0.2% | | | | | | |
Atlas Air Worldwide Holdings Inc. | | 3,800 | | | 121,486 | A |
| | | | | | |
| | |
Airlines — 1.3% | | | | | | |
Alaska Air Group Inc. | | 3,300 | | | 88,407 | A |
Hawaiian Holdings Inc. | | 9,400 | | | 77,644 | A |
SkyWest Inc. | | 40,550 | | | 672,319 | |
| | | | | | |
| | | | | 838,370 | |
| | | | | | |
| | |
Building Products — 0.9% | | | | | | |
Apogee Enterprises Inc. | | 14,600 | | | 219,292 | |
Griffon Corp. | | 33,434 | | | 336,680 | A |
| | | | | | |
| | | | | 555,972 | |
| | | | | | |
|
Commercial Services and Supplies — 4.1% | |
ATC Technology Corp. | | 8,375 | | | 165,490 | A |
Bowne and Co. Inc. | | 7,500 | | | 57,750 | |
Cenveo Inc. | | 9,500 | | | 65,740 | A |
Consolidated Graphics Inc. | | 2,700 | | | 67,365 | A |
Deluxe Corp. | | 24,200 | | | 413,820 | |
Ennis Inc. | | 16,510 | | | 266,306 | |
G & K Services Inc. | | 3,711 | | | 82,236 | |
Herman Miller Inc. | | 16,710 | | | 282,566 | |
ICT Group Inc. | | 4,200 | | | 44,100 | A |
Kimball International Inc. | | 14,607 | | | 111,452 | |
Knoll Inc. | | 10,880 | | | 113,478 | |
North American Galvanizing and Coating Inc. | | 9,099 | | | 55,231 | A |
RSC Holdings Inc. | | 23,560 | | | 171,281 | A |
| | |
44 | | Semi-Annual Report to Shareholders |
Portfolio of Investments — Continued
Legg Mason U.S. Small-Capitalization Value Trust — Continued
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Industrials — Continued | | | | | | |
Commercial Services and Supplies — Continued | |
TeleTech Holdings Inc. | | 300 | | $ | 5,118 | A |
United Stationers Inc. | | 12,770 | | | 607,980 | A |
WCA Waste Corp. | | 3,500 | | | 13,615 | A |
| | | | | | |
| | | | | 2,523,528 | |
| | | | | | |
| | |
Construction and Engineering — 1.3% | | | | | | |
Comfort Systems USA Inc. | | 15,800 | | | 183,122 | |
Dycom Industries Inc. | | 3,360 | | | 41,328 | A |
EMCOR Group Inc. | | 8,700 | | | 220,284 | A |
MasTec Inc. | | 6,200 | | | 75,330 | A |
Sterling Construction Co. Inc. | | 3,300 | | | 59,103 | A |
Tutor Perini Corp. | | 10,100 | | | 215,130 | A |
| | | | | | |
| | | | | 794,297 | |
| | | | | | |
| | |
Electrical Equipment — 1.8% | | | | | | |
Acuity Brands Inc. | | 13,880 | | | 447,075 | |
AZZ Inc. | | 7,000 | | | 281,190 | A |
EnerSys | | 8,600 | | | 190,232 | A |
Powell Industries Inc. | | 1,600 | | | 61,424 | A |
Regal-Beloit Corp. | | 1,134 | | | 51,835 | |
Thomas and Betts Corp. | | 2,700 | | | 81,216 | A |
| | | | | | |
| | | | | 1,112,972 | |
| | | | | | |
| | |
Machinery — 3.1% | | | | | | |
Alamo Group Inc. | | 5,470 | | | 86,426 | |
American Railcar Industries Inc. | | 3,700 | | | 39,257 | |
Ampco-Pittsburgh Corp. | | 2,000 | | | 53,180 | |
Barnes Group Inc. | | 8,040 | | | 137,404 | |
Briggs and Stratton Corp. | | 11,600 | | | 225,156 | |
Cascade Corp. | | 1,620 | | | 43,319 | |
CIRCOR International Inc. | | 3,500 | | | 98,910 | |
Columbus McKinnon Corp. | | 5,820 | | | 88,173 | A |
Crane Co. | | 5,700 | | | 147,117 | |
Force Protection Inc. | | 14,600 | | | 79,716 | A |
Graham Corp. | | 1,900 | | | 29,545 | |
Hurco Cos. Inc. | | 1,200 | | | 20,496 | A |
| | |
Semi-Annual Report to Shareholders | | 45 |
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Industrials — Continued | | | | | | |
Machinery — Continued | | | | | | |
K-Tron International Inc. | | 700 | | $ | 66,647 | A |
Middleby Corp. | | 2,100 | | | 115,521 | A |
Miller Industries Inc. | | 6,500 | | | 71,500 | A |
Mueller Industries Inc. | | 10,220 | | | 243,951 | |
Tecumseh Products Co. | | 2,600 | | | 29,458 | A |
Trinity Industries Inc. | | 3,900 | | | 67,041 | |
Twin Disc Inc. | | 2,300 | | | 28,681 | |
Watts Water Technologies Inc. | | 7,500 | | | 226,875 | |
| | | | | | |
| | | | | 1,898,373 | |
| | | | | | |
| | |
Marine — 0.5% | | | | | | |
American Commercial Lines Inc. | | 1,300 | | | 37,856 | A |
Genco Shipping and Trading Ltd. | | 5,900 | | | 122,602 | |
International Shipholding Corp. | | 4,000 | | | 123,240 | |
| | | | | | |
| | | | | 283,698 | |
| | | | | | |
| | |
Professional Services — 2.1% | | | | | | |
Barrett Business Services Inc. | | 2,100 | | | 22,218 | |
CDI Corp. | | 3,800 | | | 53,390 | |
Heidrick and Struggles International Inc. | | 7,400 | | | 172,124 | |
Kelly Services Inc. | | 14,240 | | | 175,152 | |
Korn/Ferry International | | 16,984 | | | 247,797 | A |
School Specialty Inc. | | 8,160 | | | 193,555 | A |
Spherion Corp. | | 14,400 | | | 89,424 | A |
TrueBlue Inc. | | 8,740 | | | 122,972 | A |
Volt Information Sciences Inc. | | 11,310 | | | 138,208 | A |
VSE Corp. | | 2,200 | | | 85,822 | |
| | | | | | |
| | | | | 1,300,662 | |
| | | | | | |
| | |
Road and Rail — 0.5% | | | | | | |
Amerco Inc. | | 2,400 | | | 110,064 | A |
Arkansas Best Corp. | | 4,310 | | | 129,041 | |
Covenant Transportation Group Inc. | | 3,100 | | | 15,221 | A |
Frozen Food Express Industries Inc. | | 2,600 | | | 7,618 | |
P.A.M. Transportation Services Inc. | | 1,600 | | | 13,264 | A |
Saia Inc. | | 990 | | | 15,919 | A |
| | |
46 | | Semi-Annual Report to Shareholders |
Portfolio of Investments — Continued
Legg Mason U.S. Small-Capitalization Value Trust — Continued
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Industrials — Continued | | | | | | |
Road and Rail — Continued | | | | | | |
USA Truck Inc. | | 444 | | $ | 5,639 | A |
| | | | | | |
| | | | | 296,766 | |
| | | | | | |
| |
Trading Companies and Distributors — 2.3% | | | | |
Aceto Corp. | | 4,825 | | | 31,845 | |
Aircastle Ltd. | | 15,600 | | | 150,852 | |
Applied Industrial Technologies Inc. | | 7,920 | | | 167,587 | |
DXP Enterprises Inc. | | 1,570 | | | 17,506 | A |
GATX Corp. | | 11,430 | | | 319,468 | |
H&E Equipment Services Inc. | | 7,200 | | | 81,576 | A |
Interline Brands Inc. | | 3,650 | | | 61,503 | A |
Rush Enterprises Inc. | | 2,090 | | | 27,003 | A |
WESCO International Inc. | | 18,900 | | | 544,320 | A |
Willis Lease Finance Corp. | | 2,320 | | | 31,714 | A |
| | | | | | |
| | | | | 1,433,374 | |
| | | | | | |
| | |
