N-CSR 1 d403691dncsr.htm LMP EQUITY TRUST--CLEARBRIDGE SMALL CAP GROWTH FUND LMP Equity Trust--ClearBridge Small Cap Growth Fund
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-06444

 

 

Legg Mason Partners Investment 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: October 31

Date of reporting period: October 31, 2022

 

 

 


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ITEM 1. REPORT TO STOCKHOLDERS.

The Annual Report to Stockholders is filed herewith.


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LOGO

 

Annual Report

 

  October 31, 2022

CLEARBRIDGE

SMALL CAP GROWTH FUND

 

 

 

 

 

LOGO

 

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


Table of Contents
What’s inside      
Letter from the president     II  
Fund overview     1  
Fund at a glance     7  
Fund expenses     8  
Fund performance     10  
Schedule of investments     12  
Statement of assets and liabilities     17  
Statement of operations     19  
Statements of changes in net assets     20  
Financial highlights     21  
Notes to financial statements     28  
Report of independent registered public accounting firm     41  
Board approval of management and subadvisory agreements     42  
Statement regarding liquidity risk management program     47  
Additional information     49  
Important tax information     55  

 

Fund objective

The Fund seeks long-term growth of capital.

 

Letter from the president

 

LOGO

 

Dear Shareholder,

We are pleased to provide the annual report of ClearBridge Small Cap Growth Fund for the twelve-month reporting period ended October 31, 2022. Please read on for a detailed look at prevailing economic and market conditions during the Fund’s reporting period and to learn how those conditions have affected Fund 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:

 

 

Fund prices and performance,

 

 

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

November 30, 2022

 

 

II

   ClearBridge Small Cap Growth Fund


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Fund overview

 

Q. What is the Fund’s investment strategy?

A. The Fund seeks long-term growth of capital. Under normal circumstances, the Fund invests at least 80% of its assets in equity securities of companies with small market capitalizations and related investments. We use a growth-oriented investment style that emphasizes small U.S. companies. Some of the sought characteristics for individual security selection include:

 

 

Superior management teams

 

 

Good prospects for growth

 

 

Predictable, growing demand for their products or services

 

 

Dominant position in a niche market or customers that are very large companies

 

 

Earnings and revenue recovery potential due to exposure to economical cyclical end markets

 

 

Strong or improving financial conditions

In addition, the Fund may invest in companies that we believe to be emerging companies relative to potential markets.

The Fund may invest in companies, we believe to be undervalued relative to their peers. The Fund may continue to hold securities of issuers that become medium capitalization or large capitalization issuers if, in our judgment, these securities remain good investments for the Fund.

We generally use a “bottom-up” approach when selecting securities for the Fund. We focus on individual security selection rather than allow macro-economic considerations to strongly influence sector weights or individual security selection.

The Fund expects that, under normal market conditions the equity securities in which it invests will typically be common stocks. The Fund may invest up to 20% of its net assets in equity securities of companies that are not considered to be small capitalization companies. The Fund may invest up to 20% of its assets in non-convertible bonds, notes and debt. The Fund may invest up to 20% of its net assets (at the time of investment) in foreign securities. The Fund may invest directly in foreign issuers or invest in depositary receipts.

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

A. The three witches of Shakespeare’s Macbeth famously chant “double, double toil and trouble; fire burn, and cauldron bubble” as they mix an odious potion to summon dark forces. The toxic ingredients of the witches’ brew (eye of newt and toe of frog, wool of bat and tongue of dog, etc.) coalesce for “a charm of powerful trouble, like a hell-broth boil and bubble.”

The witches, and their Elizabethan incantation, are apt metaphors for the macro forces that have depressed U.S. equity markets. Rising risk-free yields, as evidenced by a more than 250 basis point rise in the yield for the ten-year Treasury note, overlaid on the dislocations from the pandemic (supply chain and labor shortage) and the horrific attack on Ukraine (energy and commodity prices) proved to be too much weight for equities. The Russell 2000

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

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Fund overview (cont’d)

 

Indexi returned -18.54% over the trailing twelve months while the Fund’s benchmark, the Russell 2000 Growth Indexii, suffered even sharper losses, falling 26.02%, firmly entering bear market territory.

Stock multiples have sharply corrected from elevated levels during a period when many companies have been challenged by faltering demand and/or difficulties fulfilling customer requests. Entering 2022, we believed the prospects of reduced fiscal stimulus and monetary tightening were likely to lead to choppy markets. Yet the pernicious and accelerating inflation trend has forced the hands of central banks globally, resulting in a rising probability of contraction within the bubbling economic cauldron.

Profit margins have been squeezed (from labor and commodity costs) and in some cases taken step functions lower. While companies have implemented multiple price increases, there are sticker shock effects yet to be counted. We have already seen, for instance, a softening of the red hot residential real estate market in response to higher mortgage costs for borrowers. Some retailers are struggling as consumer wallets are thinned by higher prices.

Innovation remained out of vogue again as investors had limited appetite for higher growth companies during this period of economic stress and portfolio de-risking. The initial public offering (IPO) market essentially remained shut after 2021’s excessive supply, with IPO proceeds down approximately 94%.

