N-Q

0000950123-07-002865.txt : 20070228 0000950123-07-002865.hdr.sgml : 20070228 20070228100314 ACCESSION NUMBER: 0000950123-07-002865 CONFORMED SUBMISSION TYPE: N-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20061231 FILED AS OF DATE: 20070228 DATE AS OF CHANGE: 20070228 EFFECTIVENESS DATE: 20070228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEGG MASON PARTNERS INVESTMENT FUNDS, INC. CENTRAL INDEX KEY: 0000355747 IRS NUMBER: 133089608 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-Q SEC ACT: 1940 Act SEC FILE NUMBER: 811-03275 FILM NUMBER: 07655478 BUSINESS ADDRESS: STREET 1: 125 BROAD STREET STREET 2: 10TH FLOOR, MF-2 CITY: NEW YORK STATE: NY ZIP: 10004 BUSINESS PHONE: 800-451-2010 MAIL ADDRESS: STREET 1: 125 BROAD STREET STREET 2: 10TH FLOOR, MF-2 CITY: NEW YORK STATE: NY ZIP: 10004 FORMER COMPANY: FORMER CONFORMED NAME: SMITH BARNEY INVESTMENT FUNDS INC DATE OF NAME CHANGE: 20060105 FORMER COMPANY: FORMER CONFORMED NAME: SMITH BARNEY INVESTMENT FUNDS INC /MD/ DATE OF NAME CHANGE: 20010308 FORMER COMPANY: FORMER CONFORMED NAME: SMITH BARNEY SHEARSON INVESTMENT FUNDS INC DATE OF NAME CHANGE: 19931015

0000355747 S000008868 Legg Mason Partners Small Cap Growth Fund

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C000024144 Class A sbsgx

C000024145 Class B sbybx

C000024146 Class C sbslx

C000024147 Class Y sbzyx

N-Q 1 y28518nvq.htm FORM N-Q N-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811- 3275

Legg Mason Partners Investment Funds, Inc.

(Exact name of registrant as specified in charter)

125 Broad Street, New York, NY 10004
(Address of principal executive offices) (Zip code)

Robert I. Frenkel, Esq.
Legg Mason & Co., LLC
300 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)

Registrant’s telephone number, including area code: 1-800-451-2010

Date of fiscal year end: September 30
Date of reporting period: December 31, 2006

ITEM 1. SCHEDULE OF INVESTMENTS

LEGG MASON PARTNERS INVESTMENT FUNDS, INC.

LEGG MASON PARTNERS SMALL CAP GROWTH FUND

FORM N-Q
DECEMBER 31, 2006

Legg Mason Partners Small Cap Growth Fund



Schedule of Investments (unaudited)		December 31, 2006


Shares		Security	Value

COMMON STOCKS — 96.7%
CONSUMER DISCRETIONARY — 16.5%
Diversified Consumer Services — 1.6%
	78,600	Steiner Leisure Ltd. *	$	3,576,300

Hotels, Restaurants & Leisure — 5.2%
	3,700	Chipotle Mexican Grill Inc., Class A *		210,900
	40,600	Panera Bread Co. *		2,269,946
	44,700	PF Chang’s China Bistro Inc. *		1,715,586
	72,500	Shuffle Master Inc. *		1,899,500
	28,800	Station Casinos Inc.		2,352,096
	94,000	WMS Industries Inc. *		3,276,840

		Total Hotels, Restaurants & Leisure		11,724,868

Internet & Catalog Retail — 1.5%
	100,800	VistaPrint Ltd. *		3,337,488

Specialty Retail — 8.2%
	105,900	AC Moore Arts & Crafts Inc *		2,294,853
	81,700	Bebe Stores Inc.		1,616,843
	114,400	Charming Shoppes Inc. *		1,547,832
	70,200	Dick’s Sporting Goods Inc. *		3,439,098
	69,100	DSW, Inc., Class A Shares *		2,665,187
	133,800	Pacific Sunwear of California Inc. *		2,619,804
	98,900	Urban Outfitters Inc. *		2,277,667
	71,200	Volcom Inc. *		2,105,384

		Total Specialty Retail		18,566,668

		TOTAL CONSUMER DISCRETIONARY		37,205,324

ENERGY — 5.2%
Energy Equipment & Services — 2.1%
	43,500	FMC Technologies Inc. *		2,680,905
	64,400	Rowan Cos. Inc.		2,138,080

		Total Energy Equipment & Services		4,818,985

Oil, Gas & Consumable Fuels — 3.1%
	91,200	Berry Petroleum Co., Class A Shares		2,828,112
	60,100	GMX Resources Inc. *		2,133,550
	41,300	Ultra Petroleum Corp. *		1,972,075

		Total Oil, Gas & Consumable Fuels		6,933,737

		TOTAL ENERGY		11,752,722

FINANCIALS — 9.1%
Capital Markets — 3.4%
	24,500	Affiliated Managers Group Inc. *		2,575,685
	60,200	Investment Technology Group Inc. *		2,581,376
	109,000	optionsXpress Holdings Inc.		2,473,210

		Total Capital Markets		7,630,271

Commercial Banks — 2.8%
	56,600	East-West Bancorp Inc.		2,004,772
	29,400	Preferred Bank		1,766,646
	71,500	Western Alliance Bancorp *		2,486,055

		Total Commercial Banks		6,257,473

Insurance — 0.7%
	110,600	Amerisafe Inc. *		1,709,876

Real Estate Investment Trusts (REITs) — 2.2%
	27,200	Alexandria Real Estate Equities Inc.		2,730,880
	106,600	FelCor Lodging Trust Inc.		2,328,144

		Total Real Estate Investment Trusts (REITs)		5,059,024

		TOTAL FINANCIALS		20,656,644

See Notes to Schedule of Investments.

