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Visa – Form N-CSR LEGG MASON PARTNERS VARI For: Dec 31


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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED
SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-21128

 

 

Legg Mason Partners Variable Equity Trust

(Exact name of registrant as specified in charter)

 

 

620 Eighth
Avenue, 47th Floor, New York, NY 10018

(Address of principal executive offices)
(Zip code)

 

 

Marc A. De Oliveira.

Franklin Templeton

100
First Stamford Place

Stamford, CT 06902

(Name and address of agent for service)

 

 

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

Date of fiscal year end: December 31

Date of reporting period: December 31, 2020

 

 

 


ITEM 1.

REPORT TO STOCKHOLDERS.

The Annual Report to Stockholders is filed herewith.


 

Annual Report   December 31, 2020

CLEARBRIDGE

VARIABLE LARGE CAP GROWTH PORTFOLIO

 

 

 

Beginning in or after January 2021, as permitted by regulations adopted by the Securities and Exchange Commission,
your insurance company may no longer send you paper copies of the Fund’s shareholder reports like this one by mail, unless you specifically request paper copies of the reports from the insurance company or your financial intermediary. Instead,
the shareholder reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report. Instructions for requesting paper copies will be provided by your
insurance company.

If you already elected to receive shareholder reports electronically, you will not be affected by
this change and you need not take any action. If your insurance company offers electronic delivery, you may elect to receive shareholder reports and other communications from them electronically by following the instructions provided by the
insurance company.

You may elect to receive all future reports in paper free of charge. You can
inform the insurance company that you wish to continue receiving paper copies of shareholder reports by following the instructions provided by them. Your election will apply to all Funds available under your contract with the insurance company.

 

LOGO

 

INVESTMENT PRODUCTS: NOT FDIC INSURED • NO (BA)NK GUARANTEE • MAY LOSE
VALUE

Portfolio objective

The Portfolio seeks long-term growth of capital.

 

Letter from the president

 

LOGO

 

Dear Shareholder,

We are pleased to provide the annual report of ClearBridge Variable Large Cap Growth Portfolio for the twelve-month reporting period ended
December 31, 2020. Please read on for a detailed look at prevailing economic and market conditions during the Portfolio’s reporting period and to learn how those conditions have affected Portfolio performance.

As always, we remain committed to providing you with excellent service and a full spectrum of investment choices. We also remain committed to supplementing the
support you receive from your financial advisor. One way we accomplish this is through our website, www.leggmason.com. Here you can gain immediate access to market and investment information, including:

 

•  

Market insights and commentaries from our portfolio managers and

 

•  

A host of educational resources.

We look
forward to helping you meet your financial goals.

Sincerely,

 

LOGO

Jane Trust, CFA

President and Chief Executive Officer

January 29, 2021

 

II    ClearBridge Variable Large Cap Growth Portfolio

Portfolio overview

 

Q. What is the Portfolio’s investment strategy?

A. The Portfolio seeks long-term growth of capital. Under normal circumstances, the Portfolio invests at least 80% of its net assets, plus borrowings for investment purposes, if any, in equity securities, or
other investments with similar economic characteristics, of U.S. companies with large market capitalizations.

We attempt to
identify established large capitalization companies that are dominant in their industries due to product, distribution or service strength. Many of these companies are household names and are strategically positioned for growth in the U.S. and
overseas. The Portfolio may invest up to 20% of its assets in equity securities of companies other than those with market capitalizations similar to companies in the Russell 1000 Index
i (i.e., medium or small capitalization companies), as a non-principal investment strategy.

We emphasize individual security selection while diversifying the Portfolio’s investments across industries, which may help to reduce risk. We
attempt to identify established large-cap companies with the highest growth potential. The core holdings of the Portfolio will be large capitalization companies that we believe to be dominant in their
industries, global in scope and have a long-term history of performance. In selecting individual companies for investment, we consider such factors as the company’s management, financials and competitive market position.

We utilize ClearBridge’s fundamental research analysts who, using their industry expertise, determine the material ESG (environmental, social and governance)
factors facing both individual companies and industry sectors and 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 reflects the specific industry.

Q. What were the overall market conditions during the Portfolio’s reporting period?

A. The U.S. equity market shrugged off a global coronavirus pandemic, COVID-19, that severely
reduced economic activity for a significant portion of the twelve-month reporting period ended December 31, 2020, and managed to finish with solid gains. The large-cap S&P 500 Index
ii advanced 18.40% for the twelve-month reporting period, due in large part to
unprecedented levels of fiscal and monetary stimulus from the U.S. Federal Reserve Board (the “Fed”)
iii and Congress, while the Russell 1000 Index added 20.96% as investors gravitated to mega-cap, technology-oriented stocks that were perceived as the safest option.

Growth stocks outperformed value stocks by historically wide margins with the benchmark Russell 1000 Growth Indexiv (+38.49%) trouncing the Russell 1000 Value Indexv by 35.69 percentage points for the reporting period.

 

ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report          

 

1


Portfolio overview (cont’d)

 

On a sector basis, Consumer Discretionary (+62.92%) and Information Technology
(“IT”) (+52.89%) were the best performers in the benchmark, while Communication Services (+36.39%) also outperformed. A volatile year for crude oil prices caused Energy (-18.18%) to be the worst
performing sector, while Real Estate (+2.61%), Industrials (+8.59%) and Financials (+9.88%) also underperformed.

Early in the
reporting period, the market rallied, driven by accommodative Fed policy and an apparent partial resolution to the U.S.-China trade dispute. The market looked forward to a robust recovery in 2020 after the U.S. economy’s stall in early 2019.
High-beta
vi tech stocks led the market.

The COVID-19 pandemic shocked world markets in the second half of the first quarter of 2020. The S&P 500 Index’s
30% decline in twenty-two trading days was the fastest drop of that magnitude in history. Cyclical stocks and companies with weak balance sheets led the decline. Oil prices collapsed from $61 dollars to $20
dollars per barrel. Consumer Staples and large companies with strong balance sheets outperformed. But many groups that historically have been defensive in a recession, such as aerospace and entertainment, were not because COVID-19 threatened their profits. And large-cap technology, especially online and e-commerce, which historically suffered in
recessions due to their high betas, thrived because COVID-19 bolstered their businesses.

Swift action by the Fed and enormous fiscal stimulus packages totaling more than $4 trillion helped the market to roar back. The S&P 500
Index rose 44% in the fifty-three trading days between March 23, 2020 and June 8, 2020. The S&P 500 Index’s second-quarter 20%+ total return was the best quarter in twenty-two years. Mega-cap IT soared, causing the highest concentration of the five largest stocks in the benchmark that the market has ever seen. The rebound continued in the third quarter of 2020. By September 2020, improving
economic data flipped the market leadership away from IT towards cyclicals
1.

Resolution of the U.S. presidential election, with Joe Biden winning the White House and a divided Congress, as well as positive COVID-19 vaccine trials in November 2020 that led to emergency use authorization and initial distribution of two vaccines, continued a rally in cyclical and more value-oriented names to end the reporting period.

Q. How did we respond to these changing market conditions?

A. As growth investors, we see nuances in leadership and performance every year. The companies we own don’t manage for yearly results and we maintain a similar longer-term view. The accelerated recovery
of the stock market from its March 2020 lows makes it easy to forget that we are in the early stages of recovery from a historically deep, albeit short recession and, as a result, we are still managing the portfolio for a low-growth environment. Nothing suggests we are entering a new renaissance of economic growth, as many sectors remain on life support. What has been different in 2020, however, is how parts of IT have played both
offense and defense, a historical oddity.

 

1 

Cyclicals consists of the following sectors: Energy, Financials, Materials and Industrials.

 

2    ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report

Our focus on managing a diversified portfolio leads us to seek long-term growth opportunities not only in
above-average earnings and revenue growers like chipmaker Nvidia Corp. and business software provider salesforce.com, companies that fall into our select bucket of growth companies and were strong performers in the reporting period, but also in
established franchises who are market leaders and generators of healthy free cash flows. These blue-chip companies include Microsoft Corp., data center operator Equinix Inc. and warehouse retailer Costco Wholesale Corp. and fall in the bucket of
stable growth companies that constitute the largest weighting in the portfolio. Our third area of focus is cyclical growth companies that operate in more economically sensitive areas of the market or are undergoing a business transformation that
should boost earnings growth. These include Industrials holding United Parcel Service Inc., which was a strong contributor as a key provider of the transportation infrastructure necessary to handle this year’s surge in e-commerce.

Another secular trend we witnessed during the year has been the explosive transition to battery electric
vehicles, as well as greater sophistication of automotive technologies. We initially gained exposure to these new technologies through the purchase of high-end components maker Aptiv PLC in March 2020 and
increased our participation later in the year through a new position in NXP Semiconductors N.V. (“NXP”) NXP develops analog and microcontroller chips for a wide range of communications and sensor applications across the automotive,
wireless and industrial markets. NXP supplies the “brains” that makes electronic content in vehicles function properly and should benefit from overall auto production and demand normalizing.

We see parts of Health Care as offering attractive growth rates at more reasonable multiples than IT and related internet names. We made two additions in the
sector, taking advantage of the sharp drawdown in the early stages of the pandemic to purchase Amgen Inc., a biotechnology company positioned to embark on a multiyear acceleration in revenue growth from existing drugs in the market, as well as
several treatments in late-stage clinical trials. We also added a new position in Alcon Inc., a leader in surgical correction of cataracts and contact lenses that has major positive product cycles in both of its core businesses that should
accelerate revenue and earnings.

Other positioning changes have added cyclicality to the portfolio to be prepared once economic conditions normalize.
These included buying Ulta Beauty Inc., a cosmetics and skin care retailer, with a strong balance sheet that positions it well in the recovery to accelerate share gains versus competitors with its proven omnichannel approach, particularly the
challenged department stores. Ulta Beauty Inc., as well as new names Raytheon Technologies Corp., an aerospace and defense manufacturer, and energy drink maker Monster Beverage Corp. are poised to deliver above-average growth on the other side of an
economic recovery.

Maintaining diversification in a dominant period for momentum, with very narrow leadership, has caused the Portfolio to underperform
the benchmark over the last twelve

 

ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report          

 

3


Portfolio overview (cont’d)

 

months of the reporting period. We continue to remain underweight IT versus the
benchmark but added selectively to the sector through the addition of NXP as well as semiconductor equipment maker ASML Holding N.V. and software makers Atlassian Corp., PLC and Workday Inc.

Performance review

For the twelve months ended December 31, 2020,
Class I shares of ClearBridge Variable Large Cap Growth Portfolio
2
returned 30.73%. The Portfolio’s unmanaged benchmark, the Russell 1000 Growth Index, returned 38.49% for the same period. The Lipper Variable Large-Cap Growth Funds Category Average
vii returned 38.91% over the same time frame.

 

Performance Snapshot as of December 31, 2020 (unaudited)              
      6 months      12 months  
ClearBridge Variable Large Cap Growth Portfolio:      

Class I

     22.52      30.73

Class II

     22.38      30.41
Russell 1000 Growth Index      26.12      38.49
Lipper Variable Large-Cap Growth Funds Category Average      25.37      38.91

The performance shown represents past performance. Past performance is no guarantee of future results and current performance may
be higher or lower than the performance shown above. Principal value and investment returns will fluctuate and investors’ shares, when redeemed, may be worth more or less than their original cost.

All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all Portfolio expenses. Performance figures for
periods shorter than one year represent cumulative figures and are not annualized.

Portfolio performance figures reflect fee waivers and/or
expense reimbursements, without which the performance would have been lower.

 

Total Annual Operating Expenses
(unaudited)

As of the Portfolio’s current prospectus dated May 1, 2020, the gross total annual fund operating expense ratios for Class I and Class II shares were 0.77% and 1.03%, respectively.

Actual expenses may be higher. For example, expenses may be higher than those shown if average net assets decrease. Net assets are more likely to
decrease and Portfolio expense ratios are more likely to increase when markets are volatile.