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

A. During weak markets the Fund typically holds up better than the index, and thus we are dissatisfied that the Fund underperformed its Russell 2000 Growth benchmark during the reporting period. Despite this result, we maintain optimism in the Fund’s portfolio construction. Price declines were most pronounced among some of our long-term holdings in health care with bright growth prospects (such as Surgery Partners, Penumbra and Progyny, all of which are retained in the Fund). The Fund’s health care holdings faced technical selling pressure due to the recently concluded Russell index rebalances, which saw health care decline as a weight in most smaller growth indices; more cyclical sectors were rebalanced higher.

While we added eight new investments during the year where volatility offered attractive entry points, we eliminated nearly double the number of positions (fifteen total) to keep the portfolio focused on companies where we have the highest conviction and manage risk through what could be an extended period of macro and business uncertainty. The majority of the Fund’s exits, such as Monro and Poshmark in the consumer discretionary sector, Redfin in the real estate sector and Yext in the information technology (“IT”) sector, were sold for a variety of fundamental reasons, while Vocera Communications and Biohaven Pharmaceuticals in the health care were acquired by larger companies.

We cut back a significant chunk of larger cap longer-term investments in the Fund (including HubSpot, Insulet and Monolithic Power) and redeployed assets into existing smaller cap holdings and new ideas as liquidity events occurred. Among our new additions, we continued to find companies with product and service innovation, sound leadership and capital adequacy. One such company is Wingstop, a restaurant franchisor with over 1,700

 

 

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    ClearBridge Small Cap Growth Fund 2022 Annual Report


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locations. Wingstop has a number of growth drivers despite facing difficult COVID-19 inflated comps in the first half of 2022. Management is marketing a consumer value bundle, more fulsome national advertising year-round and an expanded menu while ingredient costs appear set to drop for wings.

Rather than make projections on which of many macro scenarios may play out, we can do best by our investors by maintaining the quality bias of a concentrated portfolio that offers exposure to a variety of growth opportunities. We continually examine the durability and magnitude of growth and returns by assessing the opportunity set and competitive advantage of each holding. We believe such diligence will benefit shareholders as the macro headwinds begin to clear.

Performance review

For the twelve months ended October 31, 2022, Class A shares of ClearBridge Small Cap Growth Fund, excluding sales charges, returned -29.95%. The Fund’s unmanaged benchmark, the Russell 2000 Growth Index, returned -26.02% for the same period. The Lipper Small-Cap Growth Funds Category Averageiii returned -26.50% over the same time frame.

 

 Performance Snapshot as of October 31,  2022

 (unaudited)

 
(excluding sales charges)   6 months     12 months  
ClearBridge Small Cap Growth Fund:    

Class 11

    -2.08     -29.76

Class A

    -2.21     -29.95

Class C

    -2.59     -30.48

Class FI

    -2.19     -29.97

Class R

    -2.36     -30.18

Class I

    -2.07     -29.77

Class IS

    -2.03     -29.68
Russell 2000 Growth Index     1.02     -26.02
Lipper Small-Cap Growth Funds Category Average     -3.28     -26.50

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. To obtain performance data current to the most recent month-end, please visit our website at www.franklintempleton.com.

All share class returns assume the reinvestment of all distributions at net asset value and the deduction of all Fund expenses. Returns have not been adjusted to include sales charges that may apply or the deduction of taxes that a shareholder would pay on Fund distributions. If sales charges were reflected, the performance quoted would be lower. Performance figures for periods shorter than one year represent cumulative figures and are not annualized.

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

 

1 

Class 1 shares of the Fund are closed to all purchases or incoming exchanges. Investors owning Class 1 may continue to maintain their then-current Class 1 shares, but are no longer permitted to add to their Class 1 share positions, except through dividend reinvestment.

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

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Fund overview (cont’d)

 

 Total Annual Operating Expenses (unaudited)

As of the Fund’s current prospectus dated March 1, 2022, gross total annual fund operating expense ratios for Class 1, Class A, Class C, Class FI, Class R, Class I and Class IS shares were 0.89%, 1.16%, 1.91%, 1.21%, 1.48%, 0.91% and 0.77%, 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 Fund expense ratios are more likely to increase when markets are volatile.

Q. What were the leading contributors to performance?

A. On an absolute basis, the Fund produced positive returns in two of the ten sectors in which it was invested over the period, with the greatest contributions to returns coming from the consumer staples sector.

Relative to the benchmark, overall sector allocation contributed to performance for the reporting period. In particular, an overweight allocation to the consumer staples sector, underweights to the real estate and consumer discretionary sectors and stock selection in the consumer staples and communication services sectors were the primary driver of results.

Leading individual stock contributors included positions in BJ’s Wholesale Club in the consumer staples sector, Wingstop in the consumer discretionary sector, RBC Bearings in the industrials sector, Biohaven Pharmaceutical in the health care sector and Iridium Communications in the communication services sector.

Q. What were the leading detractors from performance?

A. Relative to the benchmark, overall stock selection had a negative impact on performance. In particular, stock selection in the industrials, health care and consumer discretionary sectors detracted the most from performance for the year.

The leading detractors from performance for the period included Trex in the industrials sector, Varonis Systems in the IT sector, Fox Factory in the consumer discretionary sector as well as Syneos Health and Surgery Partners in the health care sector.