Transportation Infrastructure — N.M. | | | | | | |
CAI International Inc. | | 3,200 | | | 23,584 | A |
| | | | | | |
| | |
Information Technology — 12.8% | | | | | | |
Communications Equipment — 2.4% | | | | | | |
Avocent Corp. | | 11,700 | | | 237,159 | A |
Bel Fuse Inc. | | 2,500 | | | 47,575 | |
Black Box Corp. | | 9,800 | | | 245,882 | |
Communications Systems Inc. | | 2,400 | | | 28,032 | |
Digi International Inc. | | 6,400 | | | 54,528 | A |
Globecomm Systems Inc. | | 8,800 | | | 63,976 | A |
Harris Stratex Networks Inc. | | 11,100 | | | 77,700 | A |
Oplink Communications Inc. | | 11,100 | | | 161,172 | A |
Opnext Inc. | | 16,016 | | | 46,927 | A |
PC-Tel Inc. | | 9,900 | | | 61,875 | A |
Sycamore Networks Inc. | | 143,960 | | | 434,759 | A |
Tollgrade Communications Inc. | | 5,500 | | | 35,640 | A |
| | | | | | |
| | | | | 1,495,225 | |
| | | | | | |
| | |
Semi-Annual Report to Shareholders | | 47 |
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Information Technology — Continued | | | | | | |
Computers and Peripherals — 0.9% | | | | | | |
Adaptec Inc. | | 78,000 | | $ | 260,520 | A |
Electronics for Imaging Inc. | | 23,200 | | | 261,464 | A |
Silicon Graphics International Corp. | | 5,400 | | | 36,234 | A |
| | | | | | |
| | | | | 558,218 | |
| | | | | | |
| |
Electronic Equipment, Instruments &
Components — 5.3% | | | | |
Agilysys Inc. | | 4,500 | | | 29,655 | |
Anixter International Inc. | | 3,400 | | | 136,374 | A |
Benchmark Electronics Inc. | | 49,290 | | | 887,220 | A |
Coherent Inc. | | 2,560 | | | 59,699 | A |
CPI International Inc. | | 8,980 | | | 100,486 | A |
Electro Scientific Industries Inc. | | 7,710 | | | 103,237 | A |
Methode Electronics Inc. | | 11,600 | | | 100,572 | |
MTS Systems Corp. | | 2,300 | | | 67,183 | |
Multi-Fineline Electronix Inc. | | 8,900 | | | 255,519 | A |
Newport Corp. | | 7,500 | | | 65,700 | A |
Nu Horizons Electronics Corp. | | 3,600 | | | 14,256 | A |
PAR Technology Corp. | | 3,000 | | | 19,140 | A |
PC Connection Inc. | | 9,200 | | | 50,048 | A |
PC Mall Inc. | | 3,000 | | | 20,580 | A |
Richardson Electronics Ltd. | | 8,300 | | | 42,330 | |
Smart Modular Technologies WWH Inc. | | 15,700 | | | 74,732 | A |
Spectrum Control Inc. | | 5,000 | | | 42,450 | A |
SYNNEX Corp. | | 26,780 | | | 816,254 | A |
TESSCO Technologies Inc. | | 900 | | | 15,660 | |
TTM Technologies Inc. | | 4,600 | | | 52,762 | A |
Vishay Intertechnology Inc. | | 37,215 | | | 293,999 | A |
| | | | | | |
| | | | | 3,247,856 | |
| | | | | | |
| | |
Internet Software and Services — 1.8% | | | | | | |
DivX Inc. | | 5,700 | | | 31,122 | A |
Earthlink Inc. | | 51,000 | | | 428,910 | |
Infospace Inc. | | 3,900 | | | 30,186 | A |
Internap Network Services Corp. | | 27,500 | | | 88,275 | A |
Keynote Systems Inc. | | 4,600 | | | 43,378 | A |
| | |
48 | | Semi-Annual Report to Shareholders |
Portfolio of Investments — Continued
Legg Mason U.S. Small-Capitalization Value Trust — Continued
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Information Technology — Continued | | | | | | |
Internet Software and Services — Continued | | | | |
Spark Networks Inc. | | 5,300 | | $ | 11,925 | A |
United Online Inc. | | 61,580 | | | 495,103 | |
| | | | | | |
| | | | | 1,128,899 | |
| | | | | | |
IT Services — 0.8% | | | | | | |
Convergys Corp. | | 20,100 | | | 199,794 | A |
CSG Systems International Inc. | | 17,200 | | | 275,372 | A |
StarTek Inc. | | 1,900 | | | 16,492 | A |
TechTeam Global Inc. | | 3,700 | | | 31,450 | A |
| | | | | | |
| | | | | 523,108 | |
| | | | | | |
| | |
Semiconductors and Semiconductor Equipment — 1.4% | | | | | | |
Brooks Automation Inc. | | 9,716 | | | 75,105 | A |
DSP Group Inc. | | 12,200 | | | 99,308 | A |
Exar Corp. | | 13,200 | | | 97,020 | A |
Fairchild Semiconductor International Inc. | | 9,600 | | | 98,208 | A |
GSI Technology Inc. | | 10,960 | | | 43,730 | A |
Integrated Silicon Solution Inc. | | 6,300 | | | 23,688 | A |
International Rectifier Corp. | | 6,400 | | | 124,736 | A |
MKS Instruments Inc. | | 10,478 | | | 202,121 | A |
Trident Microsystems Inc. | | 11,179 | | | 28,954 | A |
White Electronic Designs Corp. | | 8,920 | | | 41,210 | A |
| | | | | | |
| | | | | 834,080 | |
| | | | | | |
| | |
Software — 0.2% | | | | | | |
Dynamics Research Corp. | | 1,880 | | | 24,478 | A |
Fair Isaac Corp. | | 2,200 | | | 47,278 | |
Versant Corp. | | 1,989 | | | 35,603 | A |
| | | | | | |
| | | | | 107,359 | |
| | | | | | |
| | |
Materials — 4.3% | | | | | | |
Chemicals — 2.5% | | | | | | |
Koppers Holdings Inc. | | 2,700 | | | 80,055 | |
Olin Corp. | | 43,030 | | | 750,443 | |
OM Group Inc. | | 6,400 | | | 194,496 | A |
Westlake Chemical Corp. | | 19,380 | | | 498,066 | |
Zoltek Cos. Inc. | | 1,472 | | | 15,456 | A |
| | | | | | |
| | | | | 1,538,516 | |
| | | | | | |
| | |
Semi-Annual Report to Shareholders | | 49 |
| | | | | | |
| | | Shares/Par | | Value | |
| | | | | | |
Materials — Continued | | | | | | |
Containers and Packaging — 0.1% | | | | | | |
AEP Industries Inc. | | 1,200 | | $ | 47,880 | A |
| | | | | | |
| | |
Metals and Mining — 1.5% | | | | | | |
A.M. Castle and Co. | | 4,900 | | | 48,706 | |
Century Aluminum Co. | | 5,700 | | | 53,295 | A |
Coeur d’Alene Mines Corp. | | 7,400 | | | 151,700 | A |
Hecla Mining Co. | | 27,000 | | | 118,530 | A |
Kaiser Aluminum Corp. | | 3,500 | | | 127,260 | |
RTI International Metals Inc. | | 5,700 | | | 141,987 | A |
Universal Stainless and Alloy Products Inc. | | 1,600 | | | 29,200 | A |
Worthington Industries Inc. | | 17,980 | | | 249,922 | |
| | | | | | |
| | | | | 920,600 | |
| | | | | | |
| | |
Paper and Forest Products — 0.2% | | | | | | |
Buckeye Technologies Inc. | | 9,600 | | | 103,008 | A |
Glatfelter | | 4,610 | | | 52,923 | |
| | | | | | |
| | | | | 155,931 | |
| | | | | | |
| | |
Telecommunication Services — 0.7% | | | | | | |
Diversified Telecommunication Services — 0.6% | | | | |
Cincinnati Bell Inc. | | 73,370 | | | 256,795 | A |
SureWest Communications | | 7,600 | | | 94,392 | A |
