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Class I (Inception date of 4/27/07 through 12/31/09)

Class II (Inception date of 10/1/02 through 12/31/09)

Portfolio objectives

The Portfolio seeks a high level of current income; long-term capital appreciation is a secondary objective.

Portfolio name change

Prior to November 2, 2009, the Portfolio was known as Legg Mason Partners Variable Capital and Income Portfolio.

What’s inside



Letter from the chairman		I

Portfolio overview		1

Portfolio at a glance		9

Portfolio expenses		10

Portfolio performance		12

Historical performance		13

Schedule of investments		14

Statement of assets and liabilities		19

Statement of operations		20

Statements of changes in net assets		21

Financial highlights		22

Notes to financial statements		24

Report of independent registered public accounting firm		43

Board approval of management and subadvisory agreements		44

Additional information		49

Important tax information		56

Legg Mason Partners Fund Advisor, LLC (“LMPFA”) is the Portfolio’s investment manager. ClearBridge Advisors, LLC (“ClearBridge”) is the Portfolio’s subadviser. LMPFA and ClearBridge are wholly-owned subsidiaries of Legg Mason, Inc.

Letter from the chairman

R. Jay Gerken, CFA

Chairman, President and Chief Executive Officer

Dear Shareholder,

While the U.S. economy was weak during the first half of the twelve-month reporting period ended December 31, 2009, the lengthiest recession since the Great Depression finally appeared to have ended during the second half of the year.

Looking back, the U.S. Department of Commerce reported that first quarter 2009 U.S. gross domestic product (“GDP”)ⁱ contracted 6.4%. The economic environment then started to get relatively better during the second quarter, as GDP fell 0.7%. The economy’s more modest contraction was due, in part, to smaller declines in both exports and business spending. After contracting four consecutive quarters, the Commerce Department reported that third quarter 2009 GDP growth was 2.2%. A variety of factors helped the economy to expand, including the government’s $787 billion stimulus program, its “Cash for Clunkers” car rebate program, which helped spur an increase in car sales, and tax credits for first-time home buyers. Economic growth then accelerated during the fourth quarter of 2009, as the advance estimate for GDP growth was 5.7%. The Commerce Department cited a slower drawdown in business inventories and consumer spending as contributing factors spurring the economy’s higher growth rate.

Even before GDP advanced in the third quarter, there were signs that the economy was starting to regain its footing. The manufacturing sector, as measured by the Institute for Supply Management’s PMIⁱⁱ, rose to 52.9 in August 2009, the first time it surpassed 50 since January 2008 (a reading below 50 indicates a contraction, whereas a reading above 50 indicates an expansion). PMI data subsequently showed that manufacturing expanded from September through December as well. In addition, December’s PMI reading of 55.9 was the highest since April 2006.

There were some mixed signals from the housing market toward the end of the reporting period. According to its most recent data, the S&P/Case-Shiller Home Price Indexⁱⁱⁱ indicated that month-over-month home prices rose for the sixth straight month in November. However, according to the National Association of Realtors, while existing home sales rose 7.4% in November, sales fell by nearly 17% in December.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio

Letter from the chairman continued

One area that remained weak–and could hamper the magnitude of economic recovery—was the labor market. While monthly job losses have moderated compared to earlier in the year, the unemployment rate remained elevated during the reporting period. After reaching a twenty-six-year high of 10.1% in October 2009, the unemployment rate fell to 10.0% in November and remained unchanged the following month. Since December 2007, the unemployment rate has more than doubled and the number of unemployed workers has risen by more than eight million.

The Federal Reserve Board (“Fed”)^iv continued to pursue an accommodative monetary policy during the reporting period. After reducing the federal funds rate^v from 5.25% in August 2007 to a range of 0 to 1/4 percent in December 2008—a historic low—the Fed maintained this stance through the end of 2009 and during its first meeting in January 2010. In conjunction with its January 2010 meeting, the Fed said that it “will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

After falling nearly 30% from September through November 2008 (before the reporting period began), the U.S. stock market, as measured by the S&P 500 Index^vi (the “Index”), rallied and, overall, generated strong results during the twelve-month reporting period. Stock prices fell during the first two months of the reporting period, due to the rapidly weakening global economy, an ongoing credit crisis and plunging corporate profits. Stock prices continued to decline in early March, reaching a twelve-year low on March 9^th. Stocks then moved sharply and posted positive returns during nine of the last ten months of the year. From its March trough through the end of December, the Index gained approximately 67%, its fastest rebound since 1933. The market’s rally was attributed to a number of factors, including optimism that the economy was gaining traction and that corporate profits would continue to improve. All told, the Index returned 26.46% over the twelve-month reporting period ended December 31, 2009, its best calendar year since 2003.

Turning to the bond market, both short- and long-term Treasury yields fluctuated during the reporting period. When the period began, Treasury yields were extremely low, given numerous “flights to quality” that were triggered by the fallout from the financial crisis in 2008. After starting the period at 0.76% and 2.25%, respectively, two- and ten-year Treasury yields then generally moved higher (and their prices lower) until early June. Two- and ten-year yields peaked at 1.42% and 3.98%, respectively, before falling and ending the reporting period at 1.14% and 3.85%, respectively. Over the twelve months ended December 31, 2009, longer-term yields moved higher than their shorter-term counterparts due to fears of future inflation given

II Legg Mason ClearBridge Variable Equity Income Builder Portfolio

the government’s massive stimulus program. In a reversal from 2008, investor risk aversion faded during the twelve-month reporting period, driving spread sector (non-Treasury) prices higher. For the twelve months ended December 31, 2009, the Barclays Capital U.S. Aggregate Index^vii returned 5.93%.

Special shareholder notices

On November 2, 2009, the Portfolio’s investment objective, policies and strategies, along with its name and performance benchmarks changed. Additionally, effective November 2, 2009, Harry D. Cohen, Peter Vanderlee, CFA, and Michael Clarfeld, CFA, portfolio managers from ClearBridge Advisors, LLC, assumed responsibility for the day-to-day management of the Portfolio’s fixed-income investments. They continue to be responsible for the allocation of the Portfolio’s assets and the day-to-day management of the Portfolio’s equity investments. Please see the prospectus for more details.

A special note regarding increased market volatility

Dramatically higher volatility in the financial markets has been very challenging for many investors. Market movements have been rapid–sometimes in reaction to economic news, and sometimes creating the news. In the midst of this evolving market environment, we at Legg Mason want to do everything we can to help you reach your financial goals. Now, as always, we remain committed to providing you with excellent service and a full spectrum of investment choices. Rest assured, we will continue to work hard to ensure that our investment managers make every effort to deliver strong long-term results.

We also remain committed to supplementing the support you receive from your financial advisor. One way we accomplish this is through our enhanced website, www.leggmason.com/individualinvestors. Here you can gain immediate access to many special features to help guide you through difficult times, including:


•	Market insights and commentaries from our portfolio managers and

•	A host of educational resources.

During periods of market unrest, it is especially important to work closely with your financial advisor and remember that reaching one’s investment goals unfolds over time and through multiple market cycles. Time and again, history has shown that, over the long run, the markets have eventually recovered and grown.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio

III

Letter from the chairman continued

Information about your portfolio

Please read on for a more detailed look at prevailing economic and market conditions during the Portfolio’s reporting period and to learn how those conditions have affected Portfolio performance.

Important information with regard to recent regulatory developments that may affect the Portfolio is contained in the Notes to Financial Statements included in this report.

As always, thank you for your confidence in our stewardship of your assets. We look forward to helping you meet your financial goals.

Sincerely,

R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer

January 29, 2010

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.


ⁱ		Gross domestic product (“GDP”) is the market value of all final goods and services produced within a country in a given period of time.

ⁱⁱ		The Institute for Supply Management’s PMI is based on a survey of purchasing executives who buy the raw materials for manufacturing at more than 350 companies. It offers an early reading on the health of the manufacturing sector.

ⁱⁱⁱ		The S&P/Case-Shiller Home Price Index measures the residential housing market, tracking changes in the value of the residential real estate market in twenty metropolitan regions across the United States.

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

^v		The federal funds rate is the rate charged by one depository institution on an overnight sale of immediately available funds (balances at the Federal Reserve) to another depository institution; the rate may vary from depository institution to depository institution and from day to day.

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

^vii		The Barclays Capital U.S. Aggregate Index is a broad-based bond index comprised of government, corporate, mortgage- and asset-backed issues, rated investment grade or higher, and having at least one year to maturity.

IV Legg Mason ClearBridge Variable Equity Income Builder Portfolio

Portfolio overview

Q. What is the Portfolio’s investment strategy?

A. The Portfolio’s primary objective is to provide a high level of current income with a secondary investment objective of long-term capital appreciation. We believe that high-quality companies with strong balance sheets coupled with strong dividend profiles are attractive candidates for long-term investment. Our investment philosophy tends to focus on identifying companies that demonstrate industry leadership or that are improving their competitive position through innovation. With respect to dividend-paying equity securities, our main focus is on the current yield of the security, with dividend growth over time being secondary.

Under normal circumstances, the Portfolio invests at least 80% of the value of its net assets plus borrowings for investment proposes, if any, in equity securities or other investments with similar economic characteristics. A significant portion of the portfolio consists of equity securities that pay dividends. Equity securities include exchange-traded and over-the-counter common stocks, preferred stocks, warrants, rights and debt securities convertible into equity securities. The Fund may also invest in real estate investment trusts (“REITs”)ⁱ. Further, the Portfolio may invest in fixed-income securities of any quality (subject to a limit of 20% of the Portfolio’s net assets) when we believe such securities provide attractive income opportunities. While the Portfolio mainly invests in equity securities that pay a dividend, its flexible mandate provides us with an extended set of investment opportunities to help generate current income.

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

A. The Portfolio’s reporting period began during the worst financial crisis since the Great Depression and included a major and historic disruption of the global stock and credit markets, record job losses, a Federal Reserve Board (“Fed”)ⁱⁱ and U.S. Department of the Treasury thrust into the spotlight of national politics and a significant reshaping of the financial services industry. It ended amidst a record-setting stock market rally and an economy that had, at least technically, emerged from the so-called “Great Recession” that began in December of 2007.

The domestic stock market was already in turmoil before the past fiscal year began, following the initial bursting of the housing market bubble in 2007 and the subsequent credit and liquidity crises that culminated in the collapse and/or distressed acquisitions of several major financial services companies, including the failure of the prominent investment bank Lehman Brothers in the largest bankruptcy filing in U.S. history. The stock market suffered a series of record-breaking declines and lows before the start of the reporting period, eventually setting what many now consider to be a durable bottom and a “generational” low in early March of 2009, after the new year and the reporting period had begun.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Portfolio overview continued

The powerful and sustained stock market rally following the March lows generated returns for the broad S&P 500 Indexⁱⁱⁱ of over 67% from the March 9^th bottom through the end of December, with the blue-chip Dow Jones Industrial Average^iv rising over 63% from its twelve-year low in March and the NASDAQ Composite Index^v gaining over 80% for the same period.

A resumption of U.S. gross domestic product (“GDP”)^vi growth in the third quarter indicated that the economy had technically emerged from the Great Recession, but mixed or disappointing data for other key economic indicators, including the highest unemployment rate since 1983, and concerns about the fate of the recovery once the government’s stimulus begins to slow and the loose interest rate environment begins to tighten, left many in the market with concerns about inflation and doubts about both the future strength of the overall economic recovery and the continued viability of the present bull market.

In terms of the bond market, over the course of the reporting period, U.S. Treasury yields moved higher (and their prices lower), whereas the spread sectors (non-Treasuries) generally performed well. Treasury yields rose during the period, as economic data was generally better than anticipated and expectations for inflation increased. The spread sectors benefited from improving credit conditions, encouraging economic data and increased investor risk appetite. Also supporting the spread sectors was strong demand from investors seeking incremental yields, given the low rates available from short-term fixed income securities.

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

A. We were cautious at the start of the reporting period, a result of the significant disruption that was taking place in the capital markets. We invested in a deliberate, disciplined and measured way and exercised caution in deploying fresh capital, only gradually increasing our exposure to equities when we believed prices were favorable.

We turned very bullish in February and March as we believed the market was washed out. The climactic selling over the prior winter, caused by fears for the financial system, had created bargains. Bargains were prevalent in common stocks, preferred securities and convertible securities. In the preferred space, we saw attractive yield opportunities as a result of depressed prices. We capitalized on similar opportunities in the area of convertible securities. Also during this time, we became more aggressive in deploying capital toward common stocks where dividend yields were high as a result of depressed stock prices. Given the fragile state of the entire country, we took a conservative approach and chose to emphasize higher-quality stocks when we took cash off the sidelines. Over the course of the reporting period, we capitalized on the strong rally in the fixed-income market and significantly reduced our exposure in this area.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

During the reporting period, in the fixed-income component of the portfolio, we utilized Eurodollar futures/options and Treasury futures/options to manage the portfolio’s duration^vii and yield curve^viii exposure. Interest rate swaps were used to manage our interest rate exposure throughout the yield curve. We also utilized credit default swaps to manage the portfolio’s investment grade bond exposure. We employed Euro-bund futures to manage our yield curve exposure in Germany and sterling LIBOR^ix futures to manage our interest rate exposure in Great Britain.

