0001193125-24-041196.txt : 20240221 0001193125-24-041196.hdr.sgml : 20240221 20240221135903 ACCESSION NUMBER: 0001193125-24-041196 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 20231231 FILED AS OF DATE: 20240221 DATE AS OF CHANGE: 20240221 EFFECTIVENESS DATE: 20240221 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEGG MASON PARTNERS VARIABLE EQUITY TRUST CENTRAL INDEX KEY: 0001176343 ORGANIZATION NAME: IRS NUMBER: 000000000 STATE OF INCORPORATION: MD FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-21128 FILM NUMBER: 24658320 BUSINESS ADDRESS: STREET 1: LEGG MASON & CO., LLC STREET 2: 620 EIGHTH AVENUE, 49TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 1-877-721-1926 MAIL ADDRESS: STREET 1: LEGG MASON & CO., LLC STREET 2: 620 EIGHTH AVENUE, 49TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10018 FORMER COMPANY: FORMER CONFORMED NAME: Legg Mason Partners Variable Portfolios IV DATE OF NAME CHANGE: 20060501 FORMER COMPANY: FORMER CONFORMED NAME: SMITH BARNEY MULTIPLE DISCIPLINE TRUST DATE OF NAME CHANGE: 20021004 FORMER COMPANY: FORMER CONFORMED NAME: SMITH BARNEY MULTIPLE DISCIPLINE ACCOUNT TRUST DATE OF NAME CHANGE: 20020626 0001176343 S000017009 Franklin Multi-Asset Variable Conservative Growth C000047266 Class I QLMLFX C000183009 Class II QVCIIX 0001176343 S000017010 Franklin Multi-Asset Variable Moderate Growth C000047267 Class I QLMLSX C000183010 Class II QVMIIX 0001176343 S000017011 Franklin Multi-Asset Variable Growth C000047268 Class I QLMLTX C000183011 Class II QLMIIX N-CSR 1 d508741dncsr.htm FRANKLIN MULTI-ASSET VARIABLE ALLOCATION SERIES Franklin Multi-Asset Variable Allocation Series

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-21128

 

 

Legg Mason Partners Variable Equity Trust

(Exact name of registrant as specified in charter)

 

 

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

(Address of principal executive offices) (Zip code)

 

 

Marc A. De Oliveira.

Franklin Templeton

100 First Stamford Place

Stamford, CT 06902

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code: 877-6LM-FUND/656-3863

Date of fiscal year end: December 31

Date of reporting period: December 31, 2023

 

 

 


ITEM 1.

REPORT TO STOCKHOLDERS.

The Annual Report to Stockholders is filed herewith.


LOGO

 

Annual Report   December 31, 2023

Franklin

Variable Asset Allocation Series

Franklin Multi-Asset Variable Growth Fund

Franklin Multi-Asset Variable Moderate Growth Fund

Franklin Multi-Asset Variable Conservative Growth Fund

 

 

 

The Securities and Exchange Commission has adopted new regulations that will result in changes to the design and delivery of annual and semi-annual shareholder reports beginning in July 2024.

If you have previously elected to receive shareholder reports electronically, you will continue to do so and need not take any action.

Otherwise, paper copies of the Fund’s shareholder reports will be mailed to you beginning in July 2024. If you would like to receive shareholder reports and other communications from the Fund electronically instead of by mail, you may make that request at any time by contacting your insurance company or your financial intermediary (such as a broker-dealer or bank).

 

INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE


What’s inside      
Letter from the president     II  
Portfolios overview     1  
Portfolios at a glance     7  
Portfolios expenses     10  
Portfolios performance     13  
Schedules of investments     19  
Statements of assets and liabilities     22  
Statements of operations     23  
Statements of changes in net assets     24  
Financial highlights     27  
Notes to financial statements     31  
Report of independent registered public accounting firm     40  
Additional information     41  
Important tax information     45  

Franklin Variable Asset Allocation Series

Franklin Variable Asset Allocation Series consists of separate investment Portfolios, each with its own investment objective and policies. Each Portfolio is a “fund of funds,” investing in other mutual funds and exchange-traded funds (ETFs), and is managed as an asset allocation program.

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

 

Letter from the president

 

LOGO

 

Dear Shareholder,

We are pleased to provide the annual report of Franklin Variable Asset Allocation Series for the twelve-month reporting period ended December 31, 2023. Please read on for a detailed look at prevailing economic and market conditions during the Portfolios’ reporting period and to learn how those conditions have affected each Portfolio’s performance.

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

 

 

Market insights and commentaries from our portfolio managers and

 

 

A host of educational resources.

We look forward to helping you meet your financial goals.

Sincerely,

 

LOGO

Jane Trust, CFA

President and Chief Executive Officer

January 31, 2024

 

II    Franklin Variable Asset Allocation Series


Portfolios overview

 

Franklin Variable Asset Allocation Series (the “Variable Asset Allocation Series”) consists of three portfolio investment options (the “Portfolios”), each of which is a “fund of funds” that invests in other mutual funds and may also invest in exchange-traded funds (“ETFs”). The Variable Asset Allocation Series offers a mix of equity funds categorized according to average market capitalization (size), investing style (e.g., value, core or growth) and global exposure (e.g., U.S. and/or international stocks). The various options within the Variable Asset Allocation Series also offer a mix of bond asset classes such as U.S. and foreign government debt, corporate bonds, high-yield debt and emerging market debt — each of which carries a varying degree of risk/reward potential. Each Portfolio is managed as an asset allocation program and allocates its assets among mutual funds and ETFs managed by the manager and its affiliates, including other Legg Mason and Franklin Templeton investment managers, and ETFs managed by unaffiliated investment advisers (“underlying funds”). When selecting investments to fulfill a desired asset class exposure, the portfolio managers expect to allocate to Legg Mason and Franklin Templeton affiliated mutual funds and ETFs, provided that appropriate products are available. At the current time, the Portfolios invest primarily in affiliated mutual funds and ETFs.

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

A. Global equities collectively advanced during the twelve-month reporting period ended December 31, 2023, delivering generally strong returns for the year. Early on, equities rose amid signs of economic resilience and investor optimism that the worldwide rate-hiking cycle might be approaching an end. That optimism subsided as financial markets experienced heightened volatility in March due to banking turmoil in the United States and Switzerland. However, equities continued to move higher as quick action by regulators eased banking concerns, many companies’ first-quarter earnings exceeded consensus estimates, and several central banks slowed or paused interest-rate hikes. Investor risk appetite soured in the third quarter as it became clearer that key central banks, like the U.S. Federal Reserve Board (the “Fed”) intended to keep rates higher for longer. Rising sovereign bond yields and energy prices, along with China’s property market crisis and Fitch Ratings’ downgrade of U.S. long-term debt, further weighed on equity markets. Late in the year, moderating inflation, encouraging economic data, and softening but solid employment figures in several regions, particularly in the United States, reinvigorated expectations for an economic soft landing, supporting risk appetite. As measured by MSCI indexes in U.S. dollar terms, developed market equities outperformed a global index for the year, while emerging market and frontier market equities lagged it. In terms of investment style, global growth stocks significantly outperformed global value stocks, which nonetheless posted strong gains for the period.

U.S. stocks finished 2023’s fourth quarter and full year with strong gains. Equities moved higher during the first half of the year, driven by better-than-expected corporate earnings reports, the suspension of the debt ceiling, subsiding concerns about U.S. regional banks, resilient economic growth, and hopes for an end to the Fed’s campaign of interest-rate hikes. In addition, investor enthusiasm for artificial intelligence (“AI”) bolstered technology-related stocks. The equity rally stumbled in the third quarter, and U.S. equity markets moved lower, after Fitch Ratings downgraded the country’s credit rating to AA+ from AAA in early August. During the fourth quarter, equities moved higher as moderating inflation and a softening but resilient job market inspired optimism that the Fed had concluded its rate-hiking cycle and was positioned to maneuver the U.S. economy into a soft landing.

Yields on short-term U.S. Treasury (“UST”) bills and long-term UST bonds rose during 2023, while yields on UST notes fell or finished the year flat. Late in the year, there was significant volatility in the UST market. Yields peaked in mid-October with the yield on the benchmark 10-year UST note reaching 5.0% intraday. However, a dovish Fed tilt led to a yield decline on most UST maturities, and the yield on the benchmark 10-year UST note finished the year where it started. The yield curve remained inverted at the end of the reporting period.

U.S. and international benchmark crude oil prices experienced the biggest annual decline since 2020, despite global demand rising to record levels. Occasional war-related “uncertainty” premiums and production curbs set by OPEC+ (Organization of the Petroleum Exporting Countries and oil-producing allies) failed to consistently propel prices higher. Rising production from nations outside the cartel and concerns about slowing demand growth also affected prices.

Gold spot prices reached a new record high in December, finishing the year up 13.1%. This was gold’s first annual gain in three years. The price was supported by a shift away from monetary policy tightening, a weaker U.S. dollar and falling U.S. government bond yields.

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

A. For all three Portfolios, we employ a tactical strategy based on both quantitative and qualitative inputs, that over- and underweights certain allocations in the portfolios in response to various market, economic and valuation conditions. These tactical views are updated on a monthly basis. At the beginning of the reporting period, we were overweight in fixed income versus equities, and we subsequently increased our equity underweight and increased our cash position at the end of March due to the bank lending crisis. At the end of July, the Portfolios added back to equities from cash but remained underweight equities and overweight fixed income as leading indicators were stabilizing, disinflation appeared in many regions, and earnings season fared better than expected, balanced with poor sentiment. At the end of October, we sold fixed income and bought equity to bring our Portfolios back to a neutral allocation as the growth backdrop continued to prove resilient and a recent 10% correction in the MSCI All Country World Indexi provided a prudent point to re-enter the equity market. At the end of November, we went overweight equities and underweight fixed income as we believed the November equity rally would continue as our strongest conviction leading indicators showed.

 

Franklin Variable Asset Allocation Series 2023 Annual Report

 

     

 

1

 

 

 


Portfolios overview (cont’d)

 

Franklin Multi-Asset Variable Growth Fund1

Franklin Multi-Asset Variable Growth Fund seeks capital appreciation. The Portfolio organizes its investments in underlying funds into two main asset classes: the equity class (equity securities of all types) and the fixed income class (fixed income securities of all types). The portfolio managers may invest across all asset classes and strategies. The portfolio managers will allocate between 70% to 100% of the Portfolio’s assets to underlying funds that invest in equity and equity-like strategies and between 0% to 30% to underlying funds that invest in fixed income strategies. The portfolio managers may, however, allocate assets to any underlying funds in varying amounts in a manner consistent with the Portfolio’s investment objective. For underlying funds that invest in both equity and fixed income securities, and/or invest in alternative investments, the portfolio managers will make a reasonable determination to assign such underlying fund, or a percentage of such underlying fund, to the equity or fixed income asset class depending upon the underlying fund’s overall asset class exposures and/or volatility profile. The underlying fund’s allocation to each class will be measured at the time of purchase and may vary thereafter as a result of market movements.

Performance review

For the twelve months ended December 31, 2023, Class I shares of Franklin Multi-Asset Variable Growth Fund returned 19.58%. The Portfolio’s unmanaged benchmarks, the Bloomberg U.S. Aggregate Indexii, the Russell 3000 Indexiii and the Variable Growth Composite Benchmarkiv, returned 5.53%, 25.96% and 20.28%, respectively, for the same period.

 

Performance Snapshot as of December 31, 2023
(unaudited)
 
     6 months     12 months  
Franklin Multi-Asset Variable Growth Fund:    

Class I

    6.76     19.58
Bloomberg U.S. Aggregate Index     3.37     5.53
Russell 3000 Index     8.43     25.96
Variable Growth Composite Benchmark     7.43     20.28

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.

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

The portfolio managers periodically adjust the allocation of the Portfolio’s assets among different Legg Mason and Franklin Templeton affiliated mutual funds and ETFs and ETFs that are managed by unaffiliated investment advisers, depending upon the portfolio managers’ outlook for the equity and bond markets in general, particular sectors of such markets and the performance outlook for the underlying funds. In assessing the equity and bond markets, the portfolio managers consider a broad range of market and economic trends and quantitative factors.

 

Total Annual Operating Expenses(unaudited)

As of the Portfolio’s current prospectus dated May 1, 2023, the gross total annual fund operating expense ratio for Class I shares was 0.79%.

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.

 

1 

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

 

Total annual fund operating expenses do not correlate with the ratios of expenses to average net assets reported in the Financial Highlights, which reflect the Portfolio’s operating expenses and do not include acquired fund fees and expenses.

 

2

 

   

Franklin Variable Asset Allocation Series 2023 Annual Report

 


 

Franklin Multi-Asset Variable Moderate Growth Fund1

Franklin Multi-Asset Variable Moderate Growth Fund seeks long-term growth of capital. The Portfolio organizes its investments in underlying funds into two main asset classes: the equity class (equity securities of all types) and the fixed income class (fixed income securities of all types). The portfolio managers may invest across all asset classes and strategies. The portfolio managers will allocate between 55% to 85% of the Portfolio’s assets to underlying funds that invest in equity and equity-like strategies and between 15% to 45% to underlying funds that invest in fixed income strategies. The portfolio managers may, however, allocate assets to any underlying funds in varying amounts in a manner consistent with the Portfolio’s investment objective. For underlying funds that invest in both equity and fixed income securities, and/or invest in alternative investments, the portfolio managers will make a reasonable determination to assign such underlying fund, or a percentage of such underlying fund, to the equity or fixed income asset class depending upon the underlying fund’s overall asset class exposures and/or volatility profile. The underlying fund’s allocation to each class will be measured at the time of purchase and may vary thereafter as a result of market movements.

Performance review

For the twelve months ended December 31, 2023, Class I shares of Franklin Multi-Asset Variable Moderate Growth Fund returned 17.81%. The Portfolio’s unmanaged benchmarks, the Bloomberg U.S. Aggregate Index, the Russell 3000 Index and the Variable Moderate Growth Composite Benchmarkv, returned 5.53%, 25.96% and 17.93%, respectively, for the same period.