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

A. The largest additions to the Fund’s portfolio were Wingstop and Xometry in the consumer discretionary sector, STARR Surgical and Intra-Cellular Therapies in the health care sector and Matador Resources in the energy sector. The largest positions closed during the period were Biohaven Pharmaceutical, Health Catalyst and Vocera Communications in the health care sector, Momentive Global in the IT sector and Bandwidth in the communication services sector.

 

 

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

Sincerely,

 

LOGO

Jeffrey J. Russell, CFA

Portfolio Manager

ClearBridge Investments, LLC

 

LOGO

Aram E. Green

Portfolio Manager

ClearBridge Investments, LLC

November 10, 2022

RISKS: Equity securities are subject to price and market fluctuations. Investments in small- and medium-capitalization companies may involve a higher degree of risk and volatility than investments in larger, more established companies. Investments in foreign securities are subject to certain risks of overseas investing, including currency fluctuations and changes in political, social and economic conditions, which could result in significant market fluctuations. 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. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. Please see the Fund’s prospectus for a more complete discussion of these and other risks and the Fund’s investment strategies.

Portfolio holdings and breakdowns are as of October 31, 2022 and are subject to change and may not be representative of the portfolio managers’ current or future investments. The Fund’s top ten holdings (as a percentage of net assets) as of October 31, 2022 were: BJ’s Wholesale Club Holdings Inc. (4.5%), RBC Bearings Inc. (3.5%), Casey’s General Stores Inc. (2.6%), National Vision Holdings Inc. (2.4%), Fox Factory Holding Corp. (2.4%), Penumbra Inc. (2.4%), Forward Air Corp. (2.3%), Trex Co. Inc. (2.3%), Progyny Inc. (2.2%) and Cactus Inc. (2.0%). Please refer to pages 12 through 16 for a list and percentage breakdown of the Fund’s holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. The Fund’s top five sector holdings (as a percentage of net assets) as of October 31, 2022 were:

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

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Table of Contents

Fund overview (cont’d)

 

information technology (25.0%), health care (22.1%), industrials (18.2%), consumer staples (10.4%) and consumer discretionary (8.9%). The Fund’s portfolio composition is subject to change at any time.

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

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

 

 

 

 

 

i 

The Russell 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 Russell 3000 Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the U.S. equity market.

 

ii 

The Russell 2000 Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000 Index companies with higher price-to-value ratios and higher forecasted growth values. (A price-to-book ratio is the price of a stock compared to the difference between a company’s assets and liabilities.)

 

iii 

Lipper, Inc., a wholly-owned subsidiary of Refinitiv, provides independent insight on global collective investments. Returns are based on the period ended October 31, 2022, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 733 funds for the six-month period and among the 719 funds for the twelve-month period in the Fund’s Lipper category, and excluding sales charges, if any.

 

 

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    ClearBridge Small Cap Growth Fund 2022 Annual Report


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Fund at a glance (unaudited)

 

Investment breakdown (%) as a percent of total investments

 

LOGO

 

The bar graph above represents the composition of the Fund’s investments as of October 31, 2022 and October 31, 2021 and does not include derivatives, such as written options. The Fund is actively managed. As a result, the composition of the Fund’s investments is subject to change at any time.

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

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Fund expenses (unaudited)

 

Example

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

This example is based on an investment of $1,000 invested on May 1, 2022 and held for the six months ended October 31, 2022.

Actual expenses

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

Hypothetical example for comparison purposes

The table below titled “Based on hypothetical total return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’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 Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund 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, such as front-end or back-end sales charges (loads). Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

  Based on actual total return1                 Based on hypothetical total return1  
     Actual
Total Return
Without
Sales
Charge2
    Beginning
Account
Value
    Ending
Account
Value
    Annualized
Expense
Ratio
    Expenses
Paid
During
the
Period3
               Hypothetical
Annualized
Total Return
    Beginning
Account
Value
    Ending
Account
Value
    Annualized
Expense
Ratio
    Expenses
Paid
During
the
Period3
 
Class 1     -2.08   $ 1,000.00     $ 979.20       0.88   $ 4.39       Class 1     5.00   $ 1,000.00     $ 1,020.77       0.88   $ 4.48  
Class A     -2.21       1,000.00       977.90       1.17       5.83       Class A     5.00       1,000.00       1,019.31       1.17       5.96  
Class C     -2.59       1,000.00       974.10       1.90       9.45       Class C     5.00       1,000.00       1,015.63       1.90       9.65  
Class FI     -2.19       1,000.00       978.10       1.15       5.73       Class FI     5.00       1,000.00       1,019.41       1.15       5.85  
Class R     -2.36       1,000.00       976.40       1.43       7.12       Class R     5.00       1,000.00       1,018.00       1.43       7.27  
Class I     -2.07       1,000.00       979.30       0.87       4.34       Class I     5.00       1,000.00       1,020.82       0.87       4.43  
Class IS     -2.03       1,000.00       979.70       0.78       3.89       Class IS     5.00       1,000.00       1,021.27       0.78       3.97  

 

 

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1 

For the six months ended October 31, 2022.

