Legg Mason Partners Variable Equity Trust
Prospectus May 1, 2024
Share class
(Symbol): I (QLMSIX), II
(QLMSTX)
CLEARBRIDGE
VARIABLE SMALL CAP
GROWTH PORTFOLIO
Shares
of the fund are offered only to insurance company separate accounts that fund
certain variable annuity and variable life insurance contracts and to qualified
retirement and pension plans. This Prospectus should be read together with the
prospectuses for those contracts and information for those plans.
The
Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this Prospectus is accurate or complete. Any
statement to the contrary is a crime.
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INVESTMENT
PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
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Investment objective
The
fund seeks long-term growth of capital.
Fees and expenses of the
fund
The
accompanying table describes the fees and expenses that you may pay if you buy,
hold and sell shares of the fund. The fee table and expense example do not
reflect expenses incurred from investing through a separate account or qualified
plan and do not reflect variable annuity or life insurance contract charges.
If they did, the overall fees and expenses
would be higher than those shown. Detailed information about the cost of
investing in this fund through a separate account or qualified plan is presented
in the contract prospectus through which the fund’s shares are offered to you or
in the information provided by your plan.
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Shareholder
fees |
(fees paid directly from
your investment) |
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Class I |
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Class II |
Maximum
sales charge (load) imposed on purchases |
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N/A |
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N/A |
Maximum
deferred sales charge (load) |
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N/A |
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N/A |
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Annual fund operating expenses
(%) |
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(expenses that you pay each
year as a percentage of the value of your
investment) |
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Class I |
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Class II |
Management
fees |
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0.75 |
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0.75 |
Distribution
and/or service (12b-1) fees |
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None |
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0.25 |
Other
expenses |
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0.05 |
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0.05 |
Total
annual fund operating expenses |
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0.80 |
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1.05 |
Example
This
example is intended to help you compare the cost of investing in the fund with
the cost of investing in other mutual funds. The example does not include
expenses incurred from investing through a separate account or qualified plan
and does not reflect variable annuity and variable life contract charges. If the
example included these expenses, the figures shown would be higher. The example
assumes:
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You
invest $10,000 in the fund for the time periods
indicated |
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Your
investment has a 5% return each year and the fund’s operating expenses
remain the same (except that any applicable fee waiver or expense
reimbursement is reflected only through its expiration
date) |
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You
reinvest all distributions and dividends without a sales
charge |
Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
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Number of years you own your shares
($) |
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1 year |
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3 years |
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5 years |
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10 years |
Class
I (with or without redemption at end of period) |
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82 |
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256 |
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444 |
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990 |
Class II
(with or without redemption at end of period) |
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107 |
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334 |
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579 |
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1,282 |
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2 |
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ClearBridge Variable Small Cap Growth
Portfolio |
Portfolio turnover. The fund pays transaction costs, such as commissions, when
it buys and sells securities (or “turns over” its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the fund’s
performance. During the most recent fiscal year, the fund’s portfolio turnover
rate was 15% of the average value of its
portfolio.
Principal investment
strategies
Under
normal circumstances, the fund invests at least 80% of its assets in equity
securities of companies with small market capitalizations and related
investments. For the purposes of this 80% policy, small capitalization companies
are companies with market capitalization values not exceeding (i) $3
billion or (ii) the highest month-end market capitalization value of any
stock in the Russell 2000 Index for the previous 12 months, whichever is
greater. Securities of companies whose market capitalizations no longer meet
this definition after purchase by the fund are still considered to be securities
of small capitalization companies for purposes of the fund’s 80% investment
policy. The Russell 2000 Index measures the performance of the 2,000 smallest
companies in the Russell 3000 Index.
The
fund may invest up to 20% of its net assets (at the time of investment) in
foreign securities.
The
portfolio managers use a growth-oriented investment style that emphasizes small
U.S. companies.
Principal risks
Risk
is inherent in all investing. The value of your investment in the fund, as well
as the amount of return you receive on your investment, may fluctuate
significantly. You may lose part or all of your investment in the fund or your
investment may not perform as well as other similar investments.
An investment in the fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or by any bank or government
agency. The following is a summary description of certain risks
of investing in the fund. The relative significance of the risks of investing in
the fund may change over time.
Stock market and
equity securities risk. The stock
markets are volatile and the market prices of equity securities held by the fund
may go up or down, sometimes rapidly or unpredictably. Equity securities may
include exchange-traded and over-the-counter common stocks, preferred stock,
depositary receipts, trust certificates, limited partnership interests,
warrants, rights, securities convertible into equity securities, and shares of
other investment companies, including exchange-traded funds, and of real estate
investment trusts. Equity securities may have greater price volatility than
other asset classes, such as fixed income securities. The market price of a
security may fluctuate based on overall market conditions, such as real or
perceived adverse economic or political conditions or trends, tariffs and trade
disruptions, inflation, substantial economic downturn or recession, changes in
interest rates, or adverse investor sentiment. Changes in market conditions will
not typically have the same impact on all types of securities. If the market
prices of the equity securities owned by the fund fall, the value of your
investment in the fund will decline. If the fund holds equity securities in a
company that becomes insolvent, the fund’s interests in the company will be
subordinated to the interests of debtholders and general creditors of the
company, and the fund may lose its entire investment.
Market events
risk. The market values of securities or
other assets will fluctuate, sometimes sharply and unpredictably, due to factors
such as economic events, governmental actions or intervention, actions taken by
the U.S. Federal Reserve or foreign central banks, market disruptions caused by
trade disputes, labor strikes or other factors, political developments, armed
conflicts, economic sanctions and countermeasures in response to sanctions,
major cybersecurity events, the global and domestic effects of widespread or
local health, weather or climate events, and other factors that may or may not
be related to the issuer of the security or other asset. Economies and financial
markets throughout the world are increasingly interconnected. Economic,
financial or political events, trading and tariff arrangements, public health
events, terrorism, wars, natural disasters and other circumstances in one
country or region could have profound impacts on global economies or markets. As
a result, whether or not the fund invests in securities of issuers located in or
with significant exposure to the countries or markets directly affected, the
value and liquidity of the fund’s investments may be negatively affected.
Following Russia’s invasion of Ukraine in 2022, Russian stocks lost all, or
nearly all, of their market value. Other securities or markets could be
similarly affected by past or future geopolitical or other events or conditions.
Furthermore, events involving limited liquidity, defaults, non-performance or
other adverse developments that affect one industry, such as the financial
services industry, or concerns or rumors about any events of these kinds, have
in the past and may in the future lead to market-wide liquidity problems, may
spread to other industries, and could negatively affect the value and liquidity
of the fund’s investments.
Raising
the ceiling on U.S. government debt has become increasingly politicized. Any
failure to increase the total amount that the U.S. government is authorized to
borrow could lead to a default on U.S. government obligations, with
unpredictable consequences for economies and markets in the U.S. and elsewhere.
Recently, inflation and interest rates have increased and may rise further.
These circumstances could adversely affect the value and liquidity of the fund’s
investments, impair the fund’s ability to satisfy redemption requests, and
negatively impact the fund’s performance.
The
United States and other countries are periodically involved in disputes over
trade and other matters, which may result in tariffs, investment restrictions
and adverse impacts on affected companies and securities. For example, the
United States has imposed tariffs and other trade barriers on Chinese exports,
has restricted sales of certain categories of goods to China, and has
established barriers to investments in China. Trade disputes may adversely
affect the economies of the United States and its trading partners, as well as
companies directly or indirectly affected and financial markets generally. The
United States government has prohibited U.S. persons from investing in Chinese
companies designated as related to the Chinese military. These and possible
future restrictions could limit the fund’s opportunities for investment and
require the sale of securities at a loss or make them illiquid. Moreover, the
Chinese government is involved in a longstanding dispute with Taiwan that has
included threats of invasion. If
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ClearBridge Variable Small Cap
Growth Portfolio |
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3 |
the
political climate between the United States and China does not improve or
continues to deteriorate, if China were to attempt unification of Taiwan by
force, or if other geopolitical conflicts develop or get worse, economies,
markets and individual securities may be severely affected both regionally and
globally, and the value of the fund’s assets may go
down.
Small capitalization
company risk. The fund will be exposed
to additional risks as a result of its investments in the securities of small
capitalization companies. Small capitalization companies may fall out of favor
with investors; may have limited product lines, operating histories, markets or
financial resources; or may be dependent upon a limited management group. The
prices of securities of small capitalization companies generally are more
volatile than those of large capitalization companies and are more likely to be
adversely affected than large capitalization companies by changes in earnings
results and investor expectations or poor economic or market conditions,
including those experienced during a recession. Securities of small
capitalization companies may underperform large capitalization companies, may be
harder to sell at times or at prices the portfolio managers believe appropriate
and may have greater potential for losses.
Growth investing
risk. The fund’s growth-oriented
investment style may increase the risks of investing in the fund. Growth
securities typically are very sensitive to market movements because their market
prices tend to reflect future expectations. When it appears those expectations
will not be met, the prices of growth securities typically fall. Growth
securities may also be more volatile than other investments because they often
do not pay dividends. The values of growth securities tend to go down when
interest rates rise because the rise in interest rates reduces the current value
of future cash flows. Growth stocks as a group may be out of favor and
underperform the overall equity market while the market favors value stocks.
Foreign investments
risk. The fund’s investments in
securities of foreign issuers or issuers with significant exposure to foreign
markets involve additional risk as compared to investments in U.S. securities or
issuers with predominantly U.S. exposure, such as less liquid, less transparent,
less regulated and more volatile markets. The value of the fund’s investments
may decline because of factors affecting the particular issuer as well as
foreign markets and issuers generally, such as unfavorable or unsuccessful
government actions, reduction of government or central bank support, inadequate
accounting standards and auditing and financial recordkeeping requirements, lack
of information, political, economic, financial or social instability, terrorism,
armed conflicts and other geopolitical events, and the impact of tariffs and
other restrictions on trade or economic sanctions. Geopolitical or other events
such as nationalization or expropriation could even cause the loss of the fund’s
entire investment in one or more countries. In addition, there may be
significant obstacles to obtaining information necessary for investigations into
or litigation against issuers located in or operating in certain foreign
markets, particularly emerging market countries, and shareholders may have
limited legal remedies.
The
value of investments in securities denominated in foreign currencies increases
or decreases as the rates of exchange between those currencies and the U.S.
dollar change. Currency conversion costs and currency fluctuations could erase
investment gains or add to investment losses. Currency exchange rates can be
volatile, and are affected by factors such as general economic and political
conditions, the actions of the U.S. and foreign governments or central banks,
the imposition of currency controls and speculation. The fund may be unable or
may choose not to hedge its foreign currency
exposure.
The
risks of foreign investments are heightened when investing in issuers in
emerging market countries.