| | | | | | |
| | | | | 351,187 | |
| | | | | | |
| |
Wireless Telecommunication Services — 0.1% | | | | |
USA Mobility Inc. | | 5,600 | | | 72,128 | |
| | | | | | |
| | |
Utilities — 4.9% | | | | | | |
Electric Utilities — 2.5% | | | | | | |
Central Vermont Public Service Corp. | | 4,200 | | | 81,060 | |
El Paso Electric Co. | | 17,100 | | | 302,157 | A |
IDACORP Inc. | | 19,370 | | | 557,663 | |
Portland General Electric Co. | | 25,510 | | | 503,057 | |
Unitil Corp. | | 4,500 | | | 101,025 | |
| | | | | | |
| | | | | 1,544,962 | |
| | | | | | |
| | |
50 | | Semi-Annual Report to Shareholders |
Portfolio of Investments — Continued
Legg Mason U.S. Small-Capitalization Value Trust — Continued
| | | | | | |
| | | Shares/Par | | Value |
| | | | | | |
Utilities — Continued | | | | | | |
Gas Utilities — 0.3% | | | | | | |
Southwest Gas Corp. | | | 7,530 | | $ | 192,617 |
| | | | | | |
| | |
Multi-Utilities — 2.1% | | | | | | |
Avista Corp. | | | 20,450 | | | 413,499 |
Black Hills Corp. | | | 10,020 | | | 252,203 |
PNM Resources Inc. | | | 53,000 | | | 619,040 |
| | | | | | |
| | | | | | 1,284,742 |
| | | | | | |
Total Common Stocks and Equity Interests
(Cost — $56,746,752) | | | | | | 60,484,744 |
Repurchase Agreements — 1.5% | | | | | | |
Bank of America 0.01%, dated 9/30/09, to be repurchased at $449,994 on 10/1/09 (Collateral: $460,000 Federal Home Loan Bank Bonds, 0.500%, due 10/18/10, value $459,755) | | $ | 449,994 | | | 449,994 |
JPMorgan Chase & Co. 0.01%, dated 9/30/09, to be repurchased at $449,994 on 10/1/09 (Collateral: $460,000 Federal Home Loan Bank Bonds, 0.600% due 6/21/10, value $461,512) | | | 449,994 | | | 449,994 |
| | | | | | |
Total Repurchase Agreements
(Cost — $899,988) | | | | | | 899,988 |
Total Investments — 99.4% (Cost — $57,646,740)B | | | 61,384,732 |
Other Assets Less Liabilities — 0.6% | | | | | | 364,521 |
| | | | | | |
| | |
Net Assets — 100.0% | | | | | $ | 61,749,253 |
| | | | | | |
| B | Aggregate cost for federal income tax purposes is substantially the same as book cost. At September 30, 2009, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows: |
| | | | |
| Gross unrealized appreciation | | $ | 8,560,465 | |
| Gross unrealized depreciation | | | (4,822,473 | ) |
| | | | |
| Net unrealized appreciation | | $ | 3,737,992 | |
| | | | |
N.M. — Not Meaningful.
See notes to financial statements.
| | |
Semi-Annual Report to Shareholders | | 51 |
Statement of Assets and Liabilities
Legg Mason U.S. Small-Capitalization Value Trust
September 30, 2009 (Unaudited)
| | | | | | | |
Assets: | | | | | | | |
Investment securities at value
(Cost – $57,646,740) | | | | | $ | 61,384,732 | |
Receivable for securities sold | | | | | | 2,281,607 | |
Receivable for fund shares sold | | | | | | 63,028 | |
Dividends and interest receivable | | | | | | 32,450 | |
| | | | | | | |
Total assets | | | | | | 63,761,817 | |
Liabilities: | | | | | | | |
Payable for securities purchased | | $ | 1,212,700 | | | | |
Payable for fund shares repurchased | | | 623,634 | | | | |
Accrued distribution and service fees | | | 39,627 | | | | |
Accrued management fee | | | 33,237 | | | | |
Accrued expenses | | | 103,366 | | | | |
| | | | | | | |
Total liabilities | | | | | | 2,012,564 | |
| | | | | | | |
Net Assets | | | | | $ | 61,749,253 | |
| | | | | | | |
Net assets consist of: | | | | | | | |
Accumulated paid-in-capital | | | | | $ | 90,794,642 | |
Accumulated net investment loss | | | | | | (197,522 | ) |
Accumulated net realized loss on investments | | | | | | (32,585,859 | ) |
Net unrealized appreciation of investments | | | | | | 3,737,992 | |
| | | | | | | |
Net Assets | | | | | $ | 61,749,253 | |
| | | | | | | |
Net Asset Value Per Share: | | | | | | | |
Class A (and redemption price) (374,245 shares outstanding) | | | | | | $7.72 | |
Class C1 (6,114,031 shares outstanding) | | | | | | $7.68 | |
Institutional Class (and redemption price) (1,333,314 shares outstanding) | | | | | | $8.92 | |
Maximum Public Offering Price Per Share: | | | | | | | |
Class A (based on maximum initial sales charge of 5.75%) | | | | | | $8.19 | |
| | | | | | | | |
| 1 | Redemption price per share is NAV of Class C shares reduced by 1.00% CDSC, if shares are redeemed within one year from purchase payment. |
See notes to financial statements.
| | |
52 | | Semi-Annual Report to Shareholders |
Statement of Operations
Legg Mason U.S. Small-Capitalization Value Trust
For the Six Months Ended September 30, 2009 (Unaudited)
| | | | | | | | |
Investment Income: | | | | | | | | |
Dividends | | $ | 393,905 | | | | | |
Interest | | | 657 | | | | | |
Less: Foreign taxes withheld | | | (70 | ) | | | | |
| | | | | | | | |
Total income | | | | | | $ | 394,492 | |
Expenses: | | | | | | | | |
Management fees (Note 3) | | | 245,633 | | | | | |
Distribution and service fees (Notes 3 and 5) | | | 226,054 | | | | | |
Audit and legal fees | | | 26,587 | | | | | |
Registration fees | | | 23,700 | | | | | |
Transfer agent and shareholder servicing expenses (Note 5) | | | 19,620 | | | | | |
Custodian fees | |
| 15,396
|
| | | | |
Directors’ fees and expenses | | | 12,560 | | | | | |
Shareholder reports expenses (Note 5) | |
| 3,345
|
| | | | |
Other expenses | | | 20,618 | | | | | |
| | | | | | | | |
| | | 593,513 | | | | | |
Less: Fees waivers and/or expense reimbursements (Notes 3 and 5) | | | (78,481 | ) | | | | |
| | | | | | | | |
Net expenses | | | | | | | 515,032 | |
| | | | | | | | |
Net Investment Loss | | | | | | | (120,540 | ) |
Net Realized and Unrealized Gain/(Loss) on Investments: | | | | | | | | |
Net realized loss on investments | | | (5,592,322 | ) | | | | |
Change in unrealized appreciation/(depreciation) of investments | | | 24,394,552 | | | | | |
| | | | | | | | |
Net Realized and Unrealized Gain on Investments | | | | | | | 18,802,230 | |
Change in Net Assets Resulting From Operations | | | | | | $ | 18,681,690 | |
See notes to financial statements.