 

2 

The Portfolio is an underlying investment option of various variable annuity and variable life insurance products. The Portfolio’s performance returns do
not reflect the deduction of expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the
performance of the Portfolio. Past performance is no guarantee of future results.

 

4    ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report

Q. What were the leading contributors to performance?

A. On an absolute basis, the Portfolio had positive returns in seven of the ten sectors in which it was invested during the period (out of eleven economic
sectors in total). The greatest contributions to returns came from the IT and Consumer Discretionary sectors.

Relative to the benchmark, stock selection
in the Industrials, Health Care and Real Estate sectors as well as an overweight to the Consumer Discretionary sector contributed to performance for the reporting period.

In terms of individual Portfolio holdings, leading contributors to performance for the period included positions in Amazon.com Inc. in the Consumer Discretionary sector, Microsoft Corp., Apple Inc. and Nvidia Corp.
in the IT sector as well as Facebook Inc. in the Communication Services sector.

Q. What were the leading detractors from performance?

A. Relative to the benchmark, overall stock selection and sector allocation detracted from performance for the reporting period.
Specifically, stock selection in the IT, Consumer Discretionary, Communication Services and Financials sectors, an underweight to IT and an overweight to Energy hurt performance.

In terms of individual holdings, detractors from performance for the period included positions in Pioneer Natural Resources Co. in the Energy Sector, Honeywell International Inc. in the Industrials sector,
Anheuser-Busch InBev in the Consumer Staples sector as well as American Express Co. and Charles Schwab Corp. in the Financials sector.

Q. Were there any significant changes to the Portfolio during the reporting period?

A. Significant changes to the Portfolio during the reporting period included the initiation of new positions in Amgen Inc. and Alcon Inc. in the Health Care sector, Ulta Beauty Inc. and Aptiv PLC in the
Consumer Discretionary sectors, Monster Beverage Corporation in the Consumer Staples sector, Raytheon Technologies Corporation in the Industrials sector and NXP Semiconductors N.V., ASML Holding N.V., Atlassian Corp. PLC and Workday Inc. in the IT
sector.

During the reporting period, we also closed the Portfolio’s positions in Alphabet Inc. in the Communications Services sector, Honeywell
International Inc. and C.H. Robinson Worldwide Inc. in the Industrial sector, American Express Company, Charles Schwab Corp. and BlackRock Inc. in the Financials sector, McCormick & Company Inc. in the Consumer Staples sector, Pioneer
Natural Resources Co. in the Energy sector, Linde PLC in the Materials sector, Johnson & Johnson in the Health Care sector and Oracle Corp. in the IT sector.

 

ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report          

 

5


Portfolio overview (cont’d)

 

Thank you for your investment in ClearBridge Variable Large Cap Growth Portfolio. As
always, we appreciate that you have chosen us to manage your assets and we remain focused on achieving the Portfolio’s investment goals.

Sincerely,

 

LOGO

Peter Bourbeau

Portfolio Manager

ClearBridge Investments, LLC

 

LOGO

Margaret Vitrano

Portfolio Manager

ClearBridge Investments, LLC

January 17, 2021

RISKS: Common stocks are subject to market and price fluctuations. Large capitalization companies may fall out of favor with investors based on market and economic conditions. In return for
the relative stability and low volatility of large capitalization companies, the Portfolio’s value may not rise as much as the value of funds that invest in companies with smaller market capitalizations. Growth stocks as a group may fall out of
favor and underperform the overall equity market while the market concentrates on value stocks. Although the Portfolio will not concentrate its investments in any one industry or investing group, it may weight its investments toward certain
industries, thus increasing its exposure to factors adversely affecting issuers within those industries. Please see the Portfolio’s prospectus for a more complete discussion of these and other risks and the Portfolio’s investment
strategies.

Portfolio holdings and breakdowns are as of December 31, 2020 and are subject to change and may not be representative of the
portfolio managers’ current or future investments. The Portfolio’s top ten holdings (as a percentage of net assets) as of December 31, 2020 were: Amazon.com Inc. (9.0%) Facebook Inc. (5.7%), Apple Inc. (5.3%), Microsoft Corp. (4.9%),
Visa Inc. (4.7%), UnitedHealth Group Inc. (3.4%), Adobe Inc. (3.3%), QUALCOMM Inc. (2.9%), Thermo Fisher Scientific Inc. (2.8%) and salesforce.com Inc. (2.6%). Please refer to pages 13 through 15 for a list and percentage breakdown of the
Portfolio’s holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to
purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or
investment strategies discussed should consult their financial professional. The Portfolio’s top five sector holdings (as a percentage of net assets) as of December 31, 2020 were: Information Technology (40.0%), Consumer Discretionary

 

6    ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report

(18.2%), Health Care (14.6%), Communication Services (9.4%) and Industrials (9.3%). The Portfolio’s composition
is subject to change at any time.

All investments are subject to risk including the possible loss of principal. Past performance is no guarantee of
future results. All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from
those of the firm as a whole.

 

i 

The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of
the Russell 3000 Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 90% of the U.S. market. The Russell 3000 Index
measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the U.S. equity market.

 

ii 

The S&P 500 Index is an unmanaged index of the stocks of 500 leading companies, and is generally representative of the performance of larger companies in the
U.S.

 

iii

The Federal Reserve Board (the “Fed”) is responsible for the formulation of U.S. policies designed to promote economic growth, full employment, stable
prices and a sustainable pattern of international trade and payments.

 

iv 

The Russell 1000 Growth Index measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. (A price-to-book ratio is the price of a stock compared to the
difference between a company’s assets and liabilities.).

 

v 

The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It
includes those Russell 1000 Index companies with lower price-to-book ratios and lower expected growth values.

 

vi

Beta measures the sensitivity of the investment to the movements of its benchmark. A beta higher than 1.0 indicates the investment has been more volatile than
the benchmark and a beta of less than 1.0 indicates that the investment has been less volatile than the benchmark.

 

vii 

Lipper, Inc., a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments. Returns are based on the period ended
December 31, 2020, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 192 funds for the six-month period and among the 192 funds for the
twelve-month period in the Portfolio’s Lipper category.

 

ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report          

 

7


Portfolio at a glance† (unaudited)

 

Investment breakdown (%) as a percent of total investments

 

 

LOGO

 

†

The bar graph above represents the composition of the Portfolio’s investments as of December 31, 2020 and December 31, 2019. The
Portfolio is actively managed. As a result, the composition of the Portfolio’s investments is subject to change at any time.

 

8    ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report

Portfolio expenses (unaudited)

 

Example

As a shareholder of the Portfolio,
you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; service and/or distribution (12b-1) fees; and other Portfolio expenses. This example is
intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other funds.

This example is based on an investment of $1,000 invested on July 1, 2020 and held for the six months ended December 31, 2020.

Actual expenses

The table below titled “Based on Actual Total Return” provides
information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your
account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period”.

Hypothetical example for comparison purposes

The table below titled “Based on Hypothetical Total Return” provides information about hypothetical account values and hypothetical expenses based on the
actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare the 5.00% hypothetical example relating to the Portfolio with the
5.00% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table below are meant
to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.

 

Based on actual total return1           Based on hypothetical total return1  
    

Actual

Total Return2

   

Beginning

Account

Value

   

Ending

Account

Value

   

Annualized

Expense

Ratio

   

Expenses

Paid

During

the

Period3

              

Hypothetical

Annualized

Total Return

   

Beginning

Account

Value

   

Ending

Account

Value

   

Annualized

Expense

Ratio

   

Expenses

Paid

During

the

Period3

 
Class I     22.52   $ 1,000.00     $ 1,225.20       0.76   $ 4.25       Class I     5.00   $ 1,000.00     $ 1,021.32       0.76   $ 3.86  
Class II     22.38       1,000.00       1,223.80       1.01       5.65       Class II     5.00       1,000.00       1,020.06       1.01       5.13  

 

ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report          

 

9


Portfolio expenses (unaudited) (cont’d)

 

1 

For the six months ended December 31, 2020.

 

2 

Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value. Total return is not annualized, as it may not be
representative of the total return for the year. 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 returns.
Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower.
Past performance is no guarantee of future results.

 

3 

Expenses (net of compensating balance arrangements, fee waivers and/or expense reimbursements) are equal to each class’ respective annualized expense ratio
multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), then divided by 366.

 

10    ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report

Portfolio performance (unaudited)

 

Average annual total returns1
                    
      Class I              Class II  
Twelve Months Ended 12/31/20      30.73               30.41
Five Years Ended 12/31/20      18.47                 N/A  
Ten Years Ended 12/31/20      17.02                 N/A  
Inception* through 12/31/20      —                 20.96  

 

Cumulative total returns1
             
Class I (12/31/10 through 12/31/20)      381.47         
Class II (Inception date of 10/31/16 through 12/31/20)      120.99           

All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an
investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect expenses associated with separate accounts such as administrative fees, account charges
and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee
waivers and/or expense reimbursements, the total return would have been lower.

 

1 

Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value.

 

*

Inception dates for Class I and Class II shares are May 1, 1998 and October 31, 2016, respectively.

 

ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report          

 

11


Portfolio performance
(unaudited) (cont’d)

 

Historical performance

Value of $10,000 invested in

Class I Shares of ClearBridge Variable Large Cap Growth Portfolio vs. Russell 1000 Growth Index†— December 2010 – December 2020

 

LOGO

All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an
investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect expenses associated with separate accounts such as administrative fees, account charges
and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee
waivers and/or expense reimbursements, the total return would have been lower.

 

†

Hypothetical illustration of $10,000 invested in Class I shares of ClearBridge Variable Large Cap Growth Portfolio on December 31, 2010,
assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value through December 31, 2020. The hypothetical illustration also assumes a $10,000 investment in the Russell 1000 Growth Index. The Russell
1000 Growth Index (the “Index”) measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth
values. The Index is unmanaged and is not subject to the same management and trading expenses of a fund. Please note that an investor cannot invest directly in an index. The performance of the Portfolio’s other class may be greater or less than
the Class I shares’ performance indicated on this chart, depending on whether greater or lesser fees were incurred by shareholders investing in the other class.

 

12    ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report

Schedule of investments

December 31, 2020

 

ClearBridge Variable Large Cap Growth Portfolio

 

Security                 Shares     Value  
Common Stocks — 98.7%                                
Communication Services — 9.4%                                

Entertainment — 2.0%

                               

Walt Disney Co.

                    47,700     $ 8,642,286  * 

Interactive Media & Services — 5.7%

                               

Facebook Inc., Class A Shares

                    90,146       24,624,281  

Media — 1.7%

                               

Comcast Corp., Class A Shares

                    143,739       7,531,924  

Total Communication Services

                            40,798,491  
Consumer Discretionary — 18.2%                                

Auto Components — 1.5%

                               

Aptiv PLC

                    51,322       6,686,743  

Internet & Direct Marketing Retail — 11.8%

                               

Alibaba Group Holding Ltd., ADR

                    25,453       5,923,677  * 

Amazon.com Inc.

                    12,058       39,272,062  * 

Booking Holdings Inc.

                    2,675       5,957,947  * 

Total Internet & Direct Marketing Retail

                            51,153,686  

Specialty Retail — 4.9%

                               

Advance Auto Parts Inc.

                    37,449       5,898,592  

Home Depot Inc.

                    28,829       7,657,559  

Ulta Beauty Inc.

                    26,583       7,633,574  * 

Total Specialty Retail

                            21,189,725  

Total Consumer Discretionary

                            79,030,154  
Consumer Staples — 4.2%                                

Beverages — 2.6%

                               

Anheuser-Busch InBev SA/NV, ADR

                    61,072       4,269,544  

Monster Beverage Corp.

                    73,640       6,810,227  * 

Total Beverages

                            11,079,771  

Food & Staples Retailing — 1.6%

                               

Costco Wholesale Corp.