Illiquidity
risk. Some assets held by the fund may
be or become impossible or difficult to sell, particularly during times of
market turmoil. These illiquid assets may also be difficult to value. Markets
may become illiquid quickly. Markets may become illiquid when, for instance,
there are few, if any, interested buyers or sellers or when dealers are
unwilling or unable to make a market for certain securities. As a general
matter, dealers have been less willing to make markets in recent years. If the
fund is forced to sell an illiquid asset to meet redemption requests or other
cash needs, or to try to limit losses, the fund may be forced to sell at a
substantial loss or may not be able to sell at all.
Portfolio management
risk. The value of your investment may
decrease if the subadviser’s judgment about the attractiveness or value of, or
market trends affecting, a particular security, industry, sector or region, or
about market movements, is incorrect or does not produce the desired results, or
if there are imperfections, errors or limitations in the models, tools and data
used by the subadviser. In addition, the fund’s investment strategies or
policies may change from time to time. Those changes may not lead to the results
intended by the subadviser and could have an adverse effect on the value or
performance of the fund.
Issuer
risk. The market price of a security
held by the fund can go up or down more than the market as a whole and can
perform differently from the value of the market as a whole due to factors
specifically relating to the security’s issuer, such as disappointing earnings
reports by the issuer, unsuccessful products or services, loss of major
customers, changes in management, corporate actions, negative perception in the
marketplace, or major litigation or changes in government regulations affecting
the issuer or the competitive environment. An individual security may also be
affected by factors relating to the industry or sector of the issuer or the
securities markets as a whole, and conversely an industry or sector or the
securities markets may be affected by a change in financial condition or other
event affecting a single issuer. Historically, the prices of securities of small
and medium capitalization companies have generally been more volatile than those
of large capitalization companies. The fund may experience a substantial or
complete loss on an individual security.
Industry or sector
focus risk. The fund may be susceptible
to an increased risk of loss, including losses due to events that adversely
affect the fund’s investments more than the market as a whole, to the extent
that the fund may, from time to time, have greater exposure to the securities of
a particular issuer or issuers within the same industry or sector.
Valuation
risk. The sales price the fund could
receive for any particular portfolio investment may differ from the fund’s
valuation of the investment, particularly for securities that trade in thin or
volatile markets or that are valued using a fair value methodology. These
differences may increase
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4 |
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ClearBridge Variable Small Cap Growth
Portfolio |
significantly
and affect fund investments more broadly during periods of market volatility.
Investors who purchase or redeem fund shares on days when the fund is holding
fair-valued securities may receive fewer or more shares or lower or higher
redemption proceeds than they would have received if the fund had not
fair-valued securities or had used a different valuation methodology. The fund’s
ability to value its investments may be impacted by technological issues and/or
errors by pricing services or other third party service providers. The valuation
of the fund’s investments involves subjective judgment, which may prove to be
incorrect.
Cybersecurity
risk. Like other funds and business
enterprises, the fund, the manager, the subadvisers and their service providers
are subject to the risk of cyber incidents occurring from time to time.
Cybersecurity incidents, whether intentionally caused by third parties or
otherwise, may allow an unauthorized party to gain access to fund assets, fund
or customer data (including private shareholder information) or proprietary
information, cause the fund, the manager, the subadvisers and/or their service
providers (including, but not limited to, fund accountants, custodians,
sub-custodians, transfer agents and financial intermediaries) to suffer data
breaches, data corruption or loss of operational functionality, or prevent fund
investors from purchasing, redeeming or exchanging shares, receiving
distributions or receiving timely information regarding the fund or their
investment in the fund. The fund, the manager, and the subadvisers have limited
ability to prevent or mitigate cybersecurity incidents affecting third party
service providers, and such third party service providers may have limited
indemnification obligations to the fund, the manager, and/or the subadvisers.
Cybersecurity incidents may result in financial losses to the fund and its
shareholders, and substantial costs may be incurred in order to prevent or
mitigate any future cybersecurity incidents. Issuers of securities in which the
fund invests are also subject to cybersecurity risks, and the value of these
securities could decline if the issuers experience cybersecurity incidents.
New
ways to carry out cyber attacks continue to develop. There is a chance that some
risks have not been identified or prepared for, or that an attack may not be
detected, which puts limitations on the fund’s ability to plan for or respond to
a cyber attack.
These
and other risks are discussed in more detail in the Prospectus or in the
Statement of Additional Information.
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ClearBridge Variable Small Cap
Growth Portfolio |
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5 |
Performance
The
accompanying bar chart and table provide some indication of the risks of
investing in the fund. The bar chart shows changes in the fund’s
performance from year to year of Class I shares. The table shows the
average annual total returns of each class of the fund and also compares the
fund’s performance with the average annual total returns of an index or other
benchmark. Performance for classes other than those shown may
vary from the performance shown to the extent the expenses for those classes
differ. The fund makes certain information, including its current net asset
value, available at www.franklintempleton.com/variablefunds (select
fund and share class). Updated performance information can be
obtained by calling the fund at 877-6LM-FUND/656-3863.
The
fund’s past performance is not necessarily an indication of how the fund will
perform in the
future.
Fees
paid by the separate accounts or qualified plans through which shares of the
fund are sold are not reflected in the accompanying bar chart and table. If they were, the returns would be lower than those
shown. Please refer to the separate account prospectus or
information provided by your qualified plan for a description of the expenses
associated with the account or plan.
Best
Quarter (06/30/2020): 38.94 Worst
Quarter (03/31/2020): (24.00)
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Average annual total returns
(%) |
(for periods ended December
31, 2023) |
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1 year |
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5 years |
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10 years |
Class
I |
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8.40 |
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9.56 |
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7.89 |
Class
II |
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8.12 |
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9.29 |
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7.62 |
Russell
2000 Growth Index (reflects no deduction for fees, expenses or taxes) |
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18.66 |
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9.22 |
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7.16 |
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ClearBridge Variable Small Cap Growth
Portfolio |
Management
Investment
manager: Franklin Templeton Fund
Adviser, LLC (“FTFA”) (formerly known as Legg Mason Partners Fund Advisor, LLC)
Subadviser: ClearBridge Investments, LLC (“ClearBridge”)
Portfolio
managers: Primary responsibility for the
day-to-day management of the fund lies with the following portfolio managers.
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Portfolio
manager |
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Title |
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Portfolio manager of the fund since |
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Jeffrey
Bailin, CFA |
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Director and Portfolio Manager of
ClearBridge |
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December
2023 |
Aram
E. Green |
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Managing Director and Portfolio
Manager
of ClearBridge |
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2007 |
Purchase and sale of fund
shares
Shares
of the fund may only be purchased or redeemed through variable annuity contracts
and variable life insurance policies offered by the separate accounts of
participating life insurance companies, through qualified pension and retirement
plans or by qualified funds of funds whose investors consist solely of separate
accounts of participating life insurance companies and/or qualified pension and
retirement plans. Additional information regarding eligibility to invest in
shares of the fund can be found in the Statement of Additional Information
(“SAI”). Prospective investors should consult their own tax professionals
regarding their eligibility to hold fund shares. Shares of the fund may be
purchased and redeemed each day the New York Stock Exchange is open, at the
fund’s net asset value determined after receipt of a request in good order.
The
fund does not have any initial or subsequent investment minimums. However, your
insurance company, pension plan or retirement plan may impose investment
minimums.
Tax information
Distributions
made by the fund to an insurance company separate account, and exchanges and
redemptions of fund shares made by a separate account, ordinarily do not cause
the corresponding contract holder to recognize income or gain for federal income
tax purposes. See the accompanying contract prospectus for information regarding
the federal income tax treatment of the distributions to separate accounts and
the holders of the contracts.
Payments to
broker/dealers and other financial intermediaries
The
fund’s related companies pay Service Agents for the sale of fund shares,
shareholder services and other purposes. “Service Agents” include banks,
brokers, dealers, insurance companies, investment advisers, financial
consultants or advisers, mutual fund supermarkets and other financial
intermediaries. These payments create a conflict of interest by influencing your
Service Agent or its employees or associated persons to recommend the fund over
another investment. Ask your financial adviser or salesperson or visit your
Service Agent’s or salesperson’s website for more information.
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ClearBridge Variable Small Cap
Growth Portfolio |
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7 |
More on the fund’s
investment strategies, investments and risks
Important information
The
fund seeks long-term growth of capital.
The
fund’s investment objective may be changed by the Board of Trustees (the
“Board”) without shareholder approval and on notice to shareholders.
There
is no assurance that the fund will meet its investment objective.
Under
normal circumstances, the fund invests at least 80% of its assets in equity
securities of companies with small market capitalizations and related
investments. The portfolio managers use a growth-oriented investment style that
emphasizes small U.S. companies. The fund expects that under normal market
conditions, the equity securities in which it invests will typically be common
stocks. For the purposes of this 80% policy, small capitalization companies are
companies with market capitalization values not exceeding (i) $3 billion or
(ii) the highest month-end market capitalization value of any stock in the
Russell 2000 Index for the previous 12 months, whichever is greater. Securities
of companies whose market capitalizations no longer meet this definition after
purchase by the fund are still considered to be securities of small
capitalization companies for purposes of the fund’s 80% investment policy. The
Russell 2000 Index measures the performance of the 2,000 smallest companies in
the Russell 3000 Index. As of February 29, 2024, the market capitalization
of the largest company included in the Russell 2000 Index was approximately
$45.683 billion and the median market capitalization of a company included
in the Russell 2000 Index was approximately $0.936 billion. The fund may invest
up to 20% of its assets in equity securities of companies that are not
considered to be small capitalization companies.
The
fund’s 80% investment policy may be changed by the Board without shareholder
approval upon 60 days’ prior notice to shareholders.
The
fund’s other investment strategies and policies may be changed from time to time
without shareholder approval, unless specifically stated otherwise in this
Prospectus or in the statement of additional information (“SAI”).
Equity investments
Equity
securities include exchange-traded and over-the-counter (“OTC”) common and
preferred stocks, warrants and rights, securities convertible into equity
securities and securities of other investment companies and of real estate
investment trusts (“REITs”).
Foreign investments
The
fund may invest up to 20% of its net assets (at the time of investment) in
foreign securities. The fund may invest directly in foreign issuers or invest in
depositary receipts.
Derivatives
Derivatives
are financial instruments whose value depends upon, or is derived from, the
value of an asset, such as one or more underlying investments, indexes or
currencies. The fund may engage in a variety of transactions using derivatives,
such as options on securities, currencies or interest rate futures. Derivatives
may be used by the fund for any of the following purposes:
• |
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As
a hedging technique in an attempt to manage risk in the fund’s portfolio
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• |
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As
a substitute for buying or selling securities |
• |
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As
a means of enhancing returns |
Using
derivatives, especially for non-hedging purposes, may involve greater risks to
the fund than investing directly in securities, particularly as these
instruments may be very complex and may not behave in the manner anticipated by
the fund. Certain derivative transactions may have a leveraging effect on the
fund.
Use
of derivatives or similar instruments may have different tax consequences for
the fund than an investment in the underlying asset, and those differences may
affect the amount, timing and character of income distributed to shareholders.