 

2 

Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value and does not reflect the deduction of the applicable sales charge with respect to Class A shares or the applicable contingent deferred sales charge (“CDSC”) with respect to Class C shares. Total return is not annualized, as it may not be representative of the total return for the year. Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results.

 

3 

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

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

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Table of Contents

Fund performance (unaudited)

 

 Average annual total returns              
Without sales charges1   Class 1     Class A     Class C     Class FI     Class R     Class I     Class IS  
Twelve Months Ended 10/31/22     -29.76     -29.95     -30.48     -29.97     -30.18     -29.77     -29.68
Five Years Ended 10/31/22     9.83       9.55       8.76       9.53       9.21       9.84       9.98  
Ten Years Ended 10/31/22     11.65       11.43       10.62       11.43       11.13       11.77       11.91  
With sales charges2   Class 1     Class A     Class C     Class FI     Class R     Class I     Class IS  
Twelve Months Ended 10/31/22     -29.76     -33.98     -31.07     -29.97     -30.18     -29.77     -29.68
Five Years Ended 10/31/22     9.83       8.26       8.76       9.53       9.21       9.84       9.98  
Ten Years Ended 10/31/22     11.65       10.77       10.62       11.43       11.13       11.77       11.91  

 

 Cumulative total returns       
Without sales charges1        
Class 1 (10/31/12 through 10/31/22)      201.15
Class A (10/31/12 through 10/31/22)      195.12  
Class C (10/31/12 through 10/31/22)      174.47  
Class FI (10/31/12 through 10/31/22)      195.02  
Class R (10/31/12 through 10/31/22)      187.23  
Class I (10/31/12 through 10/31/22)      204.22  
Class IS (10/31/12 through 10/31/22)      208.02  

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 the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 and does not reflect the deduction of the applicable sales charge with respect to Class A shares or the applicable contingent deferred sales charge (“CDSC”) with respect to Class C shares.

 

2 

Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value. In addition, Class A shares reflect the deduction of the maximum initial sales charge of 5.50% (5.75% prior to August 15, 2022). Class C shares reflect the deduction of a 1.00% CDSC, which applies if shares are redeemed within one year from purchase payment.

 

 

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Historical performance

Value of $10,000 invested in

Class A and C Shares of ClearBridge Small Cap Growth Fund vs. Russell 2000 Growth Index† — October 2012 - October 2022

 

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 the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 A and C shares on October 31, 2012, assuming the deduction of the maximum initial sales charge of 5.50% (5.75% prior to August 15, 2022) at the time of investment for Class A shares and the reinvestment of all distributions, including returns of capital, if any, at net asset value through October 31, 2022. The hypothetical illustration also assumes a $10,000 investment in the Russell 2000 Growth Index. The Russell 2000 Growth Index (the “Index”) measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000 Index companies with higher price-to value ratios and higher forecasted growth values. The Index is unmanaged and is not subject to the same management and trading expenses as a mutual fund. Please note that an investor cannot invest directly in an index. The performance of the Fund’s other classes may be greater or less than the Class A and C shares’ performance indicated on this chart depending on whether greater or lesser sales charges and fees were incurred by shareholders investing in the other classes.

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

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Table of Contents

Schedule of investments

October 31, 2022

 

ClearBridge Small Cap Growth Fund

(Percentages shown based on Fund net assets)

 

Security   Shares     Value  
Common Stocks — 99.5%                
Communication Services — 2.3%                

Diversified Telecommunication Services — 2.0%

               

Iridium Communications Inc.

    1,635,652     $ 84,285,148  * 

Media — 0.3%

               

Klaviyo Inc.

    802,521       14,041,854   *(a)(b)(c) 

Total Communication Services

            98,327,002  
Consumer Discretionary — 8.9%                

Auto Components — 2.4%

               

Fox Factory Holding Corp.

    1,136,474       99,839,241  * 

Diversified Consumer Services — 0.9%

               

Chegg Inc.

    1,780,504       38,405,471  * 

Hotels, Restaurants & Leisure — 2.0%

               

Dutch Bros Inc., Class A Shares

    435,323       16,067,772  

Sweetgreen Inc., Class A Shares

    219,543       4,083,500  

Wingstop Inc.

    396,006       62,723,390  

Total Hotels, Restaurants & Leisure

            82,874,662  

Internet & Direct Marketing Retail — 1.2%

               

Xometry Inc., Class A Shares

    830,363       49,871,602  * 

Specialty Retail — 2.4%

               

National Vision Holdings Inc.

    2,758,592       102,178,248  * 

Total Consumer Discretionary

            373,169,224  
Consumer Staples — 10.4%                

Food & Staples Retailing — 9.3%

               

BJ’s Wholesale Club Holdings Inc.

    2,438,388       188,731,231  

Casey’s General Stores Inc.

    465,131       108,240,635  

Grocery Outlet Holding Corp.

    1,796,039       62,089,068  

Performance Food Group Co.

    651,459       33,901,927  

Total Food & Staples Retailing

            392,962,861  

Food Products — 1.1%

               

Calavo Growers Inc.

    514,599       17,799,979  

Hain Celestial Group Inc.