                    18,846       7,100,796  

Total Consumer Staples

                            18,180,567  
Health Care — 14.6%                                

Biotechnology — 4.7%

                               

Alexion Pharmaceuticals Inc.

                    46,751       7,304,376  * 

Amgen Inc.

                    40,350       9,277,272  

BioMarin Pharmaceutical Inc.

                    45,378       3,979,197  * 

Total Biotechnology

                            20,560,845  

Health Care Equipment & Supplies — 1.2%

                               

Alcon Inc.

                    80,530       5,313,369  * 

Health Care Providers & Services — 3.4%

                               

UnitedHealth Group Inc.

                    41,694       14,621,252  

 

See Notes to Financial
Statements.

 

ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report          

 

13


Schedule of investments (cont’d)

December 31, 2020

 

ClearBridge Variable Large Cap Growth Portfolio

 

Security                 Shares     Value  

Life Sciences Tools & Services — 2.8%

                               

Thermo Fisher Scientific Inc.

                    25,759     $   11,998,027  

Pharmaceuticals — 2.5%

                               

Zoetis Inc.

                    66,104       10,940,212  

Total Health Care

                            63,433,705  
Industrials — 9.3%                                

Aerospace & Defense — 1.4%

                               

Raytheon Technologies Corp.

                    86,080       6,155,581  

Air Freight & Logistics — 2.4%

                               

United Parcel Service Inc., Class B Shares

                    62,174       10,470,102  

Professional Services — 1.7%

                               

IHS Markit Ltd.

                    82,389       7,401,004  

Road & Rail — 2.0%

                               

Uber Technologies Inc.

                    170,255       8,683,005  * 

Trading Companies & Distributors — 1.8%

                               

W.W. Grainger Inc.

                    18,887       7,712,317  

Total Industrials

                            40,422,009  
Information Technology — 40.0%                                

IT Services — 7.8%

                               

Akamai Technologies Inc.

                    61,348       6,440,927  * 

Fidelity National Information Services Inc.

                    49,720       7,033,391  

Visa Inc., Class A Shares

                    93,107       20,365,294  

Total IT Services

                            33,839,612  

Semiconductors & Semiconductor Equipment —
9.0%

                               

ASML Holding NV, Registered Shares

                    9,290       4,530,919  

NVIDIA Corp.

                    21,527       11,241,400  

NXP Semiconductors NV

                    32,230       5,124,892  

QUALCOMM Inc.

                    81,644       12,437,647  

Texas Instruments Inc.

                    35,163       5,771,303  

Total Semiconductors & Semiconductor Equipment

                            39,106,161  

Software — 17.9%

                               

Adobe Inc.

                    28,388       14,197,407  * 

Atlassian Corp. PLC, Class A Shares

                    11,160       2,609,989  * 

Microsoft Corp.

                    94,642       21,050,274  

Nutanix Inc., Class A Shares

                    98,909       3,152,230  * 

Palo Alto Networks Inc.

                    26,443       9,397,578  * 

salesforce.com Inc.

                    51,050       11,360,156  * 

Splunk Inc.

                    47,402       8,053,126  * 

VMware Inc., Class A Shares

                    39,098       5,483,885  * 

Workday Inc., Class A Shares

                    9,650       2,312,236  * 

Total Software

                            77,616,881  

 

See Notes to Financial
Statements.

 

 

14

   ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report

ClearBridge Variable Large Cap Growth Portfolio

 

Security                 Shares     Value  

Technology Hardware, Storage & Peripherals —
5.3%

                               

Apple Inc.

                    172,042     $ 22,828,253  

Total Information Technology

                            173,390,907  
Materials — 1.4%                                

Chemicals — 1.4%

                               

Ecolab Inc.

                    28,074       6,074,091  
Real Estate — 1.6%                                

Equity Real Estate Investment Trusts (REITs) — 1.6%

                               

Equinix Inc.

                    9,879       7,055,384  

Total Investments before Short-Term Investments (Cost — $219,060,504)

                            428,385,308  
            Rate                
Short-Term Investments — 1.4%                                

JPMorgan 100% U.S. Treasury Securities Money Market Fund, Institutional Class

            0.006%       4,739,840       4,739,840  

Western Asset Premier Institutional U.S. Treasury Reserves, Premium Shares

            0.010%       1,184,960       1,184,960  (a)  

Total Short-Term Investments (Cost — $5,924,800)

                            5,924,800  

Total Investments — 100.1% (Cost — $224,985,304)

                            434,310,108  

Liabilities in Excess of Other Assets — (0.1)%

                            (363,795

Total Net Assets — 100.0%

                          $ 433,946,313  

 

*

Non-income producing security.

 

(a) 

In this instance, as defined in the Investment Company Act of 1940, an “Affiliated Company” represents Portfolio ownership of at least 5% of the
outstanding voting securities of an issuer, or a company which is under common ownership or control with the Portfolio. At December 31, 2020, the total market value of investments in Affiliated Companies was $1,184,960 and the cost was
$1,184,960 (Note 8).

 

Abbreviation(s) used in this schedule:

ADR   — American Depositary Receipts

    

 

See Notes to Financial Statements.

 

ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report          

 

15


Statement of assets and liabilities

December 31, 2020

 

Assets:         

Investments in unaffiliated securities, at value (Cost — $223,800,344)

   $ 433,125,148  

Investments in affiliated securities, at value (Cost — $1,184,960)

     1,184,960  

Receivable for Portfolio shares sold

     108,402  

Dividends and interest receivable

     38,997  

Prepaid expenses

     3,469  

Total Assets

     434,460,976  
Liabilities:         

Investment management fee payable

     252,593  

Payable for Portfolio shares repurchased

     158,382  

Service and/or distribution fees payable

     54,229  

Trustees’ fees payable

     4,067  

Accrued expenses

     45,392  

Total Liabilities

     514,663  
Total Net Assets    $ 433,946,313  
Net Assets:         

Par value (Note 7)

   $ 115  

Paid-in capital in excess of par value

     222,787,992  

Total distributable earnings (loss)

     211,158,206  
Total Net Assets    $ 433,946,313  
Net Assets:         

Class I

     $172,147,784  

Class II

     $261,798,529  
Shares Outstanding:         

Class I

     4,563,468  

Class II

     6,985,904  
Net Asset Value:         

Class I

     $37.72  

Class II

     $37.48  

 

See Notes to Financial
Statements.

 

 

16

   ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report

Statement of operations

For the Year Ended December 31, 2020

 

Investment Income:         

Dividends

   $ 3,044,945  

Interest from unaffiliated investments

     23,130  

Interest from affiliated investments

     6,263  

Less: Foreign taxes withheld

     (10,067)  

Total Investment Income

     3,064,271  
Expenses:         

Investment management fee (Note 2)

     2,569,230  

Service and/or distribution fees (Notes 2 and 5)

     531,369  

Fund accounting fees

     70,975  

Legal fees

     35,446  

Shareholder reports

     30,905  

Audit and tax fees

     29,164  

Trustees’ fees

     27,405  

Transfer agent fees (Note 5)

     7,869  

Insurance

     4,744  

Custody fees

     4,714  

Interest expense

     19  

Miscellaneous expenses

     3,876  

Total Expenses

     3,315,716  

Less: Fee waivers and/or expense reimbursements (Notes 2 and 5)

     (2,520)  

Net Expenses

     3,313,196  
Net Investment Loss      (248,925)  
Realized and Unrealized Gain on Investments (Notes 1 and 3):         

Net Realized Gain From Unaffiliated Investment
Transactions

     16,812,878  

Change in Net Unrealized Appreciation (Depreciation) From Unaffiliated
Investments

     86,637,247  
Net Gain on Investments      103,450,125  
Increase in Net Assets From Operations    $ 103,201,200  

 

See Notes to Financial
Statements.

 

ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report          

 

17


Statements of changes in net assets

 

For the Years Ended December 31,    2020      2019  
Operations:                  

Net investment income (loss)

   $ (248,925)      $ 457,308  

Net realized gain

     16,812,878        15,345,046  

Change in net unrealized appreciation (depreciation)

     86,637,247        54,896,384  

Increase in Net Assets From Operations

     103,201,200        70,698,738  
Distributions to Shareholders From (Notes 1 and 6):                  

Total distributable earnings

     (15,745,377)        (15,231,847)  

Decrease in Net Assets From Distributions to
Shareholders

     (15,745,377)        (15,231,847)  
Portfolio Share Transactions (Note 7):                  

Net proceeds from sale of shares

     65,116,346        88,503,428  

Reinvestment of distributions

     15,745,377        15,231,847  

Cost of shares repurchased

     (67,603,237)        (27,682,627)  

Increase in Net Assets From Portfolio Share
Transactions

     13,258,486        76,052,648  

Increase in Net Assets

     100,714,309        131,519,539  
Net Assets:                  

Beginning of year

     333,232,004        201,712,465  

End of year

   $ 433,946,313      $ 333,232,004  

 

See Notes to Financial
Statements.

 

 

18

   ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report

Financial highlights

 

For a share of each class of beneficial interest outstanding throughout each year ended December
31:
 
Class I Shares1    2020      2019      2018      2017      2016  
Net asset value, beginning of year      $29.99        $23.85        $24.63        $20.76        $21.12  
Income (loss) from operations:               

Net investment income

     0.03        0.08        0.11        0.07        0.11  

Net realized and unrealized gain (loss)

     9.11        7.55        (0.06)        5.25        1.46  

Total income from operations

     9.14        7.63        0.05        5.32        1.57  
Less distributions from:               

Net investment income

     (0.01)        (0.10)        (0.08)        (0.05)        (0.11)  

Net realized gains

     (1.40)        (1.39)        (0.75)        (1.40)        (1.82)  

Total distributions

     (1.41)        (1.49)        (0.83)        (1.45)        (1.93)  
Net asset value, end of year      $37.72        $29.99        $23.85        $24.63        $20.76  

Total return2

     30.73      32.16      0.02 %3       25.76      7.39
Net assets, end of year (millions)      $172        $151        $122        $135        $115  
Ratios to average net assets:               

Gross expenses

     0.76      0.76      0.79      0.85      0.86

Net expenses4,5

     0.76        0.76        0.79        0.80        0.80  

Net investment income

     0.08        0.29        0.43        0.29        0.50  
Portfolio turnover rate      25      20      16      17      17

 

1

Per share amounts have been calculated using the average shares method.

 

2

Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance
arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. 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

The total return includes gains from settlement of security litigations. Without these gains, the total return would have been
-0.11% for the year ended December 31, 2018.

 

4

Reflects fee waivers and/or expense reimbursements.

 

5

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary
expenses and acquired fund fees and expenses, to average net assets of Class I shares did not exceed 0.80%. This expense limitation arrangement cannot be terminated prior to December 31, 2022 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.

 

See Notes to Financial Statements.

 

ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report          

 

19


Financial highlights (cont’d)

 

For a share of each class of beneficial interest outstanding throughout each year ended
December 31, unless
otherwise noted:
 
Class II Shares1    2020      2019      2018      2017      20162  
Net asset value, beginning of year      $29.88        $23.78        $24.58        $20.76        $22.01  
Income (loss) from operations:               

Net investment income (loss)

     (0.06)        0.01        0.08        0.01        0.02  

Net realized and unrealized gain (loss)

     9.07        7.52        (0.09)        5.25        0.59  

Total income (loss) from operations

     9.01        7.53        (0.01)        5.26        0.61  
Less distributions from:               

Net investment income

     (0.01)        (0.04)        (0.04)        (0.04)        (0.10)  

Net realized gains

     (1.40)        (1.39)        (0.75)        (1.40)        (1.76)  

Total distributions

     (1.41)        (1.43)        (0.79)        (1.44)        (1.86)  
Net asset value, end of year      $37.48        $29.88        $23.78        $24.58        $20.76  

Total return3

     30.41      31.84      (0.23) %4       25.44      2.69
Net assets, end of year (000s)      $261,799        $182,364        $79,652        $19,622        $103  
Ratios to average net assets:               

Gross expenses

     1.01      1.02      1.06      1.10      1.14 %5 

Net expenses6,7

     1.01        1.02        1.05        1.05        1.05 5  

Net investment income (loss)

     (0.17)        0.04        0.30        0.05        0.60 5  
Portfolio turnover rate      25      20      16      17      17 %8  

 

1 

Per share amounts have been calculated using the average shares method.