A
derivative contract will obligate or entitle the fund to deliver or receive an
asset or cash payment based on the change in value of one or more underlying
investments, indexes or currencies.
Registered
investment companies are subject to regulatory limitations on their use of
derivative investments and certain financing transactions (e.g. reverse
repurchase agreements). Among other things, a fund that invests in derivative
instruments beyond a specified limited amount must apply a value-at-risk based
limit to its use of certain derivative instruments and financing transactions
and must adopt and implement a derivatives risk management program. A fund that
uses derivative instruments in a limited amount is not subject to the same
restrictions. Regulatory restrictions may limit the fund’s ability to use
derivatives as part of its investment strategy and may not work as intended to
limit losses from derivatives.
Short sales
A
short sale is a transaction in which the fund sells securities it does not own
in anticipation of a decline in the market price of the securities. The fund may
designate no more than 25% of its net assets (taken at the then current market
value) as required collateral for such sales at any one time.
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ClearBridge Variable Small Cap Growth
Portfolio |
Cash management
The
fund may hold cash pending investment, may invest in money market instruments
and may enter into repurchase agreements and reverse repurchase agreements
(which have characteristics like borrowings) for cash management purposes. The
fund may invest in money market funds, which may or may not be affiliated with
the fund’s manager or the subadvisers. The amount of assets the fund may hold
for cash management purposes will depend on market conditions and the need to
meet expected redemption requests.
Defensive investing
The
fund may depart from its principal investment strategies in response to adverse
market, economic, political or other conditions by taking temporary defensive
positions, including by investing in any type of money market instruments and
short-term debt securities or holding cash without regard to any percentage
limitations. If a significant amount of the fund’s assets is used for
defensive investing purposes, the fund will be less likely to achieve its
investment objective. Although the subadviser has the ability to take defensive
positions, it may choose not to do so for a variety of reasons, even during
volatile market conditions.
Other investments
The
fund may also use other strategies and invest in other investments that are
described, along with their risks, in the Statement of Additional Information
(“SAI”). However, the fund might not use all of the strategies and
techniques or invest in all of the types of investments described in this
Prospectus or in the SAI.
Percentage and other
limitations
The
fund’s compliance with its investment limitations and requirements described in
this Prospectus is usually determined at the time of investment. If such a
percentage limitation is complied with at the time of an investment, any
subsequent change resulting from a change in asset values or characteristics
will not constitute a violation of that limitation.
Selection process
The
portfolio managers use a growth-oriented investment style that emphasizes small
U.S. companies believed to have one or more of the following:
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Superior
management teams |
• |
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Good
prospects for growth |
• |
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Predictable,
growing demand for their products or services |
• |
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Dominant
position in a niche market or customers that are very large companies
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• |
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Earnings
and revenue recovery potential due to exposure to economically cyclical
end markets |
• |
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Strong
or improving financial conditions |
In
addition, the fund may invest in companies the portfolio managers believe to be
emerging in new or existing markets.
The
fund may invest in companies the portfolio managers believe to be undervalued
relative to their peers. The fund may continue to hold securities of issuers
that become medium capitalization or large capitalization issuers if, in the
portfolio managers’ judgment, these securities remain good investments for the
fund.
The
portfolio managers generally use a “bottom-up” approach when selecting
securities for the fund. This means that the portfolio managers look primarily
at individual companies against the context of broader market forces.
The
subadviser’s fundamental research analysts typically use their industry
expertise to determine the material environmental, social and governance (“ESG”)
factors facing both individual companies and industry sectors. The fundamental
research analysts may also engage with company management regarding the extent
to which they promote best practices of such factors. ESG factors may include,
but are not necessarily limited to, environmentally-friendly product
initiatives, labor audits of overseas supply chains and strong corporate
governance. The choice of ESG factors for any particular company generally
reflects the specific industry. At times, the ESG analysis may be performed by
the portfolio managers. The subadviser may not assess every investment for ESG
factors and, when it does, not every ESG factor may be identified or evaluated.
The
fundamental research analysts (or portfolio managers, as applicable) typically
use an established proprietary research and engagement process to determine a
company’s profile on ESG issues. This includes generating an ESG rating, through
its ESG ratings system, by assessing ESG factors, both quantitatively and
qualitatively. This system has four rating levels: AAA, AA, A and B, assigned to
companies based on performance on key ESG issues (such as health and safety,
gender diversity, climate risk, corporate governance risk and data security),
including performance relative to the companies’ industry peer set.
More on risks of
investing in the fund
Following
is more information on the principal risks summarized above and additional risks
of investing in the fund.
Stock market and
equity securities risk. The stock
markets are volatile and the market prices of equity securities held by the fund
may go up or down, sometimes rapidly or unpredictably. Equity securities may
include exchange-traded and over-the-counter common stocks, preferred stock,
depositary receipts, trust certificates, limited partnership interests,
warrants, rights, securities convertible into equity securities, and shares of
other
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investment
companies, including exchange-traded funds, and of real estate investment
trusts. Equity securities may have greater price volatility than other asset
classes, such as fixed income securities. The market price of an equity security
may fluctuate based on overall market conditions, such as real or perceived
adverse economic or political conditions or trends, tariffs and trade
disruptions, inflation, substantial economic downturn or recession, changes in
interest rates, or adverse investor sentiment. The market price of a security
may also fall due to specific conditions that affect a particular sector of the
securities market or a particular issuer. Changes in market conditions will not
typically have the same impact on all types of securities. If the market prices
of the equity securities owned by the fund fall, the value of your investment in
the fund will decline. If the fund holds equity securities in a company that
becomes insolvent, the fund’s interests in the company will be subordinated to
the interests of debtholders and general creditors of the company, and the fund
may lose its entire investment.
Market events
risk. The market values of securities or
other assets will fluctuate, sometimes sharply and unpredictably, due to factors
such as economic events, governmental actions or intervention, actions taken by
the U.S. Federal Reserve or foreign central banks, market disruptions caused by
trade disputes, labor strikes or other factors, political developments, armed
conflicts, economic sanctions and countermeasures in response to sanctions,
major cybersecurity events, the global and domestic effects of widespread or
local health, weather or climate events, and other factors that may or may not
be related to the issuer of the security or other asset. Economies and financial
markets throughout the world are increasingly interconnected. Economic,
financial or political events, trading and tariff arrangements, public health
events, terrorism, wars, natural disasters and other circumstances in one
country or region could have profound impacts on global economies or markets. As
a result, whether or not the fund invests in securities of issuers located in or
with significant exposure to the countries or markets directly affected, the
value and liquidity of the fund’s investments may be negatively affected.
Following Russia’s invasion of Ukraine in 2022, Russian stocks lost all, or
nearly all, of their market value. Other securities or markets could be
similarly affected by past or future geopolitical or other events or conditions.
Furthermore, events involving limited liquidity, defaults, non-performance or
other adverse developments that affect one industry, such as the financial
services industry, or concerns or rumors about any events of these kinds, have
in the past and may in the future lead to market-wide liquidity problems, may
spread to other industries, and could negatively affect the value and liquidity
of the fund’s investments.
The
long-term impact of the COVID-19 pandemic and its subsequent variants on
economies, markets, industries and individual issuers is not known. Some sectors
of the economy and individual issuers have experienced or may experience
particularly large losses. Periods of extreme volatility in the financial
markets, reduced liquidity of many instruments, increased government debt,
inflation, and disruptions to supply chains, consumer demand and employee
availability, may continue for some time. The U.S. government and the Federal
Reserve, as well as certain foreign governments and central banks, took
extraordinary actions to support local and global economies and the financial
markets in response to the COVID-19 pandemic. This and other government
intervention into the economy and financial markets may not work as intended,
and have resulted in a large expansion of government deficits and debt, the long
term consequences of which are not known. In addition, the COVID-19 pandemic,
and measures taken to mitigate its effects, could result in disruptions to the
services provided to the fund by its service providers.
Raising
the ceiling on U.S. government debt has become increasingly politicized. Any
failure to increase the total amount that the U.S. government is authorized to
borrow could lead to a default on U.S. government obligations, with
unpredictable consequences for economies and markets in the U.S. and elsewhere.
Recently, inflation and interest rates have increased and may rise further.
These circumstances could adversely affect the value and liquidity of the fund’s
investments, impair the fund’s ability to satisfy redemption requests, and
negatively impact the fund’s performance.
The
United States and other countries are periodically involved in disputes over
trade and other matters, which may result in tariffs, investment restrictions
and adverse impacts on affected companies and securities. For example, the
United States has imposed tariffs and other trade barriers on Chinese exports,
has restricted sales of certain categories of goods to China, and has
established barriers to investments in China. Trade disputes may adversely
affect the economies of the United States and its trading partners, as well as
companies directly or indirectly affected and financial markets generally. The
United States government has prohibited U.S. persons from investing in Chinese
companies designated as related to the Chinese military. These and possible
future restrictions could limit the fund’s opportunities for investment and
require the sale of securities at a loss or make them illiquid. Moreover, the
Chinese government is involved in a longstanding dispute with Taiwan that has
included threats of invasion. If the political climate between the United States
and China does not improve or continues to deteriorate, if China were to attempt
unification of Taiwan by force, or if other geopolitical conflicts develop or
get worse, economies, markets and individual securities may be severely affected
both regionally and globally, and the value of the fund’s assets may go down.
Small capitalization
company risk. The fund will be exposed
to additional risks as a result of its investments in the securities of small
capitalization companies. Small capitalization companies may fall out of favor
with investors; may have limited product lines, operating histories, markets or
financial resources; or may be dependent upon a limited management group. The
prices of securities of small capitalization companies generally are more
volatile than those of large capitalization companies and are more likely to be
adversely affected than large capitalization companies by changes in earnings
results and investor expectations or poor economic or market conditions,
including those experienced during a recession. Securities of small
capitalization companies may underperform large capitalization companies, may be
harder to sell at times or at prices the portfolio managers believe appropriate
and may have greater potential for losses.
Growth investing
risk. The fund’s growth-oriented
investment style may increase the risks of investing in the fund. Growth
securities typically are very sensitive to market movements because their market
prices tend to reflect future expectations. When it appears those expectations
will not be met, the prices of growth securities typically fall. Growth
securities may also be more volatile than other investments because they often
do not pay dividends. The values of growth securities tend to go down when
interest rates rise because the rise in interest rates reduces the current value
of future cash flows. Growth stocks as a group may be out of favor and
underperform the overall equity market while the market favors value stocks.
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ClearBridge Variable Small Cap Growth
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Illiquidity
risk. Illiquidity risk exists when
particular investments are impossible or difficult to sell. Although most of the
fund’s investments must be liquid at the time of investment, investments may be
or become illiquid after purchase by the fund, particularly during periods of
market turmoil. Markets may become illiquid quickly. Markets may become illiquid
when, for instance, there are few, if any, interested buyers or sellers or when
dealers are unwilling or unable to make a market for certain securities. As a
general matter, dealers have been less willing to make markets in recent years.