 

Performance Snapshot as of December 31, 2023
(unaudited)
 
     6 months     12 months  
Franklin Multi-Asset Variable Moderate Growth Fund:    

Class I

    6.29     17.81
Bloomberg U.S. Aggregate Index     3.37     5.53
Russell 3000 Index     8.43     25.96
Variable Moderate Growth Composite Benchmark     6.81     17.93

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.

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

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

The portfolio managers periodically adjust the allocation of the Portfolio’s assets among different Legg Mason and Franklin Templeton affiliated mutual funds and ETFs and ETFs that are managed by unaffiliated investment advisers, depending upon the portfolio managers’ outlook for the equity and bond markets in general, particular sectors of such markets and the performance outlook for the underlying funds. In assessing the equity and bond markets, the portfolio managers consider a broad range of market and economic trends and quantitative factors.

 

Total Annual Operating Expenses (unaudited)

As of the Portfolio’s current prospectus dated May 1, 2023, the gross total annual fund operating expense ratio for Class I shares was 0.98%.

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.

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses (fees and expenses of underlying funds), to average net assets will not exceed 0.20% for Class I shares. Total annual fund operating expenses after waiving fees and/or reimbursing expenses exceed the expense limitation (“expense cap”) for Class I as a result of acquired fund fees and expenses. This expense limitation arrangement cannot be terminated prior to December 31, 2025 without the Board of Trustees’ consent.

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

 

1 

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

 

Total annual fund operating expenses do not correlate with the ratios of expenses to average net assets reported in the Financial Highlights, which reflect the Portfolio’s operating expenses and do not include acquired fund fees and expenses.

 

Franklin Variable Asset Allocation Series 2023 Annual Report

 

     

 

3

 

 

 


Portfolios overview (cont’d)

 

Franklin Multi-Asset Variable Conservative Growth Fund1

Franklin Multi-Asset Variable Conservative Growth Fund seeks balance of growth of capital and income. The Portfolio organizes its investments in underlying funds into two main asset classes: the equity class (equity securities of all types) and the fixed income class (fixed income securities of all types). The portfolio managers may invest across all asset classes and strategies. The portfolio managers will allocate between 35% to 65% of the Portfolio’s assets to underlying funds that invest in equity and equity-like strategies and between 35% to 65% to underlying funds that invest in fixed income strategies. The portfolio managers may, however, allocate assets to any underlying funds in varying amounts in a manner consistent with the Portfolio’s investment objective. For underlying funds that invest in both equity and fixed income securities, and/or invest in alternative investments, the portfolio managers will make a reasonable determination to assign such underlying fund, or a percentage of such underlying fund, to the equity or fixed income asset class depending upon the underlying fund’s overall asset class exposures and/or volatility profile. The underlying fund’s allocation to each class will be measured at the time of purchase and may vary thereafter as a result of market movements.

Performance review

For the twelve months ended December 31, 2023, Class I shares of Franklin Multi-Asset Variable Conservative Growth Fund returned 14.63%. The Portfolio’s unmanaged benchmarks, the Bloomberg U.S. Aggregate Index, the Russell 1000 Index and the Variable Conservative Growth Composite Benchmarkvi, returned 5.53%, 26.53% and 14.55%, respectively, for the same period.

 

Performance Snapshot as of December 31, 2023
(unaudited)
 
     6 months     12 months  
Franklin Multi-Asset Variable Conservative Growth Fund:    

Class I

    5.63     14.63

Class II

    5.43     14.28
Bloomberg U.S. Aggregate Index     3.37     5.53
Russell 1000 Index     8.44     26.53
Variable Conservative Growth Composite Benchmark     6.01     14.55

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

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

The portfolio managers periodically adjust the allocation of the Portfolio’s assets among different Legg Mason and Franklin Templeton affiliated mutual funds and ETFs and ETFs that are managed by unaffiliated investment advisers, depending upon the portfolio managers’ outlook for the equity and bond markets in general, particular sectors of such markets and the performance outlook for the underlying funds. In assessing the equity and bond markets, the portfolio managers consider a broad range of market and economic trends and quantitative factors.

 

Total Annual Operating Expenses (unaudited)

As of the Portfolio’s current prospectus dated May 1, 2023, the gross total annual fund operating expense ratios for Class I and Class II shares were 0.70% and 0.95%, 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.

 

1 

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

 

Total annual fund operating expenses do not correlate with the ratios of expenses to average net assets reported in the Financial Highlights, which reflect the Portfolio’s operating expenses and do not include acquired fund fees and expenses.

 

4

 

   

Franklin Variable Asset Allocation Series 2023 Annual Report

 


 

Q. What were the leading contributors to performance?

A. Taking into account the underlying funds’ returns and their weightings within the Portfolios, the top contributor to absolute performance came from U.S. large cap equities, followed by international equities, with stronger returns than other asset classes.

Asset allocation effects contributed to relative performance, thanks to an overweight to U.S. large cap and an underweight to U.S. fixed income.

Relative to their specific benchmarks, the leading contributors at the manager level were ClearBridge Large Cap Growth Fund, Franklin International Equity Fund and Western Asset Intermediate Bond Fund.

Q. What were the leading detractors from performance?

A. The leading detractor from absolute performance for the reporting period was the exposure to U.S. small cap equities and U.S. fixed income, which underperformed other asset classes.

From an asset allocation perspective, an overweight to international fixed income was a detractor from relative return.

Relative to their specific benchmarks, ClearBridge Appreciation Fund, BrandywineGLOBAL — Diversified US Large Cap Value Fund and ClearBridge Small Cap Growth Fund were leading detractors.

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

A. There were no significant changes to the Portfolios during the period.

Thank you for your investment in the Variable Asset Allocation Series. As always, we appreciate that you have chosen us to manage your assets and we remain focused on achieving the Portfolios’ investment goals.

Sincerely,

Franklin Advisers, Inc.

January 11, 2024

RISKS: Equity securities are subject to price and market fluctuations. Fixed income securities are subject to interest rate and credit risks. Foreign securities are subject to certain risks of overseas investing including currency fluctuations and political, social and economic uncertainties, which could increase volatility. These risks are magnified in emerging markets. Emerging market countries tend to have economic, political, and legal systems that are less developed and are less stable than those of more developed countries. Investments in small- and mid-capitalization companies may involve a higher degree of risk and volatility than investments in larger, more established companies. As interest rates rise, bond prices fall, reducing the value of the Portfolios’ share prices. High yield bonds (commonly known as “junk” bonds) involve greater credit and liquidity risks than investment grade bonds.

Each Portfolio is a fund of funds — it invests primarily in other funds — and is subject to the risks of the underlying funds in which it invests. There are additional risks and other expenses associated with investing in other mutual funds and ETFs, rather than directly in portfolio securities. In addition to the Portfolio’s operating expenses, you will indirectly bear the operating expenses of the underlying funds in which the Portfolio invests. The Portfolios pay brokerage commissions in connection with the purchase and sale of shares of ETFs. In addition, each Portfolio indirectly bears its pro rata share of the fees and expenses incurred by the underlying funds it invests in, including management fees and other expenses. These expenses are in addition to the expenses that each Portfolio bears directly in connection with its own operation. Certain underlying funds may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses and have a potentially large impact on Portfolio performance. Also, the portfolio managers may invest in underlying funds that have a limited performance history. The market values of securities or other assets will fluctuate, sometimes sharply and unpredictably, due to changes in general market conditions, overall economic trends or events, governmental actions or intervention, actions taken by the U.S. Federal Reserve or foreign central banks, market disruptions caused by trade disputes or other factors, political developments, armed conflicts, economic sanctions and countermeasures in response to sanctions, major cybersecurity events, investor sentiment, the global and domestic effects of a pandemic, and other factors that may or may not be related to the issuer of the security or other asset. Please see the Portfolios’ prospectus for a more complete discussion of these and other risks and the Portfolios’ investment strategies.

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

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

 

Franklin Variable Asset Allocation Series 2023 Annual Report

 

     

 

5

 

 

 


Portfolios overview (cont’d)

 

 

 

 

i 

The MSCI All Country World Index is a market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The MSCI ACWI consists of 45 country indices comprising 24 developed and 21 emerging market country indices.

 

ii 

The Bloomberg 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.

 

iii 

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.

 

iv 

The Variable Growth Composite Benchmark is a hypothetical representation of the performance of the Portfolio’s major asset classes. It consists of 45% Russell 1000 Index, 20% Russell 2000 Index, 20% MSCI EAFE Index, 10% Bloomberg U.S. Aggregate Index and 5% Bloomberg U.S. Corporate High Yield — 2% Issuer Cap Index. The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000 Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 93% of the Russell 3000 Index. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. The MSCI EAFE Index is a free float adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The Bloomberg U.S. Corporate High Yield — 2% Issuer Cap Index is an index of the 2% Issuer Cap component of the Bloomberg U.S. Corporate High Yield Index, which covers the U.S. dollar-denominated, non-investment grade, fixed-rate, taxable corporate bond market.

 

v 

The Variable Moderate Growth Composite Benchmark is a hypothetical representation of the performance of the Portfolio’s major asset classes. It consists of 40% Russell 1000 Index, 15% Russell 2000 Index, 15% MSCI EAFE Index, 25% Bloomberg U.S. Aggregate Index and 5% Bloomberg U.S. Corporate High Yield — 2% Issuer Cap Index.

 

vi 

The Variable Conservative Growth Composite Benchmark is a hypothetical representation of the performance of the Portfolio’s major asset classes. It consists of 28% Russell 1000 Index, 12% Russell 2000 Index, 10% MSCI EAFE Index, 43% Bloomberg U.S. Aggregate Index and 7% Bloomberg U.S. Corporate High Yield — 2% Issuer Cap Index.

 

6

 

   

Franklin Variable Asset Allocation Series 2023 Annual Report

 


Portfolios at a glance (unaudited)

 

Franklin Multi-Asset Variable Growth Fund Investment Breakdown† (%) as a percent of total investments

 

LOGO

 

The bar graph above represents the composition of the Portfolio’s investments as of December 31, 2023 and December 31, 2022. The Portfolio is actively managed. As a result, the composition of the Portfolio’s investments is subject to change at any time.

 

Franklin Variable Asset Allocation Series 2023 Annual Report       7  


Portfolios at a glance (unaudited) (cont’d)

 

Franklin Multi-Asset Variable Moderate Growth Fund Investment Breakdown† (%) as a percent of total investments

 

LOGO

 

The bar graph above represents the composition of the Portfolio’s investments as of December 31, 2023 and December 31, 2022. The Portfolio is actively managed. As a result, the composition of the Portfolio’s investments is subject to change at any time.

 

8     Franklin Variable Asset Allocation Series 2023 Annual Report


 

Franklin Multi-Asset Variable Conservative Growth Fund Investment Breakdown† (%) as a percent of total investments

 

LOGO

 

The bar graph above represents the composition of the Portfolio’s investments as of December 31, 2023 and December 31, 2022. The Portfolio is actively managed. As a result, the composition of the Portfolio’s investments is subject to change at any time.

 

Franklin Variable Asset Allocation Series 2023 Annual Report       9  


Portfolios expenses (unaudited)

 

Example

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

This example is based on an investment of $1,000 invested on July 1, 2023 and held for the six months ended December 31, 2023.

Actual expenses

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

Hypothetical example for comparison purposes

The table below titled “Based on hypothetical total return” providesinformationabouthypotheticalaccountvaluesandhypothetical 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 portfolios. To do so, compare the 5.00% hypothetical example relating to the Portfolio with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.

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

 

Based on actual total return1                 Based on hypothetical total return1  

Franklin

Multi-Asset

Variable

Growth Fund

  Actual
Total Return2
   

Beginning

Account
Value

    Ending
Account
Value
    Annualized
Expense
Ratio3
   

Expenses
Paid
During

the
Period4

          Franklin
Multi-Asset
Variable
Growth Fund
 

Hypothetical

Annualized

Total Return

   

Beginning

Account

Value

   

Ending

Account

Value

   

Annualized

Expense

Ratio3

   

Expenses
Paid
During

the
Period4

 
Class I     6.76   $ 1,000.00     $ 1,067.60       0.15   $ 0.78       Class I     5.00   $ 1,000.00     $ 1,024.45       0.15   $ 0.77  

 

1 

For the six months ended December 31, 2023.

 

2 

Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value. Total return is not annualized, as it may not be representative of the total return for the year. Total returns do not reflect expenses associated with separate accounts such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results.

 

3 

Does not include fees and expenses of the Underlying Funds in which the Portfolio invests.

 

4 

Expenses (net of compensating balance arrangements, fee waivers and/or expense reimbursements) are equal to the class’ annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), then divided by 365.

 

10     Franklin Variable Asset Allocation Series 2023 Annual Report


 

Example

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

This example is based on an investment of $1,000 invested on July 1, 2023 and held for the six months ended December 31, 2023.

Actual expenses

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

Hypothetical example for comparison purposes

The table below titled “Based on hypothetical total return” providesinformationabouthypotheticalaccountvaluesandhypothetical 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 portfolios. To do so, compare the 5.00% hypothetical example relating to the Portfolio with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.

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

 

Based on actual total return1                 Based on hypothetical total return1  

Franklin

Multi-
Asset

Variable

Moderate

Growth Fund

  Actual
Total Return2
    Beginning
Account
Value
    Ending
Account
Value
    Annualized
Expense
Ratio3
    Expenses
Paid
During
the
Period4
         

Franklin

Multi-Asset

Variable

Moderate

Growth Fund

 

Hypothetical

Annualized

Total Return

    Beginning
Account
Value
    Ending
Account
Value
    Annualized
Expense
Ratio3
   

Expenses

Paid

During

the

Period4

 
Class I     6.29   $ 1,000.00     $ 1,062.90       0.20   $ 1.04       Class I     5.00   $ 1,000.00     $ 1,024.20       0.20   $ 1.02  

 

1 

For the six months ended December 31, 2023.

 

2 

Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value. Total return is not annualized, as it may not be representative of the total return for the year. Total returns do not reflect expenses associated with separate accounts such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results.

 

3 

Does not include fees and expenses of the Underlying Funds in which the Portfolio invests.