 

2 

For the period October 31, 2016 (inception date) to December 31, 2016.

 

3 

Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance
arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. 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. Total returns for periods of less than one year are not annualized.

 

4 

The total return includes gains from settlement of security litigations. Without these gains, the total return would have been
-0.36% for the year ended December 31, 2018.

 

 

6 

Reflects fee waivers and/or expense reimbursements.

 

7 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary
expenses and acquired fund fees and expenses, to average net assets of Class II shares did not exceed 1.05%. This expense limitation arrangement cannot be terminated prior to December 31, 2022 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.

 

8 

For the year ended December 31, 2016.

 

See Notes to Financial Statements.

 

 

20

   ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report

Notes to financial statements

 

1. Organization and significant accounting policies

ClearBridge Variable Large Cap Growth Portfolio (the “Portfolio”) is a separate diversified investment series of Legg Mason Partners Variable Equity Trust
(the “Trust”). The Trust, a Maryland statutory trust, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company.

Shares of the Portfolio may only be purchased or redeemed through variable annuity contracts and variable life insurance policies offered by the
separate accounts of participating insurance companies or through eligible pension or other qualified plans.

The following are significant accounting
policies consistently followed by the Portfolio and are in conformity with U.S. generally accepted accounting principles (“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets
resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. Subsequent events have been
evaluated through the date the financial statements were issued.

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

The Board of Trustees is responsible for the valuation process and has
delegated the supervision of the daily valuation process to the Legg Mason North Atlantic Fund Valuation

 

ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report          

 

21


Notes to financial statements (cont’d)

 

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

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

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

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

 

 

22

   ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report

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

 

•  

Level 1 — quoted prices in active markets for identical investments

 

•  

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

 

•  

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

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

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

 

ASSETS  
Description   Quoted Prices
(Level 1)
   

Other Significant
Observable Inputs

(Level 2)

 

Significant
Unobservable
Inputs

(Level 3)

  Total  
Common Stocks†   $ 428,385,308     —   —   $ 428,385,308  
Short-Term Investments†     5,924,800     —   —     5,924,800  
Total Investments   $ 434,310,108     —   —   $ 434,310,108  

 

†

See Schedule of Investments for additional detailed categorizations.

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

(c) Security transactions and
investment income.
Security transactions are accounted for on a trade date basis. Interest income (including interest income from payment-in-kind securities),
adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date for dividends received in cash and/or securities. Foreign
dividend income is recorded on the ex-dividend date or as soon as practicable after the Portfolio determines the existence of a dividend declaration after exercising reasonable due diligence. The cost of
investments sold is determined by use of the specific identification method. To the extent any issuer defaults or a credit event occurs that impacts the issuer, the Portfolio may halt any additional interest

 

ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report          

 

23


Notes to financial statements (cont’d)

 

income accruals and consider the realizability of interest accrued up to the date of default or credit event.

(d) REIT distributions. The character of distributions received from Real Estate Investment
Trusts (‘‘REITs’’) held by the Portfolio is generally comprised of net investment income, capital gains, and return of capital. It is the policy of the Portfolio to estimate the character of distributions received from underlying
REITs based on historical data provided by the REITs. After each calendar year end, REITs report the actual tax character of these distributions. Differences between the estimated and actual amounts reported by the REITs are reflected in the
Portfolio’s records in the year in which they are reported by the REITs by adjusting related investment cost basis, capital gains and income, as necessary.

(e) Distributions to shareholders. Distributions from net investment income and distributions of net realized gains, if any, are declared at
least annually. Distributions to shareholders of the Portfolio are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.

(f) Share class accounting. Investment income, common expenses and realized/unrealized gains
(losses) on investments are allocated to the various classes of the Portfolio on the basis of daily net assets of each class. Fees relating to a specific class are charged directly to that share class.

(g) Compensating balance arrangements. The Portfolio has an arrangement with its custodian
bank whereby a portion of the custodian’s fees is paid indirectly by credits earned on the Portfolio’s cash on deposit with the bank.

(h) Federal and other taxes. It is the Portfolio’s policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986 (the “Code”),
as amended, applicable to regulated investment companies. Accordingly, the Portfolio intends to distribute its taxable income and net realized gains, if any, to shareholders in accordance with timing requirements imposed by the Code. Therefore, no
federal or state income tax provision is required in the Portfolio’s financial statements.

Management has analyzed the Portfolio’s tax
positions taken on income tax returns for all open tax years and has concluded that as of December 31, 2020, no provision for income tax is required in the Portfolio’s financial statements. The Portfolio’s federal and state income and
federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.

Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates.

(i) Reclassification. GAAP requires that certain components of net assets be reclassified to
reflect permanent differences between financial and tax reporting. These

 

 

24

   ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report

reclassifications have no effect on net assets or net asset value per share. During the current year, the Portfolio
had no reclassifications.

2. Investment management agreement and other transactions with affiliates

Legg Mason Partners Fund Advisor, LLC (“LMPFA”) is the Portfolio’s investment manager and ClearBridge Investments, LLC (“ClearBridge”) is
the Portfolio’s subadviser. Western Asset Management Company, LLC (“Western Asset”) manages the portion of the Portfolio’s cash and short-term instruments allocated to it. As of July 31, 2020, LMPFA, ClearBridge and Western
Asset are indirect, wholly-owned subsidiaries of Franklin Resources, Inc. (“Franklin Resources”). Prior to July 31, 2020, LMPFA, ClearBridge and Western Asset were wholly-owned subsidiaries of Legg Mason, Inc. (“Legg
Mason”). As of July 31, 2020, Legg Mason is a subsidiary of Franklin Resources.

Under the investment management agreement, the Portfolio pays
an investment management fee, calculated daily and paid monthly, in accordance with the following breakpoint schedule:

 

Average Daily Net Assets      Annual Rate  
First $1 billion        0.700
Next $1 billion        0.680  
Next $3 billion        0.650  
Next $5 billion        0.600  
Over $10 billion        0.550  

LMPFA provides administrative and certain oversight services to the Portfolio. LMPFA delegates to the subadviser the day-to-day portfolio management of the Portfolio, except for the management of the portion of the Portfolio’s cash and short-term instruments allocated to Western Asset.
For its services, LMPFA pays ClearBridge a fee monthly, at an annual rate equal to 70% of the net management fee it receives from the Portfolio. For Western Asset’s services to the Fund, LMPFA pays Western Asset monthly 0.02% of the portion of
the Fund’s average daily net assets that are allocated to Western Asset by LMPFA.

As a result of expense limitation arrangements between the
Portfolio and LMPFA, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class I and Class II shares did not exceed
0.80% and 1.05%, respectively. These expense limitation arrangements cannot be terminated prior to December 31, 2022 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 (the “affiliated money market fund waiver”). The affiliated money market fund waiver is not subject to
the recapture provision discussed below.

 

ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report          

 

25


Notes to financial statements (cont’d)

 

During the year ended December 31, 2020, fees waived and/or expenses reimbursed amounted to $2,520, which included an affiliated
money market fund waiver of $450.

LMPFA is permitted to recapture amounts waived and/or reimbursed to a class during the same fiscal year if the
class’ total annual fund operating expenses have fallen to a level below the expense limitation (“expense cap”) in effect at the time the fees were earned or the expenses incurred. In no case will LMPFA recapture any amount that would
result, on any particular business day of the Portfolio, in the class’ total annual fund operating expenses exceeding the expense cap or any other lower limit then in effect.

Legg Mason Investor Services, LLC (“LMIS”) serves as the Portfolio’s sole and exclusive distributor. As of July 31, 2020, LMIS is an indirect, wholly-owned broker-dealer subsidiary of Franklin
Resources. Prior to July 31, 2020, LMIS was a wholly-owned broker-dealer subsidiary of Legg Mason.

As of July 31, 2020, all officers and one
Trustee of the Trust are employees of Franklin Resources or its affiliates and do not receive compensation from the Trust. Prior to July 31, 2020, all officers and one Trustee of the Trust were employees of Legg Mason and did not receive
compensation from the Trust.

3. Investments

During the year ended December 31, 2020, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) were as follows:

 

Purchases      $ 91,691,705  
Sales        93,808,194  

At December 31, 2020, the aggregate cost of investments and the aggregate gross unrealized appreciation and depreciation of
investments for federal income tax purposes were as follows:

 

      Cost      Gross
Unrealized
Appreciation
     Gross
Unrealized
Depreciation
     Net
Unrealized
Appreciation
 
Securities    $ 226,153,511      $ 210,288,221      $ (2,131,624)      $ 208,156,597  

4. Derivative instruments and hedging activities

During the year ended December 31, 2020, the Portfolio did not invest in derivative instruments.

5. Class specific expenses, waivers and/or expense reimbursements

The Portfolio has adopted a Rule 12b-1 shareholder services and distribution plan and under that plan the Portfolio pays service and/or distribution fees with respect to its
Class II shares calculated at the annual rate of 0.25% of the average daily net assets of the class. Service and/or distribution fees are accrued daily and paid monthly.

 

 

26

   ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report

For the year ended December 31, 2020, class specific expenses were as follows:

 

        Service and/or
Distribution Fees
       Transfer Agent
Fees
 
Class I        —        $ 1,290  
Class II      $ 531,369          6,579  
Total      $ 531,369        $ 7,869  

For the year ended December 31, 2020, waivers and/or expense reimbursements by class were as follows:

 

        Waivers/Expense
Reimbursements
 
Class I      $ 1,078  
Class II        1,442  
Total      $ 2,520  

6. Distributions to shareholders by class

 

        Year Ended
December 31, 2020
       Year Ended
December 31, 2019
 
Net Investment Income:                      
Class I      $ 27,458        $ 497,754  
Class II        37,543          202,251  
Total      $ 65,001        $ 700,005  
Net Realized Gains:                      
Class I      $ 6,289,209        $ 6,709,030  
Class II        9,391,167          7,822,812  
Total      $ 15,680,376        $ 14,531,842  

7. Shares of beneficial interest

At December 31, 2020, the Trust had an unlimited number of shares of beneficial interest authorized with a par value of $0.00001 per share. The Portfolio has the ability to issue multiple classes of shares.
Each class of shares represents an identical interest and has the same rights, except that each class bears certain direct expenses, including those specifically related to the distribution of its shares.

Transactions in shares of each class were as follows:

 

     Year Ended
December 31,
2020
     Year Ended
December 31,
2019
 
      Shares      Amount      Shares      Amount  
Class I                                    
Shares sold      308,380      $ 9,701,909        362,092      $ 10,354,275  
Shares issued on reinvestment      176,036        6,316,667        245,905        7,206,784  
Shares repurchased      (950,783)        (30,552,570)        (696,784)        (19,719,369)  
Net decrease      (466,367)      $ (14,533,994)        (88,787)      $ (2,158,310)  

 

ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report          

 

27


Notes to financial statements (cont’d)

 

     Year Ended
December 31,
2020
     Year Ended
December 31,
2019
 
      Shares      Amount      Shares      Amount  
Class II                                    
Shares sold      1,777,335      $ 55,414,437        2,762,605      $ 78,149,153  
Shares issued on reinvestment      264,038        9,428,710        274,805        8,025,063  
Shares repurchased      (1,158,644)        (37,050,667)        (284,452)        (7,963,258)  
Net increase      882,729      $ 27,792,480        2,752,958      $ 78,210,958  

8. Transactions with affiliated company

As defined by the 1940 Act, an affiliated company is one in which the Portfolio owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control with the Portfolio. The
following company was considered an affiliated company for all or some portion of the year ended December 31, 2020. The following transactions were effected in such company for the year ended December 31, 2020.