In the equity component of the portfolio, currency contracts were used to hedge our non-U.S. dollar security exposure and we employed several puts tied to the S&P 500 Index in an effort to help manage the portfolio’s risk profile.

At the end of the reporting period, all derivative contracts had been unwound. Overall, the use of these fixed-income and equity derivative instruments detracted from performance for the period.

Performance review

For the twelve months ended December 31, 2009, Class I shares of Legg Mason ClearBridge Variable Equity Income Builder Portfolio¹ returned 22.90%.* The Portfolio’s new unmanaged benchmark, the Russell 3000 Value Index^x, and its former unmanaged benchmarks, the S&P 500 Index and the Barclays Capital U.S. Aggregate Index^xi, returned 19.76%, 26.46% and 5.93%, respectively, for the same period. The Lipper Variable Mixed-Asset Target Allocation Growth Funds Category Average² returned 24.27% over the same time frame.

¹The 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.

²Lipper, Inc., a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments. Returns are based on the twelve-month period ended December 31, 2009, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 217 funds in the Portfolio’s Lipper category.
* Prior to November 2, 2009, the Portfolio was known as Legg Mason Partners Variable Capital and Income Portfolio and was managed in accordance with a different investment objective, investment policies and investment strategies.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Portfolio overview continued

PERFORMANCE SNAPSHOT as of December 31, 2009 (unaudited)


	6 MONTHS		12 MONTHS
Legg Mason ClearBridge Variable Equity Income Builder Portfolio¹:

Class I		13.87%		22.90%

Class II		13.70%		22.66%

Russell 3000 Value Index		23.53%		19.76%

S&P 500 Index		22.59%		26.46%

Barclays Capital U.S. Aggregate Index		3.95%		5.93%

Lipper Variable Mixed-Asset Target Allocation Growth Funds Category Average²		17.60%		24.27%

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, including returns of capital, if any, 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.

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

TOTAL ANNUAL OPERATING EXPENSES (unaudited)

As of the Portfolio’s most current prospectus dated April 30, 2009, the gross total operating expense ratios for Class I and Class II shares were 0.91% and 1.15%, 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.

Q. What were the leading contributors to performance?

A. On an absolute basis, the Portfolio had positive returns in all ten equity market sectors during the reporting period, with the greatest contributions to returns coming from the Information Technology (“IT”) and Energy sectors and the smallest from the Telecommunication Services (“Telecom”) and Utilities sectors.

Relative to the Russell 3000 Value Index, the Portfolio’s overall stock selection contributed to performance. In particular, stock selection in the Energy, Industrials, Health Care, Consumer Discretionary, Utilities, Telecom

²Lipper, Inc., a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments. Returns are based on the period ended December 31, 2009, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 258 funds for the six-month period and among the 217 funds for the twelve-month period in the Portfolio’s Lipper category.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

and Consumer Staples sectors all contributed positively to performance when compared with the benchmark. The Portfolio’s overweights to the IT and Materials sectors also helped relative performance, as did its underweights to the Financials, Utilities, Health Care, Telecom and Energy sectors.

In terms of individual Portfolio holdings, leading contributors to performance for the period included positions in McDermott International Inc. in the Industrials sector, Microsoft Corp. in the IT sector, Freeport-McMoRan Copper & Gold Inc. (Class B Shares) in the Materials sector, National-Oilwell Varco Inc. in the Energy sector and Invesco Ltd. in the Financials sector.

In the fixed-income portion of the portfolio, the largest contributor to results was our overweight exposure to the high-yield sector. Significant contributors to performance included Health Care company HCA Inc. and Metals & Mining company Ryerson Inc. Our overweight exposure to investment grade bonds was also rewarded. In particular, our Industrials and Financials holdings boosted the Portfolio’s returns. Within the investment grade bond space, Japanese Commercial Banks Resona Preferred Global Securities Cayman Ltd. and Shinsei Finance Cayman Ltd., Metals & Mining company Freeport-McMoRan Copper & Gold Inc. and Food and Staples Retailer CVS Caremark Corp. were strong performers. Our overweight to non-agency mortgage-backed securities (“MBS”) was another meaningful contributor to performance.

Q. What were the leading detractors from performance?

A. The Portfolio’s stock selection in the Financials, IT and Materials sectors detracted from relative performance, as did an underweight to the Consumer Discretionary sector and overweights to the Industrials and Consumer Staples sectors.

In terms of individual Portfolio holdings, leading detractors from performance for the period included positions in Crosstex Energy Inc. in the Energy sector, Assa Abloy AB, General Electric Co. and Covanta Holding Corp., all in the Industrials sector, and Wells Fargo & Co. in the Financials sector.

In the fixed-income portion of the portfolio, our underweight to agency MBS detracted from relative performance as the asset class generated strong results, aided by the government’s ongoing purchase of these securities.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Portfolio overview continued

The Portfolio’s cash position was also a drag on performance given the extremely low yields available from short-term money market instruments.

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

A. On November 2, 2009, Legg Mason Partners Variable Capital and Income Portfolio changed its investment objective, policies and strategies, along with its name and performance benchmark. The Portfolio has been renamed “Legg Mason ClearBridge Variable Equity Income Builder Portfolio” and emphasizes investments in companies that the portfolio managers believe possess sound or improving balance sheets and strong free cash flows combined with attractive business models. The portfolio managers believe that these high-quality companies coupled with attractive dividend profiles can be good candidates for long-term investment.

The Portfolio’s portfolio management team consists of lead managers Harry D. “Hersh” Cohen, Peter Vanderlee, CFA, and Michael Clarfeld, CFA, all of ClearBridge Advisors, LLC. The three portfolio managers form a highly experienced management team and bring a disciplined investment management approach to the Portfolio. The team collectively brings with them over sixty years of investment industry experience. Western Asset Management Company, previously responsible for the fixed-income component of Legg Mason Partners Variable Capital and Income Portfolio, is no longer part of the management team of the Portfolio, effective November 2, 2009.

In order to implement the changes made to the Portfolio’s investment objective, policies and strategies in November, the portfolio managers significantly increased the Portfolio’s allocation to equities that they believe offer more attractive dividend profiles and significantly reduced the Portfolio’s allocation to fixed-income securities and equities that either pay no dividends or that they believe have less attractive dividend profiles. These portfolio transactions increased portfolio turnover for the reporting period.

The new unmanaged benchmark for the Portfolio is the Russell 3000 Value Index.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Portfolio overview continued

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.

Portfolio holdings and breakdowns are as of December 31, 2009 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 this date were: Kimberly-Clark Corp. (3.7%), H.J. Heinz Co. (3.7%), Procter & Gamble Co. (3.6%), Total SA, ADR (3.4%), BP PLC, ADR (3.2%), Waste Management Inc. (3.2%), McDonald’s Corp. (3.1%), Verizon Communications Inc. (3.1%), Johnson & Johnson (3.1%) and United Technologies Corp. (2.4%). Please refer to pages 14 through 18 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, 2009 were: Consumer Staples (17.0%), Energy (12.3%), Utilities (11.6%), Consumer Discretionary (9,9%) and Financials (9.4%). The Portfolio’s composition is subject to change at any time.

RISKS: Equity securities are subject to price fluctuation and possible loss of principal. International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. REITs are closely linked to the performance of the real estate markets. REITs are subject to illiquidity, credit and interest rate risks. Investments in fixed-income securities are subject to interest rate, credit, inflation and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed-income securities falls. Derivatives, such as options and futures, can be illiquid, may disproportionately increase losses, and have a potentially large impact on Portfolio performance. Dividends are not guaranteed, and a company may reduce or eliminate its dividend at any time. Please see the Portfolio’s prospectus for more information on these and other risks.

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.


ⁱ		Real estate investment trusts (“REITs”) invest in real estate or loans secured by real estate and issue shares in such investments, which can be illiquid.

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

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

^iv		The Dow Jones Industrial Average is a widely followed measurement of the stock market. The average is comprised of thirty stocks that represent leading companies in major industries. These stocks, widely held by both individual and institutional investors, are considered to be all blue-chip companies.

^v		The NASDAQ Composite Index is a market-value weighted index, which measures all securities listed on the NASDAQ stock market.

^vi		Gross domestic product (“GDP”) is the market value of all final goods and services produced within a country in a given period of time.

^vii		Duration is the measure of the price sensitivity of a fixed-income security to an interest rate change of 100 basis points. Calculation is based on the weighted average of the present values for all cash flows.

^viii		The yield curve is the graphical depiction of the relationship between the yield on bonds of the same credit quality but different maturities.

^ix		The London Interbank Offered Rate (“LIBOR”) is the interest rate offered by a specific group of London banks for U.S. dollar deposits of a stated maturity. LIBOR is used as a base index for setting rates of some adjustable rate financial instruments, including Adjustable Rate Mortgages (“ARMs”).

^x		The Russell 3000 Value Index measures the performance of those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth values. (A price-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities.) The Russell 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.

^xi		The Barclays Capital U.S. Aggregate Index is a broad-based bond index comprised of government, corporate, mortgage- and asset-backed issues, rated investment grade or higher, and having at least one year to maturity.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 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, distribution and/or Service (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 mutual funds.

This example is based on an investment of $1,000 invested on July 1, 2009 and held for the six months ended December 31, 2009.

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”.

BASED ON ACTUAL TOTAL RETURN¹


				BEGINNING		ENDING		ANNUALIZED			EXPENSES
	ACTUAL TOTAL			ACCOUNT		ACCOUNT		EXPENSE			PAID DURING
	RETURN²			VALUE		VALUE		RATIO			THE PERIOD³
Class I		13.87	%	$	1,000.00		$1,138.70		0.82	%	$	4.42

Class II		13.70			1,000.00		1,137.00		0.95			5.12


¹		For the six months ended December 31, 2009.

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 return does not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total return. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results.

³		Expenses (net of 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, then divided by 365.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

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 HYPOTHETICAL TOTAL RETURN¹


	HYPOTHETICAL			BEGINNING		ENDING		ANNUALIZED			EXPENSES
	ANNUALIZED			ACCOUNT		ACCOUNT		EXPENSE			PAID DURING
	TOTAL RETURN			VALUE		VALUE		RATIO			THE PERIOD²
Class I		5.00	%	$	1,000.00		$1,021.07		0.82	%	$	4.18

Class II		5.00			1,000.00		1,020.42		0.95			4.84


¹		For the six months ended December 31, 2009.

²		Expenses (net of 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, then divided by 365.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Portfolio performance (unaudited)

AVERAGE ANNUAL TOTAL RETURNS¹


	CLASS I			CLASS II
Twelve Months Ended 12/31/09		22.90	%		22.66	%

Five Years Ended 12/31/09		N/A			-0.67

Inception* through 12/31/09		-7.66			3.58

CUMULATIVE TOTAL RETURN¹


¹		Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value. 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 the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.

*		Inception dates for Class I and Class II shares are April 27, 2007 and October 1, 2002, respectively.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Historical performance (unaudited)

   VALUE OF $10,000 INVESTED IN CLASS II SHARES OF LEGG MASON CLEARBRIDGE
   VARIABLE EQUITY INCOME BUILDER PORTFOLIO VS. RUSSELL 3000 VALUE INDEX, S&P 500
   INDEX AND BARCLAYS CAPITAL U.S. AGGREGATE INDEX† — October 1, 2002 -
   December 2009


†		Hypothetical illustration of $10,000 invested in Class II shares of Legg Mason ClearBridge Variable Equity Income Builder Portfolio at inception on October 1, 2002, assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value through December 31, 2009. The Russell 3000 Value Index measures the performance of those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth values. The S&P 500 Index is an unmanaged index of 500 stocks and is generally representative of the performance of larger companies in the U.S. The Barclays Capital U.S. Aggregate Index is a broad-based bond index comprised of government, corporate, mortgage- and asset-backed issues, rated investment grade or higher, and having at least one year to maturity. The Indices are unmanaged and are not subject to the same management and trading expenses as a mutual fund. Please note that an investor cannot invest directly in an index. The performance of the Portfolio’s other class may be greater or less than the Class II shares’ performance indicated on this chart, depending on whether greater or lesser fees were incurred by shareholders investing in the other class.

‡		Effective November 2, 2009, the Portfolio’s benchmark changed from the S&P 500 Index and the Barclays Capital U.S. Aggregate Index to the Russell 3000 Value Index. The benchmark was changed to better reflect the composition of the Portfolio’s portfolio and investment strategies.