| | |
Semi-Annual Report to Shareholders | | 53 |
Statement of Changes in Net Assets
Legg Mason U.S. Small-Capitalization Value Trust
| | | | | | | | |
| | | For the Six
Months Ended
September 30, 2009 | | | For the
Year Ended
March 31, 2009 | |
| | | (Unaudited) | | | | |
Change in Net Assets: | | | | | | | | |
Net investment income (loss) | | $ | (120,540 | ) | | $ | 60,939 | |
Net realized loss | | | (5,592,322 | ) | | | (26,990,950 | ) |
Change in unrealized appreciation/(depreciation) | | | 24,394,552 | | | | (12,916,768 | ) |
Change in net assets resulting from operations | | | 18,681,690 | | | | (39,846,779 | ) |
Distributions to shareholders from: | | | | | | | | |
Net investment income: | | | | | | | | |
Class C1 | | | — | | | | (196,623 | ) |
Institutional Class | | | — | | | | (259,266 | ) |
Net realized gain on investments: | | | | | | | | |
Class C1 | | | — | | | | (208,539 | ) |
Institutional Class | | | — | | | | (28,656 | ) |
Change in net assets from fund share transactions: | | | | | | | | |
Class A | | | (27,094 | ) | | | 2,283,526 | 2 |
Class C1 | | | (5,742,274 | ) | | | (31,522,776 | ) |
Institutional Class | | | (205,145 | ) | | | (10,469,823 | ) |
Change in net assets | | | 12,707,177 | | | | (80,248,936 | ) |
Net Assets: | | | | | | | | |
Beginning of period | | | 49,042,076 | | | | 129,291,012 | |
End of period | | $ | 61,749,253 | | | $ | 49,042,076 | |
Accumulated net investment loss and overdistributed net investment income, respectively | | | $(197,522 | ) | | | $(76,982 | ) |
| 1 | On February 1, 2009, Primary Class shares were renamed Class C shares. |
| 2 | For the period February 3, 2009 (commencement of operations) to March 31, 2009. |
See notes to financial statements.
| | |
54 | | Semi-Annual Report to Shareholders |
Financial Highlights
Legg Mason U.S. Small-Capitalization Value Trust
For a share of each class of capital stock outstanding:
Class A :
| | | | | | |
| | | Six Months
Ended
September 30, 2009 | | | Period
Ended
March 31, 2009A | |
| | | (Unaudited) | | | | |
Net asset value, beginning of period | | $5.52 | | | $5.97 | |
Investment operations: | | | | | | |
Net investment incomeB | | .00 | C | | .01 | |
Net realized and unrealized gain/(loss) | | 2.20 | | | (.46 | ) |
Total from investment operations | | 2.20 | | | (.45 | ) |
Net asset value, end of period | | $7.72 | | | $5.52 | |
Total returnD | | 39.85 | % | | (7.54 | )% |
Ratios to Average Net Assets:E | | | | | | |
Total expensesF | | 1.63 | % | | 1.80 | % |
Expenses net of waivers and/or expense reimbursements, if anyF | | 1.25 | % | | 1.25 | % |
Expenses net of all reductionsF | | 1.25 | % | | 1.25 | % |
Net investment income | | .11 | % | | .80 | % |
Supplemental Data: | | | | | | |
Portfolio turnover rate | | 30.5 | % | | 59.9 | % |
Net assets, end of period (in thousands) | | $2,887 | | | $2,091 | |
| A | For the period February 3, 2009 (commencement of operations) to March 31, 2009. |
| B | Computed using average daily shares outstanding. |
| C | Amount less than $.01 per share. |
| D | Performance figures, exclusive of sales charges, may reflect compensating balance credits, fee waivers and/or expense reimbursements. In the absence of compensating balance credits, 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. |
| F | Total expenses reflects operating expenses prior to any voluntary expense waivers, expense reimbursements and/or compensating balance credits. Expenses net of waivers and/or expense reimbursements, reflects total expenses before compensating balance credits but net of any voluntary expense waivers and/or expense reimbursements. Expenses net of all reductions reflects expenses less any compensating balance credits, voluntary expense waivers and/or expense reimbursements. |
See notes to financial statements.
| | |
Semi-Annual Report to Shareholders | | 55 |
For a share of each class of capital stock outstanding:
Class CA:
| | | | | | | | | | | | | | | | | | |
| | | Six Months
Ended
September 30, 2009 | | | Years Ended March 31, | |
| | | | 2009 | | | 2008 | | | 2007 | | | 2006 | | | 2005 | |
| | | (Unaudited) | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $5.51 | | | $9.50 | | | $13.73 | | | $14.51 | | | $14.43 | | | $14.52 | |
Investment operations: | | | | | | | | | | | | | | | | | | |
Net investment income/(loss) | | (.02 | )B | | (.01 | )B | | .01 | B | | (.02 | )B | | (.06 | ) | | (.05 | ) |
Net realized and unrealized gain/(loss) | | 2.19 | | | (3.94 | ) | | (2.30 | ) | | .98 | | | 1.77 | | | 1.38 | |
Total from investment operations | | 2.17 | | | (3.95 | ) | | (2.29 | ) | | .96 | | | 1.71 | | | 1.33 | |
Distributions from: | | | | | | | | | | | | | | | | | | |
Net investment income | | — | | | (.02 | ) | | — | | | — | | | — | | | — | |
Net realized gain on investments | | — | | | (.02 | ) | | (1.94 | ) | | (1.74 | ) | | (1.63 | ) | | (1.42 | ) |
Total distributions | | — | | | (.04 | ) | | (1.94 | ) | | (1.74 | ) | | (1.63 | ) | | (1.42 | ) |
Net asset value, end of period | | $7.68 | | | $5.51 | | | $ 9.50 | | | $13.73 | | | $14.51 | | | $14.43 | |
Total returnC | | 39.38 | % | | (41.75 | )% | | (17.94 | )% | | 7.00 | % | | 12.63 | % | | 9.67 | % |
Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | |
Total expensesD | | 2.25 | %E | | 2.30 | % | | 2.05 | % | | 2.04 | % | | 2.01 | % | | 2.00 | % |
Expenses net of waivers and/or expense reimbursements, if anyD | | 2.00 | %E | | 2.00 | % | | 2.00 | % | | 2.00 | % | | 2.00 | % | | 2.00 | % |
Expenses net of all reductionsD | | 2.00 | %E | | 2.00 | % | | 2.00 | % | | 2.00 | % | | 2.00 | % | | 2.00 | % |
Net investment income (loss) | | (.63 | )%E | | (.08 | )% | | .10 | % | | (.15 | )% | | (.40 | )% | | (.39 | )% |
Supplemental Data: | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | 30.5 | % | | 59.9 | % | | 31.7 | % | | 28.9 | % | | 30.9 | % | | 46.7 | % |
Net assets, end of period
(in thousands) | | $46,963 | | | $38,306 | | | $104,013 | | | $207,926 | | | $232,061 | | | $242,719 | |
| A | On February 1, 2009, Primary Class shares were renamed Class C shares. |
| B | Computed using average daily shares outstanding. |
| C | Performance figures, exclusive of CDSC, may reflect compensating balance credits, fee waivers and/or expense reimbursements. In the absence of compensating balance credits, 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. |
| D | Total expenses reflects operating expenses prior to any voluntary expense waivers, expense reimbursements and/or compensating balance credits. Expenses net of waivers and/or expense reimbursements reflects total expenses before compensating balance credits but net of any voluntary expense waivers and/or expense reimbursements. Expenses net of all reductions reflects expenses less any compensating balance credits, voluntary expense waivers and/or expense reimbursements. |
See notes to financial statements.