When the fund holds illiquid investments, the portfolio may be harder to value,
especially in changing markets, and if the fund is forced to sell these
investments to meet redemption requests or for other cash needs, or to try to
limit losses, the fund may be forced to sell at a substantial loss or may not be
able to sell at all. The fund may experience heavy redemptions that could cause
the fund to liquidate its assets at inopportune times or at a loss or depressed
value, which could cause the value of your investment to decline. In addition,
when there is illiquidity in the market for certain investments, the fund, due
to limitations on illiquid investments, may be unable to achieve its desired
level of exposure to a certain sector.
Portfolio management
risk. The value of your investment may
decrease if the subadviser’s judgment about the attractiveness or value of, or
market trends affecting, a particular security, industry, sector or region, or
about market movements, is incorrect or does not produce the desired results, or
if there are imperfections, errors or limitations in the models, tools and data
used by the subadviser. In addition, the fund’s investment strategies or
policies may change from time to time. Those changes may not lead to the results
intended by the subadviser and could have an adverse effect on the value or
performance of the fund.
Issuer
risk. The market price of a security
held by the fund can go up or down more than the market as a whole and can
perform differently from the value of the market as a whole due to factors
specifically relating to the security’s issuer, such as disappointing earnings
reports by the issuer, unsuccessful products or services, loss of major
customers, changes in management, corporate actions, negative perception in the
marketplace, or major litigation or changes in government regulations affecting
the issuer or the competitive environment. An individual security may also be
affected by factors relating to the industry or sector of the issuer or the
securities markets as a whole, and conversely an industry or sector or the
securities markets may be affected by a change in financial condition or other
event affecting a single issuer. Historically, the prices of securities of small
and medium capitalization companies have generally been more volatile than those
of large capitalization companies. The fund may experience a substantial or
complete loss on an individual security.
Industry or sector
focus risk. The fund may be susceptible
to an increased risk of loss, including losses due to events that adversely
affect the fund’s investments more than the market as a whole, to the extent
that the fund may, from time to time, have greater exposure to the securities of
a particular issuer or issuers within the same industry or sector.
Foreign investments
risk. The fund’s investments in
securities of foreign issuers or issuers with significant exposure to foreign
markets involve additional risk as compared to investments in U.S. securities or
issuers with predominantly U.S. exposure, such as less liquid, less regulated,
less transparent and more volatile markets. The markets for some foreign
securities are relatively new, and the rules and policies relating to these
markets are not fully developed and may change. The value of the fund’s
investments may decline because of factors affecting the particular issuer as
well as foreign markets and issuers generally, such as unfavorable or
unsuccessful government actions, tariffs and trade disputes, economic sanctions,
reduction of government or central bank support, inadequate accounting standards
and auditing and financial recordkeeping requirements, lack of information,
political, economic, financial or social instability, terrorism, armed conflicts
and other geopolitical events. Geopolitical or other events such as
nationalization or expropriation could even cause the loss of the fund’s entire
investment in one or more countries.
The
Public Company Accounting Oversight Board, which regulates auditors of U.S.
public companies, may, from time to time, be unable to inspect audit work papers
in certain foreign countries. Investors in foreign countries often have limited
rights and few practical remedies to pursue shareholder claims, including class
actions or fraud claims, and the ability of the Securities and Exchange
Commission, the U.S. Department of Justice and other authorities to bring and
enforce actions against foreign issuers or foreign persons is limited. Foreign
investments may also be adversely affected by U.S. government or international
interventions, restrictions or economic sanctions, which could negatively affect
the value of an investment or result in the fund selling an investment at a
disadvantageous time.
The
value of the fund’s foreign investments may also be affected by foreign tax
laws, special U.S. tax considerations and restrictions on receiving the
investment proceeds from a foreign country. Dividends or interest on, or
proceeds from the sale or disposition of, foreign securities may be subject to
non-U.S. withholding or other taxes.
It
may be difficult for the fund to pursue claims against a foreign issuer or other
parties in the courts of a foreign country. Some securities issued by non-U.S.
governments or their subdivisions, agencies and instrumentalities may not be
backed by the full faith and credit of such governments. Even where a security
is backed by the full faith and credit of a government, it may be difficult for
the fund to pursue its rights against the government. In the past, some non-U.S.
governments have defaulted on principal and interest payments.
If
the fund buys securities denominated in a foreign currency, receives income in
foreign currencies, or holds foreign currencies from time to time, the value of
the fund’s assets, as measured in U.S. dollars, can be affected unfavorably by
changes in exchange rates relative to the U.S. dollar or other foreign
currencies. Currency exchange rates can be volatile, and are affected by factors
such as general economic and political conditions, the actions of the U.S. and
foreign governments or central banks, the imposition of currency controls and
speculation. The fund may be unable or may choose not to hedge its foreign
currency exposure.
In
certain foreign markets, settlement and clearance of trades may experience
delays in payment for or delivery of securities not typically associated with
settlement and clearance of U.S. investments. Settlement of trades in these
markets can take longer than in other markets and the fund may not receive its
proceeds from the sale of certain securities for an extended period (possibly
several weeks or even longer) due to, among other factors,
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low
trading volumes and volatile prices. The custody or holding of securities, cash
and other assets by local banks, agents and depositories in securities markets
outside the United States may entail additional risks. Governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets, and may be subject to limited or
no government oversight. In extreme cases, the fund’s securities may be
misappropriated or the fund may be unable to sell its securities. In general,
the less developed a country’s securities market is, the greater the likelihood
of custody problems.
The
risks of foreign investments are heightened when investing in issuers in
emerging market countries.
Short sales
risk. If the price of the security sold
short increases between the time of the short sale and the time the fund
replaces the borrowed security, the fund will realize a loss, which may be
substantial. A fund that engages in a short sale or short position may lose more
money than the actual cost of the short sale or short position and its potential
losses may be unlimited if the fund does not own the security sold short or the
reference instrument and it is unable to close out of the short sale or short
position.
Derivatives
risk. Derivatives involve special risks
and costs and may result in losses to the fund, even when used for hedging
purposes. Using derivatives can increase losses and reduce opportunities for
gains, such as when market prices, interest rates, currencies, or the
derivatives themselves behave in a way not anticipated by the fund’s subadviser,
especially in abnormal market conditions. Using derivatives also can have a
leveraging effect which may increase investment losses and increase the fund’s
volatility, which is the degree to which the fund’s share price may fluctuate
within a short time period. Certain derivatives have the potential for unlimited
loss, regardless of the size of the initial investment. The other parties to
certain derivatives transactions present the same types of credit risk as
issuers of fixed income securities.
The
fund’s counterparty to a derivative transaction may not honor its obligations in
respect to the transaction. In certain cases, the fund may be hindered or
delayed in exercising remedies against or closing out derivative instruments
with a counterparty, which may result in additional losses.
Derivatives
also tend to involve greater illiquidity risk and they may be difficult to
value. The fund may be unable to terminate or sell its derivative positions. In
fact, many over-the-counter derivatives will not have liquidity except through
the counterparty to the instrument. Derivatives are generally subject to the
risks applicable to the assets, rates, indices or other indicators underlying
the derivative. The value of a derivative may fluctuate more than the underlying
assets, rates, indices or other indicators to which it relates. Use of
derivatives or similar instruments may have different tax consequences for the
fund than an investment in the underlying asset, and those differences may
affect the amount, timing and character of income distributed to shareholders.
The fund’s use of derivatives may also increase the amount of taxes payable by
shareholders. The U.S. government and non-U.S. governments have adopted and
implemented regulations governing derivatives markets, including mandatory
clearing of certain derivatives, margin, and reporting requirements. The
ultimate impact of the regulations remains unclear. Additional regulation
of derivatives may make derivatives more costly, limit their availability or
utility, otherwise adversely affect their performance or disrupt markets. The
fund may be exposed to additional risks as a result of the additional
regulations. The extent and impact of the additional regulations are not yet
fully known and may not be for some time.
With
respect to the fund’s cleared derivative transactions, the fund will be required
to maintain its positions with a clearing organization through one or more
clearing brokers. The clearing organization will require the fund to post margin
and the broker may require the fund to post additional margin to secure the
fund’s obligations. The amount of margin required may change from time to time.
In addition, cleared transactions may be more expensive to maintain than
over-the-counter transactions and may require the fund to deposit larger amounts
of margin. The fund may not be able to recover margin amounts if the broker has
financial difficulties. Also, the broker may require the fund to terminate a
derivatives position under certain circumstances. This may cause the fund to
lose money.
Risks
associated with the use of derivatives are magnified to the extent that an
increased portion of the fund’s assets is committed to derivatives in general or
is invested in just one or a few types of derivatives.
Valuation
risk. Many factors may influence
the price at which the fund could sell any particular portfolio investment. The
sales price may well differ—higher or lower—from the fund’s last valuation, and
such differences could be significant, particularly for illiquid securities and
securities that trade in relatively thin markets and/or markets that experience
extreme volatility. If market conditions make it difficult to value some
investments, the fund may value these investments using more subjective methods,
such as fair value methodologies. These differences may increase significantly
and affect fund investments more broadly during periods of market volatility.
Investors who purchase or redeem fund shares on days when the fund is holding
fair-valued securities may receive fewer or more shares, or lower or higher
redemption proceeds, than they would have received if the fund had not
fair-valued securities or had used a different valuation methodology. The value
of non-U.S. securities, certain fixed income securities and currencies, as
applicable, may be materially affected by events after the close of the markets
in which they are traded, but before the fund determines its net asset
value. The fund’s ability to value its investments may also be impacted by
technological issues and/or errors by pricing services or other third party
service providers. The valuation of the fund’s investments involves subjective
judgment, which may prove to be incorrect.
Investment in other
investment companies risk. Investments
in other investment companies are subject to market and portfolio selection
risk, as well as portfolio management risk. If the fund acquires shares of
investment companies, including ones affiliated with the fund, shareholders bear
both their proportionate share of expenses in the fund (including management and
advisory fees) and, indirectly, the expenses of the investment companies.
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ClearBridge Variable Small Cap Growth
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Cash management and
defensive investing risk. The value of
the investments held by the fund for cash management or defensive investing
purposes can fluctuate. Like other fixed income securities, they are subject to
risk, including market, interest rate and credit risk. If the fund holds cash
uninvested, the cash will be subject to the credit risk of the depository
institution holding the cash and the fund will not earn income on the cash. If a
significant amount of the fund’s assets is used for cash management or defensive
investing purposes, the fund will be less likely to achieve its investment
objective. Defensive investing may not work as intended and the value of an
investment in the fund may still decline.
Risk of increase in
expenses. Your actual costs of investing
in the fund may be higher than the expenses shown in “Annual fund operating
expenses” for a variety of reasons. For example, expenses may be higher if the
fund’s average net assets decrease, as a result of redemptions or otherwise, or
if a fee limitation is changed or terminated. Net assets are more likely to
decrease and fund expense ratios are more likely to increase when markets are
volatile.