		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 the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Schedule of investments
December 31, 2009

LEGG MASON CLEARBRIDGE VARIABLE EQUITY INCOME BUILDER PORTFOLIO


SHARES		SECURITY	VALUE

COMMON STOCKS — 83.1%


CONSUMER DISCRETIONARY — 9.8%


		Hotels, Restaurants & Leisure — 3.1%
	121,000	McDonald’s Corp.	$	7,555,240
		Media — 5.1%
	454,000	Reed Elsevier PLC^(a)		3,728,143

	153,000	Thomson Corp.		4,934,250

	125,000	Vivendi Universal SA^(a)		3,690,211

		Total Media		12,352,604
		Specialty Retail — 1.6%
	137,910	Home Depot Inc.		3,989,736

		TOTAL CONSUMER DISCRETIONARY		23,897,580

CONSUMER STAPLES — 15.9%


		Beverages — 1.7%
	66,000	PepsiCo Inc.		4,012,800
		Food & Staples Retailing — 2.1%
	94,000	Wal-Mart Stores Inc.		5,024,300
		Food Products — 4.9%
	208,000	H.J. Heinz Co.		8,894,080

	113,280	Kraft Foods Inc., Class A Shares		3,078,950

		Total Food Products		11,973,030
		Household Products — 7.2%
	140,000	Kimberly-Clark Corp.		8,919,400

	143,000	Procter & Gamble Co.		8,670,090

		Total Household Products		17,589,490

		TOTAL CONSUMER STAPLES		38,599,620

ENERGY — 9.4%


		Energy Equipment & Services — 0.5%
	11,500	Diamond Offshore Drilling Inc.		1,131,830
		Oil, Gas & Consumable Fuels — 8.9%
	136,000	BP PLC, ADR		7,883,920

	265,000	Spectra Energy Corp.		5,435,150

	129,000	Total SA, ADR		8,261,160

		Total Oil, Gas & Consumable Fuels		21,580,230

		TOTAL ENERGY		22,712,060

See Notes to Financial Statements.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

LEGG MASON CLEARBRIDGE VARIABLE EQUITY INCOME BUILDER PORTFOLIO


SHARES		SECURITY	VALUE

FINANCIALS — 8.7%


		Insurance — 4.1%
	87,000	Chubb Corp.	$	4,278,660

	115,260	Travelers Cos. Inc.		5,746,864

		Total Insurance		10,025,524
		Real Estate Investment Trusts (REITs) — 1.9%
	129,000	Annaly Capital Management Inc.		2,238,150

	610,000	Chimera Investment Corp.		2,366,800

		Total Real Estate Investment Trusts (REITs)		4,604,950
		Thrifts & Mortgage Finance — 2.7%
	200,000	New York Community Bancorp Inc.		2,902,000

	219,000	People’s United Financial Inc.		3,657,300

		Total Thrifts & Mortgage Finance		6,559,300

		TOTAL FINANCIALS		21,189,774

HEALTH CARE — 7.7%


		Pharmaceuticals — 7.7%
	141,000	Bristol-Myers Squibb Co.		3,560,250

	57,000	GlaxoSmithKline PLC, ADR		2,408,250

	117,000	Johnson & Johnson		7,535,970

	72,000	Novartis AG, ADR		3,918,960

	65,000	Pfizer Inc.		1,182,350
		TOTAL HEALTH CARE		18,605,780

INDUSTRIALS — 9.3%


		Aerospace & Defense — 2.1%
	68,000	Lockheed Martin Corp.		5,123,800
		Commercial Services & Supplies — 3.2%
	233,000	Waste Management Inc.		7,877,730
		Industrial Conglomerates — 3.5%
	33,000	3M Co.		2,728,110

	83,380	United Technologies Corp.		5,787,406

		Total Industrial Conglomerates		8,515,516
		Marine — 0.5%
	34,790	Alexander & Baldwin Inc.		1,190,862

		TOTAL INDUSTRIALS		22,707,908

See Notes to Financial Statements.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Schedule of investments (continued)
December 31, 2009

LEGG MASON CLEARBRIDGE VARIABLE EQUITY INCOME BUILDER PORTFOLIO


SHARES		SECURITY	VALUE

INFORMATION TECHNOLOGY — 6.1%


		IT Services — 2.7%
	91,000	Automatic Data Processing Inc.	$	3,896,620

	85,000	Paychex Inc.		2,604,400

		Total IT Services		6,501,020
		Semiconductors & Semiconductor Equipment — 1.1%
	92,000	Microchip Technology Inc.		2,673,520
		Software — 2.3%
	189,000	Microsoft Corp.		5,762,610

		TOTAL INFORMATION TECHNOLOGY		14,937,150

MATERIALS — 2.0%


		Chemicals — 2.0%
	106,000	E.I. du Pont de Nemours & Co.		3,569,020

	20,000	PPG Industries Inc.		1,170,800

		TOTAL MATERIALS		4,739,820

TELECOMMUNICATION SERVICES — 5.7%


		Diversified Telecommunication Services — 5.7%
	183,000	AT&T Inc.		5,129,490

	228,000	Verizon Communications Inc.		7,553,640

	100,000	Windstream Corp.		1,099,000
		TOTAL TELECOMMUNICATION SERVICES		13,782,130

UTILITIES — 8.5%


		Electric Utilities — 6.3%
	150,000	American Electric Power Co. Inc.		5,218,500

	154,000	Duke Energy Corp.		2,650,340

	47,000	Exelon Corp.		2,296,890

	123,000	Progress Energy Inc.		5,044,230

		Total Electric Utilities		15,209,960
		Multi-Utilities — 2.2%
	368,000	CenterPoint Energy Inc.		5,339,680

		TOTAL UTILITIES		20,549,640

		TOTAL COMMON STOCKS (Cost — $184,207,257)		201,721,462

CONVERTIBLE PREFERRED STOCKS — 3.8%


ENERGY — 1.8%


		Oil, Gas & Consumable Fuels — 1.8%
	5,000	El Paso Corp.		4,520,000

See Notes to Financial Statements.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

LEGG MASON CLEARBRIDGE VARIABLE EQUITY INCOME BUILDER PORTFOLIO


SHARES		SECURITY	VALUE

UTILITIES — 2.0%


		Electric Utilities — 2.0%
	92,000	FPL Group Inc.	$	4,783,080

		TOTAL CONVERTIBLE PREFERRED STOCKS (Cost — $8,636,981)		9,303,080

PREFERRED STOCKS — 1.2%


UTILITIES — 1.2%


		Electric Utilities — 1.2%
	42,530	Great Plains Energy Inc. (Cost — $2,770,247)		2,806,980

FACE
AMOUNT

CONVERTIBLE BOND & NOTE — 1.5%


INFORMATION TECHNOLOGY — 1.5%


		Internet Software & Services — 1.5%
$	4,200,000	VeriSign Inc., 3.250% due 8/15/37 (Cost — $3,230,147)		3,753,750


CORPORATE BONDS & NOTES — 2.9%


CONSUMER DISCRETIONARY — 0.0%


		Media — 0.0%
	33,146	CCH II LLC/CCH II Capital Corp., Senior Notes, 13.500% due 11/30/16^(b)		38,864

CONSUMER STAPLES — 1.1%


		Food & Staples Retailing — 1.1%
	3,000,000	CVS Caremark Corp., Subordinated Bonds, 6.302% due 6/1/37^(c)		2,588,880

ENERGY — 1.1%


		Oil, Gas & Consumable Fuels — 1.1%
	3,000,000	Southern Union Co., Junior Subordinated Notes, 7.200% due 11/1/66		2,580,000

FINANCIALS — 0.7%


		Commercial Banks — 0.1%
	230,000	Wells Fargo Capital XV, Junior Subordinated Notes, 9.750% due 9/26/13^(c)(d)		247,250
		Consumer Finance — 0.2%
	440,000	American Express Co., Subordinated Debentures, 6.800% due 9/1/66		398,200
		Diversified Financial Services — 0.3%
	752,000	JPMorgan Chase & Co., Junior Subordinated Notes, 7.900% due 4/30/18^(c)(d)		778,195

See Notes to Financial Statements.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Schedule of investments (continued)
December 31, 2009

LEGG MASON CLEARBRIDGE VARIABLE EQUITY INCOME BUILDER PORTFOLIO


FACE
AMOUNT		SECURITY	VALUE
		Insurance — 0.1%
$	70,000	MetLife Inc., Junior Subordinated Debentures, 6.400% due 12/15/36	$	62,300

	258,000	Travelers Cos. Inc., Junior Subordinated Debentures, 6.250% due 3/15/37^(c)		235,365

		Total Insurance		297,665

		TOTAL FINANCIALS		1,721,310

		TOTAL CORPORATE BONDS & NOTES (Cost — $6,829,468)		6,929,054

		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $205,674,100)		224,514,326

SHORT-TERM INVESTMENT — 7.4%


		Repurchase Agreement — 7.4%
	18,063,000	Interest in $100,000,000 joint tri-party repurchase agreement dated 12/31/09 with Deutsche Bank Securities Inc., 0.010% due 1/4/10; Proceeds at maturity — $18,063,020; (Fully collateralized by various U.S. government agency obligations, 3.600% to 4.750% due 3/12/10 to 11/10/16; Market value — $18,424,438) (Cost — $18,063,000)		18,063,000

		TOTAL INVESTMENTS — 99.9% (Cost — $223,737,100#)		242,577,326

		Other Assets in Excess of Liabilities — 0.1%		251,262

		TOTAL NET ASSETS — 100.0%	$	242,828,588


^(a)		Security is valued in good faith at fair value by or under the direction of the Board of Trustees (See Note 1).

^(b)		Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Trustees, unless otherwise noted.

^(c)		Variable rate security. Interest rate disclosed is that which is in effect at December 31, 2009.

^(d)		Security has no maturity date. The date shown represents the next call date.

#		Aggregate cost for federal income tax purposes is $229,008,242.


		Abbreviation used in this schedule:

		ADR — American Depositary Receipt

See Notes to Financial Statements.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Statement of assets and liabilities
December 31, 2009


ASSETS:

Investments, at value (Cost — $223,737,100)	$	242,577,326

Foreign currency, at value (Cost — $2)		2

Cash		835

Dividends and interest receivable		851,820

Receivable for Portfolio shares sold		47,279

Receivable for securities sold		5,718

Prepaid expenses		4,129

Total Assets		243,487,109

LIABILITIES:

Payable for Portfolio shares repurchased		174,560

Payable for securities purchased		156,618

Investment management fee payable		154,586

Distribution fees payable		20,008

Trustees’ fees payable		1,142

Accrued expenses		151,607

Total Liabilities		658,521

TOTAL NET ASSETS	$	242,828,588

NET ASSETS:

Par value (Note 7)	$	262

Paid-in capital in excess of par value		340,013,411

Undistributed net investment income		1,899,945

Accumulated net realized loss on investments, futures contracts, written options, swap contracts and foreign currency transactions		(117,925,221	)

Net unrealized appreciation on investments and foreign currencies		18,840,191

TOTAL NET ASSETS	$	242,828,588

Shares Outstanding:

Class I		9,215,152

Class II		16,956,880

Net Asset Value:

Class I		$9.27

Class II		$9.28

See Notes to Financial Statements.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Statement of operations
For the Year Ended December 31, 2009


INVESTMENT INCOME:

Dividends	$	4,752,834

Interest		3,274,577

Less: Foreign taxes withheld		(106,576	)

Total Investment Income		7,920,835

EXPENSES:

Investment management fee (Note 2)		1,638,073

Distribution fees (Notes 2 and 5)		346,488

Shareholder reports (Note 5)		93,731

Audit and tax		42,227

Legal fees		40,183

Trustees’ fees		23,982

Transfer agent fees (Note 5)		12,486

Custody fees		9,246

Insurance		6,836

Miscellaneous expenses		7,775

Total Expenses		2,221,027

Less: Fee waivers and/or expense reimbursements (Notes 2 and 5)		(138,595	)

Net Expenses		2,082,432

NET INVESTMENT INCOME		5,838,403

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS, WRITTEN OPTIONS, SWAP CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS (NOTES 1, 3 AND 4):

Net Realized Gain (Loss) From:

Investment transactions		(53,979,163	)

Futures contracts		688,873

Written options		(3,141,063	)

Swap contracts		233,700

Foreign currency transactions		(280,839	)

Net Realized Loss		(56,478,492	)

Change in Net Unrealized Appreciation/Depreciation From:

Investments		96,845,715

Futures contracts		(993,741	)

Written options		25,985

Swap contracts		(88,466	)

Foreign currencies		(38,810	)

Change in Net Unrealized Appreciation/Depreciation		95,750,683

NET GAIN ON INVESTMENTS, FUTURES CONTRACTS, WRITTEN OPTIONS, SWAP CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS		39,272,191

INCREASE IN NET ASSETS FROM OPERATIONS	$	45,110,594

See Notes to Financial Statements.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Statements of changes in net assets


FOR THE YEARS ENDED DECEMBER 31,	2009			2008
OPERATIONS:

Net investment income	$	5,838,403		$	6,666,692

Net realized loss		(56,478,492	)		(60,520,148	)

Change in net unrealized appreciation/depreciation		95,750,683			(69,620,611	)

Increase (Decrease) in Net Assets From Operations		45,110,594			(123,474,067	)

DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTES 1 AND 6):

Net investment income		(7,000,029	)		(3,000,026	)

Net realized gains		—			(6,732,744	)

Decrease in Net Assets From Distributions to Shareholders		(7,000,029	)		(9,732,770	)

PORTFOLIO SHARE TRANSACTIONS (NOTE 7):

Net proceeds from sale of shares		20,823,075			22,241,367

Reinvestment of distributions		7,000,029			9,732,543

Cost of shares repurchased		(34,912,066	)		(75,545,788	)