    1,474,543       27,588,700  

Total Food Products

            45,388,679  

Total Consumer Staples

            438,351,540  
Energy — 4.0%                

Energy Equipment & Services — 3.4%

               

Cactus Inc., Class A Shares

    1,657,331       85,717,159  

ChampionX Corp.

    1,991,215       56,988,573  

Total Energy Equipment & Services

            142,705,732  

 

See Notes to Financial Statements.

 

 

12

    ClearBridge Small Cap Growth Fund 2022 Annual Report


Table of Contents

 

 

ClearBridge Small Cap Growth Fund

(Percentages shown based on Fund net assets)

 

Security   Shares     Value  

Oil, Gas & Consumable Fuels — 0.6%

               

Matador Resources Co.

    378,171     $ 25,129,463  

Total Energy

            167,835,195  
Financials — 7.5%                

Banks — 1.9%

               

Western Alliance Bancorp

    1,198,045       80,472,682  

Capital Markets — 2.7%

               

Hamilton Lane Inc., Class A Shares

    886,348       53,021,337  

PJT Partners Inc., Class A Shares

    817,866       60,849,231  

Total Capital Markets

            113,870,568  

Insurance — 2.9%

               

American Equity Investment Life Holding Co.

    1,703,384       73,381,783  

Trupanion Inc.

    909,500       45,902,465  

Total Insurance

            119,284,248  

Total Financials

            313,627,498  
Health Care — 22.0%                

Biotechnology — 1.2%

               

Biohaven Ltd.

    343,585       5,693,203  

CareDx Inc.

    1,190,297       23,698,813  

Ultragenyx Pharmaceutical Inc.

    546,832       22,124,823  

Total Biotechnology

            51,516,839  

Health Care Equipment & Supplies — 8.5%

               

Figs Inc., Class A Shares

    603,077       4,450,708  

Insulet Corp.

    164,304       42,523,518  

Integra LifeSciences Holdings Corp.

    1,538,873       77,328,368  

Omnicell Inc.

    554,593       42,881,131  

Penumbra Inc.

    577,692       99,056,847  

Silk Road Medical Inc.

    1,359,847       59,942,056  

STAAR Surgical Co.

    428,851       30,392,671  

Total Health Care Equipment & Supplies

            356,575,299  

Health Care Providers & Services — 4.3%

               

HealthEquity Inc.

    232,900       18,145,239  

Progyny Inc.

    2,089,882       92,937,052  

Surgery Partners Inc.

    2,581,869       70,201,018  

Total Health Care Providers & Services

            181,283,309  

Health Care Technology — 0.8%

               

Certara Inc.

    2,658,521       32,513,712  * 

Life Sciences Tools & Services — 5.7%

               

Azenta Inc.

    759,021       33,700,533  

CryoPort Inc.

    1,001,628       27,805,193  

ICON PLC

    412,049       81,519,774  

 

See Notes to Financial Statements.

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

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Table of Contents

Schedule of investments (cont’d)

October 31, 2022

 

ClearBridge Small Cap Growth Fund

(Percentages shown based on Fund net assets)

 

Security   Shares     Value  

Life Sciences Tools & Services — continued

               

Olink Holding AB, ADR

    1,205,806     $ 22,102,424  

Syneos Health Inc.

    1,463,663       73,739,342  

Total Life Sciences Tools & Services

            238,867,266  

Pharmaceuticals — 1.5%

               

Intra-Cellular Therapies Inc.

    367,349       16,776,829  

Pacira BioSciences Inc.

    930,579       48,166,769  

Total Pharmaceuticals

            64,943,598  

Total Health Care

            925,700,023  
Industrials — 18.2%                

Aerospace & Defense — 0.7%

               

Aerojet Rocketdyne Holdings Inc.

    617,754       29,930,181  * 

Air Freight & Logistics — 3.0%

               

Forward Air Corp.

    913,378       96,699,329  

GXO Logistics Inc.

    796,977       29,121,539  

Total Air Freight & Logistics

            125,820,868  

Building Products — 3.9%

               

Hayward Holdings Inc.

    2,172,430       20,094,978  

Masonite International Corp.

    680,290       48,661,144  

Trex Co. Inc.

    1,988,337       95,619,126  

Total Building Products

            164,375,248  

Electrical Equipment — 2.7%

               

Bloom Energy Corp., Class A Shares

    3,185,895       59,608,095  

Shoals Technologies Group Inc., Class A Shares

    2,304,561       53,258,405  

Total Electrical Equipment

            112,866,500  

Machinery — 5.4%

               

Albany International Corp., Class A Shares

    448,310       41,074,162  

RBC Bearings Inc.

    576,757       146,225,202  

Tennant Co.

    673,101       39,208,134  

Total Machinery

            226,507,498  

Road & Rail — 1.0%

               

XPO Logistics Inc.

    796,977       41,235,590  * 

Trading Companies & Distributors — 1.5%

               

H&E Equipment Services Inc.

    1,626,202       61,405,388  

Total Industrials

            762,141,273  
Information Technology — 24.8%                

Communications Equipment — 1.0%

               

Viavi Solutions Inc.

    2,796,688       42,229,989  * 

Electronic Equipment, Instruments & Components — 0.9%

               

Brain Corp.

    598,883       2,405,617  *(a)(b)(c)  

 

See Notes to Financial Statements.