| | |
56 | | Semi-Annual Report to Shareholders |
Financial Highlights — Continued
Legg Mason U.S. Small-Capitalization Value Trust — Continued
For a share of each class of capital stock outstanding:
Institutional Class:
| | | | | | | | | | | | | | | | | | |
| | | Six Months
Ended
September 30, 2009 | | | Years Ended March 31, | |
| | | | 2009 | | | 2008 | | | 2007 | | | 2006 | | | 2005 | |
| | | (Unaudited) | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | $6.37 | | | $11.05 | | | $15.48 | | | $15.99 | | | $15.59 | | | $15.39 | |
Investment operations: | | | | | | | | | | | | | | | | | | |
Net investment income | | .01 | A | | .08 | A | | .16 | A | | .13 | A | | .00 | B | | .09 | |
Net realized and unrealized gain/(loss) | | 2.54 | | | (4.55 | ) | | (2.65 | ) | | 1.10 | | | 2.03 | | | 1.53 | |
Total from investment operations | | 2.55 | | | (4.47 | ) | | (2.49 | ) | | 1.23 | | | 2.03 | | | 1.62 | |
Distributions from: | | | | | | | | | | | | | | | | | | |
Net investment income | | — | | | (.19 | ) | | — | | | — | | | — | | | — | |
Net realized gain on investments | | — | | | (.02 | ) | | (1.94 | ) | | (1.74 | ) | | (1.63 | ) | | (1.42 | ) |
Total distributions | | — | | | (.21 | ) | | (1.94 | ) | | (1.74 | ) | | (1.63 | ) | | (1.42 | ) |
Net asset value, end of period | | $8.92 | | | $ 6.37 | | | $11.05 | | | $15.48 | | | $15.99 | | | $15.59 | |
Total returnC | | 40.03 | % | | (41.24 | )% | | (17.17 | )% | | 8.09 | % | | 13.81 | % | | 11.06 | % |
Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | |
Total expensesD | | 1.32 | %E | | 1.29 | % | | 1.01 | % | | 1.00 | % | | .98 | % | | .93 | % |
Expenses net of waivers and/or expense reimbursements, if anyD | | 1.00 | %E | | 1.00 | % | | 1.00 | % | | 1.00 | % | | .98 | % | | .93 | % |
Expenses net of all reductionsD | | 1.00 | %E | | 1.00 | % | | 1.00 | % | | 1.00 | % | | .98 | % | | .93 | % |
Net investment income | | .37 | %E�� | | .88 | % | | 1.13 | % | | .85 | % | | .66 | % | | .69 | % |
Supplemental Data: | | | | | | | | | | | | | | | | | | |
Portfolio turnover rate | | 30.5 | % | | 59.9 | % | | 31.7 | % | | 28.9 | % | | 30.9 | % | | 46.7 | % |
Net assets, end of period
(in thousands) | | $11,899 | | | $8,645 | | | $25,278 | | | $33,894 | | | $35,997 | | | $14,349 | |
| A | Computed using average daily shares outstanding. |
| B | Amount less than $.01 per share. |
| C | Performance figures may reflect compensating balance credits, fee waivers and/or expense reimbursements. In the absence of compensating balance credits, 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. |
| D | Total expenses reflects operating expenses prior to any voluntary expense waivers, expense reimbursements and/or compensating balance credits. Expenses net of waivers and/or expense reimbursements reflects total expenses before compensating balance credits but net of any voluntary expense waivers and/or expense reimbursements. Expenses net of all reductions reflects expenses less any compensating balance credits, voluntary expense waivers and/or expense reimbursements. |
See notes to financial statements.
| | |
Semi-Annual Report to Shareholders | | 57 |
Notes to Financial Statements
Legg Mason Investors Trust, Inc.
(Unaudited)
1. Organization and Significant Accounting Policies:
Legg Mason Investors Trust, Inc. (“Corporation”), consisting of Legg Mason Capital Management American Leading Companies Trust (formerly known as Legg Mason American Leading Companies Trust) (“American Leading Companies”) and Legg Mason U.S. Small-Capitalization Value Trust (“U.S. Small-Cap”) (each a “Fund”), is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end, diversified investment company.
Each Fund currently offers of three classes of shares: Class A, Class C and Class I (formerly known as Institutional Class) for American Leading Companies and Class A, Class C and Institutional Class for U.S. Small-Cap. The income and expenses of the Funds are allocated proportionately to each class of shares based on daily net assets, except for Rule 12b-1 distribution and/or service fees, which are charged only on Class A and Class C shares. Transfer agent and shareholder servicing expenses are charged separately for each class.
The following are significant accounting policies consistently followed by the Funds 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 November 19, 2009, the issuance date of the financial statements.
Investment Valuation
The Funds' securities are valued under policies approved by and under the general oversight of the Board of Directors. The Funds have adopted Financial Accounting Standards Board Codification Section 820 (formerly Statement of Financial Accounting Standards No. 157) (“ASC Section 820”). ASC Section 820 establishes a single definition of fair value, creates a three-tier hierarchy as a framework for measuring fair value based on inputs used to value the Funds’ investments, and requires additional disclosure about fair value. The hierarchy of inputs is summarized below.
| | • | | Level 1 — quoted prices in active markets for identical investments |
| | • | | Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| | • | | Level 3 — significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments) |
Equity securities for which market quotations are available are valued at the last sale price or official closing price on the primary market or exchange on which they trade.
| | |
58 | | Semi-Annual Report to Shareholders |
Notes to Financial Statements — Continued
Legg Mason Investors Trust, Inc. — Continued
Debt securities are valued at the last quoted bid prices provided by an independent pricing service that are based on transactions in debt obligations, quotations from bond dealers, market transactions in comparable securities and various other relationships between securities. When prices are not readily available, or are determined not to reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before each Fund calculates its net asset value, the Funds value these securities at fair value as determined in accordance with the procedures approved by the Funds’ Board of Directors.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The Funds use valuation techniques to measure fair value that are consistent with the market approach, income approach and/or cost approach, depending on the type of the security and the particular circumstance.
The following is a summary of the inputs used in valuing the Funds’ assets carried at fair value:
American Leading Companies
| | | | | | | | | | | |
| Description | | Quoted Prices
(Level 1) | | Other Significant
Observable Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) | | Total |
Common stocks and equity interests† | | $ | 242,362,347 | | | — | | — | | $ | 242,362,347 |
Short-term securities† | | | — | | $ | 177,191 | | — | | | 177,191 |
| | | | | | | | | | | |
Total investments | | $ | 242,362,347 | | $ | 177,191 | | — | | $ | 242,539,538 |
| | | | | | | | | | | |
| † | See Portfolio of Investments for additional detailed categorizations. |
| | |
Semi-Annual Report to Shareholders | | 59 |
U.S. Small-Cap
| | | | | | | | | | | |
| Description | | Quoted Prices
(Level 1) | | Other Significant
Observable Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) | | Total |
Common stocks and equity interests† | | $ | 60,484,744 | | | — | | — | | $ | 60,484,744 |
Short-term securities† | | | — | | $ | 899,988 | | — | | | 899,988 |
| | | | | | | | | | | |
Total | | $ | 60,484,744 | | $ | 899,988 | | — | | $ | 61,384,732 |
| | | | | | | | | | | |
| † | See Portfolio of Investments for additional detailed categorizations |
Security Transactions
Security transactions are accounted for as of the trade date. Realized gains and losses from security transactions are reported on an identified cost basis for both financial reporting and federal income tax purposes.
For the six months ended September 30, 2009, security transactions (excluding short-term investments) were as follows:
| | | | | | |
| | | Purchases | | Proceeds From Sales |
American Leading Companies | | $ | 18,833,319 | | $ | 39,546,520 |
U.S. Small-Cap | | | 16,935,954 | | | 23,583,933 |
Foreign Currency Translation
Assets and liabilities initially expressed in non-U.S. currencies are translated into U.S. dollars using currency exchange rates determined prior to the close of trading on the New York Stock Exchange, usually at 2:00 p.m. Eastern time. Purchases and sales of securities and income and expenses are translated into U.S. dollars at the prevailing market rates on the dates of such transactions. The effects of changes in non-U.S. currency exchange rates on investment securities and other assets and liabilities are included with the net realized and unrealized gain or loss on investment securities for each Fund.
Repurchase Agreements
When entering into repurchase agreements, it is the Funds’ policy that their custodian or a third party custodian take possession of the underlying collateral securities, the market value of which, at all times, at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is
| | |
60 | | Semi-Annual Report to Shareholders |
Notes to Financial Statements — Continued
Legg Mason Investors Trust, Inc. — Continued
marked-to-market daily to ensure the adequacy of the collateral. If the seller defaults, and the market value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Funds may be delayed or limited.