Decrease in Net Assets From Portfolio Share Transactions		(7,088,962	)		(43,571,878	)

INCREASE (DECREASE) IN NET ASSETS		31,021,603			(176,778,715	)

NET ASSETS:

Beginning of year		211,806,985			388,585,700

End of year*	$	242,828,588		$	211,806,985

* Includes undistributed net investment income of:		$1,899,945			$3,586,170

See Notes to Financial Statements.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Financial highlights

FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT
EACH YEAR ENDED DECEMBER 31, UNLESS OTHERWISE NOTED:


CLASS I SHARES¹	2009			2008			2007²
NET ASSET VALUE, BEGINNING OF YEAR		$7.79			$12.41			$14.82

INCOME (LOSS) FROM OPERATIONS:

Net investment income		0.23			0.23			0.16

Net realized and unrealized gain (loss)		1.53			(4.50	)		0.02

Total income (loss) from operations		1.76			(4.27	)		0.18

LESS DISTRIBUTIONS FROM:

Net investment income		(0.28	)		(0.12	)		(0.21	)

Net realized gains		—			(0.23	)		(2.38	)

Total distributions		(0.28	)		(0.35	)		(2.59	)

NET ASSET VALUE, END OF YEAR		$9.27			$7.79			$12.41

Total return³		22.90	%		(35.02	)%		1.15	%

NET ASSETS, END OF YEAR (000s)		$85,386			$81,715			$157,968

RATIOS TO AVERAGE NET ASSETS:

Gross expenses		0.87	%		0.95	%		0.80	%⁴

Gross expenses, excluding dividend expense		0.87			0.93			0.80	⁴

Net expenses		0.87	⁵		0.95	⁶		0.80	⁴

Net expenses, excluding dividend expense		0.87	⁵		0.93	⁶		0.80	⁴

Net investment income		2.76			2.18			1.57	⁴

PORTFOLIO TURNOVER RATE		153	%⁷		153	%⁷		282	%⁸


¹		Per share amounts have been calculated using the average shares method.

²		For the period April 27, 2007 (inception date) to December 31, 2007.

³		Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower. Total returns do not reflect expenses associated with the 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		Annualized.

⁵		As a result of an expense limitation, effective September 18, 2009 through December 31, 2011, the ratio of expenses, other than interest, brokerage, taxes and extraordinary expenses, to average net assets of Class I shares will not exceed 1.00% until December 31, 2011.

⁶		The impact to the expense ratio was less than 0.01% as a result of compensating balance agreements.

⁷		Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 171% and 174% for the years ended December 31, 2009 and 2008, respectively.

⁸		Including mortgage dollar roll transactions. If mortgage dollar roll transactions had been excluded, the portfolio turnover rate would have been 232% for the year ended December 31, 2007.

See Notes to Financial Statements.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT
EACH YEAR ENDED DECEMBER 31:


CLASS II SHARES	2009¹			2008¹			2007¹			2006			2005
NET ASSET VALUE, BEGINNING OF YEAR		$7.80			$12.42			$14.21			$13.45			$13.17

INCOME (LOSS) FROM OPERATIONS:

Net investment income		0.22			0.23			0.21			0.22			0.16

Net realized and unrealized gain (loss)		1.53			(4.51	)		0.56			1.20			0.40

Total income (loss) from operations		1.75			(4.28	)		0.77			1.42			0.56

LESS DISTRIBUTIONS FROM:

Net investment income		(0.27	)		(0.11	)		(0.18	)		(0.23	)		(0.16	)

Net realized gains		—			(0.23	)		(2.38	)		(0.43	)		(0.12	)

Total distributions		(0.27	)		(0.34	)		(2.56	)		(0.66	)		(0.28	)

NET ASSET VALUE, END OF YEAR		$9.28			$7.80			$12.42			$14.21			$13.45

Total return²		22.66	%		(35.04	)%		5.36	%		10.50	%		4.25	%

NET ASSETS, END OF YEAR (000s)		$157,443			$130,092			$230,618			$210,857			$216,930

RATIOS TO AVERAGE NET ASSETS:

Gross expenses		1.10	%		1.19	%		1.05	%		1.12	%³		1.06	%

Gross expenses, excluding dividend expense		1.10			1.17			1.05			1.12	³		1.06

Net expenses^4,5		1.00	⁶		1.03	⁷		0.94			0.99	³		0.96

Net expenses, excluding dividend expense^4,5		1.00	⁶		1.01	⁷		0.94			0.99	³		0.96

Net investment income		2.62			2.12			1.44			1.46			1.29

PORTFOLIO TURNOVER RATE		153	%⁸		153	%⁸		282	%⁹		36	%		61	%


¹		Per share amounts have been calculated using the average shares method.
²		Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown.
³		Included in the expense ratios are certain non-recurring restructuring (and reorganization, if applicable) fees that were incurred by the Portfolio during the period. Without these fees, the gross expense ratio including and excluding dividend expense would have been 1.05% and the net expense ratio including and excluding dividend expense would have been 0.95%.
⁴		As a result of a contractual expense limitation, which commenced on April 30, 2007, the ratio of expenses, other than interest, brokerage, taxes and extraordinary expenses, to average net assets of Class II shares will not exceed 0.95%. This contractual expense limitation expired on May 1, 2008. Prior to April 30, 2007, there was a voluntary expense limitation in place of 1.00%.
⁵		Reflects fee waivers and/or expense reimbursements.
⁶		As a result of an expense limitation, effective September 18, 2009 through December 31, 2011, the ratio of expenses, other than interest, brokerage, taxes and extraordinary expenses, to average net assets of Class II shares will not exceed 1.25%.
⁷		The impact to the expense ratio was less than 0.01% as a result of compensating balance agreements.
⁸		Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 171% and 174% for the years ended December 31, 2009 and 2008, respectively.
⁹		Including mortgage dollar roll transactions. If mortgage dollar roll transactions had been excluded, the portfolio turnover rate would have been 232% for the year ended December 31, 2007.

See Notes to Financial Statements.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Notes to financial statements

1. Organization and significant accounting policies

Legg Mason ClearBridge Variable Equity Income Builder Portfolio (formerly known as Legg Mason Partners Variable Capital and Income Portfolio) (the “Portfolio”) is a separate diversified investment series of Legg Mason Partners Variable Equity Trust (the “Trust”). The Trust, a Maryland business 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 February 16, 2010, the issuance date of the financial statements.

(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. Debt securities are valued at the mean between the last quoted bid and asked prices provided by an independent pricing service, which are based on transactions in debt obligations, quotations from bond dealers, market transactions in comparable securities and various other relationships between securities. Publicly traded foreign government debt securities are typically traded internationally in the over-the-counter market, and are valued at the mean between the last quoted bid and asked prices as of the close of business of that market. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded. When prices are not readily available, or are determined not to reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Portfolio calculates its net asset value, the Portfolio values these securities at fair value as determined in accordance with procedures approved by the Portfolio’s Board of Trustees. Fair valuing of securities may also be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant American depository receipts (ADRs). Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates fair value.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

The Portfolio has adopted Financial Accounting Standards Board Codification Topic 820 (formerly, Statement of Financial Accounting Standards No. 157) (“ASC Topic 820”). ASC Topic 820 establishes a single definition of fair value, creates a three-tier hierarchy as a framework for measuring fair value based on inputs used to value the Portfolio’s investments, and requires additional disclosure about fair value. The hierarchy of inputs is summarized below.


	•	Level 1 — quoted prices in active markets for identical investments

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

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

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

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 the 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 convert future amounts to a single present amount.

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


			OTHER SIGNIFICANT		SIGNIFICANT
			OBSERVABLE		UNOBSERVABLE
	QUOTED PRICES		INPUTS		INPUTS
DESCRIPTION	(LEVEL 1)		(LEVEL 2)		(LEVEL 3)		TOTAL
Long-term investments†:

Common stocks:

Consumer discretionary	$	16,479,226	$	7,418,354		—	$	23,897,580

Other common stocks		177,823,882		—		—		177,823,882

Convertible preferred stocks		—		9,303,080		—		9,303,080

Preferred stocks		2,806,980		—		—		2,806,980

Convertible bond & note		—		3,753,750		—		3,753,750

Corporate bonds & notes		—		6,929,054		—		6,929,054

Total long-term investments	$	197,110,088	$	27,404,238		—	$	224,514,326

Short-term investment†		—		18,063,000		—		18,063,000

Total investments	$	197,110,088	$	45,467,238		—	$	242,577,326


†		See Schedule of Investments for additional detailed categorizations.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Notes to financial statements continued

(b) Repurchase agreements. The Portfolio may enter into repurchase agreements with institutions that its investment adviser has determined are creditworthy. Each repurchase agreement is recorded at cost. Under the terms of a typical repurchase agreement, a portfolio takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and of the portfolio to resell, the obligation at an agreed-upon price and time, thereby determining the yield during a portfolio’s holding period. When entering into repurchase agreements, it is the Portfolio’s policy that its custodian or a third party custodian, acting on the Portfolio’s behalf, take possession of the underlying collateral securities, the market value of which, at all times, at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction maturity exceeds one business day, the value of the collateral is marked to market and measured against the value of the agreement to ensure the adequacy of the collateral. If the counterparty defaults, the Portfolio generally has the right to use the collateral to satisfy the terms of the repurchase transaction. However, if the market value of the collateral declines during the period in which the Portfolio seeks to assert its rights or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Portfolio may be delayed or limited.

(c) Futures contracts. The Portfolio may use futures contracts to gain exposure to, or hedge against, changes in the value of equities, interest rates or foreign currencies. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.

Upon entering into a futures contract, the Portfolio is required to deposit cash or cash equivalents with a broker in an amount equal to a certain percentage of the contract amount. This is known as the ”initial margin” and subsequent payments (”variation margin”) are made or received by the Portfolio each day, depending on the daily fluctuation in the value of the contract. For certain futures, including foreign denominated futures, variation margin is not settled daily, but is recorded as a net variation margin payable or receivable. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded. The daily changes in contract value are recorded as unrealized gains or losses in the Statement of Operations and the Portfolio recognizes a realized gain or loss when the contract is closed.

Futures contracts involve, to varying degrees, risk of loss in excess of the amounts reflected in the financial statements. In addition, there is the risk that the Portfolio may not be able to enter into a closing transaction because of an illiquid secondary market.

(d) Forward foreign currency contracts. The Portfolio may enter into a forward foreign currency contract to hedge against foreign currency exchange

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

rate risk on its non-U.S. dollar denominated securities or to facilitate settlement of a foreign currency denominated portfolio transaction. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price with delivery and settlement at a future date. The contract is marked to market daily and the change in value is recorded by the Portfolio as an unrealized gain or loss. When a forward foreign currency contract is closed, through either delivery or offset by entering into another forward foreign currency contract, the Portfolio recognizes a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it is closed.

Forward foreign currency contracts involve elements of market risk in excess of the amounts reflected on the Statement of Assets and Liabilities. The Portfolio bears the risk of an unfavorable change in the foreign exchange rate underlying the forward foreign currency contract. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.

(e) Written options. When the Portfolio writes an option, an amount equal to the premium received by the Portfolio is recorded as a liability, the value of which is marked to market daily to reflect the current market value of the option written. If the option expires, the premium received is recorded as a realized gain. When a written call option is exercised, the difference between the premium received plus the option exercise price and the Portfolio’s basis in the underlying security (in the case of a covered written call option), or the cost to purchase the underlying security (in the case of an uncovered written call option), including brokerage commission, is recognized as a realized gain or loss. When a written put option is exercised, the amount of the premium received is subtracted from the cost of the security purchased by the Portfolio from the exercise of the written put option to form the Portfolio’s basis in the underlying security purchased. The writer or buyer of an option traded on an exchange can liquidate the position before the exercise of the option by entering into a closing transaction. The cost of a closing transaction is deducted from the original premium received resulting in a realized gain or loss to the Portfolio.

The risk in writing a covered call option is that the Portfolio may forego the opportunity of profit if the market price of the underlying security increases and the option is exercised. The risk in writing a put option is that the Portfolio may incur a loss if the market price of the underlying security decreases and the option is exercised. The risk in writing a call option is that the Portfolio is exposed to the risk of loss if the market price of the underlying security increases. In addition, there is the risk that the Portfolio may not be able to enter into a closing transaction because of an illiquid secondary market.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Notes to financial statements continued

(f) Mortgage dollar rolls. The Portfolio may enter into mortgage dollar rolls in which the Portfolio sells mortgage-backed securities for delivery in the current month, realizing a gain or loss, and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities to settle on a specified future date.

The Portfolio executes its mortgage dollar rolls entirely in the to-be-announced (“TBA”) market, whereby the Portfolio makes a forward commitment to purchase a security and, instead of accepting delivery, the position is offset by a sale of the security with a simultaneous agreement to repurchase at a future date. The Portfolio accounts for mortgage dollar rolls as purchases and sales.

The risk of entering into mortgage dollar rolls is that the market value of the securities the Portfolio is obligated to repurchase under the agreement may decline below the repurchase price. In the event the buyer of securities under a mortgage dollar roll files for bankruptcy or becomes insolvent, the Portfolio’s use of the proceeds of the mortgage dollar roll may be restricted pending a determination by the counterparty, or its trustee or receiver, whether to enforce the Portfolio’s obligation to repurchase the securities.