 

4 

Expenses (net of compensating balance arrangements, fee waivers and/or expense reimbursements) are equal to the class’ annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), then divided by 365.

 

Franklin Variable Asset Allocation Series 2023 Annual Report       11  


Portfolios expenses (unaudited) (cont’d)

 

Example

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

This example is based on an investment of $1,000 invested on July 1, 2023 and held for the six months ended December 31, 2023.

Actual expenses

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

Hypothetical example for comparison purposes

The table below titled “Based on hypothetical total return” providesinformationabouthypotheticalaccountvaluesandhypothetical 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 portfolios. To do so, compare the 5.00% hypothetical example relating to the Portfolio with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.

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

 

Based on actual total return1                 Based on hypothetical total return1  

Franklin

Multi-
Asset

Variable

Conservative

Growth

Fund

  Actual
Total Return2
   

Beginning

Account

Value

   

Ending

Account

Value

   

Annualized

Expense

Ratio3

   

Expenses

Paid

During

the

Period4

         

Franklin

Multi-Asset

Variable

Conservative

Growth

Fund

 

Hypothetical
Annualized

Total Return

    Beginning
Account
Value
    Ending
Account
Value
    Annualized
Expense
Ratio3
   

Expenses

Paid

During

the

Period4

 
Class I     5.63   $ 1,000.00     $ 1,056.30       0.14   $ 0.73       Class I     5.00   $ 1,000.00     $ 1,024.50       0.14   $ 0.71  
Class II     5.43       1,000.00       1,054.30       0.39       2.02       Class II     5.00       1,000.00       1,023.24       0.39       1.99  

 

1 

For the six months ended December 31, 2023.

 

2 

Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value. Total return is not annualized, as it may not be representative of the total return for the year. Total returns do not reflect expenses associated with separate accounts such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results.

 

3 

Does not include fees and expenses of the Underlying Funds in which the Portfolio invests.

 

4 

Expenses (net of compensating balance arrangements, fee waivers and/or expense reimbursements) are equal to each class’ respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), then divided by 365.

 

12     Franklin Variable Asset Allocation Series 2023 Annual Report


Portfolios performance (unaudited)

Franklin Multi-Asset Variable Growth Fund

 

 

Average annual total returns1       
      Class I  
Twelve Months Ended 12/31/23      19.58
Five Years Ended 12/31/23      10.89  
Ten Years Ended 12/31/23      7.41  

 

Cumulative total returns1       
Class I (12/31/13 through 12/31/23)      104.31

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

 

1

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

 

Franklin Variable Asset Allocation Series 2023 Annual Report       13  


Portfolios performance (unaudited) (cont’d)

Franklin Multi-Asset Variable Growth Fund

 

Historical performance

Value of $10,000 invested in

Class I Shares of Franklin Multi-Asset Variable Growth Fund vs. Benchmark Indices† — December 2013 - December 2023

 

LOGO

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

 

Hypothetical illustration of $10,000 invested in Class I shares of Franklin Multi-Asset Variable Growth Fund on December 31, 2013, assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value through December 31, 2023. The hypothetical illustration also assumes a $10,000 investment in the Bloomberg U.S. Aggregate Index, the Russell 3000 Index and the Variable Growth Composite Benchmark. The Bloomberg 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 Russell 3000 Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the U.S. equity market. The Variable Growth Composite Benchmark is a hypothetical representation of the performance of the Portfolio’s major asset classes. It consists of 45% Russell 1000 Index, 20% Russell 2000 Index, 20% MSCI EAFE Index, 10% Bloomberg U.S. Aggregate Index and 5% Bloomberg U.S. Corporate High Yield — 2% Issuer Cap Index. The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000 Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the U.S. market. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. The MSCI EAFE Index is a free float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The Bloomberg U.S. Corporate High Yield — 2% Issuer Cap Index is an index of the 2% Issuer Cap component of the Bloomberg U.S. Corporate High Yield Index, which covers the U.S. dollar-denominated, non-investment grade, fixed-rate, taxable corporate bond market. The indices are unmanaged and are not subject to the same management and trading expenses as a fund. Please note that an investor cannot invest directly in an index.

 

Prior to May 1, 2015, the Portfolio followed different investment policies and strategies under the name QS Legg Mason Variable Lifestyle Allocation 85%.

 

14     Franklin Variable Asset Allocation Series 2023 Annual Report


Portfolios performance (unaudited) (cont’d)

Franklin Multi-Asset Variable Moderate Growth Fund

 

Average annual total returns1       
      Class I  
Twelve Months Ended 12/31/23      17.81
Five Years Ended 12/31/23      9.50  
Ten Years Ended 12/31/23      6.72  

 

Cumulative total returns1       
Class I (12/31/13 through 12/31/23)      91.65

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

 

1 

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

 

Franklin Variable Asset Allocation Series 2023 Annual Report       15  


Portfolios performance (unaudited) (cont’d)

Franklin Multi-Asset Variable Moderate Growth Fund

 

Historical performance

Value of $10,000 invested in

Class I Shares of Franklin Multi-Asset Variable Moderate Growth Fund vs. Benchmark Indices† — December 2013 - December 2023

 

LOGO

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

 

Hypothetical illustration of $10,000 invested in Class I shares of Franklin Multi-Asset Variable Moderate Growth Fund on December 31, 2013, assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value through December 31, 2023. The hypothetical illustration also assumes a $10,000 investment in the Bloomberg U.S. Aggregate Index, the Russell 3000 Index and the Variable Moderate Growth Composite Benchmark. The Bloomberg 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 Russell 3000 Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the U.S. equity market. The Variable Moderate Growth Composite Benchmark is a hypothetical representation of the performance of the Portfolio’s major asset classes. It consists of 40% Russell 1000 Index, 15% Russell 2000 Index, 15% MSCI EAFE Index, 25% Bloomberg U.S. Aggregate Index and 5% Bloomberg U.S. Corporate High Yield — 2% Issuer Cap Index. The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000 Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the U.S. market. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. The MSCI EAFE Index is a free float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The Bloomberg U.S. Corporate High Yield — 2% Issuer Cap Index is an index of the 2% Issuer Cap component of the Bloomberg U.S. Corporate High Yield Index, which covers the U.S. dollar-denominated, non-investment grade, fixed-rate, taxable corporate bond market. The indices are unmanaged and are not subject to the same management and trading expenses as a fund. Please note that an investor cannot invest directly in an index.

 

Prior to May 1, 2015, the Portfolio followed different investment policies and strategies under the name QS Legg Mason Variable Lifestyle Allocation 70%.

 

16     Franklin Variable Asset Allocation Series 2023 Annual Report


Portfolios performance (unaudited) (cont’d)

Franklin Multi-Asset Variable Conservative Growth Fund

 

Average annual total returns1  
      Class I      Class II  
Twelve Months Ended 12/31/23      14.63      14.28
Five Years Ended 12/31/23      7.39        7.10  
Ten Years Ended 12/31/23      5.61        N/A  
Inception* through 12/31/23             5.62  

 

Cumulative total returns1       
Class I (12/31/13 through 12/31/23)      72.66
Class II (Inception date of 6/23/17 through 12/31/23)      42.82  

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

 

1 

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

 

*

Inception dates for Class I and Class II shares of Franklin Multi-Asset Variable Conservative Growth Fund are February 5, 1997 and June 23, 2017, respectively.

 

Franklin Variable Asset Allocation Series 2023 Annual Report       17  


Portfolios performance (unaudited) (cont’d)

Franklin Multi-Asset Variable Conservative Growth Fund

 

Historical performance

Value of $10,000 invested in

Class I Shares of Franklin Multi-Asset Variable Conservative Growth Fund vs. Benchmark Indices† — December 2013 - December 2023

 

LOGO

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

 

Hypothetical illustration of $10,000 invested in Class I shares of Franklin Multi-Asset Variable Conservative Growth Fund on December 31, 2013, assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value through December 31, 2023. The hypothetical illustration also assumes a $10,000 investment in the Bloomberg U.S. Aggregate Index, the Russell 1000 Index and the Variable Conservative Growth Composite Benchmark. The Bloomberg 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 Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000 Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the U.S. market. The Russell 3000 Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the U.S. equity market. The Variable Conservative Growth Composite Benchmark is a hypothetical representation of the performance of the Portfolio’s major asset classes. It consists of 28% Russell 1000 Index, 12% Russell 2000 Index, 10% MSCI EAFE Index, 43% Bloomberg U.S. Aggregate Index and 7% Bloomberg U.S. Corporate High Yield — 2% Issuer Cap Index. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. The MSCI EAFE Index is a free float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The Bloomberg U.S. Corporate High Yield — 2% Issuer Cap Index is an index of the 2% Issuer Cap component of the Bloomberg U.S. Corporate High Yield Index, which covers the U.S. dollar-denominated, non-investment grade, fixed-rate, taxable corporate bond market. The indices are unmanaged and are not subject to the same management and trading expenses as a fund. Please note that an investor cannot invest directly in an index.

 

Prior to May 1, 2015, the Portfolio followed different investment policies and strategies under the name QS Legg Mason Variable Lifestyle Allocation 50%.

 

18     Franklin Variable Asset Allocation Series 2023 Annual Report


Schedules of investments

December 31, 2023

 

Franklin Multi-Asset Variable Growth Fund

(Percentages shown based on Portfolio net assets)

 

Description          Shares     Value  
Investments in Underlying Funds (a) — 99.8%                        
Domestic Equity — 68.3%                        

Franklin Templeton ETF Trust — BrandywineGLOBAL — Dynamic US Large Cap Value ETF

            462,969     $ 5,696,833  

Legg Mason Global Asset Management Trust:

                       

BrandywineGLOBAL — Diversified US Large Cap Value Fund, Class IS Shares

            346,490       6,482,822  

ClearBridge Small Cap Fund, Class IS Shares

            15,874       1,063,274  

Franklin U.S. Small Cap Equity Fund, Class IS Shares

            128,458       1,614,722  

Legg Mason Partners Investment Trust:

                       

ClearBridge Appreciation Fund, Class IS Shares

            680,163       20,846,983  

ClearBridge Large Cap Growth Fund, Class IS Shares

            207,496       12,736,075  

ClearBridge Small Cap Growth Fund, Class IS Shares

            39,894       1,618,121  

Total Domestic Equity

                    50,058,830  
Foreign Equity — 23.1%                        

Legg Mason Global Asset Management Trust — Franklin International Equity Fund, Class IS Shares

            970,990       16,924,357  
Domestic Fixed Income — 8.4%                        

Western Asset Funds, Inc.:

                       

Western Asset Core Bond Fund, Class IS Shares

            431,335       4,658,413  

Western Asset Intermediate Bond Fund, Class IS Shares

            159,029       1,539,399  

Total Domestic Fixed Income

                    6,197,812  

Total Investments in Underlying Funds before Short-Term Investments (Cost — $56,020,275)

 

    73,180,999  
     Rate                
Short-Term Investments — 0.3%                        

Invesco Government & Agency Portfolio, Institutional Class
(Cost — $211,641)

    5.634     211,641       211,641  (b) 

Total Investments — 100.1% (Cost — $56,231,916)

                    73,392,640  

Liabilities in Excess of Other Assets — (0.1)%

                    (48,540

Total Net Assets — 100.0%

                  $ 73,344,100  

 

(a) 

Underlying Funds are affiliated with Franklin Resources, Inc. and more information about the Underlying Funds is available at www.franklintempleton.com (Note 8).

 

(b) 

Rate shown is one-day yield as of the end of the reporting period.

 

See Notes to Financial Statements.

 

Franklin Variable Asset Allocation Series 2023 Annual Report       19  


Schedules of investments (cont’d)

December 31, 2023

 

Franklin Multi-Asset Variable Moderate Growth Fund

(Percentages shown based on Portfolio net assets)

 

Description          Shares     Value  
Investments in Underlying Funds (a) — 99.9%                        
Domestic Equity — 61.2%                        

Franklin Templeton ETF Trust — BrandywineGLOBAL — Dynamic US Large Cap Value ETF

            153,970     $ 1,894,601  

Legg Mason Global Asset Management Trust:

                       

BrandywineGLOBAL — Diversified US Large Cap Value Fund, Class IS Shares

            116,614       2,181,841  

ClearBridge Small Cap Fund, Class IS Shares

            5,251       351,737  

Franklin U.S. Small Cap Equity Fund, Class IS Shares

            43,521       547,060  

Legg Mason Partners Investment Trust:

                       

ClearBridge Appreciation Fund, Class IS Shares

            226,802       6,951,472  

ClearBridge Large Cap Growth Fund, Class IS Shares

            71,539       4,391,070  

ClearBridge Small Cap Growth Fund, Class IS Shares

            13,472       546,413  

Total Domestic Equity

                    16,864,194  
Foreign Equity — 20.3%                        

Legg Mason Global Asset Management Trust — Franklin International Equity Fund, Class IS Shares

            321,448       5,602,842  
Domestic Fixed Income — 18.4%                        

Western Asset Funds, Inc.:

                       

Western Asset Core Bond Fund, Class IS Shares

            352,584       3,807,903  

Western Asset Intermediate Bond Fund, Class IS Shares

            128,787       1,246,658  

Total Domestic Fixed Income

                    5,054,561  

Total Investments in Underlying Funds before Short-Term Investments (Cost — $22,045,052)

 

    27,521,597  
     Rate                
Short-Term Investments — 0.3%                        

Invesco Government & Agency Portfolio, Institutional Class
(Cost — $74,001)

    5.634     74,001       74,001  (b) 

Total Investments — 100.2% (Cost — $22,119,053)

                    27,595,598  

Liabilities in Excess of Other Assets — (0.2)%

                    (43,894

Total Net Assets — 100.0%

                  $ 27,551,704  

 

(a) 

Underlying Funds are affiliated with Franklin Resources, Inc. and more information about the Underlying Funds is available at www.franklintempleton.com (Note 8).

 

(b)

Rate shown is one-day yield as of the end of the reporting period.

 

See Notes to Financial Statements.