 

      Affiliate
Value at
 December 31, 
2019
         

Purchased
     Sold  
   Cost      Shares      Cost      Shares  
Western Asset Premier Institutional U.S. Treasury Reserves, Premium Shares    $ 2,259,036      $ 17,257,771        17,257,771      $ 18,331,847        18,331,847  

 

(cont’d)    Realized
Gain (Loss)
   Interest
Income
     Net Increase
(Decrease) in
Unrealized
Appreciation
(Depreciation)
   Affiliate
Value at
December 31,
2020
 
Western Asset Premier Institutional U.S. Treasury Reserves, Premium Shares    —      $6,263      —      $1,184,960  

9. Income tax information and distributions to shareholders

The tax character of distributions paid during the fiscal years ended December 31, was as follows:

 

        2020        2019  
Distributions paid from:                      
Ordinary income      $ 95,205        $ 1,137,023  
Net long-term capital gains        15,650,172          14,094,824  
Total distributions paid      $ 15,745,377        $ 15,231,847  

 

 

28

   ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report

As of December 31, 2020, the components of distributable earnings (loss) on a tax basis were as follows:

 

Undistributed ordinary income — net      $ 584,413  
Undistributed long-term capital gains — net        2,438,735  
Total undistributed earnings      $ 3,023,148  
Other book/tax temporary differences(a)        (21,539)  
Unrealized appreciation (depreciation)(b)        208,156,597  
Total distributable earnings (loss) — net      $ 211,158,206  

 

(a) 

Other book/tax temporary differences are attributable to book/tax differences in the timing of the deductibility of various expenses.

 

(b)

 The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable to the tax
deferral of losses on wash sales.

10. Other matter

The outbreak of the respiratory illness COVID-19 (commonly referred to as “coronavirus”) has continued to rapidly spread around the world, causing considerable
uncertainty for the global economy and financial markets. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers, are not known. The
COVID-19 pandemic could adversely affect the value and liquidity of the Portfolio’s investments, impair the Portfolio’s ability to satisfy redemption requests, and negatively impact the
Portfolio’s performance. In addition, the outbreak of COVID-19, and measures taken to mitigate its effects, could result in disruptions to the services provided to the Portfolio by its service providers.

 

ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report          

 

29  


Report of independent registered public accounting firm

 

To the Board of Trustees of Legg Mason Partners Variable Equity
Trust and Shareholders of ClearBridge Variable Large Cap Growth Portfolio

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of ClearBridge Variable Large Cap Growth Portfolio (one
of the funds constituting Legg Mason Partners Variable Equity Trust, referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes
in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the four years in the period ended December 31, 2020 (collectively referred to as the
“financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, the results of its operations for the year then ended, the changes
in its net assets for each of the two years in the period ended December 31, 2020 and the financial highlights for each of the four years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in
the United States of America.

The financial statements of the Fund as of and for the year ended December 31, 2016 and the financial highlights for
the periods then ended (not presented herein, other than the financial highlights) were audited by other auditors whose report dated February 16, 2017 expressed an unqualified opinion on those financial statements and financial highlights.

Basis for Opinion

These
financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian. We
believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Baltimore, Maryland

February 12, 2021

We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.

 

 

30

   ClearBridge Variable Large Cap Growth Portfolio 2020 Annual Report

Results of special meeting of shareholders

On July 14, 2020 a special meeting of shareholders was held for the following purposes: 1) to approve a new management agreement between the Portfolio and its
investment manager; and 2) to approve a new subadvisory agreement with respect to each of the Portfolio’s subadvisers. The following table provides the number of votes cast for or against, as well as the number of abstentions and broker non-votes as to each matter voted on at the special meeting of shareholders. Each item voted on was approved.

 

Item Voted On    Voted For      Voted
Against
     Abstentions      Broker
Non-Votes
To Approve a New Management Agreement with Legg Mason Partners Fund Advisor, LLC      254,622,693.418        3,526,570.709        12,507,564.586      0
To Approve a New Subadvisory Agreement with ClearBridge Investments, LLC      253,258,651.757        3,202,255.547        14,195,921.409      0
To Approve a New Subadvisory Agreement with Western Asset Management Company, LLC      253,411,510.064        3,173,384.750        14,071,933.900      0

 


Statement regarding liquidity risk management program (unaudited)

 

As required by law, the fund has adopted and implemented a liquidity risk management program (the “Program”) that is designed to assess and manage
liquidity risk. Liquidity risk is the risk that the fund could not meet requests to redeem its shares without significant dilution of remaining investors’ interests in the fund. Legg Mason Partners Fund Advisor, LLC (the “Manager”),
the fund’s manager, is the administrator of the Program. The Manager has established a liquidity risk management committee (the “Committee”) to administer the Program on a day-to-day basis.

The Committee, on behalf of the Manager, provided the fund’s Board of Trustees with a
report that addressed the operation of the Program, assessed its adequacy and effectiveness of implementation, including, if applicable, the operation of any highly liquid investment minimum (“HLIM”), and described any material changes
that had been made to the Program or were recommended (the “Report”). The Report covered the period from December 1, 2018 through December 31, 2019 (the “Reporting Period”).

The Report confirmed that there were no material changes to the Program during the Reporting Period and that no changes were recommended.

The Report also confirmed that, throughout the Reporting Period, the Committee had monitored the fund’s portfolio liquidity and liquidity risk on an ongoing
basis, as described in the Program and in Board reporting throughout the Reporting Period.

The Report discussed the Committee’s annual review of
the Program, which addressed, among other things, the following elements of the Program:

Assessment, Management, and Periodic Review of Liquidity
Risk.
The Committee reviewed the fund’s investment strategy and liquidity of portfolio investments during both normal and reasonably foreseeable stressed conditions. The Committee noted that the fund’s investment strategy continues to
be appropriate for an open-end fund, taking into account, among other things, whether and to what extent the fund held less liquid and illiquid assets and the extent to which any such investments affected the
fund’s ability to meet redemption requests. In managing and reviewing the fund’s liquidity risk, the Committee also considered the extent to which the fund’s investment strategy involves a relatively concentrated portfolio or large
positions in particular issuers, the extent to which the fund uses borrowing for investment purposes, and the extent to which the fund uses derivatives (including for hedging purposes). The Committee also reviewed the fund’s short-term and
long-term cash flow projections during both normal and reasonably foreseeable stressed conditions. In assessing the fund’s cash flow projections, the Committee considered, among other factors, historical net redemption activity, redemption
policies, ownership concentration, distribution channels, and the degree of certainty associated with the fund’s short-term and long-term cash flow projections. The Committee also considered the fund’s holdings of cash and cash
equivalents, as well as borrowing arrangements and other

 

 

32

   ClearBridge Variable Large Cap Growth Portfolio

Statement regarding liquidity risk management program (unaudited) (cont’d)

 

funding sources, including, if applicable, the fund’s participation in a credit facility, as components of the fund’s ability to meet redemption requests.

Liquidity Classification. The Committee reviewed the Program’s liquidity classification methodology for categorizing the fund’s
investments into one of four liquidity buckets. In reviewing the fund’s investments, the Committee considered, among other factors, whether trading varying portions of a position in a particular portfolio investment or asset class in sizes the
fund would reasonably anticipate trading, would be reasonably expected to significantly affect liquidity.

Highly Liquid Investment Minimum. The
Committee performed an analysis to determine whether the fund is required to maintain a Highly Liquid Investment Minimum, and determined that no such minimum is required because the fund primarily holds highly liquid investments.

Compliance with Limitation on Illiquid Investments. The Committee confirmed that during the Reporting Period, the fund did not acquire any illiquid
investment such that, after the acquisition, the fund would have invested more than 15% of its assets in illiquid investments that are assets, in accordance with the Program and applicable SEC rules.

Redemptions in Kind. The Committee confirmed that no redemptions in-kind were effected by the fund during the
Reporting Period.

The Report stated that the Committee concluded that the Program is reasonably designed and operated effectively to assess and manage
the fund’s liquidity risk throughout the Reporting Period.

 

ClearBridge Variable Large Cap Growth Portfolio           

 

33


Additional information (unaudited)

Information about Trustees and Officers

 

The business and affairs of ClearBridge Variable Large Cap Growth Portfolio (the “Portfolio”) are conducted by management under the supervision and
subject to the direction of its Board of Trustees. The business address of each Trustee is c/o Jane Trust, Legg Mason, 100 International Drive, 11th Floor, Baltimore, Maryland 21202. Information pertaining to the Trustees and officers of the
Portfolio is set forth below.

The Statement of Additional Information includes additional information about Trustees and is available, without charge,
upon request by calling the Portfolio at 1-877-721-1926.

 

Independent Trustees†
   
Paul R. Ades  
Year of birth   1940
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 1983
Principal occupation(s) during the past five years   Paul R. Ades, PLLC (law firm) (since 2000)
Number of funds in fund complex overseen by Trustee   49
Other board memberships held by Trustee during the past five years   None
Andrew L. Breech  
Year of birth   1952
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 1991
Principal occupation(s) during the past five years   President, Dealer Operating Control Service, Inc. (automotive retail management) (since 1985)
Number of funds in fund complex overseen by Trustee   49
Other board memberships held by Trustee during the past five years   None
Althea L. Duersten  
Year of birth   1951
Position(s) with Trust   Trustee and Chair
Term of office1 and length of time served2   Since 2014
Principal occupation(s) during the past five years   Retired (since 2011); formerly, Chief Investment Officer, North America, JPMorgan Chase (investment bank) and member of JPMorgan Executive Committee
(2007 to 2011)
Number of funds in fund complex overseen by Trustee   49
Other board memberships held by Trustee during the past five years   Non-Executive Director, Rokos Capital Management LLP (since 2019)

 

 

34

   ClearBridge Variable Large Cap Growth Portfolio

Additional information (unaudited) (cont’d)

Information about Trustees and Officers

 

Independent Trustees† (cont’d)    
Stephen R. Gross  
Year of birth   1947
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 1986
Principal occupation(s) during the past five years   Chairman Emeritus (since 2011) and formerly, Chairman, HLB Gross Collins, P.C. (accounting and consulting firm) (1979 to 2011); Executive Director
of Business Builders Team, LLC (since 2005); Principal, Gross Consulting Group, LLC (since 2011); CEO, Gross Capital Partners, LLC (since 2014); CEO, Trusted CFO Solutions, LLC (since 2011)
Number of funds in fund complex overseen by Trustee   49
Other board memberships held by Trustee during the past five years   None
Susan M. Heilbron  
Year of birth   1945
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 1991
Principal occupation(s) during the past five years   Retired; formerly, President, Lacey & Heilbron (communications consulting) (1990 to 2002); General Counsel and Executive Vice President, The
Trump Organization (1986 to 1990); Senior Vice President, New York State Urban Development Corporation (1984 to 1986); Associate, Cravath, Swaine & Moore LLP (1980 to 1984) and (1977 to 1979)
Number of funds in fund complex overseen by Trustee   49
Other board memberships held by Trustee during the past five years   Formerly, Director, Lincoln Savings Bank, FSB (1991 to 1994); Director, Trump Shuttle, Inc. (air transportation) (1989 to 1990); Director,
Alexander’s Inc. (department store) (1987 to 1990)
Howard J. Johnson  
Year of birth   1938
Position(s) with Trust   Trustee
Term of office1 and length of time served2   From 1981 to 1998 and since 2000 (Chairman since 2013)
Principal occupation(s) during the past five years   Retired; formerly, Chief Executive Officer, Genesis Imaging LLC (technology company) (2003 to 2012)
Number of funds in fund complex overseen by Trustee   49
Other board memberships held by Trustee during the past five years   None

 

ClearBridge Variable Large Cap Growth Portfolio  

 