Environmental,
social and governance (ESG) considerations risk. ESG considerations are one of a number of factors
that the subadviser examines when considering investments for the fund’s
portfolio. In light of this, the issuers in which the fund invests may not be
considered ESG-focused issuers and may have lower or adverse ESG assessments.
The subadviser may not assess every investment for ESG factors and, when it
does, not every ESG factor may be identified or evaluated. The subadviser’s
assessment of an issuer’s ESG factors is subjective and may differ from that of
investors, third-party service providers (e.g., ratings providers) and other
funds. As a result, securities selected by the subadviser may not reflect the
beliefs and values of any particular investor. The subadviser also may be
dependent on the availability of timely, complete and accurate ESG data reported
by issuers and/or third party research providers, the timeliness, completeness
and accuracy of which is out of the subadviser’s control. ESG factors are often
not uniformly measured or defined, which could impact the subadviser’s ability
to assess an issuer. While the subadviser views ESG considerations as having the
potential to contribute to the fund’s long-term performance, there is no
guarantee that such results will be achieved.
Operational
risk. Your ability to transact with
the fund or the valuation of your investment may be negatively impacted because
of the operational risks arising from factors such as processing errors and
human errors, inadequate or failed internal or external processes, failures in
systems and technology (including those due to cybersecurity incidents), changes
in personnel, and errors caused by third party service providers or trading
counterparties. It is not possible to identify all of the operational risks that
may affect the fund or to develop processes and controls that eliminate or
mitigate the occurrence of such failures. The fund and its shareholders could be
negatively impacted as a result.
Cybersecurity
risk. Like other funds and business
enterprises, the fund, the manager, the subadvisers and their service providers
are subject to the risk of cyber incidents occurring from time to time.
Cybersecurity incidents, whether intentionally caused by third parties or
otherwise, may allow an unauthorized party to gain access to fund assets, fund
or customer data (including private shareholder information) or proprietary
information, cause the fund, the manager, the subadvisers and/or their service
providers (including, but not limited to, fund accountants, custodians,
sub-custodians, transfer agents and financial intermediaries) to suffer data
breaches, data corruption or loss of operational functionality, or prevent fund
investors from purchasing, redeeming or exchanging shares, receiving
distributions or receiving timely information regarding the fund or their
investment in the fund. The fund, the manager, and the subadvisers have limited
ability to prevent or mitigate cybersecurity incidents affecting third party
service providers, and such third party service providers may have limited
indemnification obligations to the fund, the manager, and/or the subadvisers.
Cybersecurity incidents may result in financial losses to the fund and its
shareholders, and substantial costs may be incurred in order to prevent or
mitigate any future cybersecurity incidents. Issuers of securities in which the
fund invests are also subject to cybersecurity risks, and the value of these
securities could decline if the issuers experience cybersecurity incidents.
New
ways to carry out cyber attacks continue to develop. There is a chance that some
risks have not been identified or prepared for, or that an attack may not be
detected, which puts limitations on the fund’s ability to plan for or respond to
a cyber attack.
Please
note that there are other factors that could adversely affect your investment
and that could prevent the fund from achieving its investment objective. More
information about risks appears in the SAI. Before investing, you should
carefully consider the risks that you will assume.
Portfolio holdings
The
fund’s policies and procedures with respect to the disclosure of the fund’s
portfolio securities are described in the SAI. For more information about the
fund’s portfolio holdings, please visit the fund’s website,
www.franklintempleton.com/variablefunds, and click on the name of the fund.
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ClearBridge Variable Small Cap
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More on fund management
Franklin
Templeton Fund Adviser, LLC (“FTFA” or the “manager”) (formerly known as Legg
Mason Partners Fund Advisor, LLC) is the fund’s investment manager. FTFA, with
offices at 280 Park Avenue, New York, New York 10017, also serves as the
investment manager of other Franklin Templeton-sponsored funds. FTFA provides
administrative and certain oversight services to the fund. As of
December 31, 2023, FTFA’s total assets under management were approximately
$182.93 billion.
ClearBridge
Investments, LLC (“ClearBridge” or the “subadviser”) provides the day-to-day
portfolio management of the fund, except for any portion of the fund’s cash and
short-term instruments that is allocated to Western Asset Management Company,
LLC (“Western Asset”). ClearBridge has offices at 620 Eighth Avenue, New York,
New York 10018 and is an investment adviser that manages U.S. and international
equity investment strategies for institutional and individual
investors. ClearBridge has been committed to delivering long-term results
through active management for more than 60 years, and bases its investment
decisions on fundamental research and the insights of seasoned portfolio
management teams. As of December 31, 2023, ClearBridge’s total assets under
management (including assets under management for ClearBridge, LLC, an affiliate
of ClearBridge) were approximately $176.65 billion, including $36.51 billion for
which ClearBridge provides non-discretionary investment models to managed
account sponsors.
Western
Asset manages the portion of the fund’s cash and short-term instruments
allocated to it. Western Asset, established in 1971, has offices at 385 East
Colorado Boulevard, Pasadena, California 91101 and 620 Eighth Avenue, New York,
New York 10018. Western Asset acts as investment adviser to institutional
accounts, such as corporate pension plans, mutual funds and endowment funds. As
of December 31, 2023, the total assets under management of Western Asset
and its supervised affiliates were approximately $384.48 billion.
FTFA,
ClearBridge and Western Asset are indirect, wholly-owned subsidiaries of
Franklin Resources, Inc. (“Franklin Resources”). Franklin Resources, whose
principal executive offices are at One Franklin Parkway, San Mateo, California
94403, is a global investment management organization operating, together with
its subsidiaries, as Franklin Templeton. As of December 31, 2023, Franklin
Templeton’s asset management operations had aggregate assets under management of
approximately $1.46 trillion.
Portfolio managers
Primary
responsibility for the day-to-day management of the fund lies with the following
portfolio managers. The portfolio managers have the ultimate authority to make
portfolio decisions.
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Portfolio
manager |
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Title and recent
biography |
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Portfolio manager
of the fund since |
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Jeffrey Bailin, CFA |
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Mr.
Bailin is a Director and Portfolio Manager of ClearBridge with 14 years of
industry experience. Mr. Bailin joined ClearBridge in 2015. Prior to
ClearBridge, he worked as Vice President & Lead Analyst, Equity
Research for Health Care Distribution & Technology at Credit
Suisse.
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December
2023 |
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Aram E. Green |
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Mr.
Green is a Managing Director and Portfolio Manager of ClearBridge and has
23 years of industry experience. He was formerly an equity analyst at
Hygrove Partners LLC. Mr. Green joined the subadviser in 2006.
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2007 |
The
SAI provides information about the compensation of the portfolio managers, other
accounts managed by the portfolio managers and any fund shares held by the
portfolio managers.
Management fee
The
fund pays a management fee at an annual rate of 0.75% of its average daily net
assets.
For
the fiscal year ended December 31, 2023, the fund paid FTFA an effective
management fee of 0.75% of the fund’s average daily net assets for management
services. The effective management fee reflects any fees waived by the manager
(including any fees waived in connection with investments by the fund in
affiliated investment companies for which the fund paid a management fee).
A
discussion regarding the basis for the Board’s approval of the fund’s management
agreement and subadvisory agreements is available in the fund’s Semi-Annual
Report for the period ended June 30, 2023.
Expense limitation
The
manager has agreed to waive fees and/or reimburse operating expenses (other than
interest, brokerage commissions, taxes, extraordinary expenses and acquired fund
fees and expenses) so that the ratio of total annual fund operating expenses
will not exceed 1.00% for Class I shares
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ClearBridge Variable Small Cap Growth
Portfolio |
and
1.25% for Class II shares, subject to recapture as described below. These
arrangements are expected to continue until December 31, 2025, may be
terminated prior to that date by agreement of the manager and the Board, and may
be terminated at any time after that date by the manager. These arrangements,
however, may be modified by the manager to decrease total annual fund operating
expenses at any time. The manager is also permitted to recapture amounts waived
and/or reimbursed to a class during the same fiscal year in which the manager
earned the fee or incurred the expense if the class’ total annual fund operating
expenses have fallen to a level below the limits described above. In no case
will the manager recapture any amount that would result, on any particular
business day of the fund, in the class’ total annual fund operating expenses
exceeding the applicable limits described above or any other lower limit then in
effect. In addition, the manager has agreed to waive the fund’s management fee
to an extent sufficient to offset the net management fee payable in connection
with any investment in an affiliated money market fund. This management fee
waiver is not subject to the recapture provision discussed above.
Additional information
The
fund enters into contractual arrangements with various parties, including, among
others, the fund’s manager and the subadvisers, who provide services to the
fund. Shareholders are not parties to, or intended (or “third-party”)
beneficiaries of, those contractual arrangements.
This
Prospectus and the SAI provide information concerning the fund that you should
consider in determining whether to purchase shares of the fund. The fund may
make changes to this information from time to time. Neither this Prospectus nor
the SAI is intended to give rise to any contract rights or other rights in any
shareholder, other than rights conferred by federal or state securities laws.
Distribution
Franklin
Distributors, LLC (“Franklin Distributors” or the “Distributor”), an indirect,
wholly-owned broker/dealer subsidiary of Franklin Resources, serves as the
fund’s sole and exclusive distributor.
The
fund has adopted a Rule 12b-1 shareholder services and distribution plan for
Class II shares. Under the plan, Class II shares of the fund are
subject to a distribution fee of 0.25% of the average daily net assets of the
class. The plan allows Class II shares of the fund to bear distribution
fees in connection with the sale and distribution of Class II shares. It
also allows the fund to pay for services to Class II shareholders. From
time to time, Franklin Distributors and/or financial intermediaries may agree to
a reduction or waiver of these fees. This fee is an ongoing expense and over
time may cost you more than paying other types of sales charges. Class I
shares are not subject to any distribution and/or service fees.
Additional payments
In
addition to payments made to intermediaries under the fund’s shareholder
services and distribution plan and other payments made by the fund for
shareholder services and/or recordkeeping, the Distributor, the manager and/or
their affiliates make payments for distribution, shareholder servicing,
marketing and promotional activities and related expenses out of their profits
and other available sources, including profits from their relationships with the
fund. These payments are not reflected as additional expenses in the fee table
contained in this Prospectus. The recipients of these payments may include the
Distributor and affiliates of the manager, as well as Service Agents through
which investors may purchase shares of the fund, including your Service Agent.
The total amount of these payments is substantial, may be substantial to any
given recipient and may exceed the costs and expenses incurred by the recipient
for any fund-related marketing or shareholder servicing activities. The payments
described in this paragraph are often referred to as “revenue sharing payments.”
Revenue sharing arrangements are separately negotiated between the Distributor,
the manager and/or their affiliates, and the recipients of these payments.