(g) Securities traded on a to-be-announced basis. The Portfolio may trade securities on a TBA basis. In a TBA transaction, the Portfolio commits to purchasing or selling securities which have not yet been issued by the issuer and for which specific information, such as the face amount, maturity date and underlying pool of investments in U.S. government agency mortgage pass-through securities, is not announced. Securities purchased on a TBA basis are not settled until they are delivered to the Portfolio. Beginning on the date the Portfolio enters into a TBA transaction, cash, U.S. government securities or other liquid high-grade debt obligations are segregated in an amount equal in value to the purchase price of the TBA security. These securities are subject to market fluctuations and their current value is determined in the same manner as for other securities.

(h) Inflation-indexed bonds. Inflation-indexed bonds are fixed-income securities whose principal value or interest rate is periodically adjusted according to the rate of inflation. As the index measuring inflation changes, the principal value or interest rate of inflation-indexed bonds will be adjusted accordingly. Inflation adjustments to the principal amount of inflation-indexed bonds are reflected as an increase or decrease to investment income on the Statement of Operations. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

(i) Loan participations. The Portfolio may invest in loans arranged through private negotiation between one or more financial institutions. The Portfolio’s investment in any such loan may be in the form of a participation in or an assignment of the loan. In connection with purchasing participations, the Portfolio generally will have no right to enforce compliance by the borrower with the terms of the loan agreement related to the loan, or any rights of off-set against the borrower and the Portfolio may not benefit directly from any collateral supporting the loan in which it has purchased the participation.

The Portfolio assumes the credit risk of the borrower, the lender that is selling the participation and any other persons interpositioned between the Portfolio and the borrower. In the event of the insolvency of the lender selling the participation, the Portfolio may be treated as a general creditor of the lender and may not benefit from any off-set between the lender and the borrower.

(j) Swap agreements. The Portfolio may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk, or for other purposes. The use of swaps involves risks that are different from those associated with ordinary portfolio transactions.

Swap contracts are marked to market daily and changes in value are recorded as unrealized appreciation/(depreciation). Gains or losses are realized upon termination of the swap agreement. Periodic payments and premiums received or made by the Portfolio are recognized in the Statement of Operations as realized gains or losses, respectively. Collateral, in the form of restricted cash or securities, may be required to be held in segregated accounts with the Portfolio’s custodian in compliance with the terms of the swap contracts. Securities held as collateral for swap contracts are identified in the Schedule of Investments and restricted cash, if any, is identified on the Statement of Assets and Liabilities. Risks may exceed amounts recorded in the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts’ terms, and the possible lack of liquidity with respect to the swap agreements.

Payments received or made at the beginning of the measurement period are reflected as a premium or deposit, respectively, on the Statement of Assets and Liabilities. These upfront payments are amortized over the life of the swap and are recognized as realized gain or loss in the Statement of Operations. A liquidation payment received or made at the termination of the swap is recognized as realized gain or loss in the Statement of Operations. Net periodic payments received or paid by the Portfolio are recognized as realized gain or loss at the time of receipt or payment in the Statement of Operations.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Notes to financial statements continued

Credit default swaps

The Portfolio may enter into credit default swap (“CDS”) contracts for investment purposes, to manage its credit risk or to add leverage. CDS agreements involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a third party, typically corporate or sovereign issuers, on a specified obligation, or in the event of a write-down, principal shortfall, interest shortfall or default of all or part of the referenced entities comprising a credit index. The Portfolio may use a CDS to provide protection against defaults of the issuers (i.e., to reduce risk where the Portfolio has exposure to a sovereign issuer) or to take an active long or short position with respect to the likelihood of a particular issuer’s default. As a seller of protection, the Portfolio generally receives an upfront payment or a stream of payments throughout the term of the swap provided that there is no credit event. If the Portfolio is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the maximum potential amount of future payments (undiscounted) that the Portfolio could be required to make under a credit default swap agreement would be an amount equal to the notional amount of the agreement. These amounts of potential payments will be partially offset by any recovery of values from the respective referenced obligations. As a seller of protection, the Portfolio effectively adds leverage to its portfolio because, in addition to its total net assets, the Portfolio is subject to investment exposure on the notional amount of the swap. As a buyer of protection, the Portfolio generally receives an amount up to the notional value of the swap if a credit event occurs.

Implied spreads are the theoretical prices a lender receives for credit default protection. When spreads rise, market perceived credit risk rises and when spreads fall, market perceived credit risk falls. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to enter into the agreement. Wider credit spreads and decreasing market values, when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. Credit spreads utilized in determining the period end market value of credit default swap agreements on corporate or sovereign issues are disclosed in the Notes to Financial Statements and serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for credit derivatives. For credit default swap agreements on asset-backed securities and credit indices, the quoted market prices and resulting values, particularly in relation to the notional amount of the contract as well as the annual payment rate, serve as an indication of the current status of the payment/performance risk.

The Portfolio’s maximum risk of loss from counterparty risk, as the protection buyer, is the fair value of the contract (this risk is mitigated by the posting of

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

collateral by the counterparty to the Portfolio to cover the Portfolio’s exposure to the counterparty). As the protection seller, the Portfolio’s maximum risk is the notional amount of the contract. Credit default swaps are considered to have credit risk-related contingent features since they require payment by the protection seller to the protection buyer upon the occurrence of a defined credit event.

Entering into a CDS agreement involves, to varying degrees, elements of credit, market and documentation risk in excess of the related amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreement may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreement, and that there will be unfavorable changes in net interest rates.

Interest rate swaps

The Portfolio may enter into interest rate swap contracts. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional principal amount. The Portfolio may elect to pay a fixed rate and receive a floating rate, or, receive a fixed rate and pay a floating rate on a notional principal amount. The net interest received or paid on interest rate swap agreements is accrued daily as interest income. Interest rate swaps are marked to market daily based upon quotations from market makers and the change, if any, is recorded as an unrealized gain or loss in the Statement of Operations. When a swap contract is terminated early, the Portfolio records a realized gain or loss equal to the difference between the original cost and the settlement amount of the closing transaction.

The risks of interest rate swaps include changes in market conditions that will affect the value of the contract or changes in the present value of the future cash flow streams and the possible inability of the counterparty to fulfill its obligations under the agreement. The Portfolio’s maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from the counterparty over the contract’s remaining life, to the extent that amount is positive. This risk is mitigated by the posting of collateral by the counterparty to the Portfolio to cover the Portfolio’s exposure to the counterparty.

(k) Foreign currency translation. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such transactions.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Notes to financial statements continued

The Portfolio does not isolate that portion of the results of operations resulting from fluctuations in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

Net realized foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Portfolio’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities, on the date of valuation, resulting from changes in exchange rates.

Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.

(l) Credit and market risk. The Portfolio invests in high yield instruments that are subject to certain credit and market risks. The yields of high yield obligations reflect, among other things, perceived credit and market risks. The Portfolio’s investment in securities rated below investment grade typically involves risks not associated with higher rated securities including, among others, greater risk related to timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading.

Investments in securities that are collateralized by residential real estate mortgages are subject to certain credit and liquidity risks. When market conditions result in an increase in default rates of the underlying mortgages and the foreclosure values of underlying real estate properties are materially below the outstanding amount of these underlying mortgages, collection of the full amount of accrued interest and principal on these investments may be doubtful. Such market conditions may significantly impair the value and liquidity of these investments and may result in a lack of correlation between their credit ratings and values.

(m) Security transactions and investment income. Security transactions are accounted for on a trade date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. 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

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

due diligence. The cost of investments sold is determined by use of the specific identification method. To the extent any issuer defaults or credit event occurs by the issuer, the Portfolio may halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default or credit event.

(n) 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.

(o) 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.

(p) 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 income tax provision is required in the Portfolio’s financial statements.

Management has analyzed the Portfolio’s tax positions taken on federal income tax returns for all open tax years and has concluded that as of December 31, 2009, 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 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.

(q) Reclassification. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. During the current year, the following reclassifications have been made:


	UNDISTRIBUTED NET			ACCUMULATED NET
	INVESTMENT INCOME			REALIZED LOSS
(a)	$	(524,599	)	$	524,599


^(a)		Reclassifications are primarily due to foreign currency transactions treated as ordinary income for tax purposes, losses from mortgage backed securities treated as capital losses for tax purposes, book/tax differences in the treatment of swap contracts and book/tax differences in the treatment of partnership investments.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Notes to financial statements continued

2. Investment management agreement and other transactions with affiliates

Legg Mason Partners Fund Advisor, LLC (“LMPFA”) is the Portfolio’s investment manager. ClearBridge Advisors, LLC (“ClearBridge”), is the Portfolio’s subadviser. Western Asset Management Company (“Western Asset”) and Western Asset Management Company Limited (“Western Asset Limited”) also served as the Portfolio’s subadvisers prior to November 2, 2009. LMPFA, ClearBridge, Western Asset and Western Asset Limited are wholly-owned subsidiaries of Legg Mason, Inc. (“Legg Mason”).

Under the investment management agreement, the Portfolio pays an investment management fee, calculated daily and paid monthly, at an annual rate of 0.75% of the Portfolio’s average daily net assets.

LMPFA provides administrative and certain oversight services to the Portfolio. LMPFA has delegated to the subadvisers the day-to-day portfolio management of the Portfolio except for the management of cash and short term instruments. For its services, LMPFA pays the subadvisers 70% of the net management fee it receives from the Portfolio. The fee will be divided on a pro rata basis, based on the assets allocated to each subadviser, from time to time.

Prior to November 2, 2009, Western Asset Limited provided certain advisory services to the Portfolio relating to currency transactions and investments in non-U.S. dollar denominated securities. Western Asset Limited did not receive any compensation from the Portfolio and was compensated by Western Asset for its services to the Portfolio. In turn, Western Asset paid Western Asset Limited a subadvisory fee of 0.30% on the assets managed by Western Asset Limited.

As a result of an expense limitation, effective September 18, 2009 through December 31, 2011, the ratio of expenses, other than interest, brokerage, taxes and extraordinary expenses, to the average net assets of the Portfolio’s Class I and II shares will not exceed 1.00% and 1.25%, respectively. This expense limitation cannot be terminated prior to December 31, 2011 without the Board of Trustees’ consent.

The manager is permitted to recapture amounts previously forgone or reimbursed to the Portfolio during the same fiscal year if the Portfolio’s total annual operating expenses have fallen to a level below an expense limitation (“expense cap”). In no case will the manager recapture any amount that would result, on any particular business day of the Portfolio, in the Portfolio’s total annual operating expenses exceeding the expense cap.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Legg Mason Investor Services, LLC (“LMIS”), a wholly-owned broker-dealer subsidiary of Legg Mason, serves as the Portfolio’s sole and exclusive distributor.

Certain officers and one Trustee of the Trust are employees of Legg Mason or its affiliates and do not receive compensation from the Trust.

3. Investments

During the year ended December 31, 2009, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) and U.S Government & Agency Obligations were as follows:


			U.S. GOVERNMENT &
	INVESTMENTS		AGENCY OBLIGATIONS
Purchases	$	265,962,618	$	61,217,236

Sales		266,171,966		67,780,826

At December 31, 2009, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:


Gross unrealized appreciation	$	14,092,338

Gross unrealized depreciation		(523,254	)

Net unrealized appreciation	$	13,569,084

During the year ended December 31, 2009, written option transactions for the Portfolio were as follows:


	NUMBER OF			PREMIUMS
	CONTRACTS			RECEIVED
Written options, outstanding December 31, 2008		10		$	7,203

Options written		21,362			10,367,421

Options closed		(21,364	)		(10,373,437	)

Options expired		(8	)		(1,187	)

Written options, outstanding December 31, 2009		—			—

4. Derivative instruments and hedging activities

Financial Accounting Standards Board Codification Topic 815 (formerly, Statement of Financial Accounting Standards No. 161) (“ASC Topic 815”) requires enhanced disclosure about an entity’s derivative and hedging activities.

The following tables provide information about the effect of derivatives and hedging activities on the Portfolio’s Statement of Operations for the year ended December 31, 2009. The first table provides additional detail about the amounts and sources of gains/(losses) realized on derivatives during the period. The second table provides additional information about the changes in unrealized

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Notes to financial statements continued

appreciation/(depreciation) resulting from the Portfolio’s derivatives and hedging activities during the period.