 

20     Franklin Variable Asset Allocation Series 2023 Annual Report


 

 

Franklin Multi-Asset Variable Conservative Growth Fund

(Percentages shown based on Portfolio net assets)

 

Description          Shares     Value  
Investments in Underlying Funds (a) — 99.8%                        
Domestic Equity — 45.9%                        

Franklin Templeton ETF Trust — BrandywineGLOBAL — Dynamic US Large Cap Value ETF

            322,113     $ 3,963,601  

Legg Mason Global Asset Management Trust:

                       

BrandywineGLOBAL — Diversified US Large Cap Value Fund, Class IS Shares

            245,860       4,600,038  

ClearBridge Small Cap Fund, Class IS Shares

            11,641       779,710  

Franklin U.S. Small Cap Equity Fund, Class IS Shares

            93,329       1,173,145  

Legg Mason Partners Investment Trust:

                       

ClearBridge Appreciation Fund, Class IS Shares

            484,556       14,851,641  

ClearBridge Large Cap Growth Fund, Class IS Shares

            155,297       9,532,110  

ClearBridge Small Cap Growth Fund, Class IS Shares

            29,564       1,199,137  

Total Domestic Equity

                    36,099,382  
Domestic Fixed Income — 38.4%                        

Western Asset Funds, Inc.:

                       

Western Asset Core Bond Fund, Class IS Shares

            2,099,640       22,676,117  

Western Asset Intermediate Bond Fund, Class IS Shares

            774,054       7,492,840  

Total Domestic Fixed Income

                    30,168,957  
Foreign Equity — 15.5%                        

Legg Mason Global Asset Management Trust — Franklin International Equity Fund, Class IS Shares

            697,053       12,149,631  

Total Investments in Underlying Funds before Short-Term Investments (Cost — $68,405,170)

 

    78,417,970  
     Rate                
Short-Term Investments — 0.3%                        

Invesco Government & Agency Portfolio, Institutional Class
(Cost — $234,966)

    5.634     234,966       234,966  (b) 

Total Investments — 100.1% (Cost — $68,640,136)

                    78,652,936  

Liabilities in Excess of Other Assets — (0.1)%

                    (63,790

Total Net Assets — 100.0%

                  $ 78,589,146  

 

(a) 

Underlying Funds are affiliated with Franklin Resources, Inc. and more information about the Underlying Funds is available at www.franklintempleton.com (Note 8).

 

(b) 

Rate shown is one-day yield as of the end of the reporting period.

 

See Notes to Financial Statements.

 

Franklin Variable Asset Allocation Series 2023 Annual Report       21  


Statements of assets and liabilities

December 31, 2023

 

     

Franklin Multi-Asset

Variable

Growth Fund

    

Franklin Multi-Asset

Variable Moderate
Growth Fund

    

Franklin Multi-Asset

Variable Conservative

Growth Fund

 
Assets:                           

Investments in affiliated Underlying Funds, at cost

   $ 56,020,275      $ 22,045,052      $ 68,405,170  

Short-term investments, at cost

     211,641        74,001        234,966  

Investments in affiliated Underlying Funds, at value

   $ 73,180,999      $ 27,521,597      $ 78,417,970  

Short-term investments, at value

     211,641        74,001        234,966  

Distributions receivable from affiliated Underlying Funds

     20,118        16,384        98,359  

Receivable for investments in affiliated Underlying Funds

     15,061        6,988         

Distributions receivable from unaffiliated Underlying Funds

     924        384        1,211  

Receivable from investment manager

            2,043         

Prepaid expenses

     5        1        5  

Total Assets

     73,428,748        27,621,398        78,752,511  
Liabilities:                           

Audit and tax fees payable

     27,256        26,922        27,094  

Payable for investments in affiliated Underlying Funds

     20,763        16,911        101,500  

Payable for Portfolio shares repurchased

     13,102        3,469        6,832  

Fund accounting fees payable

     12,651        12,453        12,663  

Legal fees payable

     6,323        6,076        6,323  

Trustees’ fees payable

     1,177        469        1,238  

Service and/or distribution fees payable

                   4,013  

Accrued expenses

     3,376        3,394        3,702  

Total Liabilities

     84,648        69,694        163,365  
Total Net Assets    $ 73,344,100      $ 27,551,704      $ 78,589,146  
Net Assets:                           

Par value (Note 7)

   $ 55      $ 20      $ 55  

Paid-in capital in excess of par value

     57,767,239        23,003,965        69,948,712  

Total distributable earnings (loss)

     15,576,806        4,547,719        8,640,379  
Total Net Assets    $ 73,344,100      $ 27,551,704      $ 78,589,146  
Net Assets:                           

Class I

     $73,344,100        $27,551,704        $59,370,103  

Class II

                   $19,219,043  
Shares Outstanding:                           

Class I

     5,474,557        2,043,736        4,120,408  

Class II

                   1,339,865  
Net Asset Value:                           

Class I

     $13.40        $13.48        $14.41  

Class II

                   $14.34  

 

See Notes to Financial Statements.

 

22     Franklin Variable Asset Allocation Series 2023 Annual Report


Statements of operations

For the Year Ended December 31, 2023

 

     

Franklin Multi-Asset

Variable

Growth Fund

    

Franklin Multi-Asset

Variable Moderate

Growth Fund

    

Franklin Multi-Asset

Variable Conservative

Growth Fund

 
Investment Income:                           

Income distributions from affiliated Underlying Funds

   $ 1,185,141      $ 506,678      $ 1,786,822  

Income distributions from unaffiliated Underlying Funds

     23,667        12,123        32,866  

Total Investment Income

     1,208,808        518,801        1,819,688  
Expenses:                           

Legal fees

     31,690        30,478        31,690  

Fund accounting fees

     30,599        30,121        30,619  

Audit and tax fees

     27,202        26,922        27,148  

Shareholder reports

     8,573        9,004        8,284  

Trustees’ fees

     5,187        2,021        5,372  

Commitment fees (Note 9)

     622        232        650  

Interest expense

     171        76        287  

Transfer agent fees (Notes 2 and 5)

     171        168        330  

Custody fees

     107        193        436  

Insurance

     5        1        6  

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

                   42,365  

Miscellaneous expenses

     1,210        1,057        2,228  

Total Expenses

     105,537        100,273        149,415  

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

            (46,278)         

Net Expenses

     105,537        53,995        149,415  
Net Investment Income      1,103,271        464,806        1,670,273  
Realized and Unrealized Gain (Loss) on Affiliated Underlying Funds and Capital Gain Distributions From Affiliated Underlying Funds (Notes 1 and 3):

 

Net Realized Gain From:

                          

Sale of affiliated Underlying Funds

     1,098,706        102,203        (30,869)  

Capital gain distributions from affiliated Underlying Funds

     2,049,551        693,561        1,481,484  

Net Realized Gain

     3,148,257        795,764        1,450,615  

Change in Net Unrealized Appreciation (Depreciation) from Affiliated Underlying Funds

     8,531,517        3,171,926        7,139,800  
Net Gain on Affiliated Underlying Funds and Capital Gain Distributions From Affiliated Underlying Funds      11,679,774        3,967,690        8,590,415  
Increase in Net Assets From Operations    $ 12,783,045      $ 4,432,496      $ 10,260,688  

 

See Notes to Financial Statements.

 

Franklin Variable Asset Allocation Series 2023 Annual Report       23  


Statements of changes in net assets

Franklin Multi-Asset Variable Growth Fund

 

For the Years Ended December 31,    2023      2022  
Operations:                  

Net investment income

   $ 1,103,271      $ 1,168,664  

Net realized gain

     3,148,257        2,749,797  

Change in net unrealized appreciation (depreciation)

     8,531,517        (17,421,853)  

Increase (Decrease) in Net Assets From Operations

     12,783,045        (13,503,392)  
Distributions to Shareholders From (Notes 1 and 6):                  

Total distributable earnings

     (4,051,270)        (8,834,004)  

Decrease in Net Assets From Distributions to Shareholders

     (4,051,270)        (8,834,004)  
Portfolio Share Transactions (Note 7):                  

Net proceeds from sale of shares

     312,023        300,619  

Reinvestment of distributions

     4,051,270        8,834,004  

Cost of shares repurchased

     (9,808,783)        (11,016,369)  

Decrease in Net Assets From Portfolio Share Transactions

     (5,445,490)        (1,881,746)  

Increase (Decrease) in Net Assets

     3,286,285        (24,219,142)  
Net Assets:                  

Beginning of year

     70,057,815        94,276,957  

End of year

   $ 73,344,100      $ 70,057,815  

 

See Notes to Financial Statements.

 

24     Franklin Variable Asset Allocation Series 2023 Annual Report


Franklin Multi-Asset Variable Moderate Growth Fund

 

For the Years Ended December 31,    2023      2022  
Operations:                  

Net investment income

   $ 464,806      $ 461,493  

Net realized gain

     795,764        501,908  

Change in net unrealized appreciation (depreciation)

     3,171,926        (5,755,637)  

Increase (Decrease) in Net Assets From Operations

     4,432,496        (4,792,236)  
Distributions to Shareholders From (Notes 1 and 6):                  

Total distributable earnings

     (1,185,349)        (2,464,256)  

Decrease in Net Assets From Distributions to Shareholders

     (1,185,349)        (2,464,256)  
Portfolio Share Transactions (Note 7):                  

Net proceeds from sale of shares

     153,073        81,068  

Reinvestment of distributions

     1,185,349        2,464,256  

Cost of shares repurchased

     (3,422,783)        (2,989,082)  

Decrease in Net Assets From Portfolio Share Transactions

     (2,084,361)        (443,758)  

Increase (Decrease) in Net Assets

     1,162,786        (7,700,250)  
Net Assets:                  

Beginning of year

     26,388,918        34,089,168  

End of year

   $ 27,551,704      $ 26,388,918  

 

See Notes to Financial Statements.

 

Franklin Variable Asset Allocation Series 2023 Annual Report       25  


Statements of changes in net assets (cont’d)

Franklin Multi-Asset Variable Conservative Growth Fund

 

For the Years Ended December 31,    2023      2022  
Operations:                  

Net investment income

   $ 1,670,273      $ 1,472,605  

Net realized gain (loss)

     1,450,615        (81,071)  

Change in net unrealized appreciation (depreciation)

     7,139,800        (14,723,049)  

Increase (Decrease) in Net Assets From Operations

     10,260,688        (13,331,515)  
Distributions to Shareholders From (Notes 1 and 6):                  

Total distributable earnings

     (1,725,004)        (5,912,251)  

Decrease in Net Assets From Distributions to Shareholders

     (1,725,004)        (5,912,251)  
Portfolio Share Transactions (Note 7):                  

Net proceeds from sale of shares

     4,047,411        4,861,075  

Reinvestment of distributions

     1,725,004        5,912,251  

Cost of shares repurchased

     (8,482,957)        (13,839,306)  

Decrease in Net Assets From Portfolio Share Transactions

     (2,710,542)        (3,065,980)  

Increase (Decrease) in Net Assets

     5,825,142        (22,309,746)  
Net Assets:                  

Beginning of year

     72,764,004        95,073,750  

End of year

   $ 78,589,146      $ 72,764,004  

 

See Notes to Financial Statements.

 

26     Franklin Variable Asset Allocation Series 2023 Annual Report


Financial highlights

Franklin Multi-Asset Variable Growth Fund

 

For a share of beneficial interest outstanding throughout each year ended December 31:  
Class I Shares1   2023     2022     2021     2020     2019  
Net asset value, beginning of year     $11.85       $15.88       $14.74       $14.00       $12.20  
Income (loss) from operations:          

Net investment income

    0.19       0.20       0.16       0.17       0.18  

Net realized and unrealized gain (loss)

    2.10       (2.63)       2.87       1.30       2.52  

Total income (loss) from operations

    2.29       (2.43)       3.03       1.47       2.70  
Less distributions from:          

Net investment income

    (0.15)       (0.41)       (0.69)       (0.21)       (0.21)  

Net realized gains

    (0.59)       (1.19)       (1.20)       (0.52)       (0.69)  

Total distributions

    (0.74)       (1.60)       (1.89)       (0.73)       (0.90)  
Net asset value, end of year     $13.40       $11.85       $15.88       $14.74       $14.00  

Total return2

    19.58     (14.80)     20.69     11.24     22.58
Net assets, end of year (000s)     $73,344       $70,058       $94,277       $92,655       $97,959  
Ratios to average net assets:          

Gross expenses3

    0.15     0.13     0.12     0.14     0.12

Net expenses3,4

    0.15       0.13       0.12       0.13 5      0.12  

Net investment income

    1.53       1.52       1.00       1.27       1.38  
Portfolio turnover rate     20     42     19     21     19

 

1 

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

 

2 

Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Total returns do not reflect expenses associated with separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Past performance is no guarantee of future results.

 

3 

Does not include fees and expenses of the Underlying Funds in which the Portfolio invests.

 

4 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses (fees and expenses of Underlying Funds), to average net assets of Class I shares did not exceed 0.20%. This expense limitation arrangement cannot be terminated prior to December 31, 2025 without the Board of Trustees’ consent.

 

5 

Reflects fee waivers and/or expense reimbursements.

 

See Notes to Financial Statements.

 

Franklin Variable Asset Allocation Series 2023 Annual Report       27  


Financial highlights (cont’d)

Franklin Multi-Asset Variable Moderate Growth Fund

 

For a share of beneficial interest outstanding throughout each year ended December 31:  
Class I Shares1   2023     2022     2021     2020     2019  
Net asset value, beginning of year     $11.95       $15.37       $14.62       $13.87       $12.16  
Income (loss) from operations:          

Net investment income

    0.22       0.21       0.17       0.18       0.20  

Net realized and unrealized gain (loss)

    1.90       (2.47)       2.25       1.29       2.25  

Total income (loss) from operations

    2.12       (2.26)       2.42       1.47       2.45  
Less distributions from:          

Net investment income

    (0.24)       (0.23)       (0.68)       (0.23)       (0.51)  

Net realized gains

    (0.35)       (0.93)       (0.99)       (0.49)       (0.23)  

Total distributions

    (0.59)       (1.16)       (1.67)       (0.72)       (0.74)  
Net asset value, end of year     $13.48       $11.95       $15.37       $14.62       $13.87  

Total return2

    17.81     (14.36)     16.66     11.07     20.43
Net assets, end of year (000s)     $27,552       $26,389       $34,089       $33,030       $33,182  
Ratios to average net assets:          

Gross expenses3

    0.37     0.35     0.31     0.35     0.29

Net expenses3,4,5

    0.20       0.20       0.20       0.20       0.20  

Net investment income

    1.73       1.61       1.04       1.36       1.53  
Portfolio turnover rate     18     42     18     26     21

 

1 

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

 

2 

Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Total returns do not reflect expenses associated with separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Past performance is no guarantee of future results.