Revenue
sharing payments create an incentive for an intermediary or its employees or
associated persons to recommend or sell shares of the fund to you. Contact your
Service Agent for details about revenue sharing payments it receives or may
receive. Additional information about revenue sharing payments is available in
the SAI. Revenue sharing payments, as well as payments by the fund under the
shareholder services and distribution plan or for recordkeeping and/or
shareholder services, also benefit the manager, the Distributor and their
affiliates to the extent the payments result in more assets being invested in
the fund on which fees are being charged.
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ClearBridge Variable Small Cap
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15 |
Share transactions
Share classes
The
fund has two share classes, Class I and Class II shares. Class I and Class II
shares have different expense structures. Class I shares are not subject to a
shareholder services and distribution fee, while Class II shares are subject to
a shareholder services and distribution fee of 0.25% of the average daily net
assets of the class.
Availability of the fund
Shares
of the fund may only be purchased or redeemed through variable annuity contracts
and variable life insurance policies offered by the separate accounts of
participating life insurance companies, through qualified pension and retirement
plans or by qualified funds of funds whose investors consist solely of separate
accounts of participating life insurance companies and/or qualified pension and
retirement plans. Additional information regarding eligibility to invest in
shares of the fund can be found in the SAI. Prospective investors should consult
their own tax professionals regarding their eligibility to hold fund shares.
Shares of the fund are sold at the fund’s net asset value next determined after
receipt by the fund, through its agent, of a purchase request in good order.
The
interests of different variable insurance products investing in the fund could
conflict due to differences of tax treatment and other considerations. The
fund’s Board currently does not foresee any disadvantages to investors arising
from the fact that the fund may offer its shares to different insurance company
separate accounts that serve as the investment medium for their variable annuity
and variable life products. Nevertheless, the Board intends to monitor events to
identify any material irreconcilable conflicts which may arise, and to determine
what action, if any, should be taken in response to these conflicts. If a
conflict were to occur, one or more insurance company’s separate accounts might
be required to withdraw their investments in the fund and shares of another fund
may be substituted. In addition, the sale of shares may be suspended or
terminated if required by law or regulatory authority or if it is found by the
Board to be in the best interests of the fund’s shareholders.
The
fund reserves the right to reject any specific purchase order.
Certain
insurance companies may have selected, and the Distributor may have made
available, fund share classes with distribution and/or service-related fees that
are higher than other available share classes. As a result of higher fees paid
by investors in such share classes, the amount of fees that may otherwise need
to be paid by the Distributor or its affiliates to such insurance company would
decrease.
Redemption of shares
The
redemption price of the shares of the fund will be the net asset value next
determined after receipt by the fund, through its agent, of a redemption order
from a separate account and by qualified plans, which may be more or less than
the price paid for the shares. The fund will ordinarily make payment within one
business day after receipt of a redemption request in good order. Redemption
proceeds must be remitted to a separate account on or before the second day
following receipt of the request in good order, except on a day on which the New
York Stock Exchange (the “NYSE”) is closed or as permitted by the Securities and
Exchange Commission in extraordinary circumstances.
Under
normal circumstances, the fund expects to meet redemption requests by using cash
or cash equivalents in its portfolio or selling portfolio assets to generate
cash. The fund also may pay redemption proceeds using cash obtained through
borrowing arrangements that may be available from time to time.
The
fund may pay all or a portion of redemption proceeds by delivering securities
(for example, if the fund reasonably believes that a cash redemption may have a
substantial impact on the fund and its remaining shareholders). In that event, a
redeeming shareholder may incur costs (such as brokerage commissions) in
converting the securities into cash and the shareholder may receive less for the
securities than the price at which they were valued for purposes of the
redemption.
The
fund has available an unsecured revolving credit facility (the “Global Credit
Facility”) that may be used as an additional source of liquidity to fund
redemptions of shares. There can be no assurance that the Global Credit Facility
will remain available to the fund generally or that any available credit under
the Global Credit Facility will be available to the fund when the fund seeks to
draw on the Global Credit Facility.
During
periods of deteriorating or stressed market conditions, when an increased
portion of the fund’s portfolio may be comprised of investments that have lower
liquidity, or during extraordinary or emergency circumstances, the fund may be
more likely to pay redemption proceeds with cash obtained through short-term
borrowing arrangements or by giving securities.
Subject
to applicable law, the fund may, with prior notice, adopt other policies from
time to time requiring mandatory redemption of shares in certain circumstances.
Frequent trading of fund
shares
The
Board has adopted the following policies and procedures with respect to frequent
trading (Frequent Trading Policy):
Frequent trading
generally. The fund discourages and does
not intend to accommodate short-term or frequent purchases and redemptions of
fund shares, often referred to as “frequent trading,” and asks its fund of fund
investors and participating life insurance companies (“Insurers”) for their
cooperation in trying to discourage such activity in their separate accounts by
contract holders and their service agents. The fund intends to seek to
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16 |
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ClearBridge Variable Small Cap Growth
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restrict
or reject such trading or take other action, as described below, if in the
judgment of the fund’s manager or transfer agent such trading may interfere with
the efficient management of the fund’s portfolio, may materially increase the
fund’s transaction costs, administrative costs or taxes, or may otherwise be
detrimental to the interests of the fund and its shareholders.
The
Frequent Trading Policy applies to any account, whether a direct account or
accounts with financial intermediaries such as investment advisers,
broker/dealers or retirement plan administrators, and accounts held through
intermediaries such as insurance company separate accounts, where the
intermediary holds fund shares for a number of its customers in one account.
Frequent trading
consequences. If information regarding
trading activity in the fund or in any other Franklin Templeton affiliated fund
or non-Franklin Templeton affiliated fund is brought to the attention of the
fund’s manager or transfer agent and based on that information the fund or its
manager or transfer agent in their sole discretion conclude that such trading
may be detrimental to the fund as described in this Frequent Trading Policy, the
fund may temporarily or permanently bar future purchases into the fund or,
alternatively, may limit the amount, number or frequency of any future purchases
and/or the method by which a shareholder may request future purchases and
redemptions (including purchases and/or redemptions by an exchange or transfer
between the fund and any other mutual fund). In determining what actions should
be taken, the fund’s transfer agent may consider a variety of factors, including
the potential impact of such remedial actions on the fund or its shareholders.
If the fund is a “fund of funds,” the fund’s transfer agent may take into
account the impact of the trading activity and of any proposed remedial action
on both the fund and the underlying funds in which the fund invests.
In
considering trading activity, the fund may consider, among other factors,
trading history both directly and, if known, through financial intermediaries,
in the fund, in other Franklin Templeton affiliated funds, in non-Franklin
Templeton affiliated mutual funds, or in accounts under common control or
ownership.
Frequent trading
through Insurers. An Insurer’s order for
purchases and/or redemptions pursuant to a contract holder’s instructions
(including purchases and/or redemptions by an exchange or transfer between the
fund and any mutual fund) are submitted pursuant to aggregated orders
(Aggregated Orders). A fund of fund’s order for purchases and/or redemptions
pursuant to its investors’ instructions are also submitted pursuant to
Aggregated Orders. While the fund will encourage Insurers and funds of funds to
apply the Frequent Trading Policy to their investors, the fund is limited in its
ability to monitor the trading activity or enforce the Frequent Trading Policy
because Insurers and funds of funds have the relationships with, and are
responsible for maintaining the account records of, the individual investors.
For example, should it occur, the fund may not be able to detect frequent
trading that may be facilitated by financial intermediaries or made difficult to
identify in the Aggregated Orders used by Insurers and fund of fund investors.
Therefore,
the fund or its agent selectively monitor the Aggregated Orders used by Insurers
and fund of fund investors for purchases, exchanges and redemptions in respect
of all their investors and seek the cooperation of Insurers and fund of fund
investors to apply the Frequent Trading Policy. There may be legal and
technological limitations on the ability of an Insurer or fund of fund to impose
trading restrictions and to apply the Frequent Trading Policy to their investors
through such methods as implementing short-term trading limitations or
restrictions, assessing the fund’s redemption fee (if applicable) and monitoring
trading activity for what might be frequent trading. As a result, the fund may
not be able to determine whether trading by Insurers or funds of funds in
respect of their investors is contrary to the Frequent Trading Policy.
Risks from frequent
trading. Depending on various factors,
including the size of the fund, the amount of assets the portfolio manager
typically maintains in cash or cash equivalents and the dollar amount and number
and frequency of trades and the types of securities in which the fund typically
invests, short-term or frequent trading may interfere with the efficient
management of the fund’s portfolio, increase the fund’s transaction costs,
administrative costs and taxes and/or impact fund performance.
In
addition, if the nature of the fund’s portfolio holdings exposes the fund to
“arbitrage market timers,” the value of the fund’s shares may be diluted if
redeeming shareholders receive proceeds (and buying shareholders receive shares)
based upon net asset values which do not reflect appropriate fair value prices.
Arbitrage market timing occurs when an investor seeks to take advantage of the
possible delay between the change in the value of a mutual fund’s portfolio
holdings and the reflection of the change in the fund’s net asset value per
share. A fund that invests significantly in foreign securities may be
particularly vulnerable to arbitrage market timing. Arbitrage market timing in
foreign investments may occur because of time zone differences between the
foreign markets on which the fund’s international portfolio securities trade and
the time as of which the fund’s net asset value is calculated. Arbitrage market
timers may purchase shares of the fund based on events occurring after foreign
market closing prices are established, but before calculation of the fund’s net
asset value. One of the objectives of the fund’s fair value pricing procedures
is to minimize the possibilities of this type of arbitrage market timing.
Since
the fund may invest significantly in securities that are, or may be, restricted,
unlisted, traded infrequently, thinly traded, or relatively illiquid (relatively
illiquid securities), the fund may be particularly vulnerable to arbitrage
market timing. An arbitrage market timer may seek to take advantage of a
possible differential between the last available market prices for one or more
of these relatively illiquid securities that are used to calculate the fund’s
net asset value and the latest indications of market values for those
securities. One of the objectives of the fund’s fair value pricing procedures is
to minimize the possibilities of this type of arbitrage market timing.
The
fund is currently using several methods to reduce the risk of frequent trading.
These methods include:
• |
|
seeking
the cooperation of Insurers and funds of funds to assist the fund in
identifying potential frequent trading activity;
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ClearBridge Variable Small Cap
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17 |
• |
|
committing
staff to selectively review on a continuing basis recent trading activity
in order to identify trading activity that may be contrary to the Frequent
Trading Policy; |
• |
|
monitoring
potential price differentials following the close of trading in foreign
markets to determine whether the application of fair value pricing
procedures is warranted; and |
• |
|
seeking
the cooperation of financial intermediaries to assist the fund in
identifying frequent trading activity. |
Though
these methods involve judgments that are inherently subjective and involve some
selectivity in their application, the fund seeks to make judgments and
applications that are consistent with the interests of the fund’s shareholders.
There is no assurance that the fund or its agents will gain access to any or all
information necessary to detect frequent trading in Insurers’ separate accounts.