 

 

14

    ClearBridge Small Cap Growth Fund 2022 Annual Report


Table of Contents

 

 

ClearBridge Small Cap Growth Fund

(Percentages shown based on Fund net assets)

 

Security   Shares     Value  

Electronic Equipment, Instruments & Components — continued

               

nLight Inc.

    846,412     $ 9,115,857  

OSI Systems Inc.

    310,818       25,543,024  

Total Electronic Equipment, Instruments & Components

            37,064,498  

IT Services — 2.1%

               

Shift4 Payments Inc., Class A Shares

    1,304,970       59,989,471  

Wix.com Ltd.

    322,814       27,148,657  

Total IT Services

            87,138,128  

Semiconductors & Semiconductor Equipment — 5.2%

               

Allegro MicroSystems Inc.

    2,824,847       71,779,362  

Lattice Semiconductor Corp.

    1,421,916       68,977,145  

Monolithic Power Systems Inc.

    237,328       80,560,990  

Total Semiconductors & Semiconductor Equipment

            221,317,497  

Software — 15.6%

               

Aspen Technology Inc.

    274,667       66,318,347  

Envestnet Inc.

    964,427       47,555,895  

HubSpot Inc.

    34,686       10,286,480  

Jamf Holding Corp.

    1,541,550       36,488,489  

Model N Inc.

    1,910,753       72,608,614  *(d)  

New Relic Inc.

    773,174       45,802,828  

PagerDuty Inc.

    2,950,464       73,584,572  

Paycor HCM Inc.

    2,610,496       79,541,813  

Qualys Inc.

    285,453       40,694,180  

SEMrush Holdings Inc., Class A Shares

    1,272,891       15,567,457  

Smartsheet Inc., Class A Shares

    579,508       20,236,419  

Sprout Social Inc., Class A Shares

    960,821       57,966,331  

Varonis Systems Inc.

    2,441,151       65,349,612  

Viant Technology Inc., Class A Shares

    745,317       3,398,646  

Zeta Global Holdings Corp., Class A Shares

    2,422,733       20,205,593  

Total Software

            655,605,276  

Total Information Technology

            1,043,355,388  
Materials — 1.4%                

Chemicals — 1.4%

               

Balchem Corp.

    416,129       58,174,834  

Total Common Stocks (Cost — $2,976,730,431)

            4,180,681,977  

 

See Notes to Financial Statements.

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

15


Table of Contents

Schedule of investments (cont’d)

October 31, 2022

 

ClearBridge Small Cap Growth Fund

(Percentages shown based on Fund net assets)

 

Security   Rate     Shares     Value  
Preferred Stocks — 0.3%                        
Health Care — 0.1%                        

Pharmaceuticals — 0.1%

                       

Caris Life Sciences Inc., Series C

          2,075,035     $ 4,406,523  *(a)(b)(c)  

Caris Life Sciences Inc., Series D

          360,901       766,406  *(a)(b)(c)  

Total Health Care

                    5,172,929  
Information Technology — 0.2%                        

Electronic Equipment, Instruments & Components — 0.2%

                       

Brain Corp.

          1,923,387       7,725,938  *(a)(b)(c)  

Total Preferred Stocks (Cost — $18,797,220)

                    12,898,867  

Total Investments before Short-Term Investments (Cost — $2,995,527,651)

 

            4,193,580,844  
Short-Term Investments — 0.3%                        

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

    2.966     9,642,872       9,642,872  (e)  

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

    3.147     2,410,717       2,410,717  (d)(e)  

Total Short-Term Investments (Cost — $12,053,589)

                    12,053,589  

Total Investments — 100.1% (Cost — $3,007,581,240)

                    4,205,634,433  

Liabilities in Excess of Other Assets — (0.1)%

                    (6,208,994

Total Net Assets — 100.0%

                  $ 4,199,425,439  

 

*

Non-income producing security.

 

(a) 

Security is valued in good faith in accordance with procedures approved by the Board of Trustees (Note 1).

 

(b) 

Security is valued using significant unobservable inputs (Note 1).

 

(c) 

Restricted security (Note 9).

 

(d) 

In this instance, as defined in the Investment Company Act of 1940, an “Affiliated Company” represents Fund ownership of at least 5% of the outstanding voting securities of an issuer, or a company which is under common ownership or control with the Fund. At October 31, 2022, the total market value of investments in Affiliated Companies was $75,019,331 and the cost was $73,227,170 (Note 8).

 

(e) 

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

 

Abbreviation(s) used in this schedule:

ADR — American Depositary Receipts

 

See Notes to Financial Statements.