AMOUNT OF REALIZED GAIN OR (LOSS) ON DERIVATIVES RECOGNIZED
	INTEREST RATE			FOREIGN EXCHANGE			CREDIT		OTHER
	CONTRACTS			CONTRACTS			CONTRACTS		CONTRACTS
	RISK			RISK			RISK		RISK		TOTAL
Purchased Options	$	(5,573,839	)		—			—		—	$	(5,573,839	)

Written Options		(3,141,063	)		—			—		—		(3,141,063	)

Futures Contracts		688,873			—			—		—		688,873

Swap Contracts		33,895			—		$	199,805		—		233,700

Forward Foreign Currency Contracts		—		$	(281,476	)		—		—		(281,476	)

Total	$	(7,992,134	)	$	(281,476	)	$	199,805		—	$	(8,073,805	)


CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON DERIVATIVES RECOGNIZED
	INTEREST RATE			FOREIGN EXCHANGE			CREDIT			OTHER
	CONTRACTS			CONTRACTS			CONTRACTS			CONTRACTS
	RISK			RISK			RISK			RISK		TOTAL
Written Options	$	25,985			—			—			—	$	25,985

Futures Contracts		(993,741	)		—			—			—		(993,741	)

Swap Contracts		(31,855	)		—		$	(56,611	)		—		(88,466	)

Forward Foreign Currency Contracts				$	(38,810	)		—			—		(38,810	)

Total	$	(999,611	)	$	(38,810	)	$	(56,611	)		—	$	(1,095,032	)

At December 31, 2009, the Portfolio did not have any derivative instruments outstanding. During the year ended December 31, 2009, the Portfolio had average market values of $17,073,769, $1,086,302, $2,891,340, $1,112,705, and $2,428,608 in futures contracts (to buy), futures contracts (to sell), written options, forward foreign currency contracts (to buy) and forward foreign currency contracts (to sell), respectively, and had notional balances of $6,923, $2,699,231 and $89,077 of credit default swap contracts (to buy protection), credit default swap contracts (to sell protection) and interest rate swap contracts, respectively.

5. Class specific expenses, waivers and/or reimbursements

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

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

For the year ended December 31, 2009, class specific expenses were as follows:


	DISTRIBUTION		TRANSFER AGENT		SHAREHOLDER
	FEES†		FEES		REPORTS EXPENSES‡
Class I		—	$	5,884	$	43,224

Class II	$	346,488		6,602		50,507

Total	$	346,488	$	12,486	$	93,731


†		During the year ended December 31, 2009, LMIS waived a portion of its distribution fees for the Portfolio resulting in a waiver of $138,595. The distribution plan fee waiver can be terminated at any time.

‡		For the period January 1, 2009 through September 8, 2009. Subsequent to September 8, 2009, these expenses were accrued as common Portfolio expenses.

For the year ended December 31, 2009, waivers and/or reimbursements by class were as follows:


	WAIVERS/
	REIMBURSEMENTS
Class I		—

Class II	$	138,595

Total	$	138,595

6. Distributions to shareholders by class


	YEAR ENDED		YEAR ENDED
	DECEMBER 31, 2009		DECEMBER 31, 2008
Net Investment Income:
Class I	$	2,620,145	$	1,200,961

Class II		4,379,884		1,799,065

Total	$	7,000,029	$	3,000,026

Net Realized Gains:
Class I		—	$	2,690,783

Class II		—		4,041,961

Total		—	$	6,732,744

7. Shares of beneficial interest

At December 31, 2009, 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 share of a class 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.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Notes to financial statements continued

Transactions in shares of each class were as follows:


	YEAR ENDED						YEAR ENDED
	DECEMBER 31, 2009						DECEMBER 31, 2008
	SHARES			AMOUNT			SHARES			AMOUNT
Class I
Shares sold		354,223		$	2,929,314			347,393		$	3,714,623

Shares issued on reinvestment		303,539			2,620,145			387,165			3,891,517

Shares repurchased		(1,932,144	)		(15,465,371	)		(2,978,614	)		(31,055,586	)

Net decrease		(1,274,382	)	$	(9,915,912	)		(2,244,056	)	$	(23,449,446	)

Class II
Shares sold		2,136,441		$	17,893,761			1,788,704		$	18,526,744

Shares issued on reinvestment		506,842			4,379,884			580,357			5,841,026

Shares repurchased		(2,359,924	)		(19,446,695	)		(4,258,205	)		(44,490,202	)

Net increase (decrease)		283,359		$	2,826,950			(1,889,144	)	$	(20,122,432	)

8. Income tax information and distributions to shareholders

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


	2009		2008
Distributions Paid From:
Ordinary income	$	7,000,029	$	7,900,030

Net long-term capital gains		—		1,832,740

Total distributions paid	$	7,000,029	$	9,732,770

As of December 31, 2009, the components of accumulated earnings on a tax basis were as follows:


Undistributed ordinary income — net	$	2,029,231

Capital loss carryforward*		(111,496,175	)

Other book/tax temporary differences^(a)		(1,287,190	)

Unrealized appreciation/(depreciation)^(b)		13,569,049

Total accumulated earnings/(losses) — net	$	(97,185,085	)


*		As of December 31, 2009, the Portfolio had the following net capital loss carryforward remaining:


YEAR OF EXPIRATION	AMOUNT
12/31/2016	$	(39,880,781	)

12/31/2017		(71,615,394	)

	$	(111,496,175	)


		These amounts will be available to offset any future taxable capital gains.

^(a)		Other book/tax temporary differences are attributable primarily to the tax deferral of losses on straddles, the deferral of post-October capital losses for tax purposes and book/tax differences in the timing of the deductibility of various expenses.

^(b)		The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

9. Regulatory matters

On May 31, 2005, the U.S. Securities and Exchange Commission (“SEC”) issued an order in connection with the settlement of an administrative proceeding against Smith Barney Fund Management LLC (“SBFM”), a wholly-owned subsidiary of Legg Mason and the then investment adviser or manager to the Portfolio, and Citigroup Global Markets Inc. (“CGM”), a former distributor of the Portfolio, relating to the appointment of an affiliated transfer agent for the Smith Barney family of mutual funds, including the Portfolio (the “Affected Funds”).

The SEC order found that SBFM and CGM willfully violated Section 206(1) of the Investment Advisers Act of 1940, as amended, and the rules promulgated there under (the “Advisers Act”). Specifically, the order found that SBFM and CGM knowingly or recklessly failed to disclose to the boards of the Affected Funds in 1999 when proposing a new transfer agent arrangement with an affiliated transfer agent that: First Data Investors Services Group (“First Data”), the Affected Funds’ then-existing transfer agent, had offered to continue as transfer agent and do the same work for substantially less money than before; and that Citigroup Asset Management (“CAM”), the Citigroup business unit that, at the time, included the Affected Funds’ investment manager and other investment advisory companies, had entered into a side letter with First Data under which CAM agreed to recommend the appointment of First Data as sub-transfer agent to the affiliated transfer agent in exchange for, among other things, a guarantee by First Data of specified amounts of asset management and investment banking fees to CAM and CGM. The order also found that SBFM and CGM willfully violated Section 206(2) of the Advisers Act by virtue of the omissions discussed above and other misrepresentations and omissions in the materials provided to the Affected Funds’ boards, including the failure to make clear that the affiliated transfer agent would earn a high profit for performing limited functions while First Data continued to perform almost all of the transfer agent functions, and the suggestion that the proposed arrangement was in the Affected Funds’ best interests and that no viable alternatives existed.

SBFM and CGM do not admit or deny any wrongdoing or liability. The settlement does not establish wrongdoing or liability for purposes of any other proceeding. The SEC censured SBFM and CGM and ordered them to cease and desist from violations of Sections 206(1) and 206(2) of the Advisers Act. The order required Citigroup to pay $208.1 million, including $109 million in disgorgement of profits, $19.1 million in interest, and a civil money penalty of $80 million. Approximately $24.4 million has already been paid to the Affected Funds, primarily through fee waivers. The remaining $183.7 million, including the penalty, has been paid to the U.S. Treasury and will be distributed pursuant to a plan submitted for the approval of the SEC. The order also required that transfer agency fees received from the Affected Funds since December 1, 2004, less certain expenses, be placed in escrow and provided

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Notes to financial statements continued

that a portion of such fees might be subsequently distributed in accordance with the terms of the order. On April 3, 2006, an aggregate amount of approximately $9 million held in escrow was distributed to the Affected Funds.

The order required SBFM to recommend a new transfer agent contract to the Affected Funds’ boards within 180 days of the entry of the order; if a Citigroup affiliate submitted a proposal to serve as transfer agent or sub-transfer agent, SBFM and CGM would have been required, at their expense, to engage an independent monitor to oversee a competitive bidding process. On November 21, 2005, and within the specified timeframe, the Affected Funds’ boards selected a new transfer agent for the Affected Funds. No Citigroup affiliate submitted a proposal to serve as transfer agent. Under the order, SBFM also must comply with an amended version of a vendor policy that Citigroup instituted in August 2004.

Although there can be no assurance, LMPFA does not believe that this matter will have a material adverse effect on the Affected Funds.

On December 1, 2005, Citigroup completed the sale of substantially all of its global asset management business, including SBFM, to Legg Mason.

10. Legal matters

Beginning in May 2004, class action lawsuits alleging violations of the federal securities laws were filed against CGM, a former distributor of the Portfolio, and other affiliated funds (collectively, the “Funds”) and a number of its then affiliates, including SBFM and Salomon Brothers Asset Management Inc. (“SBAM”), which were then investment adviser or manager to certain of the Funds (the “Managers”), substantially all of the mutual funds then managed by the Managers (the “Defendant Funds”), and Board members of the Defendant Funds (collectively, the “Defendants”). The complaints alleged, among other things, that CGM created various undisclosed incentives for its brokers to sell Smith Barney and Salomon Brothers funds. In addition, according to the complaints, the Managers caused the Defendant Funds to pay excessive brokerage commissions to CGM for steering clients towards proprietary funds. The complaints also alleged that the Defendants breached their fiduciary duty to the Defendant Funds by improperly charging Rule 12b-1 fees and by drawing on fund assets to make undisclosed payments of soft dollars and excessive brokerage commissions. The complaints also alleged that the Defendant Funds failed to adequately disclose certain of the allegedly wrongful conduct. The complaints sought injunctive relief and compensatory and punitive damages, rescission of the Defendant Funds’ contracts with the Managers, recovery of all fees paid to the Managers pursuant to such contracts and an award of attorneys’ fees and litigation expenses.

On December 15, 2004, a consolidated amended complaint (the “Complaint”) was filed alleging substantially similar causes of action. On May 27, 2005, all of

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

the Defendants filed motions to dismiss the Complaint. On July 26, 2006, the court issued a decision and order (1) finding that plaintiffs lacked standing to sue on behalf of the shareholders of the Funds in which none of the plaintiffs had invested and dismissing those Funds from the case (although stating that they could be brought back into the case if standing as to them could be established), and (2) other than one stayed claim, dismissing all of the causes of action against the remaining Defendants, with prejudice, except for the cause of action under Section 36(b) of the 1940 Act, which the court granted plaintiffs leave to replead as a derivative claim.

On October 16, 2006, plaintiffs filed their Second Consolidated Amended Complaint (“Second Amended Complaint”) which alleges derivative claims on behalf of nine funds identified in the Second Amended Complaint, under Section 36(b) of the 1940 Act, against CAM, SBAM and SBFM as investment advisers to the identified funds, as well as CGM as a distributor for the identified funds (collectively, the “Second Amended Complaint Defendants”). The Portfolio was not identified in the Second Amended Complaint. The Second Amended Complaint alleges no claims against any of the funds or any of their Board Members. Under Section 36(b), the Second Amended Complaint alleges similar facts and seeks similar relief against the Second Amended Complaint Defendants as the Complaint.

On December 3, 2007, the court granted the Defendants’ motion to dismiss, with prejudice. On January 2, 2008, the plaintiffs filed a notice of appeal to the Second Circuit Court of Appeals. The appeal was fully briefed and oral argument before the U.S. Court of Appeals for the Second Circuit took place on March 5, 2009. The parties currently are awaiting a decision from the U.S. Court of Appeals for the Second Circuit.

Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be filed in the future.

* * *

Beginning in August 2005, five class action lawsuits alleging violations of federal securities laws and state law were filed against CGM and SBFM by the SEC. The complaints seek injunctive relief and compensatory and punitive damages, removal of SBFM as the adviser for the Smith Barney family of funds, rescission of the Funds’ management and other contracts with SBFM, recovery of all fees paid to SBFM pursuant to such contracts and an award of attorneys’ fees and litigation expenses.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Report of independent registered public accounting firm

The Board of Trustees and Shareholders
Legg Mason Partners Variable Equity Trust:

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Legg Mason ClearBridge Variable Equity Income Builder Portfolio (formerly Legg Mason Partners Variable Capital and Income Portfolio), a series of Legg Mason Partners Variable Equity Trust, as of December 31, 2009, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Portfolio’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Legg Mason ClearBridge Variable Equity Income Builder Portfolio as of December 31, 2009, and the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.