 

3 

Does not include fees and expenses of the Underlying Funds in which the Portfolio invests.

 

4

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses (fees and expenses of Underlying Funds), to average net assets of Class I shares did not exceed 0.20%. This expense limitation arrangement cannot be terminated prior to December 31, 2025 without the Board of Trustees’ consent.

 

5 

Reflects fee waivers and/or expense reimbursements.

 

See Notes to Financial Statements.

 

28     Franklin Variable Asset Allocation Series 2023 Annual Report


 

 

Franklin Multi-Asset Variable Conservative Growth Fund

 

For a share of each class of beneficial interest outstanding throughout each year ended December 31:  
Class I Shares1   2023     2022     2021     2020     2019  
Net asset value, beginning of year     $12.86       $16.25       $15.86       $14.88       $13.23  
Income (loss) from operations:          

Net investment income

    0.31       0.26       0.21       0.23       0.27  

Net realized and unrealized gain (loss)

    1.57       (2.59)       1.60       1.37       2.01  

Total income (loss) from operations

    1.88       (2.33)       1.81       1.60       2.28  
Less distributions from:          

Net investment income

    (0.33)       (0.30)       (0.57)       (0.32)       (0.31)  

Net realized gains

          (0.76)       (0.85)       (0.30)       (0.32)  

Total distributions

    (0.33)       (1.06)       (1.42)       (0.62)       (0.63)  
Net asset value, end of year     $14.41       $12.86       $16.25       $15.86       $14.88  

Total return2

    14.63     (14.17)     11.47     10.96     17.37
Net assets, end of year (000s)     $59,370       $57,593       $76,687       $77,465       $80,945  
Ratios to average net assets:          

Gross expenses3

    0.14     0.13     0.12     0.14     0.12

Net expenses3,4

    0.14       0.13       0.12       0.14 5      0.12  

Net investment income

    2.25       1.87       1.24       1.59       1.88  
Portfolio turnover rate     16     49     17     28     24

 

1 

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

 

2 

Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Total returns do not reflect expenses associated with separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Past performance is no guarantee of future results.

 

3 

Does not include fees and expenses of the Underlying Funds in which the Portfolio invests.

 

4 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses (fees and expenses of Underlying Funds), to average net assets of Class I shares did not exceed 0.20%. This expense limitation arrangement cannot be terminated prior to December 31, 2025 without the Board of Trustees’ consent.

 

5 

Reflects fee waivers and/or expense reimbursements.

 

See Notes to Financial Statements.

 

Franklin Variable Asset Allocation Series 2023 Annual Report       29  


Financial highlights (cont’d)

Franklin Multi-Asset Variable Conservative Growth Fund

 

For a share of each class of beneficial interest outstanding throughout each year ended December 31:  
Class II Shares1   2023     2022     2021     2020     2019  
Net asset value, beginning of year     $12.81       $16.18       $15.81       $14.83       $13.21  
Income (loss) from operations:          

Net investment income

    0.29       0.23       0.17       0.21       0.25  

Net realized and unrealized gain (loss)

    1.54       (2.57)       1.58       1.35       1.97  

Total income (loss) from operations

    1.83       (2.34)       1.75       1.56       2.22  
Less distributions from:          

Net investment income

    (0.30)       (0.27)       (0.53)       (0.28)       (0.28)  

Net realized gains

          (0.76)       (0.85)       (0.30)       (0.32)  

Total distributions

    (0.30)       (1.03)       (1.38)       (0.58)       (0.60)  
Net asset value, end of year     $14.34       $12.81       $16.18       $15.81       $14.83  

Total return2

    14.28     (14.33)     11.12     10.77     16.94
Net assets, end of year (000s)     $19,219       $15,171       $18,387       $13,579       $9,823  
Ratios to average net assets:          

Gross expenses3

    0.39     0.38     0.37     0.39     0.37

Net expenses3,4

    0.39       0.38       0.37       0.39 5      0.37  

Net investment income

    2.15       1.68       1.03       1.41       1.77  
Portfolio turnover rate     16     49     17     28     24

 

1 

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

 

2 

Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Total returns do not reflect expenses associated with separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Past performance is no guarantee of future results.

 

3 

Does not include fees and expenses of the Underlying Funds in which the Portfolio invests.

 

4 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses (fees and expenses of Underlying Funds), to average net assets of Class II shares did not exceed 0.45%. This expense limitation arrangement cannot be terminated prior to December 31, 2025 without the Board of Trustees’ consent.

 

5 

Reflects fee waivers and/or expense reimbursements.

 

See Notes to Financial Statements.

 

30     Franklin Variable Asset Allocation Series 2023 Annual Report


Notes to financial statements

 

1. Organization and significant accounting policies

Franklin Multi-Asset Variable Growth Fund (“Variable Growth”), Franklin Multi-Asset Variable Moderate Growth Fund (“Variable Moderate Growth”) and Franklin Multi-Asset Variable Conservative Growth Fund (“Variable Conservative Growth”) (the “Portfolios”) are separate diversified investment series of Legg Mason Partners Variable Equity Trust (the “Trust”). The Trust, a Maryland statutory trust, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Portfolios invest in Legg Mason and Franklin Templeton affiliated mutual funds and exchange-traded funds (“ETFs”) and ETFs managed by unaffiliated investment advisers (“Underlying Funds”). Shares of the Portfolios are offered to separate accounts sponsored by certain life insurance companies and qualified pension and retirement plans, including affiliates of the investment manager.

Shares of the Portfolios 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 Portfolios follow the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services — Investment Companies (“ASC 946”). The following are significant accounting policies consistently followed by the Portfolios and are in conformity with U.S. generally accepted accounting principles (“GAAP”), including, but not limited to, ASC 946. Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. Subsequent events have been evaluated through the date the financial statements were issued.

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

Pursuant to policies adopted by the Board of Trustees, the Portfolios’ manager has been designated as the valuation designee and is responsible for the oversight of the daily valuation process. The Portfolios’ manager is assisted by the Global Fund Valuation Committee (the “Valuation Committee”). The Valuation Committee is responsible for making fair value determinations, evaluating the effectiveness of the Portfolios’ pricing policies, and reporting to the Portfolios’ manager and the Board of Trustees. When determining the reliability of third party pricing information for investments owned by the Portfolios, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the daily change in prices and reviews transactions among market participants.

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

 

Franklin Variable Asset Allocation Series 2023 Annual Report       31  


Notes to financial statements (cont’d)

 

proposals or tender offers affecting the security; the price and extent of public trading in similar securities of the issuer or comparable companies; and the existence of a shelf registration for restricted securities. Additionally, if the closing net asset value per share for an Underlying Fund is not available on the day of valuation, the Valuation Committee may adjust the Underlying Fund’s last available net asset value per share to account for significant events that have occurred subsequent to the Underlying Fund’s last net asset value per share calculation but prior to the day of valuation.

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

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

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

 

 

Level 1 — unadjusted 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 Portfolios’ own assumptions in determining the fair value of investments)

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

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

Variable Growth

 

ASSETS  
Description  

Quoted Prices

(Level 1)

   

Other Significant

Observable Inputs

(Level 2)

   

Significant

Unobservable

Inputs

(Level 3)

    Total  
Investments in Underlying Funds†   $ 73,180,999                 $ 73,180,999  
Short-Term Investments†     211,641                   211,641  
Total Investments   $ 73,392,640                 $ 73,392,640  

 

See Schedule of Investments for additional detailed categorizations.

Variable Moderate Growth

 

ASSETS  
Description  

Quoted Prices

(Level 1)

   

Other Significant

Observable Inputs

(Level 2)

   

Significant

Unobservable

Inputs

(Level 3)

    Total  
Investments in Underlying Funds†   $ 27,521,597                 $ 27,521,597  
Short-Term Investments†     74,001                   74,001  
Total Investments   $ 27,595,598                 $ 27,595,598  

 

See Schedule of Investments for additional detailed categorizations.

 

32     Franklin Variable Asset Allocation Series 2023 Annual Report


 

Variable Conservative Growth

 

     ASSETS                       
Description  

Quoted Prices

(Level 1)

   

Other Significant

Observable Inputs

(Level 2)

   

Significant

Unobservable

Inputs

(Level 3)

    Total  
Investments in Underlying Funds†   $ 78,417,970                 $ 78,417,970  
Short-Term Investments†     234,966                   234,966  
Total Investments   $ 78,652,936                 $ 78,652,936  

 

See Schedule of Investments for additional detailed categorizations.

(b) Fund of funds risk. The cost of investing in the Portfolios, as funds of funds, may be higher than the cost of investing in a mutual fund that only invests directly in individual securities. An Underlying Fund may change its investment objective or policies without the Portfolios’ approval, which could force the Portfolios to withdraw their investments from such Underlying Fund at a time that is unfavorable to the Portfolios. In addition, one Underlying Fund may buy the same securities that another Underlying Fund sells. Therefore, the Portfolios would indirectly bear the costs of these trades without accomplishing any investment purpose.

(c) Security transactions and investment income. Security transactions are accounted for on a trade date basis. Net investment income distributions, if any, from the Underlying Funds are recorded on the ex-dividend date as investment income. Interest income is recorded on an accrual basis. Short-term and long-term capital gain distributions, if any, from the Underlying Funds are recorded on the ex-dividend date as realized gains. The character of certain distributions received from the Underlying Funds may represent a return of capital. The Portfolios determine the components of these distributions subsequent to the ex-dividend date, based on the actual tax character reported by the Underlying Funds. These distributions are recorded by adjusting the cost basis of the related Underlying Fund. The cost of investments sold is determined by use of the specific identification method.

(d) 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 Portfolios are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.

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

(f) Compensating balance arrangements. The Portfolios have an arrangement with their custodian bank whereby a portion of the custodian’s fees is paid indirectly by credits earned on the Portfolios’ cash on deposit with the bank.

(g) Federal and other taxes. It is the Portfolios’ 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 Portfolios intend to distribute their taxable income and net realized gains, if any, to shareholders in accordance with timing requirements imposed by the Code. Therefore, no federal or state income tax provision is required in the Portfolios’ financial statements.

Management has analyzed the Portfolios’ tax positions taken on income tax returns for all open tax years and has concluded that as of December 31, 2023, no provision for income tax is required in the Portfolios’ financial statements. The Portfolios’ federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.

(h) Reclassification. GAAP requires that certain components of net assets be reclassified to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. During the current year, the Portfolios had no reclassifications.

2. Investment management agreement and other transactions with affiliates

Franklin Templeton Fund Adviser, LLC (“FTFA”) (formerly known as Legg Mason Partners Fund Advisor, LLC (“LMPFA”) prior to November 30, 2023) is each Portfolio’s investment manager. Franklin Advisers, Inc. (“Franklin Advisers”) is each Portfolio’s subadviser. Western Asset Management Company, LLC (“Western Asset”) manages the portion of each Portfolio’s cash and

 

Franklin Variable Asset Allocation Series 2023 Annual Report       33  


Notes to financial statements (cont’d)

 

short-term instruments allocated to it. FTFA, Franklin Advisers and Western Asset are wholly-owned subsidiaries of Franklin Resources, Inc. (“Franklin Resources”). Under the investment management agreements, the Portfolios do not pay a management fee.

FTFA provides administrative and certain oversight services to the Portfolios. FTFA delegates to the subadviser the day-to-day portfolio management of the Portfolios, except for the management of the portion of each Portfolio’s cash and short-term instruments allocated to Western Asset.

The Portfolios indirectly bear their proportionate share of expenses from the Underlying Funds. Since the Underlying Funds have varied expense levels and the Portfolios may own different proportions of the Underlying Funds at different times, the amount of expenses incurred indirectly by the Portfolios will vary.

As a result of expense limitation arrangements between the Portfolios and FTFA, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses (fees and expenses of Underlying Funds), to average net assets of Class I shares of Variable Growth, Variable Moderate Growth and Variable Conservative Growth and Class II shares of Variable Conservative Growth did not exceed 0.20% and 0.45%, respectively. These expense limitation arrangements cannot be terminated prior to December 31, 2025 without the Board of Trustees’ consent.

During the year ended December 31, 2023, fees waived and/or expenses reimbursed were as follows:

 

Variable Moderate Growth    $ 46,278  

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

In addition, the Portfolios indirectly pay management and/or administration fees to FTFA and certain FTFA affiliates as shareholders in the Underlying Funds. These management and/or administration fees ranged from 0.40% to 0.75% of the average daily net assets of the Underlying Funds.

Franklin Distributors, LLC (“Franklin Distributors”) serves as the Portfolios’ sole and exclusive distributor. Franklin Distributors is an indirect, wholly-owned broker-dealer subsidiary of Franklin Resources. Franklin Templeton Investor Services, LLC (“Investor Services”) serves as the Portfolios’ shareholder servicing agent and acts as the Portfolios’ transfer agent and dividend-paying agent. Investor Services is an indirect, wholly-owned subsidiary of Franklin Resources. Each class of shares of the Portfolios pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. Investor Services charges account-based fees based on the number of individual shareholder accounts, as well as a fixed percentage fee based on the total account-based fees charged. In addition, each class reimburses Investor Services for out of pocket expenses incurred. For the year ended December 31, 2023, Variable Growth, Variable Moderate Growth and Variable Conservative Growth incurred transfer agent fees as reported on the Statements of Operations, of which $70, $66 and $249, respectively, was earned by Investor Services.

All officers and one Trustee of the Trust are employees of Franklin Resources or its affiliates and do not receive compensation from the Trust.