Compensating Balance Credits
Each Fund has an arrangement with its custodian bank whereby a portion of the custodian’s fee is paid indirectly by credits earned on the Fund’s cash on deposit with the bank. This deposit arrangement is an alternative to purchasing overnight investments.
Commission Recapture
American Leading Companies has entered into a directed brokerage agreement with State Street Bank & Trust Company, its custodian, whereby a portion of commissions paid on investment transactions may be rebated to the Fund. Such payments are included in the realized gain/(loss) on investment transactions. During the six months ended September 30, 2009, the Fund did not receive any commission rebates.
Redemptions In-Kind
The Funds under certain conditions may redeem their shares in-kind by distributing portfolio securities rather than making cash payment. Gains and losses realized on redemption in-kind transactions are not recognized for tax purposes, and are reclassified from undistributed realized gain (loss) to paid in-capital. During the six months ended September 30, 2009, the Funds did not have any redemptions in-kind.
Investment Income and Distributions to Shareholders
Interest income and expenses are recorded on the accrual basis. Bond premiums and discounts are amortized for financial reporting and federal income tax purposes. Dividend income is recorded on the ex-dividend date. Dividends from net investment income, if available, are determined at the class level and paid annually for each Fund. Distributions from net realized capital gains, which are calculated at the Fund level, are declared and paid annually in June, if available. An additional distribution may be made in December, to the extent necessary, in order to comply with federal excise tax requirements. Distributions are determined in accordance with federal income tax regulations, which may differ from those determined in accordance with GAAP. Accordingly, periodic reclassifications are made within each Fund’s capital accounts to reflect income and gains available for distribution under federal income tax regulations.
| | |
Semi-Annual Report to Shareholders | | 61 |
Foreign Taxes
The Funds are subject to foreign income taxes imposed by certain countries in which each invests. Foreign income taxes are accrued by the Funds and withheld from dividend and interest income.
Market Price Risk
The prices of securities held by each Fund may decline in response to certain events, including those directly involving the companies whose securities are owned by each Fund; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency, interest rate and commodity price fluctuations. The value-oriented, equity-type securities generally purchased by each Fund may involve large price swings and potential for loss.
Other
In the normal course of business, each Fund enters into contracts that provide general indemnifications. Each Fund’s maximum exposure under these arrangements is dependent on claims that may be made against that Fund in the future and, therefore, cannot be estimated. However, based on experience, the risk of material loss from such claims is considered remote.
2. Federal Income Taxes:
It is each 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, each 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 income tax provision is required in either Fund’s financial statements.
Management has analyzed each Fund’s tax positions taken on federal income tax returns for all open tax years and has concluded that as of September 30, 2009, no provision for income tax would be required in either Fund’s financial statements. Each 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 Internal Revenue Service and state departments of revenue.
Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates.
Reclassifications
GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share.
| | |
62 | | Semi-Annual Report to Shareholders |
Notes to Financial Statements — Continued
Legg Mason Investors Trust, Inc. — Continued
Capital loss carryforwards
As of March 31, 2009, the Funds had net capital loss carryforwards of the following:
| | | | | | | | |
| Year of Expiration | | American Leading
Companies | | | U.S. Small-Cap | |
3/31/2017 | | $ | (36,469,435 | ) | | $ | (9,157,674 | ) |
3. Transactions With Affiliates:
American Leading Companies has an investment advisory and management agreement with Legg Mason Capital Management, Inc. (“LMCM”). Pursuant to the agreement, LMCM provides American Leading Companies with investment advisory, management and administrative services for which the Fund pays a fee, computed daily and payable monthly, at an annual rate of the Fund’s average daily net assets shown in the table below.
During the period, U.S. Small-Cap had a management agreement with Legg Mason Fund Adviser, Inc. (“LMFA”). Pursuant to the agreement, LMFA provided U.S. Small-Cap with management and administrative services for which the Fund paid a fee, computed daily and payable monthly, at the annual rate of the Fund’s average daily net assets shown in the table below.
The following chart summarizes the management fees for each of the Funds:
| | | | |
| Fund | | Management
Fee | | Net Asset Breakpoint |
American Leading Companies | | 0.70% | | on net assets up to $1 billion |
| | 0.68% | | on net assets $1 billion – $2 billion |
| | 0.65% | | on net assets $2 billion – $5 billion |
| | 0.62% | | on net assets $5 billion – $10 billion |
| | 0.59% | | on net assets in excess of $10 billion |
U.S. Small-Cap | | 0.85% | | on net assets up to $100 million |
| | 0.75% | | on net assets $100 million – $1 billion |
| | 0.65% | | on net assets in excess of $1 billion |
| | |
Semi-Annual Report to Shareholders | | 63 |
Each Fund’s manager has voluntarily agreed to waive its fees and/or reimburse expenses in any month to the extent a Fund’s expenses (exclusive of taxes, interest, brokerage and extraordinary expenses) exceed during that month certain annual rates of that Fund’s average daily net assets. These voluntary waivers and/or expense reimbursements may be terminated or modified at any time. For the six months ended September 30, 2009, each Fund’s manager waived fees and/or reimbursed expenses in the amount of $88 for American Leading Companies and $78,481 for U.S. Small-Cap, respectively.
Each Fund’s manager is permitted to recapture amounts previously voluntarily forgone or reimbursed by the manager to the Fund during the same fiscal year if the Fund’s total annual operating expenses have fallen to a level below the voluntary fee waiver/reimbursement (“expense cap”) shown in the fee table of each Fund’s prospectus. In no case will the manager recapture any amount that would result, on any particular business day of a Fund, in the Fund’s total operating expenses exceeding the expense cap.
The following chart summarizes the expense limitations for each of the Funds:
| | | | | | | | | | | | |
| Fund | | Class A
Expense
Limitation | | | Class C
Expense
Limitation | | | Class I
Expense
Limitation | | | Institutional Class
Expense
Limitation | |
American Leading Companies | | 1.20 | % | | 1.95 | % | | 0.95 | % | | N/A | |
U.S. Small-Cap | | 1.25 | % | | 2.00 | % | | N/A | | | 1.00 | % |
Brandywine Global Investment Management, LLC (“Brandywine Global”) serves as investment adviser to U.S. Small-Cap. Brandywine Global is responsible, subject to the general supervision of the Fund’s manager, for the actual investment activity of the Fund. The Fund’s manager pays Brandywine Global a fee for its services, computed daily and payable monthly, at an annual rate equal to 58.8% of the fee received by the manager.
Legg Mason Investor Services, LLC (“LMIS”), serves as the Funds’ distributor.
During the period, LMFA served as administrator to American Leading Companies under an administrative services agreement with LMCM. For LMFA’s services to American Leading Companies, LMCM (not the Fund) paid LMFA a fee, calculated daily and payable monthly, of 0.05% of the average daily net assets of the Fund.
As of September 30, 2009, Legg Mason Partners Fund Advisor, LLC (“LMPFA”) replaced LMFA. Effective upon the substitution, LMPFA assumed the rights and responsibilities of LMFA under all agreements regarding each Fund as described in the Funds’ prospectus.
LMCM, LMFA, LMPFA, Brandywine Global and LMIS are wholly owned subsidiaries and corporate affiliates of Legg Mason, Inc.
For American Leading Companies Trust, there is a maximum initial sales charge of 5.75% for Class A shares. On February 1, 2009, Class C shares began to charge a
| | |
64 | | Semi-Annual Report to Shareholders |
Notes to Financial Statements — Continued
Legg Mason Investors Trust, Inc. — Continued
contingent deferred sales charge (“CDSC”) of 1.00% on shares bought by investors on or after that date, which applies if shares are redeemed within one year from purchase payment. In certain cases, Class A shares have a 1.00% CDSC, which applies to certain redemptions made within 12 months following purchases of $1,000,000 or more without an initial sales charge.