 

 

16

    ClearBridge Small Cap Growth Fund 2022 Annual Report


Table of Contents

Statement of assets and liabilities

October 31, 2022

 

Assets:         

Investments in unaffiliated securities, at value (Cost — $2,934,354,070)

   $ 4,130,615,102  

Investments in affiliated securities, at value (Cost — $73,227,170)

     75,019,331  

Receivable for Fund shares sold

     3,124,881  

Dividends receivable from unaffiliated investments

     274,387  

Dividends receivable from affiliated investments

     25,934  

Prepaid expenses

     76,373  

Total Assets

     4,209,136,008  
Liabilities:         

Payable for Fund shares repurchased

     5,963,841  

Investment management fee payable

     2,559,190  

Transfer agent fees payable

     829,430  

Service and/or distribution fees payable

     211,135  

Trustees’ fees payable

     19,243  

Accrued expenses

     127,730  

Total Liabilities

     9,710,569  
Total Net Assets    $ 4,199,425,439  
Net Assets:         

Par value (Note 7)

   $ 1,140  

Paid-in capital in excess of par value

     3,043,299,090  

Total distributable earnings (loss)

     1,156,125,209  
Total Net Assets    $ 4,199,425,439  

 

See Notes to Financial Statements.

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

17


Table of Contents

Statement of assets and liabilities (cont’d)

October 31, 2022

 

Net Assets:         

Class 1

     $3,486,516  

Class A

     $887,023,124  

Class C

     $2,365,169  

Class FI

     $4,532,893  

Class R

     $74,632,094  

Class I

     $1,031,676,828  

Class IS

     $2,195,708,815  
Shares Outstanding:         

Class 1

     98,681  

Class A

     26,394,640  

Class C

     102,914  

Class FI

     133,848  

Class R

     2,342,284  

Class I

     27,553,688  

Class IS

     57,419,090  
Net Asset Value:         

Class 1 (and redemption price)

     $35.33  

Class A (and redemption price)

     $33.61  

Class C*

     $22.98  

Class FI (and redemption price)

     $33.87  

Class R (and redemption price)

     $31.86  

Class I (and redemption price)

     $37.44  

Class IS (and redemption price)

     $38.24  
Maximum Public Offering Price Per Share:         

Class A (based on maximum initial sales charge of 5.50%; 5.75% prior to August 15, 2022)

     $35.57  

 

*

Redemption price per share is NAV of Class C shares reduced by a 1.00% CDSC if shares are redeemed within one year from purchase payment (Note 2).

 

See Notes to Financial Statements.

 

 

18

    ClearBridge Small Cap Growth Fund 2022 Annual Report


Table of Contents

Statement of operations

For the Year Ended October 31, 2022

 

Investment Income:         

Dividends from unaffiliated investments

   $ 15,134,051  

Dividends from affiliated investments

     130,249  

Total Investment Income

     15,264,300  
Expenses:         

Investment management fee (Note 2)

     37,040,263  

Transfer agent fees (Note 5)

     3,542,548  

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

     2,971,295  

Trustees’ fees

     368,269  

Registration fees

     228,787  

Fund accounting fees

     113,953  

Legal fees

     86,696  

Shareholder reports

     50,973  

Audit and tax fees

     41,970  

Insurance

     35,355  

Custody fees

     30,288  

Commitment fees (Note 10)

     15,326  

Interest expense

     2,342  

Miscellaneous expenses

     32,226  

Total Expenses

     44,560,291  

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

     (9,777)  

Net Expenses

     44,550,514  
Net Investment Loss      (29,286,214)  
Realized and Unrealized Gain (Loss) on Investments and Written Options (Notes 1, 3, 4 and 11):

 

Net Realized Gain (Loss) From:

        

Investment transactions in unaffiliated securities

     143,057,976  

Investment transactions in affiliated securities

     (193,364)  

Written options

     2,952,968  

Net Realized Gain

     145,817,580  

Change in Net Unrealized Appreciation (Depreciation) From:

        

Investments in unaffiliated securities

     (2,040,635,694)  

Investments in affiliated securities

     10,638,267  

Written options

     1,112,605  

Change in Net Unrealized Appreciation (Depreciation)

     (2,028,884,822)  
Net Loss on Investments and Written Options      (1,883,067,242)  
Decrease in Net Assets From Operations    $ (1,912,353,456)  

 

See Notes to Financial Statements.

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

19


Table of Contents

Statements of changes in net assets

 

 

For the Years Ended October 31,    2022      2021  
Operations:                  

Net investment loss

   $ (29,286,214)      $ (36,282,718)  

Net realized gain

     145,817,580        694,697,207  

Change in net unrealized appreciation (depreciation)

     (2,028,884,822)        1,295,613,811  

Increase (Decrease) in Net Assets From Operations

     (1,912,353,456)        1,954,028,300  
Distributions to Shareholders From (Notes 1 and 6):                  

Total distributable earnings

     (620,167,731)        (352,076,827)  

Decrease in Net Assets From Distributions to Shareholders

     (620,167,731)        (352,076,827)  
Fund Share Transactions (Note 7):                  

Net proceeds from sale of shares

     1,315,209,013        1,909,073,172  

Reinvestment of distributions

     528,805,094        299,558,380  

Cost of shares repurchased

     (1,451,571,677)        (1,742,316,689)  

Shares redeemed in-kind (Note 11)

     (290,159,627)        (107,868,094)  

Increase in Net Assets From Fund Share Transactions

     102,282,803        358,446,769  

Increase (Decrease) in Net Assets

     (2,430,238,384)        1,960,398,242  
Net Assets:                  

Beginning of year

     6,629,663,823        4,669,265,581  

End of year

   $ 4,199,425,439      $ 6,629,663,823  

 

See Notes to Financial Statements.