35


 

 

Independent Trustees†
(cont’d)
   
Jerome H. Miller  
Year of birth   1938
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 1995
Principal occupation(s) during the past five years   Retired; formerly, President, Shearson Lehman Asset Management (1991 to 1993), Vice Chairman, Shearson Lehman Hutton Inc. (1989 to 1992) and Senior
Executive Vice President, E.F. Hutton Group Inc. (1986 to 1989)
Number of funds in fund complex overseen by Trustee   49
Other board memberships held by Trustee during the past five years   None
Ken Miller  
Year of birth   1942
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 1983
Principal occupation(s) during the past five years   Retired; formerly, President, Young Stuff Apparel Group, Inc. (apparel manufacturer), division of Li & Fung (1963 to 2012)
Number of funds in fund complex overseen by Trustee   49
Other board memberships held by Trustee during the past five years   None
Thomas F. Schlafly  
Year of birth   1948
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 1983
Principal occupation(s) during the past five years   Chairman, The Saint Louis Brewery, LLC (brewery) (since 2012); formerly, President, The Saint Louis Brewery, Inc. (1989 to 2012); Senior Counsel
(since 2017) and formerly, Partner (2009 to 2016), Thompson Coburn LLP (law firm)
Number of funds in fund complex overseen by Trustee   49
Other board memberships held by Trustee during the past five years   Director, CNB St. Louis Bank (since 2006)

 

 

36

   ClearBridge Variable Large Cap Growth Portfolio

Additional information (unaudited) (cont’d)

Information about Trustees and Officers

 

Interested Trustee and Officer    
Jane Trust, CFA3  
Year of birth   1962
Position(s) with Trust   Trustee, President and Chief Executive Officer
Term of office1 and length of time served2   Since 2015
Principal occupation(s) during the past five years   Senior Vice President, Fund Board Management, Franklin Templeton (since 2020); Officer and/or Trustee/Director of 147 funds associated with Legg
Mason Partners Fund Advisor, LLC (“LMPFA”) or its affiliates (since 2015); President and Chief Executive Officer of LMPFA (since 2015); formerly, Senior Managing Director (2018 to 2020) and Managing Director (2016 to 2018) of Legg Mason
& Co., LLC (“Legg Mason & Co.”); Senior Vice President of LMPFA (2015)
Number of funds in fund complex overseen by Trustee   145
Other board memberships held by Trustee during the past five years   None
 
Additional Officers    
Ted P. Becker  

Franklin Templeton

620
Eighth Avenue, 47th Floor, New York, NY 10018

 
Year of birth   1951
Position(s) with Trust   Chief Compliance Officer
Term of office1 and length of time served2   Since 2007
Principal occupation(s) during the past five years   Vice President, Global Compliance of Franklin Templeton (since 2020); Chief Compliance Officer of LMPFA (since 2006); Chief Compliance Officer of
certain funds associated with Legg Mason & Co. or its affiliates (since 2006); formerly, Director of Global Compliance at Legg Mason, Inc. (2006 to 2020); Managing Director of Compliance of Legg Mason & Co. (2005 to 2020)
Susan Kerr  

Franklin Templeton

620
Eighth Avenue, 47th Floor, New York, NY 10018

 
Year of birth   1949
Position(s) with Trust   Chief Anti-Money Laundering Compliance Officer
Term of office1 and length of time served2   Since 2013
Principal occupation(s) during the past five years   Senior Compliance Analyst, Franklin Templeton (since 2020); Chief Anti-Money Laundering Compliance Officer of certain funds associated with Legg
Mason & Co. or its affiliates (since 2013) and Anti-Money Laundering Compliance Officer (since 2012), Senior Compliance Officer (since 2011) and Assistant Vice President (since 2010) of Legg Mason Investor Services, LLC (“LMIS”);
formerly, Assistant Vice President of Legg Mason & Co. (2010 to 2020)

 

ClearBridge Variable Large Cap Growth Portfolio  

 

37


 

 

Additional Officers (cont’d)    
Jenna Bailey  

Franklin Templeton

100
First Stamford Place, 5th Floor, Stamford, CT 06902

 
Year of birth   1978
Position(s) with Trust   Identity Theft Prevention Officer
Term of office1 and length of time served2   Since 2015
Principal occupation(s) during the past five years   Senior Compliance Analyst of Franklin Templeton (since 2020); Identity Theft Prevention Officer of certain funds associated with Legg Mason &
Co. or its affiliates (since 2015); formerly, Compliance Officer of Legg Mason & Co. (2013 to 2020); Assistant Vice President of Legg Mason & Co. (2011 to 2020)
Marc A. De Oliveira*  

Franklin Templeton

100
First Stamford Place, 6th Floor, Stamford, CT 06902

 
Year of birth   1971
Position(s) with Trust   Secretary and Chief Legal Officer
Term of office1 and length of time served2   Since 2020
Principal occupation(s) during the past five years   Associate General Counsel of Franklin Templeton (since 2020); Assistant Secretary of certain funds associated with Legg Mason & Co. or its
affiliates (since 2006); formerly, Managing Director (2016 to 2020) and Associate General Counsel of Legg Mason & Co. (2005 to 2020)
Thomas C. Mandia  

Franklin Templeton

100
First Stamford Place, 6th Floor, Stamford, CT 06902

 
Year of birth   1962
Position(s) with Trust   Senior Vice President
Term of office1 and length of time served2   Since 2020
Principal occupation(s) during the past five years   Senior Associate General Counsel of Franklin Templeton (since 2020); Secretary of LMPFA (since 2006); Assistant Secretary of certain funds
associated with Legg Mason & Co. or its affiliates (since 2006); Secretary of LM Asset Services, LLC (“LMAS”) (since 2002) and Legg Mason Fund Asset Management, Inc. (“LMFAM”) (since 2013) (formerly registered investment
advisers); formerly, Managing Director and Deputy General Counsel of Legg Mason & Co. (2005 to 2020)

 

 

38

   ClearBridge Variable Large Cap Growth Portfolio

Additional information
(unaudited) (cont’d)

Information about Trustees and Officers

 

Additional Officers (cont’d)    
Christopher Berarducci  

Franklin Templeton

620
Eighth Avenue, 47th Floor, New York, NY 10018

 
Year of birth   1974
Position(s) with Trust   Treasurer and Principal Financial Officer
Term of office1 and length of time served2   Since 2014 and 2019
Principal occupation(s) during the past five years   Vice President, Fund Administration and Reporting, Franklin Templeton (since 2020); Treasurer (since 2010) and Principal Financial Officer (since
2019) of certain funds associated with Legg Mason & Co. or its affiliates; formerly, Managing Director (2020), Director (2015 to 2020), and Vice President (2011 to 2015) of Legg Mason & Co.
Jeanne M. Kelly  

Franklin Templeton

620
Eighth Avenue, 47th Floor, New York, NY 10018

 
Year of birth   1951
Position(s) with Trust   Senior Vice President
Term of office1 and length of time served2   Since 2007
Principal occupation(s) during the past five years   U.S. Fund Board Team Manager, Franklin Templeton (since 2020); Senior Vice President of certain funds associated with Legg Mason & Co. or its
affiliates (since 2007); Senior Vice President of LMPFA (since 2006); President and Chief Executive Officer of LMAS and LMFAM (since 2015); formerly, Managing Director of Legg Mason & Co. (2005 to 2020); Senior Vice President of LMFAM (2013 to
2015)

 

† 

Trustees who are not “interested persons” of the Portfolio within the meaning of Section 2(a)(19) of the Investment Company Act of 1940, as
amended (the “1940 Act”).

 

*

Effective August 6, 2020, Mr. De Oliveira became Secretary and Chief Legal Officer.

 

1 

Each Trustee and officer serves until his or her respective successor has been duly elected and qualified or until his or her earlier death, resignation,
retirement or removal.

 

2 

Indicates the earliest year in which the Trustee became a board member for a fund in the Legg Mason fund complex or the officer took such office.

 

3 

Ms. Trust is an “interested person” of the Portfolio, as defined in the 1940 Act, because of her position with LMPFA and/or certain of its
affiliates.

 

ClearBridge Variable Large Cap Growth Portfolio  

 

39


Important tax information (unaudited)

 

The following information is provided with respect to the distributions paid during the taxable year ended December 31, 2020:

 

Record date:        6/17/2020          12/10/2020  
Payable date:        6/18/2020          12/11/2020  
Ordinary Income:                      

Dividends Qualifying for the Dividends

                     

Received Deduction for Corporations

       100.00        100.00
Long-Term Capital Gain Dividend        $0.154330          $1.247950  

 

 

 

40

   ClearBridge Variable Large Cap Growth Portfolio

ClearBridge

Variable Large Cap Growth Portfolio

 

Trustees

Paul R. Ades

Andrew L. Breech

Althea L. Duersten

Chair

Stephen R. Gross

Susan M. Heilbron

Howard J. Johnson

Jerome H. Miller

Ken Miller

Thomas F. Schlafly

Jane Trust

 

Investment manager

Legg Mason Partners Fund
Advisor, LLC

Subadviser

ClearBridge Investments, LLC

Distributor

Legg Mason Investor Services, LLC

Custodian

The Bank of New York Mellon

 

Transfer agent

BNY Mellon Investment

Servicing (US) Inc.

4400 Computer Drive

Westborough, MA 01581

Independent registered public accounting firm

PricewaterhouseCoopers LLP

Baltimore, MD

 

ClearBridge Variable Large Cap Growth Portfolio

The Portfolio is a separate investment series of Legg Mason Partners Variable Equity Trust, a Maryland statutory trust.

ClearBridge Variable Large Cap Growth Portfolio

Legg Mason Funds

620 Eighth Avenue, 47th Floor

New York, NY 10018

 

The Portfolio files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Portfolio’s Forms
N-PORT are available on the SEC’s website at www.sec.gov. To obtain information on Form N-PORT, shareholders can call the Portfolio at 1-877-721-1926.

Information on how the
Portfolio voted proxies relating to portfolio securities during the prior 12-month period ended June 30th of each year and a description of the policies and procedures that the Portfolio uses to determine how
to vote proxies related to portfolio transactions are available (1) without charge, upon request, by calling the Portfolio at
1-877-721-1926, (2) at www.leggmason.com/variablefunds and (3) on the SEC’s website at www.sec.gov.

 

 

This report is submitted for the general information of the shareholders of ClearBridge Variable Large Cap Growth Portfolio. This report is not authorized for distribution to prospective investors in the Portfolio
unless preceded or accompanied by a current prospectus.

Investors should consider the Portfolio’s investment objectives, risks, charges and
expenses carefully before investing. The prospectus contains this and other important information about the Portfolio. Please read the prospectus carefully before investing.

www.leggmason.com

© 2021 Legg Mason Investor Services, LLC

Member FINRA, SIPC


Legg Mason Funds Privacy and Security Notice

 

Your Privacy and the Security of Your Personal Information is Very Important to the Legg Mason Funds

This Privacy and Security Notice (the “Privacy Notice”) addresses the Legg Mason Funds’ privacy and data protection practices with respect to
nonpublic personal information the Funds receive. The Legg Mason Funds include any funds sold by the Funds’ distributor, Legg Mason Investor Services, LLC, as well as Legg Mason-sponsored closed-end
funds. The provisions of this Privacy Notice apply to your information both while you are a shareholder and after you are no longer invested with the Funds.

The Type of Nonpublic Personal Information the Funds Collect About You

The Funds collect and
maintain nonpublic personal information about you in connection with your shareholder account. Such information may include, but is not limited to:

 

•  

Personal information included on applications or other forms;

 

•  

Account balances, transactions, and mutual fund holdings and positions;

 

•  

Bank account information, legal documents, and identity verification documentation;

 

•  

Online account access user IDs, passwords, security challenge question responses; and

 

•  

Information received from consumer reporting agencies regarding credit history and creditworthiness (such as the amount of an individual’s total debt,
payment history, etc.).