During the six months ended September 30, 2009, LMIS and its affiliates did not receive sales charges on sales of American Leading Companies’ Class A shares. In addition, for the six months ended September 30, 2009, CDSCs paid to LMIS and its affiliates were approximately $400 on American Leading Companies’ Class C shares.
For U.S. Small-Cap, there is a maximum initial sales charge of 5.75% for Class A shares. On February 1, 2009, Class C shares began to charge a CDSC of 1.00% on shares bought by investors on or after that date, which applies if shares are redeemed within one year from purchase payment. In certain cases, Class A shares have a 1.00% CDSC, which applies to certain redemptions made within 12 months following purchase of $1,000,000 or more without an initial sales charge.
During the six months ended September 30, 2009, LMIS and its affiliates received sales charges of approximately $900 on sales of U.S. Small Cap’s Class A shares. In addition, for the six months ended September 30, 2009, there were no CDSCs paid to LMIS and its affiliates on U.S. Small Cap’s Class C shares.
Under a Deferred Compensation Plan (the “Plan”), directors may elect to defer receipt of all or a specified portion of their compensation. A participating director may select one or more funds in which his or her deferred director’s fees will be deemed to be invested. Deferred fees remain in the funds until distributed in accordance with the Plan.
4. Derivative Instruments and Hedging Activities:
Financial Accounting Standards Board Codification Section 815 (formerly Statement of Financial Accounting Standards No. 161) (“ASC Topic 815”) requires enhanced disclosure about an entity’s derivative and hedging activities.
During the six months ended September 30, 2009, the Funds did not invest in any derivative instruments.
5. Class Specific Expenses, Waivers and/or Reimbursements:
The Funds have adopted a Rule 12b-1 distribution plan and under that plan the Funds pay a service fee with respect to their Class A and C shares calculated at the annual rate of 0.25% of the average daily net assets of each respective class. The Funds also pay a distribution fee with respect to their Class C shares calculated at the annual rate of 0.75% of the average daily net assets of their Class C shares. Distribution fees are accrued daily and paid monthly.
| | |
Semi-Annual Report to Shareholders | | 65 |
For the period ended September 30, 2009, class specific expenses were as follows:
American Leading Companies
| | | | | | | | | |
| | | Distribution
Fees | | Transfer Agent
and Shareholder
Servicing Expenses | | Shareholder Reports
Expenses1 |
Class A | | $ | 15,292 | | $ | 3,981 | | $ | 182 |
Class C | | | 975,516 | | | 78,916 | | | 22,675 |
Class IA | | | — | | | 7,278 | | | 1,475 |
| | | | | | | | | |
Total | | $ | 990,808 | | $ | 90,175 | | $ | 24,332 |
| | | | | | | | | |
U.S. Small-Cap
| | | | | | | | | |
| | | Distribution
Fees | | Transfer Agent
and Shareholder
Servicing Expenses | | Shareholder Reports
Expenses1 |
Class A | | $ | 3,143 | | $ | 1,876 | | $ | 412 |
Class C | | | 222,911 | | | 11,266 | | | 2,504 |
Institutional Class | | | — | | | 6,478 | | | 135 |
| | | | | | | | | |
Total | | $ | 226,054 | | $ | 19,620 | | $ | 3,051 |
| | | | | | | | | |
| A | Effective October 5, 2009, Institutional Class shares were renamed Class I shares. |
| 1 | For the period April 1, 2009 through September 10, 2009. Subsequent to September 10, 2009, these expenses were accrued as common fund expenses. |
For the period ended September 30, 2009, class specific waivers and/or reimbursements were as follows:
| | | | | | | | | | | | | | | |
| | | Class A | | Class C | | Class I | | Institutional
Class | | Total |
American Leading Companies | | $ | 46 | | | — | | $ | 42 | | | N/A | | $ | 88 |
U.S. Small-Cap | | | 4,728 | | $ | 56,799 | | | N/A | | $ | 16,954 | | | 78,481 |
6. Line of Credit:
The Funds, along with certain other Legg Mason Funds, participate in a $200 million line of credit (“Credit Agreement”) to be used for temporary or emergency purposes. Pursuant to the Credit Agreement, each participating Fund is liable only for principal and interest payments related to borrowings made by that Fund. Borrowings under the Credit Agreement bear interest at a rate equal to the prevailing federal funds
| | |
66 | | Semi-Annual Report to Shareholders |
Notes to Financial Statements — Continued
Legg Mason Investors Trust, Inc. — Continued
rate plus the federal funds rate margin. Neither Fund utilized the line of credit during the six months ended September 30, 2009.
7. Fund Share Transactions:
At September 30, 2009, there were 100,000,000 shares authorized at $.001 par value for Class A of American Leading Companies and U.S. Small-Cap. At September 30, 2009, there were 250,000,000 and 50,000,000 shares authorized at $.001 par value for Class C of American Leading Companies and U.S. Small-Cap, respectively. At September 30, 2009, there were 250,000,000 shares authorized at $.001 par value for Class I of American Leading Companies and 50,000,000 shares authorized at $0.001 par value for Institutional Class of U.S. Small-Cap.
Share transactions are detailed below:
American Leading Companies
| | | | | | | | | | | | | | |
| | | Six Months Ended
September 30, 2009 | | | Year Ended
March 31, 2009 | |
| | | Shares | | | Amount | | | Shares | | | Amount | |
Class A | | | | | | | | | | | | | | |
Shares sold | | 19,590 | | | $ | 250,691 | | | 1,201,487 | A | | $ | 12,544,198 | A |
Shares repurchased | | (92,378 | ) | | | (1,110,076 | ) | | (150,672 | )A | | | (1,469,770 | )A |
| | | | | | | | | | | | | | |
Net Increase (Decrease) | | (72,788 | ) | | $ | (859,385 | ) | | 1,050,815 | A | | $ | 11,074,428 | A |
| | | | | | | | | | | | | | |
Class CB | | | | | | | | | | | | | | |
Shares sold | | 265,946 | | | $ | 3,213,486 | | | 2,832,671 | | | $ | 39,612,249 | |
Shares issued on reinvestment | | — | | | | — | | | 251,573 | | | | 3,257,702 | |
Shares repurchased | | (2,067,038 | ) | | | (25,028,402 | ) | | (13,270,477 | ) | | | (192,414,805 | ) |
| | | | | | | | | | | | | | |
Net Decrease | | (1,801,092 | ) | | $ | (21,814,916 | ) | | (10,186,233 | ) | | $ | (149,544,854 | ) |
| | | | | | | | | | | | | | |
Class IC | | | | | | | | | | | | | | |
Shares sold | | 101,741 | | | $ | 1,270,166 | | | 568,283 | | | $ | 9,715,962 | |
Shares issued on reinvestment | | — | | | | — | | | 49,581 | | | | 783,332 | |
Shares repurchased | | (214,563 | ) | | | (2,663,854 | ) | | (2,989,913 | ) | | | (51,793,830 | ) |
| | | | | | | | | | | | | | |
Net Decrease | | (112,822 | ) | | $ | (1,393,688 | ) | | (2,372,049 | ) | | $ | (41,294,536 | ) |
| | | | | | | | | | | | | | |
| A | For the period February 3, 2009 (commencement of operations) to March 31, 2009. |
| B | On February 1, 2009, Primary Class shares were renamed Class C shares. |
| C | Effective October 5, 2009, Institutional Class shares were renamed Class I shares. |
| | |
Semi-Annual Report to Shareholders | | 67 |
| | | | | | | | | | | | | | |
| U.S. Small-Cap | | | | | | | | | | | | | | |
| | | Six Months Ended
September 30, 2009 | | | Year Ended
March 31, 2009 | |
| | | Shares | | | Amount | | | Shares | | | Amount | |
Class A | | | | | | | | | | | | | | |
Shares sold | | 26,346 | | | $ | 177,656 | | | 394,985 | A | | $ | 2,361,502 | A |
Shares repurchased | | (31,126 | ) | | | (204,750 | ) | | (15,960 | )A | | | (77,976 | )A |
| | | | | | | | | | | | | | |
Net Increase (Decrease) | | (4,780 | ) | | $ | (27,094 | ) | | 379,025 | A | | $ | 2,283,526 | A |
| | | | | | | | | | | | | | |
Class CB | | | | | | | | | | | | | | |
Shares sold | | 139,010 | | | $ | 927,728 | | | 751,097 | | | $ | 5,878,888 | |
Shares issued on reinvestment | | — | | | | — | | | 42,395 | | | | 403,602 | |
Shares repurchased | | (973,558 | ) | | | (6,670,002 | ) | | (4,797,830 | ) | | | (37,805,266 | ) |
| | | | | | | | | | | | | | |
Net Decrease | | (834,548 | ) | | $ | (5,742,274 | ) | | (4,004,338 | ) | | $ | (31,522,776 | ) |
| | | | | | | | | | | | | | |
Institutional Class | | | | | | | | | | | | | | |
Shares sold | | 130,200 | | | $ | 1,032,666 | | | 420,558 | | | $ | 3,820,412 | |
Shares issued on reinvestment | | — | | | | — | | | 26,318 | | | | 287,922 | |
Shares repurchased | | (153,415 | ) | | | (1,237,811 | ) | | (1,378,142 | ) | | | (14,578,157 | ) |
| | | | | | | | | | | | | | |
Net Decrease | | (23,215 | ) | | $ | (205,145 | ) | | (931,266 | ) | | $ | (10,469,823 | ) |
| | | | | | | | | | | | | | |
8. Other Shareholder Information:
At the May 2009 meeting, the Board of Directors approved changing Legg Mason Capital Management American Leading Companies Trust’s fiscal year end from March 31st to October 31st. This change will result in a “stub period” annual report being produced for the seven-month period ending October 31, 2009.