New York, New York
February 16, 2010

Legg Mason ClearBridge Variable Equity Income Builder Portfolio 2009 Annual Report

Board approval of management and subadvisory
agreements (unaudited)

At a meeting of the Trust’s Board of Trustees, the Board considered the re-approval for an annual period of the management agreement of Legg Mason ClearBridge Variable Equity Income Builder Portfolio (the “Fund”), pursuant to which Legg Mason Partners Fund Advisor, LLC (the “Manager”) provides the Fund with investment advisory and administrative services, and the Fund’s sub-advisory agreement, pursuant to which ClearBridge Advisors, LLC (the “Sub-Adviser”) provides day-to-day management of the Fund’s portfolio. (The management agreement and sub-advisory agreement are collectively referred to as the “Agreements.”) The Manager and the Sub-Adviser are wholly-owned subsidiaries of Legg Mason, Inc. The Trustees who are not “interested persons” (as defined in the Investment Company Act of 1940, as amended (the “Independent Trustees”)) of the Fund were assisted in their review by Fund counsel and independent legal counsel and met with independent legal counsel in executive sessions separate from representatives of the Manager and the Sub-Adviser. The Independent Trustees requested and received information from the Manager and the Sub-Adviser they deemed reasonably necessary for their review of the Agreements and the performance of the Manager and the Sub-Adviser. Included was information about the Manager, the Sub-Adviser and the Fund’s distributor (including any distributors affiliated with the Fund during the past two years), as well as the management, sub-advisory and distribution arrangements for the Fund and other funds overseen by the Board. This information was initially reviewed by a special committee of the Independent Trustees and then by the full Board.

In voting to approve the Agreements, the Independent Trustees considered whether the approval of the Agreements would be in the best interests of the Fund and its shareholders, an evaluation based on several factors including those discussed below.

Nature, extent and quality of the services provided to the fund under the management agreement and sub-advisory agreement

The Board received and considered information regarding the nature, extent and quality of services provided to the Fund by the Manager and the Sub-Adviser under the Management Agreement and Sub-Advisory Agreement, respectively, during the past year. The Trustees also considered the Manager’s supervisory activities over the Sub-Adviser. In addition, the Independent Trustees received and considered other information regarding the administrative and other services rendered to the Fund and its shareholders by the Manager. The Board noted information received at regular meetings throughout the year related to the services rendered by the Manager in its management of the Fund’s affairs, including the management of cash and short-term instruments, and the Manager’s role in coordinating the activities of the Sub-Adviser and the Fund’s other service providers. The Board’s evaluation of the services provided by the Manager and the Sub-Adviser took into account

44 Legg Mason ClearBridge Variable Equity Income Builder Portfolio

the Board’s knowledge and familiarity gained as Trustees of funds in the Legg Mason fund complex, including the scope and quality of the investment management and other capabilities of the Manager and the Sub-Adviser and the quality of the Manager’s administrative and other services. The Board observed that the scope of services provided by the Manager had expanded over time as a result of regulatory and other developments, including maintaining and monitoring its own and the Fund’s expanded compliance programs. The Board reviewed information received from the Manager and the Fund’s Chief Compliance Officer regarding the Fund’s compliance policies and procedures established pursuant to Rule 38a-1 under the Investment Company Act of 1940, as amended.

The Board reviewed the qualifications, backgrounds and responsibilities of the Fund’s senior personnel and the portfolio management team primarily responsible for the day-to-day portfolio management of the Fund. The Board considered the degree to which the Manager implemented organizational changes to improve investment results and the services provided to the Legg Mason fund complex. The Board also considered, based on its knowledge of the Manager and the Manager’s affiliates, the financial resources available to the Manager’s parent organization, Legg Mason, Inc.

The Board also considered the division of responsibilities between the Manager and the Sub-Adviser and the oversight provided by the Manager. The Board also considered the Manager’s and the Sub-Adviser’s brokerage policies and practices, the standards applied in seeking best execution, the Manager’s policies and practices regarding soft dollars, and the existence of quality controls applicable to brokerage allocation procedures. In addition, management also reported to the Board on, among other things, its business plans, recent organizational changes, portfolio manager compensation plan and policy regarding portfolio managers’ ownership of fund shares.

The Board concluded that, overall, it was satisfied with the nature, extent and quality of services provided (and expected to be provided) under the respective Agreement by the Manager and the Sub-Adviser.

Fund performance

The Board received and reviewed performance information for the Fund and for all mixed-asset target allocation growth funds underlying variable insurance products (the “Performance Universe”) selected by Lipper, Inc. (“Lipper”), an independent provider of investment company data. The Board was provided with a description of the methodology Lipper used to determine the similarity of the Fund with the funds included in the Performance Universe. The Trustees noted that they also had received and discussed with management information at periodic intervals comparing the Fund’s performance to that of its benchmark index. The information comparing the Fund’s performance to that of the Performance Universe was for the one-, three- and five-year periods

Legg Mason ClearBridge Variable Equity Income Builder Portfolio

Board approval of management and subadvisory
agreements (unaudited) continued

ended June 30, 2009. The Board also reviewed performance information provided by the Manager for periods ended September 30, 2009, which showed the Fund’s performance was lower than the Lipper category average during the third quarter. The Trustees noted that the Fund had changed its portfolio management team in August 2009 and its investment objective, investment policies and investment strategies in November. The Trustees also noted that the Manager was committed to providing the resources necessary to assist the portfolio managers and to improve Fund performance. Based on its review, the Board noted that it was too early to evaluate the new portfolio management team and investment strategy and generally was satisfied with management’s efforts to improve performance going forward. The Board determined to continue to evaluate the Fund’s performance and directed the Independent Trustees’ performance committee to continue to periodically review Fund performance with the Manager and report to the full Board during periods between Board meetings.

Management fees and expense ratios

The Board reviewed and considered, the contractual management fee (the “Contractual Management Fee”) payable by the Fund to the Manager in light of the nature, extent and quality of the management and sub-advisory services provided by the Manager and the Sub-Advisers, respectively. The Board noted that the Manager, and not the Fund, pays the sub-advisory fees to the Sub-Advisers and, accordingly, that the retention of the Sub-Advisers does not increase the fees and expenses incurred by the Fund. In addition, because of the Manager’s fee waiver and/or expense reimbursement arrangement in effect for the Fund, which partially reduced the management fee paid to the Manager, the Board also reviewed and considered the actual management fee rate (after taking into account waivers and reimbursements) (“Actual Management Fee”).

The Board also reviewed information regarding the fees the Manager and the Sub-Advisers charged any of their U.S. clients investing primarily in an asset class similar to that of the Fund including, where applicable, separate accounts. The Manager reviewed with the Board the significant differences in the scope of services provided to the Fund and to such other clients, noting that the Fund is provided with regulatory compliance and administrative services, office facilities and Fund officers (including the Fund’s chief financial, chief legal and chief compliance officers), and that the Manager coordinates and oversees the provision of services to the Fund by other fund service providers, including the Sub-Advisers. The Board considered the fee comparisons in light of the scope of services required to manage these different types of accounts.

The Board received an analysis of complex-wide management fees provided by the Manager, which, among other things, set out a framework of fees based on asset classes. Management also discussed with the Board the Fund’s

46 Legg Mason ClearBridge Variable Equity Income Builder Portfolio

distribution arrangements, including how amounts received by the Fund’s distributors are expended, and the fees received and expenses incurred in connection with such arrangements by affiliates of the Manager.

Additionally, the Board received and considered information comparing the Fund’s Contractual Management Fee and Actual Management Fee and the Fund’s overall expense ratio with those of a group of 12 mixed-asset target allocation growth funds underlying variable insurance products selected by Lipper as comparable to the Fund (the “Expense Group”), and a broader group of funds selected by Lipper consisting of all mixed-asset target allocation growth funds underlying variable insurance products (the “Expense Universe”). This information showed that the Fund’s Contractual Management Fee and Actual Management Fee were higher than the median of management fees paid by the other funds in the Expense Group and higher than the average management fee paid by the other funds in the Expense Universe, and that the Fund’s actual total expense ratio was lower than the median of the total expense ratios of the funds in the Expense Group and higher than the average total expense ratio of the funds in the Expense Universe.

Manager profitability

The Board received and considered a profitability analysis of the Manager and its affiliates in providing services to the Fund. The Board also received profitability information with respect to the Legg Mason Partners fund complex as a whole. In addition, the Board received information with respect to the Manager’s allocation methodologies used in preparing this profitability data as well as a report from an outside consultant that had reviewed the Manager’s methodology. The Board also noted the profitability percentage ranges determined by appropriate court cases to be reasonable given the services rendered to investment companies. The Board determined that the Manager’s profitability was not excessive in light of the nature, extent and quality of the services provided to the Fund.

Economies of scale

The Board received and considered information regarding whether there have been economies of scale with respect to the management of the Fund as the Fund’s assets grow, whether the Fund has appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered whether economies of scale in the provision of services to the Fund were being passed along to the shareholders.

The Board also noted that to the extent the Fund’s assets increase over time, the Fund and its shareholders should realize other economies of scale as certain expenses, such as fixed fund fees, become a smaller percentage of overall assets. The Board noted that it appeared that the benefits of any economies of scale also would be appropriately shared with shareholders

Legg Mason ClearBridge Variable Equity Income Builder Portfolio

Board approval of management and subadvisory
agreements (unaudited) continued

through increased investment in fund management and administration resources.

Taking all of the above into consideration, the Board determined that the management fee was reasonable in light of the comparative performance and expense information and the nature, extent and quality of the services provided to the Fund under the Agreements.

Other benefits to the manager

The Board considered other benefits received by the Manager and its affiliates, including the Sub-Advisers, as a result of the Manager’s relationship with the Fund, including the opportunity to offer additional products and services to Fund shareholders.

In light of the costs of providing investment management and other services to the Fund and the Manager’s ongoing commitment to the Fund, the profits and other ancillary benefits that the Manager and its affiliates received were considered reasonable.

Based on their discussions and considerations, including those described above, the Trustees approved the Management Agreement and the Sub-Advisory Agreements to continue for another year.

No single factor reviewed by the Board was identified by the Board as the principal factor in determining whether to approve the Management Agreement and the Sub-Advisory Agreements.

48 Legg Mason ClearBridge Variable Equity Income Builder Portfolio

Additional information (unaudited)
Information about Trustees and Officers

The business and affairs of Legg Mason ClearBridge Variable Equity Income Builder Portfolio (formerly known as Legg Mason Partners Variable Capital and Income Portfolio) (the “Portfolio”) are managed under the direction of the Board of Trustees. The current Trustees, including the Trustees who are not “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the Portfolio (the “Independent Trustees”), and executive officers of the Portfolio, their years of birth, their principal occupations during at least the past five years (their titles may have varied during that period), the number of funds associated with Legg Mason the Trustees oversee, and other board memberships they hold are set forth below. The address of each Trustee is c/o R. Jay Gerken, 620 Eighth Avenue, New York, New York 10018.

The Statement of Additional Information includes additional information about Trustees and is available, without charge, upon request by calling Funds Investor Services at 1-800-822-5544 or Institutional Shareholder Services at 1-888-425-6432.


INDEPENDENT TRUSTEES
PAUL R. ADES

Birth year		1940

Position(s) held with Fund¹		Trustee

Term of office¹ and length of time served²		Since 1983

Principal occupation(s) during past five years		Law Firm of Paul R. Ades, PLLC (since 2000)

Number of portfolios in fund complex over- seen by Trustee		54

Other board member- ships held by Trustee		None

ANDREW L. BREECH

Birth year		1952

Position(s) held with Fund¹		Trustee

Term of office¹ and length of time served²		Since 1991

Principal occupation(s) during past five years		President, Dealer Operating Control Service, Inc. (automotive retail management) (since 1985)

Number of portfolios in fund complex over- seen by Trustee		54

Other board member- ships held by Trustee		None

Legg Mason ClearBridge Variable Equity Income Builder Portfolio

Additional information (unaudited) continued
Information about Trustees and Officers


DWIGHT B. CRANE

Birth year		1937

Position(s) held with Fund¹		Trustee

Term of office¹ and length of time served²		Since 1981

Principal occupation(s) during past five years		Professor Emeritus, Harvard Business School (since 2007); formerly, Professor, Harvard Business School (1969 to 2007); Independent Consultant (since 1969)

Number of portfolios in fund complex over- seen by Trustee		54

Other board member- ships held by Trustee		None

ROBERT M. FRAYN, JR.*

Birth year		1934

Position(s) held with Fund¹		Trustee

Term of office¹ and length of time served²		Since 1981

Principal occupation(s) during past five years		Retired; formerly, President and Director, Book Publishing Co. (1970 to 2002)

Number of portfolios in fund complex over- seen by Trustee		54

Other board member- ships held by Trustee		None

FRANK G. HUBBARD

Birth year		1937

Position(s) held with Fund¹		Trustee

Term of office¹ and length of time served²		Since 1993

Principal occupation(s) during past five years		President, Avatar International, Inc. (business development) (since 1998)

Number of portfolios in fund complex over- seen by Trustee		54

Other board member- ships held by Trustee		None

50 Legg Mason ClearBridge Variable Equity Income Builder Portfolio


HOWARD J. JOHNSON

Birth year		1938

Position(s) held with Fund¹		Trustee

Term of office¹ and length of time served²		From 1981 to 1998 and 2000 to Present

Principal occupation(s) during past five years		Chief Executive Officer, Genesis Imaging LLC (technology company) (since 2003)

Number of portfolios in fund complex over- seen by Trustee		54

Other board member- ships held by Trustee		None

DAVID E. MARYATT

Birth year		1936

Position(s) held with Fund¹		Trustee

Term of office¹ and length of time served²		Since 1983

Principal occupation(s) during past five years		Private Investor; President and Director, ALS Co. (real estate management and development firm) (since 1992)