How the Funds Use Nonpublic Personal Information About You

The Funds do not sell or share your nonpublic personal information with third parties or with affiliates for their marketing purposes, or with other financial
institutions or affiliates for joint marketing purposes, unless you have authorized the Funds to do so. The Funds do not disclose any nonpublic personal information about you except as may be required to perform transactions or services you have
authorized or as permitted or required by law.

The Funds may disclose information about you to:

 

•  

Employees, agents, and affiliates on a “need to know” basis to enable the Funds to conduct ordinary business, or to comply with obligations to
government regulators;

 

•  

Service providers, including the Funds’ affiliates, who assist the Funds as part of the ordinary course of business (such as printing, mailing services, or
processing or servicing your account with us) or otherwise perform services on the Funds’ behalf, including companies that may perform statistical analysis, market research and marketing services solely for the Funds;

 

•  

Permit access to transfer, whether in the United States or countries outside of the United States to such Funds’ employees, agents and affiliates and
service providers as required to enable the Funds to conduct ordinary business, or to comply with obligations to government regulators;

 

•  

The Funds’ representatives such as legal counsel, accountants and auditors to enable the Funds to conduct ordinary business, or to comply with obligations
to government regulators;

 

•  

Fiduciaries or representatives acting on your behalf, such as an IRA custodian or trustee of a grantor trust.

 

NOT PART OF THE ANNUAL REPORT

Legg Mason Funds Privacy and Security Notice (cont’d)

 

Except as otherwise permitted by applicable law, companies acting on the Funds’
behalf, including those outside the United States, are contractually obligated to keep nonpublic personal information the Funds provide to them confidential and to use the information the Funds share only to provide the services the Funds ask them
to perform. The Funds may disclose nonpublic personal information about you when necessary to enforce their rights or protect against fraud, or as permitted or required by applicable law, such as in connection with a law enforcement or regulatory
request, subpoena, or similar legal process. In the event of a corporate action or in the event a Fund service provider changes, the Funds may be required to disclose your nonpublic personal information to third parties. While it is the Funds’
practice to obtain protections for disclosed information in these types of transactions, the Funds cannot guarantee their privacy policy will remain unchanged.

Keeping You Informed of the Funds’ Privacy and Security Practices

The Funds will notify
you annually of their privacy policy as required by federal law. While the Funds reserve the right to modify this policy at any time they will notify you promptly if this privacy policy changes.

The Funds’ Security Practices

The
Funds maintain appropriate physical, electronic and procedural safeguards designed to guard your nonpublic personal information. The Funds’ internal data security policies restrict access to your nonpublic personal information to authorized
employees, who may use your nonpublic personal information for Fund business purposes only.

Although the Funds strive to protect your nonpublic personal
information, they cannot ensure or warrant the security of any information you provide or transmit to them, and you do so at your own risk. In the event of a breach of the confidentiality or security of your nonpublic personal information, the Funds
will attempt to notify you as necessary, so you can take appropriate protective steps. If you have consented to the Funds using electronic communications or electronic delivery of statements, they may notify you under such circumstances using the
most current email address you have on record with them.

In order for the Funds to provide effective service to you, keeping your account information
accurate is very important. If you believe that your account information is incomplete, not accurate or not current, if you have questions about the Funds’ privacy practices, or our use of your nonpublic personal information, write the Funds
using the contact information on your account statements, email the Funds by clicking on the Contact Us section of the Funds’ website at www.leggmason.com, or contact the Fund at
1-877-721-1926.

Revised April
2018

Legg Mason California Consumer Privacy Act Policy

Although much of the personal information we collect is “nonpublic personal information” subject to federal law, residents of California may, in certain circumstances, have additional rights under the
California Consumer Privacy Act (“CCPA”). For example, if you are a broker,

 

NOT PART OF THE ANNUAL REPORT

Legg Mason Funds Privacy and Security Notice (cont’d)

 

dealer, agent, fiduciary, or representative acting by or on behalf of, or for, the
account of any other person(s) or household, or a financial advisor, or if you have otherwise provided personal information to us separate from the relationship we have with personal investors, the provisions of this Privacy Policy apply to your
personal information (as defined by the CCPA).

 

•  

In addition to the provisions of the Legg Mason Funds Security and Privacy Notice, you may have the right to know the categories and specific pieces of personal
information we have collected about you.

 

•  

You also have the right to request the deletion of the personal information collected or maintained by the Funds.

If you wish to exercise any of the rights you have in respect of your personal information, you should advise the Funds by contacting them as set forth below. The
rights noted above are subject to our other legal and regulatory obligations and any exemptions under the CCPA. You may designate an authorized agent to make a rights request on your behalf, subject to the identification process described below. We
do not discriminate based on requests for information related to our use of your personal information, and you have the right not to receive discriminatory treatment related to the exercise of your privacy rights.

We may request information from you in order to verify your identity or authority in making such a request. If you have appointed an authorized agent to make a
request on your behalf, or you are an authorized agent making such a request (such as a power of attorney or other written permission), this process may include providing a password/passcode, a copy of government issued identification, affidavit or
other applicable documentation, i.e. written permission. We may require you to verify your identity directly even when using an authorized agent, unless a power of attorney has been provided. We reserve the right to deny a request submitted by an
agent if suitable and appropriate proof is not provided.

For the 12-month period prior to the date of this
Privacy Policy, the Legg Mason Funds have not sold any of your personal information; nor do we have any plans to do so in the future.

Contact
Information

Address: Data Privacy Officer, 100 International Dr., Baltimore, MD 21202

Email: DataProtectionOfficer@franklintempleton.com

Phone: 1-800-396-4748

Revised October 2020

 

NOT PART OF THE ANNUAL REPORT

www.leggmason.com

© 2021 Legg Mason Investor Services, LLC Member FINRA, SIPC

FDXX010538 2/21 SR21-4071


The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer,
principal accounting officer or controller.

 

ITEM 3.

AUDIT COMMITTEE FINANCIAL EXPERT.

The Board of Trustees of the registrant has determined that Stephen R. Gross possesses the technical attributes identified in Instruction 2(b)
of Item 3 to Form N-CSR to qualify as an “audit committee financial expert,” and has designated Stephen R. Gross as the Audit Committee’s financial expert Stephen R. Gross is an
“independent” Trustees pursuant to paragraph (a)(2) of Item 3 to Form N-CSR.

 

ITEM 4.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

a) Audit Fees. The aggregate fees billed in the last two fiscal years ending December 31, 2019 and December 31, 2020 (the
“Reporting Periods”) for professional services rendered by the Registrant’s principal accountant (the “Auditor”) for the audit of the Registrant’s annual financial statements, or services that are normally provided by
the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $296,402 in December 31, 2019 and $379,280 in December 31, 2020.

b) Audit-Related Fees. The aggregate fees billed in the Reporting Period for assurance and related services by the Auditor that are
reasonably related to the performance of the Registrant’s financial statements were $0 in December 31, 2019 and $0 in December 31, 2020.

(c) Tax Fees. The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance,
tax advice and tax planning (“Tax Services”) were $0 in December 31, 2019 and $0 in December 31, 2020. These services consisted of (i) review or preparation of U.S. federal, state, local and excise tax returns;
(ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory, regulatory or administrative developments, and (iii) tax advice regarding tax qualification matters and/or treatment of various financial
instruments held or proposed to be acquired or held.

There were no fees billed for tax services by the Auditors to service affiliates
during the Reporting Periods that required pre-approval by the Audit Committee.

d) All Other
Fees
. The aggregate fees billed in the Reporting Periods for products and services provided by the Auditor, other than the services reported in paragraphs (a) through (c) for the Item 4 for the Legg Mason Partners Variable
Equity Trust., were $0 in December 31, 2019 and $0 in December 31, 2020

All Other Fees. There were no other non-audit services rendered by the Auditor to Legg Mason Partners Fund Advisors, LLC (“LMPFA”), and any entity controlling, controlled by or under common control with LMPFA that provided ongoing services
to Legg Mason Partners Variable Equity Trust requiring pre-approval by the Audit Committee in the Reporting Period.

(e) Audit Committee’s pre–approval policies and procedures described in paragraph (c) (7) of Rule 2-01 of Regulation S-X.

(1) The Charter for the Audit Committee
(the “Committee”) of the Board of each registered investment company (the “Fund”) advised by LMPFA or one of their affiliates (each, an “Adviser”) requires that the Committee shall approve (a) all audit and
permissible non-audit services to be provided to the Fund and (b) all permissible non-audit services to be provided by the Fund’s independent auditors to the
Adviser and any Covered Service Providers if the engagement relates directly to the operations and financial reporting of the Fund. The


Committee may implement policies and procedures by which such services are approved other than by the full Committee.

The Committee shall not approve non-audit services that the Committee believes may impair the
independence of the auditors. As of the date of the approval of this Audit Committee Charter, permissible non-audit services include any professional services (including tax services), that are not prohibited
services as described below, provided to the Fund by the independent auditors, other than those provided to the Fund in connection with an audit or a review of the financial statements of the Fund. Permissible
non-audit services may not include: (i) bookkeeping or other services related to the accounting records or financial statements of the Fund; (ii) financial information systems design and
implementation; (iii) appraisal or valuation services, fairness opinions or contribution-in-kind reports; (iv) actuarial services; (v) internal audit
outsourcing services; (vi) management functions or human resources; (vii) broker or dealer, investment adviser or investment banking services; (viii) legal services and expert services unrelated to the audit; and (ix) any other
service the Public Company Accounting Oversight Board determines, by regulation, is impermissible.

Pre-approval by the Committee of any permissible non-audit
services is not required so long as: (i) the aggregate amount of all such permissible non-audit services provided to the Fund, the Adviser and any service providers controlling, controlled by or under
common control with the Adviser that provide ongoing services to the Fund (“Covered Service Providers”) constitutes not more than 5% of the total amount of revenues paid to the independent auditors during the fiscal year in which the
permissible non-audit services are provided to (a) the Fund, (b) the Adviser and (c) any entity controlling, controlled by or under common control with the Adviser that provides ongoing services
to the Fund during the fiscal year in which the services are provided that would have to be approved by the Committee; (ii) the permissible non-audit services were not recognized by the Fund at the time
of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved by the Committee (or its delegate(s)) prior to the completion of the
audit.

(2) For the Legg Mason Partners Variable Equity Trust, the percentage of fees that were approved by the audit committee, with
respect to: Audit-Related Fees were 100% and 100% for December 31, 2019 and December 31, 2020; Tax Fees were 100% and 100% for December 31, 2019 and December 31, 2020; and Other Fees were 100% and 100% for December 31, 2019
and December 31, 2020.

(f) N/A

(g) Non-audit fees billed by the Auditor for services rendered to Legg Mason Partners Variable Equity
Trust, LMPFA and any entity controlling, controlled by, or under common control with LMPFA that provides ongoing services to Legg Mason Partners Variable Equity Trust during the reporting period were $544,232 in December 31, 2019 and $674,925
in December 31, 2020.

(h) Yes. Legg Mason Partners Variable Equity Trust’s Audit Committee has considered whether the provision
of non-audit services that were rendered to Service Affiliates, which were not pre-approved (not requiring pre-approval), is
compatible with maintaining the Accountant’s independence. All services provided by the Auditor to the Legg Mason Partners Variable Equity Trust or to Service Affiliates, which were required to be
pre-approved, were pre-approved as required.

 

ITEM 5.

AUDIT COMMITTEE OF LISTED REGISTRANTS.

 

  a)

The independent board members are acting as the registrant’s audit committee as specified in
Section
 3(a)(58)(B) of the Exchange Act .The Audit Committee consists of the following Board members:

Paul R. Ades

Andrew L. Breech


Althea L. Duersten

Stephen R. Gross

Susan M.
Heilbron

Howard J. Johnson

Jerome H. Miller

Ken Miller

Thomas F. Schlafly

 

 

ITEM 6.