Page 1

Legg Mason Partners Small Cap Growth Fund



Schedule of Investments (unaudited) (continued)		December 31, 2006


Shares		Security	Value

HEALTH CARE — 20.4%
Biotechnology — 8.9%
	67,900	Alexion Pharmaceuticals Inc. *	$	2,742,481
	149,500	Arena Pharmaceuticals Inc. *		1,930,045
	183,500	Array BioPharma Inc. *		2,370,820
	172,800	BioMarin Pharmaceutical Inc. *		2,832,192
	103,700	Cubist Pharmaceuticals Inc. *		1,878,007
	201,300	Exelixis Inc. *		1,811,700
	125,700	Keryx Biopharmaceuticals Inc. *		1,671,810
	101,500	Myriad Genetics Inc. *		3,176,950
	46,600	Vertex Pharmaceuticals Inc. *		1,743,772

		Total Biotechnology		20,157,777

Health Care Equipment & Supplies — 3.2%
	81,000	AngioDynamics Inc. *		1,740,690
	44,200	Gen-Probe Inc. *		2,314,754
	65,600	ResMed Inc. *		3,228,832

		Total Health Care Equipment & Supplies		7,284,276

Health Care Providers & Services — 7.4%
	157,800	Allscripts Healthcare Solutions Inc. *		4,259,022
	122,400	Eclipsys Corp. *		2,516,544
	122,300	PSS World Medical Inc. *		2,388,519
	53,200	Psychiatric Solutions Inc. *		1,996,064
	38,000	Sierra Health Services Inc. *		1,369,520
	68,700	VCA Antech Inc. *		2,211,453
	27,500	WellCare Health Plans Inc. *		1,894,750

		Total Health Care Providers & Services		16,635,872

Life Sciences Tools & Services — 0.9%
	69,700	Parexel International Corp. *		2,019,209

		TOTAL HEALTH CARE		46,097,134

INDUSTRIALS — 14.4%
Aerospace & Defense — 2.5%
	108,400	BE Aerospace Inc *		2,783,712
	106,800	TransDigm Group Inc. *		2,831,268

		Total Aerospace & Defense		5,614,980

Airlines — 1.2%
	183,800	JetBlue Airways Corp. *		2,609,960

Commercial Services & Supplies — 6.6%
	24,500	Corporate Executive Board Co.		2,148,650
	62,300	Geo Group, Inc. *		2,337,496
	90,400	Kenexa Corp. *		3,006,704
	162,800	Mobile Mini Inc. *		4,385,832
	149,100	PeopleSupport Inc. *		3,138,555

		Total Commercial Services & Supplies		15,017,237

Machinery — 2.5%
	76,800	Dynamic Materials Corp.		2,158,080
	61,900	Mueller Industries Inc.		1,962,230
	56,200	RBC Bearings Inc. *		1,610,692

		Total Machinery		5,731,002

Road & Rail — 0.9%
	52,300	Landstar System Inc.		1,996,814

Trading Companies & Distributors — 0.7%
	39,700	MSC Industrial Direct Co. Inc., Class A Shares		1,554,255

		TOTAL INDUSTRIALS		32,524,248

See Notes to Schedule of Investments.

Page 2

Legg Mason Partners Small Cap Growth Fund



Schedule of Investments (unaudited) (continued)		December 31, 2006


Shares		Security	Value

INFORMATION TECHNOLOGY — 27.9%
Communications Equipment — 1.6%
	166,000	Foundry Networks Inc. *	$	2,486,680
	37,400	Riverbed Technolgoy Inc. *		1,148,180

		Total Communications Equipment		3,634,860

Computers & Peripherals — 1.3%
	99,200	Rackable Systems Inc. *		3,072,224

Electronic Equipment & Instruments — 2.6%
	66,825	Benchmark Electronics Inc. *		1,627,857
	46,200	Itron Inc. *		2,395,008
	37,300	Trimble Navigation Ltd. *		1,892,229

		Total Electronic Equipment & Instruments		5,915,094

Internet Software & Services — 6.2%
	64,900	Akamai Technologies Inc. *		3,447,488
	88,200	aQuantive Inc. *		2,175,012
	45,400	Equinix Inc. *		3,433,148
	84,500	j2 Global Communications Inc. *		2,302,625
	109,900	Sohu.com Inc. *		2,637,600