3. Investments

During the year ended December 31, 2023, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) were as follows:

 

        Purchases        Sales  
Variable Growth      $ 14,266,367        $ 20,197,241  
Variable Moderate Growth        4,768,290          6,643,923  
Variable Conservative Growth        11,856,183          12,897,224  

 

34     Franklin Variable Asset Allocation Series 2023 Annual Report


 

At December 31, 2023, the aggregate cost of investments and the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:

 

              Variable Growth  
      Cost     

Gross

Unrealized

Appreciation

    

Gross

Unrealized

Depreciation

    

Net

Unrealized

Appreciation

 
Securities    $ 59,793,295      $ 17,370,531      $ (3,771,186)      $ 13,599,345  
              Variable Moderate Growth  
      Cost     

Gross

Unrealized

Appreciation

    

Gross

Unrealized

Depreciation

    

Net

Unrealized

Appreciation

 
Securities    $ 23,543,518      $ 5,829,412      $ (1,777,332)      $ 4,052,080  
              Variable Conservative Growth  
      Cost     

Gross

Unrealized

Appreciation

    

Gross

Unrealized

Depreciation

    

Net

Unrealized

Appreciation

 
Securities    $ 71,013,114      $ 12,515,647      $ (4,875,825)      $ 7,639,822  

4. Derivative instruments and hedging activities

During the year ended December 31, 2023, the Portfolios did not invest in derivative instruments.

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

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

For the year ended December 31, 2023, class specific expenses were as follows:

 

                 

Transfer Agent

Fees

 
Variable Growth                      
Class I                 $ 171  
                 

Transfer Agent

Fees

 
Variable Moderate Growth                      
Class I                 $ 168  
       

Service and/or

Distribution Fees

      

Transfer Agent

Fees

 
Variable Conservative Growth

 

          
Class I               $ 182  
Class II      $ 42,365          148  
Total      $ 42,365        $ 330  

For the year ended December 31, 2023, waivers and/or expense reimbursements by class were as follows:

 

       

Waivers/Expense

Reimbursements

 
Variable Moderate Growth           
Class I      $ 46,278  

 

Franklin Variable Asset Allocation Series 2023 Annual Report       35  


Notes to financial statements (cont’d)

 

6. Distributions to shareholders by class

 

       

Year Ended

December 31, 2023

      

Year Ended

December 31, 2022

 
Variable Growth                      
Net Investment Income:                      
Class I      $ 825,006        $ 2,350,004  
Net Realized Gains:                      
Class I      $ 3,226,264        $ 6,484,000  
       

Year Ended

December 31, 2023

      

Year Ended

December 31, 2022

 
Variable Moderate Growth                      
Net Investment Income:                      
Class I      $ 470,002        $ 505,001  
Net Realized Gains:                      
Class I      $ 715,347        $ 1,959,255  
       

Year Ended

December 31, 2023

      

Year Ended

December 31, 2022

 
Variable Conservative Growth                      
Net Investment Income:                      
Class I      $ 1,340,234        $ 1,337,353  
Class II        384,770          312,652  
Total      $ 1,725,004        $ 1,650,005  
Net Realized Gains:                      
Class I               $ 3,390,539  
Class II                 871,707  
Total               $ 4,262,246  

7. Shares of beneficial interest

At December 31, 2023, the Trust had an unlimited number of shares of beneficial interest authorized with a par value of $0.00001 per share. The Portfolios have the ability to issue multiple classes of shares. Each class of shares represents an identical interest and has the same rights, except that each class bears certain direct expenses, including those specifically related to the distribution of its shares.

Transactions in shares of each class were as follows:

 

     Year Ended
December 31, 2023
     Year Ended
December 31, 2022
 
      Shares      Amount      Shares      Amount  
Variable Growth                                    
Class I                                    
Shares sold      24,267      $ 312,023        23,637      $ 300,619  
Shares issued on reinvestment      310,481        4,051,270        767,696        8,834,004  
Shares repurchased      (770,071)        (9,808,783)        (816,987)        (11,016,369)  
Net decrease      (435,323)      $ (5,445,490)        (25,654)      $ (1,881,746)  

 

36     Franklin Variable Asset Allocation Series 2023 Annual Report


     Year Ended
December 31, 2023
     Year Ended
December 31, 2022
 
      Shares      Amount      Shares      Amount  
Variable Moderate Growth                                    
Class I                                    
Shares sold      12,073      $ 153,073        6,076      $ 81,068  
Shares issued on reinvestment      89,698        1,185,349        210,888        2,464,256  
Shares repurchased      (266,722)        (3,422,783)        (226,463)        (2,989,082)  
Net decrease      (164,951)      $ (2,084,361)        (9,499)      $ (443,758)  
     Year Ended
December 31, 2023
     Year Ended
December 31, 2022
 
      Shares      Amount      Shares      Amount  
Variable Conservative Growth                                    
Class I                                    
Shares sold      35,780      $ 492,520        68,471      $ 949,728  
Shares issued on reinvestment      93,677        1,340,234        370,064        4,727,892  
Shares repurchased      (487,621)        (6,667,349)        (680,060)        (9,440,661)  
Net decrease      (358,164)      $ (4,834,595)        (241,525)      $ (3,763,041)  
Class II                                    
Shares sold      261,440      $ 3,554,891        277,096      $ 3,911,347  
Shares issued on reinvestment      27,011        384,770        93,205        1,184,359  
Shares repurchased      (133,192)        (1,815,608)        (321,759)        (4,398,645)  
Net increase      155,259      $ 2,124,053        48,542      $ 697,061  

8. Transactions with affiliated companies

As defined by the 1940 Act, an affiliated company is one in which the Portfolios own 5% or more of the outstanding voting securities, or a company which is under common ownership or control with the Portfolios. The following Underlying Funds were considered affiliated companies for all or some portion of the year ended December 31, 2023. The following transactions were effected in such Underlying Funds for the year ended December 31, 2023.

 

Variable Growth

 

Affiliate

Value at

December 31,

2022

    Purchased    

Sold

   

Realized

Gain (Loss)

from Sale
of Affiliated

Underlying

Funds

   

Income

Distributions

from

Affiliated

Underlying

Funds

   

Capital Gain

Distributions

from

Affiliated

Underlying

Funds

   

Net Increase

(Decrease) in

Unrealized

Appreciation

(Depreciation)

   

Affiliate

Value at
December 31,

2023

 
  Cost     Shares     Proceeds     Shares  
BrandywineGLOBAL — Dynamic US Large Cap Value ETF

 

    $ 4,969,958     $ 1,114,148       96,645     $ 813,783       67,760     $ 36,463     $ 66,437           $ 390,047     $ 5,696,833  
BrandywineGLOBAL — Diversified US Large Cap Value Fund, Class IS Shares

 

      5,865,906       638,063       35,643       352,143       19,440       (8,671)       122,839     $ 5,225       339,667       6,482,822  
ClearBridge Small Cap Fund, Class IS Shares

 

      3,030,133       85,748       1,457       2,547,842       37,818       320,354       5,807       9,941       174,881       1,063,274  
Franklin U.S. Small Cap Equity Fund, Class IS Shares

 

      3,569,262       266,788       23,838       2,634,329       219,564       397,247       7,830       83,957       15,754       1,614,722  
ClearBridge Appreciation Fund, Class IS Shares

 

      15,496,378       5,638,263       183,988       2,430,028       83,345       (18,445)       204,912       703,351       2,160,815       20,846,983  
ClearBridge Large Cap Growth Fund, Class IS Shares

 

      11,279,060       1,645,972       27,312       3,543,695       61,234       293,411             1,240,972       3,061,327       12,736,075  
ClearBridge Small Cap Growth Fund, Class IS Shares

 

      2,213,551       151,105       4,501       979,329       23,920       693,848       24       6,105       (461,054)       1,618,121  
Franklin International Equity Fund, Class IS Shares

 

      14,153,402       3,869,965       227,785       3,349,711       204,145       131,239       459,965             2,119,462       16,924,357  
Western Asset Core Bond Fund, Class IS Shares

 

      6,697,358       651,862       61,303       2,657,319       261,794       (626,657)       242,634             593,169       4,658,413  
Western Asset Intermediate Bond Fund, Class IS Shares

 

      2,206,642       204,453       21,448       889,062       95,433       (120,083)       74,693             137,449       1,539,399  
    $ 69,481,650     $ 14,266,367             $ 20,197,241             $ 1,098,706     $ 1,185,141     $ 2,049,551     $ 8,531,517     $ 73,180,999  

 

Franklin Variable Asset Allocation Series 2023 Annual Report       37  


Notes to financial statements (cont’d)

 

Variable Moderate Growth

 

Affiliate

Value at

December 31,

2022

    Purchased    

Sold

   

Realized

Gain (Loss)

from Sale
of Affiliated

Underlying

Funds

   

Income

Distributions

from

Affiliated

Underlying

Funds

   

Capital Gain

Distributions

from

Affiliated

Underlying

Funds

   

Net Increase

(Decrease) in

Unrealized

Appreciation

(Depreciation)

   

Affiliate

Value at
December 31,

2023

 
  Cost     Shares     Proceeds     Shares  
BrandywineGLOBAL — Dynamic US Large Cap Value ETF

 

    $ 1,651,207     $ 165,618       14,069     $ 51,922       4,318     $ 580     $ 22,118           $ 129,118     $ 1,894,601  
BrandywineGLOBAL — Diversified US Large Cap Value Fund, Class IS Shares

 

      1,954,535       167,876       9,458       53,046       2,897       (720)       41,091     $ 1,749       113,196       2,181,841  
ClearBridge Small Cap Fund, Class IS Shares

 

      1,007,736       65,216       1,101       891,311       13,222       112,097       1,842       3,292       57,999       351,737  
Franklin U.S. Small Cap Equity Fund, Class IS Shares

 

      1,190,705       85,765       7,676       867,045       72,303       127,293       2,623       28,108       10,342       547,060  
ClearBridge Appreciation Fund, Class IS Shares

 

      5,149,090       1,863,176       60,902       785,589       26,661       11,120       68,399       234,777       713,675       6,951,472  
ClearBridge Large Cap Growth Fund, Class IS Shares

 

      3,767,607       703,570       11,694       1,198,701       20,797       99,609             423,571       1,018,985       4,391,070  
ClearBridge Small Cap Growth Fund, Class IS Shares

 

      736,913       57,063       1,701       327,038       7,975       40,225             2,064       39,250       546,413  
Franklin International Equity Fund, Class IS Shares

 

      4,621,127       1,187,431       69,958       955,641       57,822       41,619       152,431             708,306       5,602,842  
Western Asset Core Bond Fund, Class IS Shares

 

      4,555,136       361,394       34,020       1,139,043       111,166       (271,026)       166,853             301,442       3,807,903  
Western Asset Intermediate Bond Fund, Class IS Shares

 

      1,489,045       111,181       11,672       374,587       40,123       (58,594)       51,321             79,613       1,246,658  
    $ 26,123,101       $4,768,290     $ 6,643,923             $ 102,203     $ 506,678     $ 693,561     $ 3,171,926     $ 27,521,597  

Variable Conservative Growth

 

Affiliate

Value at

December 31,

2022

    Purchased    

Sold

   

Realized

Gain (Loss)

from Sale
of Affiliated

Underlying

Funds

   

Income

Distributions

from

Affiliated

Underlying

Funds

   

Capital Gain

Distributions

from

Affiliated

Underlying

Funds

   

Net Increase

(Decrease) in

Unrealized

Appreciation

(Depreciation)

   

Affiliate

Value at
December 31,

2023

 
  Cost     Shares     Proceeds     Shares  
BrandywineGLOBAL — Dynamic US Large Cap Value ETF

 

    $ 3,534,113     $ 531,702       45,507     $ 389,724       32,069     $ 15,001     $ 46,102           $ 272,509     $ 3,963,601  
BrandywineGLOBAL — Diversified US Large Cap Value Fund, Class IS Shares

 

      4,051,672       390,064       22,210       80,000       4,485       (5,757)       86,390     $ 3,674       244,059       4,600,038  
ClearBridge Small Cap Fund, Class IS Shares

 

      2,091,580       156,518       2,651       1,820,000       27,065       225,404       4,247       7,271       126,208       779,710  
Franklin U.S. Small Cap Equity Fund, Class IS Shares

 

      2,465,224       189,424       17,086       1,765,000       147,665       342,116       5,674       58,750       (58,619)       1,173,145  
ClearBridge Appreciation Fund, Class IS Shares

 

      10,630,436       3,995,355 130,861       1,275,000       43,853       34,185       145,598       499,757       1,466,665       14,851,641  
ClearBridge Large Cap Growth Fund, Class IS Shares

 

      7,728,774       1,512,519       25,254       2,007,500       35,385       162,938             907,519       2,135,379       9,532,110  
ClearBridge Small Cap Growth Fund, Class IS Shares

 

      1,529,952       169,512       5,036       675,000       16,467       103,445       18       4,513       71,228       1,199,137  
Western Asset Core Bond Fund, Class IS Shares

 

      23,612,774       1,901,900 179,036       3,165,000       307,016       (771,699)       893,960             1,098,142       22,676,117  
Western Asset Intermediate Bond Fund, Class IS Shares

 

      7,782,860       584,862       61,389       1,015,000       109,179       (175,052)       275,506             315,170       7,492,840  
Franklin International Equity Fund, Class IS Shares

 

      8,922,695       2,424,327       142,788       705,000       42,970       38,550       329,327             1,469,059       12,149,631  
    $ 72,350,080     $ 11,856,183             $ 12,897,224             $ (30,869)     $ 1,786,822     $ 1,481,484     $ 7,139,800     $ 78,417,970  

9. Redemption facility

The Portfolios, together with other U.S. registered and foreign investment funds (collectively, the “Borrowers”) managed by Franklin Resources or its affiliates, are borrowers in a joint syndicated senior unsecured credit facility totaling $2.675 billion

 

38     Franklin Variable Asset Allocation Series 2023 Annual Report


 

(the “Global Credit Facility”). The Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Unless renewed, the Global Credit Facility will terminate on January 31, 2025.