SCHEDULE OF INVESTMENTS.

Included herein under Item 1.

 

ITEM 7.

DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

 

ITEM 8.

PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

 

ITEM 9.

PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.

Not applicable.

 

ITEM 10.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

 

ITEM 11.

CONTROLS AND PROCEDURES.

 

  (a)

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

 

  (b)

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

 

ITEM 12.

DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT
INVESTMENT COMPANIES.

 

 

(a) (1) Code of Ethics attached hereto.


Exhibit 99.CODE ETH

(a) (2) Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 attached hereto.

Exhibit 
99.CERT

(b) Certifications pursuant to Section 
906 of the Sarbanes-Oxley Act of 2002 attached hereto.

Exhibit 99.906CERT


SIGNATURES

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

 

Legg Mason Partners Variable Equity Trust
By:  

/s/Jane Trust

  Jane Trust
  Chief Executive Officer

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

 

By:  

/s/Jane Trust

  Jane Trust
  Chief Executive Officer
By:  

/s/ Christopher Berarducci

  Christopher Berarducci
  Principal Financial Officer

CODE OF ETHICS

I. Introduction

A. Individuals Covered by the Code

This Code applies to all employees of Legg Mason & Co., LLC and interested directors of the Proprietary Funds who are not otherwise subject
to another code of ethics adopted pursuant to either Rule 17j-1 under the Investment Company Act or Rule 204A-1 under the Investment Advisers Act (“Covered
Persons”).

 

1.

Without limiting the generality of the foregoing, this Code covers all employees of Legg Mason & Co.,
LLC who perform services on behalf of the Proprietary Funds as part of the following regulated entities:

 

a.

Legg Mason Investor Services, LLC (“LMIS”).

 

b.

Legg Mason Partners Fund Advisor, LLC (“LMPFA”).

 

2.

For the avoidance of doubt, each of the Legg Mason Registered Advisers (other than LMPFA) have adopted their
own codes of ethics, and employees of the Legg Mason Registered Advisers who are subject to the requirements of those codes of ethics (including any who may be registered representatives of LMIS) are not subject to the requirements of this Code.

B. Standards of Business Conduct

This Code is based on the principle that Legg Mason and its affiliates owe a fiduciary duty to Legg Mason’s clients, and that all Covered Persons must
therefore avoid activities, interests and relationships that might (i) present a conflict of interest or the appearance of a conflict of interest, or (ii) otherwise interfere with Legg Mason’s ability to make decisions in the best
interests of any of its clients. In particular, Covered Persons must at all times comply with the following standards of business conduct:

 

1.

Compliance with Applicable Law. All Covered Persons must comply with the Federal Securities Laws that apply to
the business of Legg Mason.

 

2.

Clients Come First. Covered Persons must scrupulously avoid serving their personal interests ahead of the
interests of clients. For example, a Covered Person may not induce or cause a client to take action, or not to take action, for the Covered Person’s personal benefit at the expense of the client’s best interests.

 

3.

Avoid Taking Advantage. Covered Persons may not use their knowledge of the Legg Mason Registered Advisers’
investment activities or client portfolio holdings to profit by the market effect of such activities or to engage in short-term or other abusive trading in Reportable Funds.

 

4.

Avoid Other Inappropriate Relationships or Activities. Covered Persons should avoid relationships or activities
that could call into question the Covered Person’s ability to exercise independent judgment in the best interests of Legg Mason’s clients. In particular, Covered Persons should take note of the provisions of the Legg Mason Code of Conduct
and the Legg Mason Employee Handbook that pertain to confidentiality, corporate opportunities, gifts and entertainment, insider trading and outside business activities. In addition, Covered Persons who are registered representatives of LMIS should
also take note of LMIS’s policies and procedures pertaining to these activities.

 

1


5.

Observe the Spirit of the Code. Doubtful situations should be resolved in favor of Legg Mason’s clients.
Technical compliance with the Code’s procedures will not automatically insulate from scrutiny any personal Securities Transactions or other course of conduct that might indicate an abuse of these governing principles.

C. Duty to Report Violations

Covered Persons must
promptly report all violations of this Code to the Compliance Department.

D. Fiduciary Duty / Political Contributions

Covered Persons are prohibited from making political contributions for the purpose of obtaining or retaining any Legg Mason Registered Adviser or its
affiliates as investment advisers. Covered Persons are specifically prohibited from making political contributions to any person for the purpose of influencing the selection or retention of an investment adviser by a government entity. Covered
Persons will be required to certify annually that they have and will comply with this provision.

II. Personal Securities Transactions

A. Prohibited Transactions in Individual Securities

Covered Persons are subject to the following restrictions on their personal trading activities in individual securities:

 

1.

Fraudulent Transactions. In connection with the purchase or sale, directly or indirectly, by a Covered Person
of (A) a Reportable Security which, within the most recent fifteen (15) calendar days, (i) is or has been held by a Legg Mason client, or (ii) is being or has been considered by a Legg Mason Registered Adviser for purchase by a
client, or (B) an Equivalent Security thereof, Covered Persons are prohibited from:

 

a.

Employing any device, scheme or artifice to defraud Legg Mason’s clients;

 

b.

Making any untrue statement of a material fact or omitting to state a material fact necessary to make the
statements made, in light of the circumstances under which they were made, not misleading;

 

c.

Engaging in any act, practice or course of business that operates or would operate as a fraud or deceit on Legg
Mason’s clients; or

 

d.

Engaging in any manipulative practice with respect to Legg Mason’s clients.

 

2.

Inside Information. Covered Persons are prohibited from engaging in any transaction in a Security (or
Equivalent Security) at a time when the Covered Person is in possession of material non-public information regarding the Security or the issuer of the Security.

 

3.

Market Manipulation. Covered Persons are prohibited from engaging in any transactions in a Security (or
Equivalent Security) intended to raise, lower or maintain the price of that Security or to create a false appearance of active trading in that Security.

 

4.

Trading on the Knowledge of Client Transactions. Covered Persons are prohibited from engaging in any
transactions in a Security (or an Equivalent Security) on the basis of any information they may be in possession of to the effect that (i) a Legg Mason Registered Adviser is or may be considering an investment in or sale of such Security on
behalf of its clients or (ii) has or may have an open order in such Security on behalf of its clients.

 

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5. Legg Mason, Inc. Stock. Covered Persons are prohibited from engaging in any transaction in Legg Mason
securities that is not in compliance with the “Legg Mason, Inc. Policies and Procedures Regarding Acquisitions and Dispositions of Legg Mason Securities,” as the same may be amended from time to time. A copy of this policy is available on
the Legg Mason Legal and Compliance Website.

B. Prohibited Transactions in Reportable Funds

 

1.

Market Timing in Reportable Funds. No Covered Person may use his or her knowledge of the portfolio holdings or
investment activities of a Reportable Fund to engage in any short-term or other abusive trading strategy involving such Fund that may conflict with the best interests of the Fund and its shareholders.

 

2.

60-Day Holding Period for Investments in Proprietary Funds. Subject to
the exemptions set forth below, no Covered Person may sell (or exchange out of) shares of a Proprietary Fund in which the Covered Person has a Beneficial Interest if the Covered Person has not held the shares of the same Proprietary Fund for sixty
(60) calendar days, including any individual retirement account or 401(k) participant account.

 

3.

Additionally, Proprietary Funds that are sold in the LM 401(k) account are also subject to a 60-day minimum waiting period. No Covered Person may buy (or exchange into) shares of a Proprietary Fund within sixty (60) calendar days of a sell of (or exchange out of) shares of the same Proprietary Fund
within the same LM 401(k) account.

The following Securities Transactions involving Proprietary Funds are exempt from the 60-day minimum holding period requirement set forth in this Section II.B.2 and II.B.3:

 

a.

Money Market Funds and Other Short-Term Trading Vehicles. Purchases or redemptions of Proprietary Funds that
are money market funds or that hold themselves out as short-term trading vehicles.

 

b.

Managed Accounts. Transactions in Proprietary Funds held in a Managed Account in connection with which the
Covered Person has no direct or indirect influence or control over the account, is neither consulted nor advised of the trade before it is executed, and has no knowledge of specific management actions taken by a trustee or investment manager.

 

c.

Systematic Investment. Purchases or redemptions of Proprietary Funds pursuant to an Automatic Investment Plan
where a prescribed purchase or sale is made automatically on a regular predetermined basis without affirmative action by the Covered Person or pursuant to a similar arrangement approved by the Compliance Department (for example, automated payroll
deduction investments by 401(k) participants or automatic dividend reinvestment).

C.
Pre-Approval of Investments in Initial Public Offerings and Private Placements

Covered Persons are prohibited
from acquiring a Beneficial Interest in a Reportable Security through an initial public offering (other than a new offering of securities issued by a registered open-end investment company) or Private
Placement without the prior written approval of the Compliance Department. Requests for such approval shall be submitted to the Compliance Department through Fidelity National Information Services, Inc. (“FIS”)/PTA using substantially the
form of “Request for Approval to Invest in an Initial Public Offering or Private Placement” attached hereto as Appendix A.

 

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D. Reporting and Trading Requirements

 

1.

Acknowledgement of Receipt; Initial and Periodic Disclosure of Personal Holdings; Annual Certification.

 

a.

Within ten (10) calendar days of being identified as a Covered Person under this Code, each Covered Person
must acknowledge that he or she has received and reviewed a copy of the Code, and has disclosed all Securities holdings in which such Covered Person has a Beneficial Interest..

 

b.

Thereafter, on an annual basis, each Covered Person shall give the same acknowledgements and, in addition,
shall certify that he or she has complied with all applicable provisions of the Code.

 

c.

Such acknowledgments and certifications shall be provided through FIS/PTA using substantially the form of the
“Acknowledgement of Receipt of Code of Ethics, Personal Holdings Report and Annual Certification” attached hereto as Appendix B.

 

2.

Execution of Personal Securities Transactions.

 

a.

Approved Accounts. Unless one of the following exceptions applies, Covered Persons must execute their personal
securities transactions involving any Reportable Securities or Reportable Funds in which they have or acquire a Beneficial Interest through one of the following two types of accounts (“Approved Accounts”):

 

i.

Approved Securities Accounts. Securities accounts (including IRA accounts) with financial intermediaries that
have been approved by the Compliance Department (an “Approved Securities Account”); or

 

ii.

Approved Retirement Accounts. Participant accounts in retirement plans approved by the Compliance Department on
the grounds that either (i) automated feeds into FIS/PTA have been established, or (ii) sufficient policies and procedures are in place to protect any Reportable Funds that may be in the plan from the types of activities prohibited by
Sections A and B above (an “Approved Retirement Account”).1

 

b.

Exceptions. The following types of accounts are exempt from the requirements of section 2.a above, subject to
compliance with the conditions set forth below:

 

i.

Mutual Fund-Only and Managed Accounts. Covered Persons may have or acquire a Beneficial Interest in Mutual
Fund-Only and Managed Accounts that are not Approved Securities Accounts, provided that the requirement set forth in this Code relating to a Managed Account or Mutual Fund-Only Account, as the case may be, are satisfied. To qualify for this
exemption, a Covered Person must deliver to the Compliance Department through FIS/PTA a certification in substantially the form of the “Certificate for Managed Accounts or Mutual Fund-Only Accounts” attached hereto as Appendix D.

 

ii.

Outside Retirement Accounts. Covered Persons may have or acquire a Beneficial Interest in a retirement account
other than an Approved Retirement Account (an “Outside Retirement Account”), provided that the Covered Person complies with the certification or reporting requirements set forth in Section 3.c below, and provided further that, for
purposes of this Code, an IRA account shall be treated as a securities account and not as a retirement account.

 

 

1

A list of the approved financial intermediaries and retirement plans may by found on the Legal and Compliance
home page on LMEX.

 

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iii.

Dividend Reinvestment Plans. Covered Person may have or acqui