While the fund will seek to take actions (directly and with the assistance of
Insurers) that will detect frequent trading, it cannot represent that such
trading activity can be minimized or completely eliminated.
Revocation of
frequent trading trades. Transactions
placed in violation of the Frequent Trading Policy or exchange limit guidelines
are not necessarily deemed accepted by the fund and may be cancelled or revoked
by the fund, in full or in part, as soon as practicable following receipt by the
fund and prompt inquiry of the intermediary.
Dividends, other
distributions and taxes
Distributions
made by the fund are automatically reinvested in additional shares of the fund
at net asset value unless the fund is instructed otherwise. Distributions to an
insurance company separate account, and exchanges and redemptions of fund shares
made by a separate account, ordinarily do not cause contract holders to
recognize income or gain for federal income tax purposes. Please see the
accompanying contract prospectus for information regarding the federal income
tax treatment of distributions to the separate accounts and to contract holders.
In
order to enable insurance company separate accounts investing in the fund to
comply with the diversification requirements applicable to “segregated asset
accounts” under the Internal Revenue Code of 1986, as amended (the “Code”), the
fund intends to structure its portfolio in a manner that complies with those
requirements and to prohibit investment in the fund by investors other than
separate accounts established and maintained by insurance companies for the
purpose of funding variable annuity and life insurance contracts and certain
qualified pension and retirement plans and other regulated investment companies
whose shares are generally offered only to such separate accounts and pension
and retirement plans. The applicable Treasury regulations generally provide
that, as of the end of each calendar quarter or within 30 days thereafter, no
more than 55% of the total assets of a segregated asset account may be
represented by any one investment, no more than 70% by any two investments, no
more than 80% by any three investments, and no more than 90% by any four
investments. For this purpose, all securities of the same issuer are considered
a single investment, but in the case of U.S. government securities, each
government agency or instrumentality is considered to be a separate issuer. An
alternative asset diversification test may be satisfied under certain
circumstances. So long as the fund qualifies as a “regulated investment company”
and ensures that its shares are held only by qualifying investors (including
other regulated investment companies whose shares are held only by qualifying
investors), each segregated asset account investing in the fund will be entitled
to “look through” to the fund’s portfolio in order to satisfy the
diversification requirements. As noted above, shares of the fund are offered
only to separate accounts established and maintained by insurance companies for
the purpose of funding variable annuity and variable life insurance contracts
and to certain qualified pension and retirement plans and other regulated
investment companies whose shares are generally offered only to such separate
accounts and pension and retirement plans; if the fund were to sell its shares
to other categories of shareholders, the fund may fail to comply with applicable
Treasury requirements regarding investor control. If the fund should fail to
comply with the diversification or investor control requirements or fail to
qualify as a regulated investment company under the Code, contracts invested in
the fund would not be treated as annuity, endowment or life insurance contracts
under the Code, and all income and gain earned in past years and currently
inside the contracts would be taxed currently to the policyholders and income
and gain would remain subject to taxation as ordinary income thereafter, even if
the fund were to become adequately diversified.
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18 |
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ClearBridge Variable Small Cap Growth
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Share price
You
may buy or redeem shares at their net asset value next determined after receipt
of your request in good order. The fund’s net asset value per share is the value
of its assets minus its liabilities divided by the number of shares outstanding.
Net asset value is calculated separately for each class of shares.
The
fund calculates its net asset value every day the NYSE is open. The fund
generally values its securities and other assets and calculates its net asset
value as of the scheduled close of regular trading on the NYSE, normally at 4:00
p.m. (Eastern time). If the NYSE closes at a time other than the scheduled
closing time, the fund will calculate its net asset value as of the scheduled
closing time. The NYSE is closed on certain holidays listed in the SAI.
Orders
to buy or redeem shares at a certain day’s price must be received by the fund,
through its agent, before the scheduled close of regular trading on the NYSE on
that day to receive that day’s price. If the NYSE closes early on that day, you
must place your order prior to the scheduled closing time. It is the
responsibility of the separate account or qualified plan to transmit all orders
to buy or redeem shares to the transfer agent within the time period agreed to
by such parties.
Valuation
of the fund’s securities and other assets is performed in accordance with the
valuation policy approved by the Board. The fund’s manager serves as the fund’s
valuation designee for purposes of compliance with Rule 2a-5 under the
Investment Company Act of 1940, as amended. Under the valuation policy, assets
are valued as follows:
• |
|
Equity
securities and certain derivative instruments that are traded on an
exchange are valued at the closing price (which may be reported at a
different time than the time at which the fund’s net asset value is
calculated) or, if that price is unavailable or deemed by the manager not
representative of market value, the last sale price. Where a security is
traded on more than one exchange (as is often the case overseas), the
security is generally valued at the price on the exchange considered by
the manager to be the primary exchange. In the case of securities not
traded on an exchange, or if exchange prices are not otherwise available,
the prices are typically determined by independent third party pricing
services that use a variety of techniques and methodologies. Investments
in mutual funds are valued at the net asset value per share of the class
of the underlying fund held by the fund as determined on each business
day. |
• |
|
The
valuations for fixed income securities and certain derivative instruments
are typically the prices supplied by independent third party pricing
services, which may use market prices or broker/dealer quotations or a
variety of fair valuation techniques and methodologies.
|
• |
|
The
valuations of securities traded on foreign markets and certain fixed
income securities will generally be based on prices determined as of the
earlier closing time of the markets in which they primarily trade. The
prices of foreign equity securities typically are adjusted using a fair
value model developed by an independent third party pricing service to
estimate the value of those securities at the time of closing of the NYSE.
When the fund holds securities or other assets that are denominated in a
foreign currency, the fund will normally use the currency exchange rates
as of 4:00 p.m. (Eastern time). Foreign markets are open for trading on
weekends and other days when the fund does not price its shares.
Therefore, the value of the fund’s shares may change on days when you will
not be able to purchase or redeem the fund’s shares.
|
• |
|
If
independent third party pricing services are unable to supply prices for a
portfolio investment, or if the prices supplied are deemed by the manager
to be unreliable, the market price may be determined by the manager using
quotations from one or more broker/dealers. When such prices or quotations
are not available, or when the manager believes that they are unreliable,
the manager will price securities in accordance with the valuation policy.
Among other things, the use of a formula or other method that takes into
consideration market indices, yield curves and other specific adjustments
may be used to determine fair value. Fair value of a security is the
amount, as determined by the manager in good faith, that the fund might
reasonably expect to receive upon a current sale of the security. Fair
value procedures may also be used if the manager determines that a
significant event has occurred between the time at which a market price is
determined and the time at which the fund’s net asset value is calculated.
|
Many
factors may influence the price at which the fund could sell any particular
portfolio investment. The sales price may well differ—higher or lower—from the
fund’s last valuation, and such differences could be significant, particularly
for securities that trade in relatively thin markets and/or markets that
experience extreme volatility. Moreover, valuing securities using fair value
methodologies involves greater reliance on judgment than valuing securities
based on market quotations. Fair value methodologies may value securities higher
or lower than another fund using market quotations or its own fair value
methodologies to price the same securities. There can be no assurance that the
fund could obtain the value assigned to a security if it were to sell the
security at approximately the time at which the fund determines its net asset
value. Investors who purchase or redeem fund shares on days when the fund is
holding fair-valued securities may receive a greater or lesser number of shares,
or higher or lower redemption proceeds, than they would have received if the
fund had not fair-valued the security or had used a different methodology.
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ClearBridge Variable Small Cap
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19 |
Financial highlights
The
financial highlights tables are intended to help you understand the performance
of each class for the past five years, unless otherwise noted. Certain
information reflects financial results for a single fund share. Total return
represents the rate that a shareholder would have earned (or lost) on a fund
share assuming reinvestment of all dividends and distributions. Total returns do
not reflect expenses associated with a separate account such as administrative
fees, account charges and surrender charges, which, if reflected, would reduce
the total returns for all periods shown. Unless otherwise noted, this
information has been audited by the fund’s independent registered public
accounting firm, PricewaterhouseCoopers LLP, whose report, along with the fund’s
financial statements, is incorporated by reference into the fund’s SAI (see back
cover) and is included in the fund’s annual report. The fund’s annual report is
available upon request by calling toll-free 877-6LM-FUND/656-3863 or via the
following hyperlink: (
https://www.sec.gov/Archives/edgar/data/1176343/000119312524041189/d622599dncsr.htm).
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For a share of each class of beneficial interest
outstanding throughout each year ended
December 31: |
|
Class I Shares1 |
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
| |
Net asset value,
beginning of year |
|
|
$25.23 |
|
|
|
$36.32 |
|
|
|
$36.60 |
|
|
|
$27.54 |
|
|
|
$23.88 |
|
|
|
|
|
| |
Income (loss) from operations: |
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
| |
Net
investment loss |
|
|
(0.10) |
|
|
|
(0.12) |
|
|
|
(0.18) |
|
|
|
(0.15) |
|
|
|
(0.14) |
|
Net
realized and unrealized gain (loss) |
|
|
2.22 |
|
|
|
(10.42) |
|
|
|
4.70 |
|
|
|
11.83 |
|
|
|
6.50 |
|
Total income (loss) from
operations |
|
|
2.12 |
|
|
|
(10.54) |
|
|
|
4.52 |
|
|
|
11.68 |
|
|
|
6.36 |
|
|
|
|
|
| |
Less distributions from: |
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
| |
Net
realized gains |
|
|
— |
|
|
|
(0.55) |
|
|
|
(4.80) |
|
|
|
(2.62) |
|
|
|
(2.70) |
|
Total
distributions |
|
|
— |
|
|
|
(0.55) |
|
|
|
(4.80) |
|
|
|
(2.62) |
|
|
|
(2.70) |
|
|
|
|
|
| |
Net asset value,
end of year |
|
|
$27.35 |
|
|
|
$25.23 |
|
|
|
$36.32 |
|
|
|
$36.60 |
|
|
|
$27.54 |
|
Total return2 |
|
|
8.40 |
% |
|
|
(28.85) |
% |
|
|
12.61 |
% |
|
|
43.26 |
% |
|
|
26.87 |
% |
|
|
|
|
| |
Net assets, end of
year (millions) |
|
|
$287 |
|
|
|
$261 |
|
|
|
$368 |
|
|
|
$351 |
|
|
|
$267 |
|
|
|
|
|
| |
Ratios to average net assets: |
|
|
|
| |
|
|
| |
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|
| |
|
|
| |
|
| |
Gross
expenses |
|
|
0.80 |
% |
|
|
0.80 |
% |
|
|
0.80 |
% |
|
|
0.81 |
% |
|
|
0.81 |
% |
Net
expenses3,4 |
|
|
0.80 |
|
|
|
0.80 |
|
|
|
0.80 |
|
|
|
0.81 |
|
|
|
0.81 |
|
Net
investment loss |
|
|
(0.39) |
|
|
|
(0.43) |
|
|
|
(0.46) |
|
|
|
(0.52) |
|
|
|
(0.49) |
|
|
|
|
|
| |
Portfolio turnover
rate |
|
|
15 |
% |
|
|
8 |
% |
|
|
16 |
% |
|
|
21 |
% |
|
|
21 |
% |
1 |
Per
share amounts have been calculated using the average shares method.