| A | For the period February 3, 2009 (commencement of operations) to March 31, 2009. |
| B | On February 1, 2009, Primary Class shares were renamed Class C shares. |
Investment Managers
For Legg Mason Capital Management American Leading Companies Trust:
Legg Mason Capital Management, Inc.
Baltimore, MD
For Legg Mason U.S. Small-Capitalization Value Trust:
Legg Mason Partners Fund Advisor, LLC
New York, NY
Investment Advisers
For Legg Mason Capital Management American Leading Companies Trust:
Legg Mason Capital Management, Inc.
Baltimore, MD
For Legg Mason U.S. Small-Capitalization Value Trust:
Brandywine Global Investment Management, LLC
Philadelphia, PA
Board of Directors
Mark R. Fetting, Chairman
David R. Odenath, President
Dr. Ruby P. Hearn
Arnold L. Lehman
Robin J.W. Masters
Dr. Jill E. McGovern
Arthur S. Mehlman
G. Peter O’Brien
S. Ford Rowan
Robert M. Tarola
Officers
R. Jay Gerken, Vice President
Kaprel Ozsolak, Chief Financial Officer and Treasurer
Robert I. Frenkel, Secretary and Chief Legal Officer
Ted P. Becker, Vice President and Chief Compliance Officer
Transfer and Shareholder Servicing Agent
Boston Financial Data Services, Inc.
Quincy, MA
Custodian
State Street Bank & Trust Company
Boston, MA
Counsel
K&L Gates LLP
Washington, DC
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
Baltimore, MD
Legg Mason Investors Trust, Inc.
LEGG MASON INVESTORS TRUST, INC.
Legg Mason Funds
55 Water Street
New York, New York 10041
The Funds file their complete schedules of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. To obtain information on Form N-Q from the Funds, shareholders can call Funds Investor Services at 1-800-822-5544 or Institutional Shareholder Services at 1-888-425-6432.
Information on how the Funds voted proxies relating to portfolio securities during the prior 12-month period ended June 30th of each year and a description of the policies and procedures that the Funds use to determine how to vote proxies related to portfolio transactions are available (1) without charge, upon request, by calling Funds Investor Services at 1-800-822-5544 or Institutional Shareholder Services at 1-888-425-6432, (2) on the Funds’ website at www.leggmason.com/individualinvestors and (3) on the SEC’s website at www.sec.gov.
This report is submitted for the general information of the shareholders of Legg Mason Investors Trust, Inc. This report is not authorized for distribution to prospective investors in the Legg Mason Investor Trust, Inc. unless preceded or accompanied by a current prospectus.
Investors should consider each Fund’s investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information about the Funds. Please read the prospectus carefully before investing.
www.leggmason.com/individualinvestors
©2009 Legg Mason Investor Services, LLC
Member FINRA, SIPC
BUILT TO WINSM
At Legg Mason, we’ve assembled a collection of experienced investment management firms and empowered each of them with the tools, the resources and, most importantly, the independence to pursue the strategies they know best.
| • | | Each was purposefully chosen for their commitment to investment excellence. |
| • | | Each is focused on specific investment styles and asset classes. |
| • | | Each exhibits thought leadership in their chosen area of focus. |
Together, we’ve built a powerful portfolio of solutions for financial advisors and their clients. And it has made us a world leader in money management.*
| * | Ranked eleventh-largest money manager in the world, according to Pensions & Investments, May 18, 2009, based on 12/31/08 worldwide assets under management. |
www.leggmason.com/individualinvestors
©2009 Legg Mason Investor Services, LLC Member FINRA, SIPC
LMF-013/S (11/09) SR09-948
NOT PART OF THE SEMI-ANNUAL REPORT
Not applicable for semiannual reports.
| Item 3. | Audit Committee Financial Expert. |
Not applicable for semiannual reports.
| Item 4. | Principal Accountant Fees and Services. |
Not applicable for semiannual reports.
| Item 5. | Audit Committee of Listed Registrants. |
The Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.
| Item 6. | Schedule of Investments |
The schedule of investments in securities of unaffiliated issuers is included as part of the report to shareholders filed under Item 1 of this Form.
| Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
| Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable.
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers. |
Not applicable.
| Item 10. | Submission of Matters to a Vote of Security Holders. |
The Nominating Committee will accept recommendations for nominations from shareholders. Shareholders may forward recommendations to the Fund Assistant Secretary at 100 International Drive, 7th Floor, Baltimore, Maryland 21202, Attn. Fund Assistant Secretary.
| Item 11. | Controls and Procedures. |
(a) The Registrant’s principal executive and principal financial officers have concluded, based on their evaluation of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) as of a date within 90 days of the filing date of this report that the Registrant’s disclosure controls and procedures are effective, and that the disclosure controls and procedures are reasonably designed to ensure that (1) the information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) that information required to be disclosed is properly communicated to the Registrant’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding the required disclosures.
(b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) during the Registrant’s second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
| | (a) (1) | Not applicable for semiannual reports. |
| | (a) (2) | Separate certifications for the Registrant’s principal executive officer and principal financial officer are attached. |
| | (b) | Separate certifications for the Registrant’s principal executive officer and principal financial officer are attached. |
The certifications provided pursuant to Rule 30a-2(b) of the Investment Company Act of 1940 and Section 906 of the Sarbanes-Oxley Act are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (“Exchange Act”), or otherwise subject to the liability of that section. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the Registrant specifically incorporates them by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Legg Mason Investors Trust, Inc.
|
/S/ DAVID R. ODENATH |
| David R. Odenath |
President, Legg Mason Investors Trust, Inc. |
|
| Date: November 27, 2009 |
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.
|
/S/ DAVID R. ODENATH |
| David R. Odenath |
President, Legg Mason Investors Trust, Inc. |
|
| Date: November 27, 2009 |
|
/S/ KAPREL OZSOLAK |
| Kaprel Ozsolak |
Chief Financial Officer and Treasurer, Legg Mason Investors Trust, Inc. |
|
| Date: November 27, 2009 |