		Total Internet Software & Services		13,995,873

IT Services — 1.1%
	171,000	MPS Group Inc. *		2,424,780

Semiconductors & Semiconductor Equipment — 7.7%
	62,550	Diodes Inc. *		2,219,274
	49,400	FormFactor Inc. *		1,840,150
	62,300	Hittite Microwave Corp. *		2,013,536
	130,500	Mattson Technology Inc. *		1,216,260
	54,710	MEMC Electronic Materials Inc. *		2,141,349
	97,180	Microsemi Corp. *		1,909,587
	305,800	ON Semiconductor Corp. *		2,314,906
	259,300	RF Micro Devices Inc. *		1,760,647
	114,200	Trident Microsystems Inc. *		2,076,156

		Total Semiconductors & Semiconductor Equipment		17,491,865

Software — 7.4%
	99,400	Blackbaud Inc.		2,584,400
	56,900	Blackboard Inc. *		1,709,276
	134,300	Concur Technologies Inc. *		2,154,172
	191,000	Informatica Corp. *		2,332,110
	163,500	Quest Software Inc. *		2,395,275
	108,800	Ultimate Software Group Inc. *		2,530,688
	168,800	Witness Systems Inc. *		2,959,064

		Total Software		16,664,985

		TOTAL INFORMATION TECHNOLOGY		63,199,681

MATERIALS — 2.1%
Metals & Mining — 0.8%
	22,400	RTI International Metals Inc. *		1,752,128

Paper & Forest Products — 1.3%
	152,400	Votorantim Celulose e Papel SA, ADR		2,988,564

		TOTAL MATERIALS		4,740,692

TELECOMMUNICATION SERVICES — 1.1%
Wireless Telecommunication Services — 1.1%
	293,400	Dobson Communications Corp., Class A Shares *		2,555,514

		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $166,460,236)		218,731,959

See Notes to Schedule of Investments.

Page 3

Legg Mason Partners Small Cap Growth Fund



Schedule of Investments (unaudited) (continued)		December 31, 2006


Face
Amount		Security	Value

SHORT-TERM INVESTMENT — 1.9%
Repurchase Agreement — 1.9%
$	4,345,000	Interest in $373,105,000 joint tri-party repurchase agreement dated 12/29/06 with Morgan Stanley, 5.250% due 1/3/07; Proceeds at maturity — $4,348,168; (Fully collateralized by various U.S. government agency obligations, 3.500% to 6.500% due 1/1/09 to 9/1/33; Market value — $4,414,292) (Cost — $4,345,000)	$	4,345,000

		TOTAL INVESTMENTS — 98.6% (Cost — $170,805,236#)		223,076,959
		Other Assets in Excess of Liabilities — 1.4%		3,138,319

		TOTAL NET ASSETS — 100.0%	$	226,215,278


*		Non-income producing security.

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

		Abbreviation used in this schedule:

		ADR — American Depositary Receipt

See Notes to Schedule of Investments.

Page 4

Notes to Schedule of Investments (unaudited)

1. Organization and Significant Accounting Policies

Legg Mason Partners Small Cap Growth Fund (the “Fund”) is a separate diversified series of Legg Mason Partners Investment Funds, Inc. (the “Company”). The Company, a Maryland corporation, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company.

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

(a) Investment Valuation. Equity securities for which market quotations are available are valued at the last sale price or official closing price on the primary market or exchange on which they trade. Debt securities are valued at the mean between the bid and asked 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 the Fund calculates its net asset value, the Fund may value these investments at fair value as determined in accordance with the procedures approved by the Fund’s Board of Directors. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates market value.

(b) Repurchase Agreements. When entering into repurchase agreements, it is the Fund’s policy that its custodian or a third party custodian take possession of the underlying collateral securities, the market value of which 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 marked-to-market 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 Fund may be delayed or limited.

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

2. Investments

At December 31, 2006, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:


Gross unrealized appreciation	$	56,146,546
Gross unrealized depreciation		(3,874,823	)

Net unrealized appreciation	$	52,271,723

ITEM 2. CONTROLS AND PROCEDURES.

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

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

ITEM 3. EXHIBITS.

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

SIGNATURES

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

Legg Mason Partners Investment Funds, Inc.


By
R. Jay Gerken
Chief Executive Officer

Date: February 28, 2007

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


By

R. Jay Gerken
Chief Executive Officer

Date: February 28, 2007


By
Kaprel Ozsolak
Chief Financial Officer

Date: February 28, 2007

EX-99.CERT 2 y28518exv99wcert.htm EX-99.CERT: CERTIFICATION EX-99.CERT

CERTIFICATIONS

I, R. Jay Gerken, certify that:

I have reviewed this report on Form N-Q of Legg Mason Partners Investment Funds, Inc. — Legg Mason Partners Small Cap Growth Fund;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the schedule of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

	a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

	d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: February 28, 2007	/s/ R. Jay Gerken
	R. Jay Gerken
	Chief Executive Officer

I, Kaprel Ozsolak, certify that:

I have reviewed this report on Form N-Q of Legg Mason Partners Investment Funds, Inc. - Legg Mason Partners Small Cap Growth Fund;

	a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

	d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: February 28, 2007	/s/ Kaprel Ozsolak
	Kaprel Ozsolak
	Chief Financial Officer