Number of portfolios in fund complex over- seen by Trustee		54

Other board member- ships held by Trustee		None

JEROME H. MILLER

Birth year		1938

Position(s) held with Fund¹		Trustee

Term of office¹ and length of time served²		Since 1995

Principal occupation(s) during past five years		Retired

Number of portfolios in fund complex over- seen by Trustee		54

Other board member- ships held by Trustee		None

Legg Mason ClearBridge Variable Equity Income Builder Portfolio

Additional information (unaudited) continued
Information about Trustees and Officers


KEN MILLER

Birth Year		1942

Position(s) held with Fund¹		Trustee

Term of office¹ and length of time served²		Since 1983

Principal occupation(s) during past five years		President, Young Stuff Apparel Group, Inc. (apparel manufacturer), division of Li & Fung (since 1963)

Number of portfolios in fund complex over- seen by Trustee		54

Other board member- ships held by Trustee		None

JOHN J. MURPHY

Birth year		1944

Position(s) held with Fund¹		Trustee

Term of office¹ and length of time served²		Since 2002

Principal occupation(s) during past five years		Founder and Senior Principal, Murphy Capital Management (investment management) (since 1983)

Number of portfolios in fund complex over- seen by Trustee		54

Other board member- ships held by Trustee		Director, Nicholas Applegate Institutional Funds; (since 2005); Trustee, Consulting Group Capital Markets Funds; (since 2002); Trustee, UBS Funds (since 2008); formerly, Director, Atlantic Stewardship Bank (from 2004 to 2005); formerly, Director, Barclays International Funds Group Ltd. and affiliated companies (1983 to 2003)

THOMAS F. SCHLAFLY

Birth year		1948

Position(s) held with Fund¹		Trustee

Term of office¹ and length of time served²		Since 1983

Principal occupation(s) during past five years		President, The Saint Louis Brewery, Inc. (brewery) (since 1989); Partner, Thompson Coburn LLP (law firm) (since 2009); Of Counsel, Husch Blackwell Sanders LLP (law firm) and its predecessor firms (prior to May 2009)

Number of portfolios in fund complex over- seen by Trustee		54

Other board member- ships held by Trustee		Director, Citizens National Bank of Greater St. Louis, (since 2006)

52 Legg Mason ClearBridge Variable Equity Income Builder Portfolio


JERRY A. VISCIONE

Birth year		1944

Position(s) held with Fund¹		Trustee

Term of office¹ and length of time served²		Since 1993

Principal occupation(s) during past five years		Retired

Number of portfolios in fund complex over- seen by Trustee		54

Other board member- ships held by Trustee		None

INTERESTED TRUSTEE
R. JAY GERKEN, CFA³

Birth year		1951

Position(s) held with Fund¹		Trustee, President, Chairman, and Chief Executive Officer

Term of office¹ and length of time served²		Since 2002

Principal occupation(s) during past five years		Managing Director, Legg Mason & Co., LLC; Chairman of the Board and Trustee/Director of 147 funds associated with Legg Mason Partners Fund Advisor, LLC (“LMPFA”) and its affiliates; President of LMPFA (since 2006); Chairman, President and Chief Executive Officer (“CEO”) of certain mutual funds associated with Legg Mason, Inc. or its affiliates; President and CEO, Smith Barney Fund Management LLC and Chairman, President and CEO, Citi Fund Management, Inc. (“CFM”) (formerly registered investment advisers) (since 2002); formerly, Managing Director of Citigroup Global Markets Inc. (1989 to 2006); formerly, Chairman, President and CEO, Travelers Investment Adviser Inc. (2002 to 2005)

Number of portfolios in fund complex over- seen by Trustee		134

Other board member- ships held by Trustee		Former Trustee, Consulting Group Capital Markets Funds (2002 to 2006)

OFFICERS
KAPREL OZSOLAK Legg Mason 55 Water Street, New York, NY 10041

Birth year		1965

Position(s) held with Fund¹		Chief Financial Officer and Treasurer

Term of office¹ and length of time served²		Since 2004

Principal occupation(s) during past five years		Director of Legg Mason; Chief Financial Officer and Treasurer of certain mutual funds associated with Legg Mason; formerly, Controller of certain mutual funds associated with certain predecessor firms of Legg Mason (2002 to 2004)

Legg Mason ClearBridge Variable Equity Income Builder Portfolio

Additional information (unaudited) continued
Information about Trustees and Officers



TED P. BECKER Legg Mason 620 Eighth Avenue, New York, NY 10018

Birth year		1951

Position(s) held with Fund¹		Chief Compliance Officer

Term of office¹ and length of time served²		Since 2006

Principal occupation(s) during past five years		Director of Global Compliance at Legg Mason (since 2006); Chief Compliance Officer of LMPFA (since 2006); Managing Director of Compliance at Legg Mason (since 2005); Chief Compliance Officer with certain mutual funds associated with Legg Mason, LMPFA and certain affiliates (since 2006); formerly, Managing Director of Compliance at CAM or its predecessor (2002 to 2005);

JOHN CHIOTA Legg Mason 100 First Stamford Place, Stamford, CT 06902

Birth year		1968

Position(s) held with Fund¹		Chief Anti-Money Laundering Compliance Officer/Identity Theft Prevention Officer

Term of office¹ and length of time served²		Since 2006/2008

Principal occupation(s) during past five years		Identity Theft Prevention Officer with certain mutual funds associated with Legg Mason or its affiliates (since 2008); Chief Anti-Money Laundering Compliance Officer with certain mutual funds associated with Legg Mason or its affiliates (since 2006); Vice President of Legg Mason or its predecessor (since 2004); Prior to August 2004, Chief AML Compliance Officer with TD Waterhouse

ROBERT I. FRENKEL Legg Mason 100 First Stamford Place, Stamford, CT 06902

Birth year		1954

Position(s) held with Fund¹		Secretary and Chief Legal Officer

Term of office¹ and length of time served²		Since 2003

Principal occupation(s) during past five years		Managing Director and General Counsel of Global Mutual Funds for Legg Mason and its predecessors (since 1994); Secretary and Chief Legal Officer of mutual funds associated with Legg Mason (since 2003); formerly, Secretary of CFM (2001 to 2004)

THOMAS C. MANDIA Legg Mason 100 First Stamford Place, Stamford, CT 06902

Birth year		1962

Position(s) held with Fund¹		Assistant Secretary

Term of office¹ and length of time served²		Since 2000

Principal occupation(s) during past five years		Managing Director and Deputy General Counsel of Legg Mason (since 2005); formerly, Managing Director and Deputy General Counsel for CAM (1992 to 2005)

54 Legg Mason ClearBridge Variable Equity Income Builder Portfolio


ALBERT LASKAJ Legg Mason 55 Water Street, New York, NY 10041

Birth year		1977

Position(s) held with Fund¹		Controller

Term of office¹ and length of time served²		Since 2007

Principal occupation(s) during past five years		Vice President of Legg Mason (since 2008); Controller of certain mutual funds associated with Legg Mason (since 2007); formerly, Assistant Controller of certain mutual funds associated with Legg Mason (2005 to 2007); formerly, Accounting Manager of certain mutual funds associated with certain predecessor firms of Legg Mason (2003 to 2005)

STEVEN FRANK Legg Mason 55 Water Street, New York, NY 10041

Birth year		1967

Position(s) held with fund¹		Controller

Term of office¹ and Length of time served²		Since 2005

Principal occupation(s) during past five years		Vice President of Legg Mason (since 2002); Controller of certain mutual funds associated with Legg Mason or its predecessors (since 2005); formerly, Assistant Controller of certain mutual funds associated with Legg Mason predecessors (2001 to 2005)


¹		Each Trustee and Officer serves until his or her 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 or Officer became a Board Member or Officer, as applicable for a fund in the Legg Mason Partners funds complex.

³		Mr. Gerken is an “interested person” of the Trust as defined in the 1940 Act, because Mr. Gerken is an officer of LMPFA and certain of its affiliates.

*		Mr. Frayn retired from the Board of Trustees effective December 31, 2009.

Legg Mason ClearBridge Variable Equity Income Builder Portfolio

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

LEGG MASON CLEARBRIDGE VARIABLE EQUITY INCOME BUILDER PORTFOLIO
Legg Mason Funds
55 Water Street
New York, New York 10041

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 on Form N-Q. The Portfolio’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Portfolio’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. To obtain information on Form N-Q from the Portfolio, shareholders can call Funds Investor Services at 1-800-822-5544 or Institutional Shareholder Services at 1-888-425-6432.

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 Funds Investor Services at 1-800-822-5544 or Institutional Shareholder Services at 1-888-425-6432, (2) on the Portfolio’s website at www.leggmason.com/individualinvestors and (3) on the SEC’s website at www.sec.gov.

This report is submitted for the general information of the shareholders of Legg Mason ClearBridge Variable Equity Income Builder 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/individualinvestors

We are committed to keeping nonpublic personal information about you secure and confidential. This notice is intended to help you understand how we fulfill this commitment. From time to time, we may collect a variety of personal information about you, including:


•	Information we receive from you on applications and forms, via the telephone and through our websites;

•	Information about your transactions with us, our affiliates or others (such as your purchases, sales or account balances); and

•	Information we receive from consumer reporting agencies.

We do not disclose nonpublic personal information about our customers or former customers, except to our affiliates (such as broker-dealers or investment advisers within the Legg Mason family of companies) or as is otherwise permitted by applicable law or regulation. For example, we may share this information with others in order to process your transactions or service an account. We may also provide this information to companies that perform marketing services on our behalf, such as printing and mailing, or to other financial institutions with whom we have joint marketing agreements. When we enter into such agreements, we will require these companies to protect the confidentiality of this information and to use it only to perform the services for which we hired them.

With respect to our internal security procedures, we maintain physical, electronic and procedural safeguards to protect your nonpublic personal information, and we restrict access to this information.

If you decide at some point either to close your account(s) or become an inactive customer, we will continue to adhere to our privacy policies and practices with respect to your nonpublic personal information.

NOT PART OF THE ANNUAL REPORT

ITEM 2. CODE OF ETHICS.

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

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

The Board of Directors of the registrant has determined that Jerry A. Viscione 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 Mr. Viscione as the Audit Committee’s financial expert. Mr. Viscione is an “independent” Director 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, 2008 and December 31, 2009 (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 $229,100 in 2008 and $414,700 in 2009.

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 $12,900 in 2008 and $1,427 in 2009. These services consisted of procedures performed in connection with the Re-domiciliation of the various reviews of Prospectus supplements, and consent issuances related to the N-1A filings for the Legg Mason Partners Variable Equity Trust.

In addition, there were no Audit-Related Fees billed in the Reporting Period for assurance and related services by the Auditor to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Legg Mason Partners Variable Equity Trust (“service affiliates”), that were reasonably related to the performance of the annual audit of the service affiliates. Accordingly, there were no such fees that required pre-approval by the Audit Committee for the Reporting Periods (prior to July 6, 2003 services provided by the Auditor were not required to be pre-approved).

(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 $42,850 in 2008 and $43,200 in 2009. 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. There were no other fees billed in the Reporting Periods for products and services provided by the Auditor, other than the services reported in paragraphs (a) through (c) of this Item for the Legg Mason Partners Variable Equity Trust.

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 2008 and 2009; Tax Fees were 100% and 100% for 2008 and 2009; and Other Fees were 100% and 100% for 2008 and 2009.

(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 $0 in 2009.

(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.

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

Paul R. Ades
Andrew L. Breech
Dwight B. Crane
Robert M. Frayn, Jr.
Frank G. Hubbard
Howard J. Johnson
David E. Maryatt
Jerome H. Miller
Ken Miller
John J. Murphy
Thomas F. Schlafly
Jerry A. Viscione

Not applicable.

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 registrant’s last fiscal half-year (the registrant’s second fiscal half-year in the case of an annual report) that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting.

ITEM 12. EXHIBITS.

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

Exhibit 99.CODE ETH

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

Exhibit 99.CERT

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

Exhibit 99.906CERT



Michael Clarfeld, CFA	Harry D. “Hersh” Cohen	Peter Vanderlee, CFA
Portfolio Manager	Portfolio Manager	Portfolio Manager
ClearBridge Advisors, LLC	ClearBridge Advisors, LLC	ClearBridge Advisors, LLC


†		The bar graphs above represent the composition of the Portfolio’s investments as of December 31, 2009 and December 31, 2008. The Portfolio is actively managed. As a result, the composition of the Portfolio’s investments is subject to change at any time.


Record date:	6/17/2009		12/21/2009

Payable date:	6/18/2009		12/22/2009

Dividends qualifying for the dividends received deduction for corporations	48.13	%	65.31	%


	*	Ranked eleventh-largest money manager in the world, according to Pensions & Investments, May 18, 2009, based on 12/31/08 worldwide assets under management.


By:		/s/ R. Jay Gerken (R. Jay Gerken)
		Chief Executive Officer of
		Legg Mason Partners Variable Equity Trust


By:		/s/ Kaprel Ozsolak (Kaprel Ozsolak)
		Chief Financial Officer of
		Legg Mason Partners Variable Equity Trust