Under the terms of the Global Credit Facility, the Portfolios shall, in addition to interest charged on any borrowings made by the Portfolios and other costs incurred by the Portfolios, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in the Statements of Operations. The Portfolios did not utilize the Global Credit Facility during the year ended December 31, 2023.

10. Income tax information and distributions to shareholders

The tax character of distributions paid during the fiscal year ended December 31, 2023 was as follows:

 

      Variable
Growth
     Variable
Moderate Growth
     Variable
Conservative Growth
 
Distributions paid from:                           
Ordinary income    $ 1,029,944      $ 531,435      $ 1,725,004  
Net long-term capital gains      3,021,326        653,914         
Total distributions paid    $ 4,051,270      $ 1,185,349      $ 1,725,004  

The tax character of distributions paid during the fiscal year ended December 31, 2022 was as follows:

 

      Variable
Growth
     Variable
Moderate Growth
     Variable
Conservative Growth
 
Distributions paid from:                           
Ordinary income    $ 2,370,742      $ 464,047      $ 1,650,034  
Net long-term capital gains      6,463,262        2,000,209        4,262,217  
Total distributions paid    $ 8,834,004      $ 2,464,256      $ 5,912,251  

As of December 31, 2023, the components of distributable earnings (loss) on a tax basis were as follows:

 

      Variable
Growth
     Variable
Moderate Growth
     Variable
Conservative Growth
 
Undistributed ordinary income — net    $ 496,012      $ 31,867      $ 282,343  
Undistributed long-term capital gains — net      1,511,709        493,675        748,348  
Total undistributed earnings    $ 2,007,721      $ 525,542      $ 1,030,691  
Other book/tax temporary differences (a)      (30,260)        (29,903)        (30,134)  
Unrealized appreciation (depreciation) (b)      13,599,345        4,052,080        7,639,822  
Total distributable earnings (loss) — net    $ 15,576,806      $ 4,547,719      $ 8,640,379  

 

(a) 

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

 

(b) 

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

 

Franklin Variable Asset Allocation Series 2023 Annual Report       39  


Report of independent registered public accounting firm

 

To the Board of Trustees of Legg Mason Partners Variable Equity Trust and Shareholders of Franklin Multi-Asset Variable Growth Fund, Franklin Multi-Asset Variable Moderate Growth Fund and Franklin Multi-Asset Variable Conservative Growth Fund

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Franklin Multi-Asset Variable Growth Fund, Franklin Multi-Asset Variable Moderate Growth Fund and Franklin Multi-Asset Variable Conservative Growth Fund (three of the portfolios constituting Legg Mason Partners Variable Equity Trust, hereafter collectively referred to as the “Portfolios”) as of December 31, 2023, the related statements of operations for the year ended December 31, 2023, the statements of changes in net assets for each of the two years in the period ended December 31, 2023, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2023 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Portfolios as of December 31, 2023, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period ended December 31, 2023 and each of the financial highlights for each of the five years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinions

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

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

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2023 by correspondence with the custodian and transfer agent of the underlying funds; when replies were not received from the transfer agent, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.

/s/PricewaterhouseCoopers LLP

Baltimore, Maryland

February 13, 2024

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

 

40     Franklin Variable Asset Allocation Series 2023 Annual Report


Additional information (unaudited)

Information about Trustees and Officers

 

The business and affairs of Franklin Variable Asset Allocation Series (the “Portfolios”) are conducted by management under the supervision and subject to the direction of its Board of Trustees. The business address of each Trustee is c/o Jane Trust, Franklin Templeton, 280 Park Avenue, 8th Floor, New York, New York 10017.

Information pertaining to the Trustees and officers of the Portfolios is set forth below. The Statement of Additional Information includes additional information about Trustees and is available, without charge, upon request by calling the Portfolios at 877-6LM-FUND/656-3863.

 

 

Independent Trustees†
Andrew L. Breech
Year of birth   1952
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 1991
Principal occupation(s) during the past five years   President, Dealer Operating Control Service, Inc. (automotive retail management) (since 1985)
Number of funds in fund complex overseen by Trustee   55
Other board memberships held by Trustee during the past five years   None
Althea L. Duersten*
Year of birth   1951
Position(s) with Trust   Trustee and Chair of the Board
Term of office1 and length of time served2   Since 2014 (Chair of the Board since 2021)
Principal occupation(s) during the past five years   Retired (since 2011); formerly, Chief Investment Officer, North America, JPMorgan Chase (investment bank) and member of JPMorgan Executive Committee (2007 to 2011)
Number of funds in fund complex overseen by Trustee   55
Other board memberships held by Trustee during the past five years   Formerly, Non-Executive Director, Rokos Capital Management LLP (2019 to 2020)
Stephen R. Gross
Year of birth   1947
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 1986
Principal occupation(s) during the past five years   Chairman Emeritus (since 2011) and formerly, Chairman, HLB Gross Collins, P.C. (accounting and consulting firm) (1979 to 2011); Executive Director of Business Builders Team, LLC (since 2005); Principal, Gross Consulting Group, LLC (since 2011); CEO, Gross Capital Partners, LLC (since 2014); CEO, Trusted CFO Solutions, LLC (since 2011)
Number of funds in fund complex overseen by Trustee   55
Other board memberships held by Trustee during the past five years   None
Susan M. Heilbron
Year of birth   1945
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 1991
Principal occupation(s) during the past five years   Retired; formerly, President, Lacey & Heilbron (communications consulting) (1990 to 2002); General Counsel and Executive Vice President, The Trump Organization (1986 to 1990); Senior Vice President, New York State Urban Development Corporation (1984 to 1986); Associate, Cravath, Swaine & Moore LLP (1980 to 1984 and 1977 to 1979)
Number of funds in fund complex overseen by Trustee   55
Other board memberships held by Trustee during the past five years   None

 

Franklin Variable Asset Allocation Series       41  


Additional information (unaudited) (cont’d)

Information about Trustees and Officers

 

Independent Trustees† (cont’d)
Arnold L. Lehman
Year of birth   1944
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 1982
Principal occupation(s) during the past five years   Senior Advisor, Phillips (auction house) (since 2015); formerly, Fellow, Ford Foundation (2015 to 2016); Director of the Brooklyn Museum (1997 to 2015)
Number of funds in fund complex overseen by Trustee   55
Other board memberships held by Trustee during the past five years   Trustee of American Federation of Arts (since 2002)
Robin J. W. Masters
Year of birth   1955
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 2002
Principal occupation(s) during the past five years   Retired; formerly, Chief Investment Officer of ACE Limited (insurance) (1986 to 2000)
Number of funds in fund complex overseen by Trustee   55
Other board memberships held by Trustee during the past five years   Director of HSBC Corporate Money Funds Limited, HSBC Managed Portfolios Limited and HSBC Specialist Funds Limited (since 2020); formerly, Director of Cheyne Capital International Limited (investment advisory firm) (2005 to 2020)
Ken Miller
Year of birth   1942
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 1983
Principal occupation(s) during the past five years   Retired; formerly, President, Young Stuff Apparel Group, Inc. (apparel manufacturer), division of Li & Fung (1963 to 2012)
Number of funds in fund complex overseen by Trustee   55
Other board memberships held by Trustee during the past five years   None
G. Peter O’Brien**
Year of birth   1945
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 1999
Principal occupation(s) during the past five years   Retired, Trustee Emeritus of Colgate University (since 2005); Board Member, Hill House, Inc. (residential home care) (since 1999); formerly, Board Member, Bridges School (pre-school) (2006 to 2017); Managing Director, Equity Capital Markets Group of Merrill Lynch & Co. (1971 to 1999)
Number of funds in fund complex overseen by Trustee   Trustee of Legg Mason funds consisting of 55 portfolios; Director/Trustee of the Royce Family of Funds consisting of 16 portfolios
Other board memberships held by Trustee during the past five years   Formerly, Director of TICC Capital Corp. (2003 to 2017)
Thomas F. Schlafly
Year of birth   1948
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 1983
Principal occupation(s) during the past five years   Chairman, The Saint Louis Brewery, LLC (brewery) (since 2012); formerly, President, The Saint Louis Brewery, Inc. (1989 to 2012); Senior Counsel (since 2017) and formerly, Partner (2009 to 2016), Thompson Coburn LLP (law firm)
Number of funds in fund complex overseen by Trustee   55
Other board memberships held by Trustee during the past five years   Director, CNB St. Louis Bank (since 2020); formerly, Director, Citizens National Bank of Greater St. Louis (2006 to 2020)

 

42     Franklin Variable Asset Allocation Series


 

Interested Trustee and Officer
Jane Trust, CFA3
Year of birth   1962
Position(s) with Trust   Trustee, President and Chief Executive Officer
Term of office1 and length of time served2   Since 2015
Principal occupation(s) during the past five years   Senior Vice President, Fund Board Management, Franklin Templeton (since 2020); Officer and/or Trustee/Director of 123 funds associated with FTFA or its affiliates (since 2015); President and Chief Executive Officer of FTFA (since 2015); formerly, Senior Managing Director (2018 to 2020) and Managing Director (2016 to 2018) of Legg Mason & Co., LLC (“Legg Mason & Co.”); and Senior Vice President of FTFA (2015)
Number of funds in fund complex overseen by Trustee   123
Other board memberships held by Trustee during the past five years   None

 

Additional Officers

Ted P. Becker

Franklin Templeton

280 Park Avenue, 8th Floor, New York, NY 10017

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

Susan Kerr

Franklin Templeton

280 Park Avenue, 8th Floor, New York, NY 10017

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

Marc A. De Oliveira

Franklin Templeton

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

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

 

Franklin Variable Asset Allocation Series       43  


Additional information (unaudited) (cont’d)

Information about Trustees and Officers

 

Additional Officers (cont’d)

Thomas C. Mandia

Franklin Templeton

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

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

Christopher Berarducci

Franklin Templeton

280 Park Avenue, 8th Floor, New York, NY 10017

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

Jeanne M. Kelly

Franklin Templeton

280 Park Avenue, 8th Floor, New York, NY 10017

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

 

FTFA, referenced above, was formerly known as LMPFA prior to November 30, 2023.

 

*

Effective February 7, 2024, Ms. Duersten retired from the Board.

 

**

Effective February 7, 2024, Mr. O’Brien became Chair of the Board.

 

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

 

1 

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

 

2 

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

 

3 

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

 

44     Franklin Variable Asset Allocation Series


Important tax information (unaudited)

 

By mid-February, tax information related to a shareholder’s proportionate share of distributions paid during the preceding calendar year will be received, if applicable. Please also refer to www.franklintempleton.com for per share tax information related to any distributions paid during the preceding calendar year. Shareholders are advised to consult with their tax advisors for further information on the treatment of these amounts on their tax returns.

The following tax information for the Portfolios is required to be furnished to shareholders with respect to income earned and distributions paid during its fiscal year.

The Portfolios hereby report the following amounts, or if subsequently determined to be different, the maximum allowable amounts, for the fiscal year ended December 31, 2023:

 

      Pursuant to:    

Variable

Growth

   

Variable

Moderate Growth

   

Variable

Conservative Growth

 
Long-Term Capital Gain Dividends Distributed      §852(b)(3)(C)     $ 3,021,326     $ 653,914        
Income Eligible for Dividends Received Deduction (DRD)      §854(b)(1)(A)     $ 442,332     $ 147,751     $ 312,633  

Under Section 853 of the Internal Revenue Code, the Portfolios intend to elect to pass through to their shareholders the following amounts, or amounts as finally determined, of foreign taxes paid and foreign source income earned by the Portfolios during the fiscal year ended December 31, 2023:

 

    

Variable

Growth

   

Variable

Moderate Growth

   

Variable

Conservative Growth

 
Foreign Taxes Paid   $ 40,053     $ 13,273     $ 28,677  
Foreign Source Income Earned   $ 500,018     $ 165,704     $ 358,004  

 

Franklin Variable Asset Allocation Series       45  


Franklin

Variable Asset Allocation Series

 

Trustees

Andrew L. Breech

Stephen R. Gross

Susan M. Heilbron

Arnold L. Lehman

Robin J. W. Masters

Ken Miller

G. Peter O’Brien*

Chair

Thomas F. Schlafly

Jane Trust

Investment manager

Franklin Templeton Fund Adviser, LLC**

Subadviser

Franklin Advisers, Inc.

Distributor

Franklin Distributors, LLC

Custodian

The Bank of New York Mellon

Transfer agent

Franklin Templeton Investor Services, LLC

3344 Quality Drive

Rancho Cordova, CA 95670-7313

Independent registered public accounting firm

PricewaterhouseCoopers LLP

Baltimore, MD

 

*

Effective February 7, 2024, Mr. O’Brien became Chair of the Board.

**

Formerly known as Legg Mason Partners Fund Advisor, LLC.

 

Franklin Variable Asset Allocation Series

Franklin Multi-Asset Variable Growth Fund

Franklin Multi-Asset Variable Moderate Growth Fund

Franklin Multi-Asset Variable Conservative Growth Fund

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

 

Franklin Variable Asset Allocation Series

Legg Mason Funds

620 Eighth Avenue, 47th Floor

New York, NY 10018

The Portfolios file their complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year as an exhibit to their reports on Form N-PORT. The Portfolios’ Forms N-PORT are available on the SEC’s website at www.sec.gov. To obtain information on Form N-PORT, shareholders can call the Portfolios at 877-6LM-FUND/656-3863.

 

Information on how the Portfolios 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 Portfolios use to determine how to vote proxies related to portfolio transactions are available (1) without charge, upon request, by calling the Portfolios at 877-6LM-FUND/656-3863, (2) at www.franklintempleton.com and (3) on the SEC’s website at www.sec.gov.

 

This report is submitted for the general information of the shareholders of Franklin Multi-Asset Variable Growth Fund, Franklin Multi-Asset Variable Moderate Growth Fund and Franklin Multi-Asset Variable Conservative Growth Fund. This report is not authorized for distribution to prospective investors in the Portfolios unless preceded or accompanied by a current prospectus.

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

www.franklintempleton.com

© 2024 Franklin Distributors, LLC, Member FINRA/SIPC. All rights reserved.