|
2 |
Performance
figures may reflect compensating balance arrangements, fee waivers and/or
expense reimbursements. In the absence of compensating balance
arrangements, fee waivers and/or expense reimbursements, the total return
would have been lower. Total returns do not reflect expenses associated
with separate accounts such as administrative fees, account charges and
surrender charges which, if reflected, would reduce the total return for
all periods shown. Past performance is no guarantee of future results.
|
3 |
Reflects
fee waivers and/or expense reimbursements. |
4 |
As
a result of an expense limitation arrangement, the ratio of total annual
fund operating expenses, other than interest, brokerage commissions,
taxes, extraordinary expenses and acquired fund fees and expenses, to
average net assets of Class I shares did not exceed 1.00%. This expense
limitation arrangement cannot be terminated prior to December 31,
2025 without the Board of Trustees’ consent. In addition, the manager has
agreed to waive the Portfolio’s management fee to an extent sufficient to
offset the net management fee payable in connection with any investment in
an affiliated money market fund. |
|
|
|
| |
20 |
|
| |
ClearBridge Variable Small Cap Growth
Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
For a share of each class of beneficial interest
outstanding throughout each year ended
December 31: |
|
Class II Shares1 |
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
| |
Net asset value,
beginning of year |
|
|
$23.39 |
|
|
|
$33.81 |
|
|
|
$34.46 |
|
|
|
$26.11 |
|
|
|
$22.81 |
|
|
|
|
|
| |
Income (loss) from operations: |
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
| |
Net
investment loss |
|
|
(0.15) |
|
|
|
(0.17) |
|
|
|
(0.27) |
|
|
|
(0.21) |
|
|
|
(0.20) |
|
Net
realized and unrealized gain (loss) |
|
|
2.05 |
|
|
|
(9.70) |
|
|
|
4.42 |
|
|
|
11.18 |
|
|
|
6.20 |
|
Total income (loss) from
operations |
|
|
1.90 |
|
|
|
(9.87) |
|
|
|
4.15 |
|
|
|
10.97 |
|
|
|
6.00 |
|
|
|
|
|
| |
Less distributions from: |
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
| |
Net
realized gains |
|
|
— |
|
|
|
(0.55) |
|
|
|
(4.80) |
|
|
|
(2.62) |
|
|
|
(2.70) |
|
Total
distributions |
|
|
— |
|
|
|
(0.55) |
|
|
|
(4.80) |
|
|
|
(2.62) |
|
|
|
(2.70) |
|
|
|
|
|
| |
Net asset value,
end of year |
|
|
$25.29 |
|
|
|
$23.39 |
|
|
|
$33.81 |
|
|
|
$34.46 |
|
|
|
$26.11 |
|
Total return2 |
|
|
8.12 |
% |
|
|
(29.01) |
% |
|
|
12.31 |
% |
|
|
42.91 |
% |
|
|
26.55 |
% |
|
|
|
|
| |
Net assets, end of
year (millions) |
|
|
$136 |
|
|
|
$117 |
|
|
|
$175 |
|
|
|
$153 |
|
|
|
$105 |
|
|
|
|
|
| |
Ratios to average net assets: |
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
| |
Gross
expenses |
|
|
1.05 |
% |
|
|
1.05 |
% |
|
|
1.05 |
% |
|
|
1.06 |
% |
|
|
1.06 |
% |
Net
expenses3,4 |
|
|
1.05 |
|
|
|
1.04 |
|
|
|
1.05 |
|
|
|
1.06 |
|
|
|
1.06 |
|
Net
investment loss |
|
|
(0.64) |
|
|
|
(0.69) |
|
|
|
(0.71) |
|
|
|
(0.76) |
|
|
|
(0.74) |
|
|
|
|
|
| |
Portfolio turnover
rate |
|
|
15 |
% |
|
|
8 |
% |
|
|
16 |
% |
|
|
21 |
% |
|
|
21 |
% |
1 |
Per
share amounts have been calculated using the average shares method.
|
2 |
Performance
figures may reflect compensating balance arrangements, fee waivers and/or
expense reimbursements. In the absence of compensating balance
arrangements, fee waivers and/or expense reimbursements, the total return
would have been lower. Total returns do not reflect expenses associated
with separate accounts such as administrative fees, account charges and
surrender charges which, if reflected, would reduce the total return for
all periods shown. Past performance is no guarantee of future results.
|
3 |
Reflects
fee waivers and/or expense reimbursements. |
4 |
As
a result of an expense limitation arrangement, the ratio of total annual
fund operating expenses, other than interest, brokerage commissions,
taxes, extraordinary expenses and acquired fund fees and expenses, to
average net assets of Class II shares did not exceed 1.25%. This expense
limitation arrangement cannot be terminated prior to December 31,
2025 without the Board of Trustees’ consent. In addition, the manager has
agreed to waive the Portfolio’s management fee to an extent sufficient to
offset the net management fee payable in connection with any investment in
an affiliated money market fund. |
|
|
|
| |
ClearBridge Variable Small Cap
Growth Portfolio |
|
| |
21 |
Franklin Templeton Funds Privacy and Security Notice
Franklin
Templeton* is committed to safeguarding your personal information. This notice
is designed to provide you with a summary of the non-public personal information
Franklin Templeton may collect and maintain about current or former individual
investors; our policy regarding the use of that information; and the measures we
take to safeguard the information. We do not sell individual investors’
non-public personal information to anyone and only share it as described in this
notice.
Information We Collect
When
you invest with us, you provide us with your non-public personal information. We
collect and use this information to service your accounts and respond to your
requests. The non-public personal information we may collect falls into the
following categories:
• |
|
Information
we receive from you or your financial intermediary on applications or
other forms, whether we receive the form in writing or electronically. For
example, this information may include your name, address, tax
identification number, birth date, investment selection, beneficiary
information, and your personal bank account information and/or email
address if you have provided that information. |
• |
|
Information
about your transactions and account history with us, or with other
companies that are part of Franklin Templeton, including transactions you
request on our website or in our app. This category also includes your
communications to us concerning your investments.
|
• |
|
Information
we receive from third parties (for example, to update your address if you
move, obtain or verify your email address or obtain additional information
to verify your identity). |
• |
|
Information
collected from you online, such as your IP address or device ID and data
gathered from your browsing activity and location. (For example, we may
use cookies to collect device and browser information so our website
recognizes your online preferences and device information.) Our website
contains more information about cookies and similar technologies and ways
you may limit them. |
• |
|
Other
general information that we may obtain about you such as demographic
information. |
Disclosure Policy
To
better service your accounts and process transactions or services you requested,
we may share non-public personal information with other Franklin Templeton
companies. From time to time we may also send you information about
products/services offered by other Franklin Templeton companies although we will
not share your non-public personal information with these companies without
first offering you the opportunity to prevent that sharing.
We
will only share non-public personal information with outside parties in the
limited circumstances permitted by law. For example, this includes situations
where we need to share information with companies who work on our behalf to
service or maintain your account or process transactions you requested, when the
disclosure is to companies assisting us with our own marketing efforts, when the
disclosure is to a party representing you, or when required by law (for example,
in response to legal process). Additionally, we will ensure that any outside
companies working on our behalf, or with whom we have joint marketing
agreements, are under contractual obligations to protect the confidentiality of
your information, and to use it only to provide the services we asked them to
perform.
Confidentiality and
Security
Our
employees are required to follow procedures with respect to maintaining the
confidentiality of our investors’ non-public personal information. Additionally,
we maintain physical, electronic and procedural safeguards to protect the
information. This includes performing ongoing evaluations of our systems
containing investor information and making changes when appropriate.
At
all times, you may view our current privacy notice on our website at
https://www.franklintempleton.com/help/privacy-policy or contact us for a copy
at (800) 632-2301.
*For
purposes of this privacy notice Franklin Templeton shall refer to the following
entities:
Fiduciary
Trust International of the South (FTIOS), as custodian for individual retirement
plans
Franklin
Advisers, Inc.
Franklin
Distributors, LLC, including as program manager of the Franklin Templeton 529
College Savings Plan and the NJBEST 529 College Savings Plan
Franklin
Mutual Advisers, LLC
Franklin,
Templeton and Mutual Series Funds
Franklin
Templeton Institutional, LLC
Franklin
Templeton Investments Corp., Canada
Franklin
Templeton Investments Management, Limited UK
Templeton
Asset Management, Limited
Templeton
Global Advisors, Limited
Templeton
Investment Counsel, LLC
If
you are a customer of other Franklin Templeton affiliates and you receive
notices from them, you will need to read those notices separately.
|
THIS PAGE IS
NOT PART OF THE PROSPECTUS |
ClearBridge
Variable Small Cap Growth Portfolio
You
may visit www.franklintempleton.com/variablefunds for a free copy of a
Prospectus, Statement of Additional Information (“SAI”) or an Annual or
Semi-Annual Report.
Shareholder
reports Additional information about the
fund’s investments is available in the fund’s Annual and Semi-Annual Reports to
shareholders. In the fund’s Annual Report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
fund’s performance during its last fiscal year. The independent registered
public accounting firm’s report and financial statements in the fund’s Annual
Report are incorporated by reference into (are legally a part of) this
Prospectus.
Statement of
additional information The SAI provides
more detailed information about the fund and is incorporated by reference into
(is legally a part of) this Prospectus.
You
can make inquiries about the fund or obtain shareholder reports or the SAI
(without charge) by calling the fund at 877-6LM-FUND/656-3863, or by writing to
the fund at Legg Mason Funds, P.O. Box 33030, St. Petersburg, FL 33733-8030.
Reports
and other information about the fund are available on the EDGAR Database on the
Securities and Exchange Commission’s Internet site at
http://www.sec.gov. Copies of this information may be obtained for a
duplicating fee by electronic request at the following E-mail address:
[email protected].
If
someone makes a statement about the fund that is not in this Prospectus, you
should not rely upon that information. Neither the fund nor the Distributor is
offering to sell shares of the fund to any person to whom the fund may not
lawfully sell its shares.
Shares
of the fund are offered only to insurance company separate accounts that fund
certain variable annuity and variable life insurance contracts and to qualified
pension and retirement plans or by qualified funds of funds whose investors
consist solely of separate accounts of participating life insurance companies
and/or qualified pension and retirement plans. Additional information regarding
eligibility to invest in shares of the fund can be found in the SAI. Prospective
investors should consult their own tax professionals regarding their eligibility
to hold fund shares. This Prospectus should be read together with the
prospectuses for those contracts and information for those plans.
|
(Investment
Company Act
file
no. 811-21128)
FD04189ST
05/24
©
2024 Franklin Templeton. All rights
reserved. |