Legg Mason Funds Privacy and Security Notice

 

Your Privacy Is Our Priority

Franklin Templeton* is committed to safeguarding your personal information. This notice is designed to provide you with a summary of the non-public personal information Franklin Templeton may collect and maintain about current or former individual investors; our policy regarding the use of that information; and the measures we take to safeguard the information. We do not sell individual investors’ non-public personal information to anyone and only share it as described in this notice.

Information We Collect

When you invest with us, you provide us with your non-public personal information. We collect and use this information to service your accounts and respond to your requests. The non-public personal information we may collect falls into the following categories:

 

 

Information we receive from you or your financial intermediary on applications or other forms, whether we receive the form in writing or electronically. For example, this information may include your name, address, tax identification number, birth date, investment selection, beneficiary information, and your personal bank account information and/or email address if you have provided that information.

 

 

Information about your transactions and account history with us, or with other companies that are part of Franklin Templeton, including transactions you request on our website or in our app. This category also includes your communications to us concerning your investments.

 

 

Information we receive from third parties (for example, to update your address if you move, obtain or verify your email address or obtain additional information to verify your identity).

 

 

Information collected from you online, such as your IP address or device ID and data gathered from your browsing activity and location. (For example, we may use cookies to collect device and browser information so our website recognizes your online preferences and device information.) Our website contains more information about cookies and similar technologies and ways you may limit them.

 

 

Other general information that we may obtain about you such as demographic information.

Disclosure Policy

To better service your accounts and process transactions or services you requested, we may share non-public personal information with other Franklin Templeton companies. From time to time we may also send you information about products/services offered by other Franklin Templeton companies although we will not share your non-public personal information with these companies without first offering you the opportunity to prevent that sharing.

We will only share non-public personal information with outside parties in the limited circumstances permitted by law. For example, this includes situations where we need to share information with companies who work on our behalf to service or maintain your account or process transactions you requested, when the disclosure is to companies assisting us with our own marketing efforts, when the disclosure is to a party representing you, or when required by law (for example, in response to legal process). Additionally, we will ensure that any outside companies working on our behalf, or with whom we have joint marketing agreements, are under contractual obligations to protect the confidentiality of your information, and to use it only to provide the services we asked them to perform.

Confidentiality and Security

Our employees are required to follow procedures with respect to maintaining the confidentiality of our investors’ non-public personal information. Additionally, we maintain physical, electronic and procedural safeguards to protect the information. This includes performing ongoing evaluations of our systems containing investor information and making changes when appropriate.

At all times, you may view our current privacy notice on our website at franklintempleton.com or contact us for a copy at (800) 632-2301.

*For purposes of this privacy notice Franklin Templeton shall refer to the following entities:

Fiduciary Trust International of the South (FTIOS), as custodian for individual retirement plans

 

NOT PART OF THE ANNUAL REPORT


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

 

Franklin Advisers, Inc.

Franklin Distributors, LLC, including as program manager of the Franklin Templeton 529 College Savings Plan and the NJBEST 529 College Savings Plan

Franklin Mutual Advisers, LLC

Franklin, Templeton and Mutual Series Funds

Franklin Templeton Institutional, LLC

Franklin Templeton Investments Corp., Canada

Franklin Templeton Investments Management, Limited UK

Franklin Templeton Portfolio Advisors, Inc.

Legg Mason Funds serviced by Franklin Templeton Investor Services, LLC

Templeton Asset Management, Limited

Templeton Global Advisors, Limited

Templeton Investment Counsel, LLC

If you are a customer of other Franklin Templeton affiliates and you receive notices from them, you will need to read those notices separately.

 

NOT PART OF THE ANNUAL REPORT


www.franklintempleton.com

© 2024 Franklin Distributors, LLC, Member FINRA/SIPC. All rights reserved.

FD01436 2/24 SR24-4806


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

 

ITEM 4.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

a) Audit Fees. The aggregate fees billed in the last two fiscal years ending December 31, 2022 and December 31, 2023 (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 $349,206 in December 31, 2022 and $349,206 in December 31, 2023.

b) Audit-Related Fees. The aggregate fees billed in the Reporting Period for assurance and related services by the Auditor that are reasonably related to the performance of the Registrant’s financial statements were $0 in December 31, 2022 and $0 in December 31, 2023.

(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 $149,250 in December 31, 2022 and $149,250 in December 31, 2023. These services consisted of (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory, regulatory or administrative developments, and (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired or held.

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

d) All Other Fees. The aggregate fees billed in the Reporting Periods for products and services provided by the Auditor, other than the services reported in paragraphs (a) through (c) for the Item 4 for the Legg Mason Partners Variable Equity Trust., were $0 in December 31, 2022 and $0 in December 31, 2023.

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) None of the services described in paragraphs (b) through (d) of this Item were performed in reliance on paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Not applicable.

(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 $785,604 in December 31, 2022 and $799,106 in December 31, 2023.

(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.

(i) Not applicable.

(j) Not applicable.


ITEM 5.

AUDIT COMMITTEE OF LISTED REGISTRANTS.

 

  a)

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

Andrew L. Breech

Althea L. Duersten*

Stephen R. Gross

Susan M. Heilbron

Arnold L. Lehman

Robin J. W. Masters

Ken Miller

G. Peter O’Brien

Thomas F. Schlafly

 

  *

Effective February 7, 2024, Ms. Duersten retired from the Board.

 

  b)

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 period covered by


  this report that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting.

 

ITEM 12.

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

Not applicable.

 

ITEM 13.

RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION.

 

  (a)

Not applicable.

 

  (b)

Not applicable.

 

ITEM 14.

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


SIGNATURES

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

 

Legg Mason Partners Variable Equity Trust
By:  

/s/ Jane Trust

  Jane Trust
  Chief Executive Officer

Date: February 20, 2024

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

 

By:  

/s/ Jane Trust

  Jane Trust
  Chief Executive Officer

Date: February 20, 2024

 

By:  

/s/ Christopher Berarducci

  Christopher Berarducci
  Principal Financial Officer

Date: February 20, 2024

EX-99.CODE 2 d508741dex99code.htm CODE OF ETHICS Code of Ethics

Code of Conduct for Principal Executive and Financial Officers (SOX)

Covered Officers and Purpose of the Code

The Funds’ code of ethics (the “Code”) for investment companies within the Legg Mason family of mutual funds (each a “Fund,” and collectively, the “Funds”) applies to each Fund’s Principal Executive Officer, Principal Financial Officer, and Controller (the “Covered Officers”) for the purpose of promoting:

 

 

honest and ethical conduct, including ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

 

full, fair, accurate, timely and understandable disclosure in reports and documents a registrant files with, or submits to, the Securities and Exchange Commission (“SEC”) and in other public communications made by the Funds;

 

 

compliance with applicable laws and governmental rules and regulations;

 

 

prompt internal reporting of Code violations to appropriate persons identified in the Code; and

 

 

accountability for adherence to the Code.

Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.

Covered Officers Should Ethically Handle Actual and Apparent Conflicts of Interest

A “conflict of interest” occurs when a Covered Officer’s private interest interferes with the interests of, or his or her service to, a Fund. For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper personal benefits as a result of his or her position with a Fund.

Certain conflicts of interest arise out of the relationships between Covered Officers and a Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (“Investment Company Act”) and the Investment Advisers Act of 1940 (“Investment Advisers Act”). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with a Fund because of their status as “affiliated persons” of the Fund. The Funds’ and the investment advisers’ compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code.

Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between a Fund and an investment adviser of which Covered Officers are also officers or employees. As a result, this Code recognizes Covered Officers will, in the normal course of their duties (whether formally for a Fund or for the adviser, or for both), be involved in establishing policies and


implementing decisions that will have different effects on the adviser and the Funds. The participation of Covered Officers in such activities is inherent in the contractual relationship between a Fund and an adviser and is consistent with the performance by Covered Officers of their duties as officers of the Funds. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds’ Boards of Directors/Trustees (“Boards”) that Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes and that such service, by itself does not give rise to a conflict of interest.

Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of a Fund.

Each Covered Officer must:

 

 

not use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by a Fund;

 

 

not cause a Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Fund; and,

 

 

not use material non-public knowledge of portfolio transactions made or contemplated for the Trust to trade personally or cause others to trade personally in contemplation of the market effect of such transactions.

There are some actual or potential conflict of interest situations that, if material, should always be discussed with the Chief Compliance Officer (“CCO”) or designate that has been appointed by the Board of the Funds. Examples of these include:

 

 

service as a director on the board of any public company (other than the Funds or their investment advisers or any affiliated person thereof);

 

 

the receipt of any non-nominal gifts (i.e., in excess of $100);

 

 

the receipt of any entertainment from any company with which a Fund has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety;

 

 

any ownership interest in, or any consulting or employment relationship with, any of the Funds’ service providers (other than their investment advisers, or principal underwriter, or any affiliated person thereof);


 

a direct or indirect financial interest in commissions, transaction charges or spreads paid by a Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer’s employment, such as compensation or equity ownership.

Disclosure and Compliance

Each Covered Officer should:

 

 

familiarize him or herself with the disclosure requirements generally applicable to the Funds;

 

 

not knowingly misrepresent, or cause others to misrepresent, facts about a Fund to others, whether within or outside the Fund, including to the Fund’s Directors/Trustees and auditors, and to governmental regulators and self-regulatory organizations; and

 

 

to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Funds and the advisers with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds.

It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations.

Reporting and Accountability

Each Covered Officer must:

 

 

upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he or she has received, read, and understands the Code;

 

 

annually thereafter affirm to the Board that he or she has complied with the requirements of the Code;

 

 

not retaliate against any other Covered Officer or any employee of the Funds or their advisers or any affiliated persons thereof or service providers of the Funds for reports of potential violations that are made in good faith;

 

 

notify the CCO promptly if he or she knows of any violation of this Code, of which failure to do so is itself a violation; and


 

report at least annually, if necessary, any employment position, including officer or directorships, held by the Covered Officer or any immediate family member of a Covered Officer with affiliated persons of or Service Providers to the Funds.

The CCO is responsible for applying this Code to specific situations in which questions are presented and has the authority to interpret this Code in any particular situation. However, approvals or waivers sought by a Covered Officer will be considered by the Compliance Committee or Audit Committee, (the “Committee”) responsible for oversight of the Fund’s code of ethics under Rule 17j-1 under the Investment Company Act. If a Covered Officer seeking an approval or waiver sits on the Committee, the Covered Person shall recuse him or herself from any such deliberations. Any approval or waiver granted by the Committee will be reported promptly to the Chair of the Audit Committees of the Funds.

The Funds will follow these procedures in investigating and enforcing this Code:

 

 

the CCO will take all appropriate action to investigate any potential violations reported to him, which actions may include the use of internal or external counsel, accountants or other personnel;

 

 

if, after such investigation, the CCO believes that no violation has occurred, the CCO is not required to take any further action;

 

 

any matter that the CCO believes is a violation will be reported to the Committee;

 

 

if the Committee concurs that a violation has occurred, it will inform the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer;

 

 

the Committee will be responsible for granting waivers, as appropriate; and,

 

 

any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules.

Other Policies and Procedures

This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds’ advisers, principal underwriter, or other service providers govern or purport to govern the behavior or activities of Covered Officers subject to this Code, they are superseded by this Code to the extent they overlap or conflict with the provisions of this Code. The Funds’ and their investment advisers’ and principal underwriter’s codes of ethics under Rule 17j-1 under the Investment Company Act are separate requirements applying to Covered Officers and others, and are not part of this Code.


Confidentiality

All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board and Fund counsel, and the board of Directors/Trustees and fund counsel of any other investment company for whom a Covered Officer serves in a similar capacity.

Annual Report

No less than annually, the CCO shall provide the Board with a written report describing any issues having arisen since the prior year’s report.

Internal Use

This Code is intended solely for the internal use by the Funds and does not constitute an admission by or on behalf of any Fund, as to any fact, circumstance or legal consideration.

EX-99.CERT 3 d508741dex99cert.htm CERTIFICATIONS 302 Certifications 302

CERTIFICATIONS PURSUANT TO SECTION 302

EX-99.CERT

CERTIFICATIONS

I, Jane Trust, certify that:

 

1.

I have reviewed this report on Form N-CSR of Legg Mason Partners Variable Equity Trust;

 

2.

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

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4.

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

 

  a)

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

 

  b)

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

 

  c)

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

 

  d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

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

 

  a)

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

 

  b)

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

 

Date: February 20, 2024      

/s/ Jane Trust

      Jane Trust
      Chief Executive Officer


CERTIFICATIONS

I, Christopher Berarducci, certify that:

 

1.

I have reviewed this report on Form N-CSR of Legg Mason Partners Variable Equity Trust;

 

2.

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

 

3.

Based on my knowledge, the financial information included in this report, and the financial statements on which the financial information is based, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4.

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

 

  a)

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

 

  b)

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

 

  c)

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

 

  d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

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

 

  a)

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

 

  b)

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

 

Date: February 20, 2024      

/s/ Christopher Berarducci

      Christopher Berarducci
      Principal Financial Officer
EX-99.906CT 4 d508741dex99906ct.htm CERTIFICATIONS 906 Certifications 906

CERTIFICATIONS PURSUANT TO SECTION 906

EX-99.906CERT

CERTIFICATION

Jane Trust, Chief Executive Officer, and Christopher Berarducci, Principal Financial Officer of Legg Mason Partners Variable Equity Trust (the “Registrant”), each certify to the best of their knowledge that:

1.The Registrant’s periodic report on Form N-CSR for the period ended December 31, 2023 (the “Form N-CSR”) fully complies with the requirements of section 15(d) of the Securities Exchange Act of 1934, as amended; and

2.The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

Chief Executive Officer     Principal Financial Officer
Legg Mason Partners Variable Equity Trust     Legg Mason Partners Variable Equity Trust

/s/ Jane Trust

   

/s/ Christopher Berarducci

Jane Trust     Christopher Berarducci
Date: February 20, 2024     Date: February 20, 2024

This certification is being furnished to the Securities and Exchange Commission solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Form N-CSR with the Commission.

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