 

 

20

    ClearBridge Small Cap Growth Fund 2022 Annual Report


Table of Contents

Financial highlights

 

 For a share of each class of beneficial interest outstanding throughout each year ended October 31:  
Class 1 Shares1   2022     2021     2020     2019     2018  
Net asset value, beginning of year     $56.17       $42.48       $35.87       $38.54       $33.67  
Income (loss) from operations:          

Net investment loss

    (0.23)       (0.30)       (0.23)       (0.21)       (0.21)  

Net realized and unrealized gain (loss)

    (15.16)       17.24       9.47       2.21       6.24  

Total income (loss) from operations

    (15.39)       16.94       9.24       2.00       6.03  
Less distributions from:          

Net realized gains

    (5.45)       (3.25)       (2.63)       (4.67)       (1.16)  

Total distributions

    (5.45)       (3.25)       (2.63)       (4.67)       (1.16)  
Net asset value, end of year     $35.33       $56.17       $42.48       $35.87       $38.54  

Total return2

    (29.76)     41.62     27.19     6.58     18.52
Net assets, end of year (000s)     $3,487       $5,366       $4,415       $3,750       $3,882  
Ratios to average net assets:          

Gross expenses

    0.89     0.89     0.92     0.93     0.93

Net expenses3

    0.89 4       0.89 4       0.92 4       0.93       0.93  

Net investment loss

    (0.58)       (0.58)       (0.62)       (0.58)       (0.54)  
Portfolio turnover rate     9 %5       19 %5       21 %5       18 %5       15

 

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. Past performance is no guarantee of future results.

 

3 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class 1 shares did not exceed the ratio of total annual fund operating expenses of Class A shares. This expense limitation arrangement cannot be terminated prior to December 31, 2024 without the Board of Trustees’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.

 

4 

Reflects fee waivers and/or expense reimbursements.

 

5 

Excludes securities delivered as a result of a redemption in-kind.

 

See Notes to Financial Statements.

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

21


Table of Contents

Financial highlights (cont’d)

 

 For a share of each class of beneficial interest outstanding throughout each year ended October 31:  
Class A Shares1   2022     2021     2020     2019     2018  
Net asset value, beginning of year     $53.85       $40.95       $34.74       $37.57       $32.93  
Income (loss) from operations:          

Net investment loss

    (0.33)       (0.42)       (0.31)       (0.29)       (0.30)  

Net realized and unrealized gain (loss)

    (14.46)       16.57       9.15       2.13       6.10  

Total income (loss) from operations

    (14.79)       16.15       8.84       1.84       5.80  
Less distributions from:          

Net realized gains

    (5.45)       (3.25)       (2.63)       (4.67)       (1.16)  

Total distributions

    (5.45)       (3.25)       (2.63)       (4.67)       (1.16)  
Net asset value, end of year     $33.61       $53.85       $40.95       $34.74       $37.57  

Total return2

    (29.95)     41.23     26.90     6.29     18.23
Net assets, end of year (millions)     $887       $1,332       $993       $895       $906  
Ratios to average net assets:          

Gross expenses

    1.18     1.16     1.17     1.19     1.19

Net expenses3,4

    1.18       1.16       1.17       1.19       1.19  

Net investment loss

    (0.87)       (0.85)       (0.87)       (0.84)       (0.80)  
Portfolio turnover rate     9 %5       19 %5       21 %5       18 %5       15

 

1 

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

 

2 

Performance figures, exclusive of sales charges, 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 

Reflects fee waivers and/or expense reimbursements.

 

4 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class A shares did not exceed 1.28%. This expense limitation arrangement cannot be terminated prior to December 31, 2024 without the Board of Trustees’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.

 

5 

Excludes securities delivered as a result of a redemption in-kind.

 

See Notes to Financial Statements.

 

 

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 For a share of each class of beneficial interest outstanding throughout each year ended October 31:  
Class C Shares1   2022     2021     2020     2019     2018  
Net asset value, beginning of year     $38.93       $30.60       $26.77       $30.24       $26.91  
Income (loss) from operations:          

Net investment loss

    (0.45)       (0.58)       (0.42)       (0.41)       (0.45)  

Net realized and unrealized gain (loss)

    (10.05)       12.16       6.88       1.61       4.94  

Total income (loss) from operations

    (10.50)       11.58       6.46       1.20       4.49  
Less distributions from:          

Net realized gains

    (5.45)       (3.25)       (2.63)       (4.67)       (1.16)  

Total distributions

    (5.45)       (3.25)       (2.63)       (4.67)       (1.16)  
Net asset value, end of year     $22.98       $38.93       $30.60       $26.77       $30.24  

Total return2

    (30.48)     40.15     25.95     5.61     17.40
Net assets, end of year (000s)     $2,365       $5,976       $9,551       $13,912       $36,204  
Ratios to average net assets:          

Gross expenses

    1.99     1.91     1.92     1.88     1.89

Net expenses3,4

    1.99       1.91       1.92       1.88       1.89  

Net investment loss

    (1.68)       (1.60)       (1.60)       (1.52)       (1.50)  
Portfolio turnover rate     9 %5       19 %5       21 %5       18 %5       15

 

1 

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

 

2 

Performance figures, exclusive of CDSC, 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 

Reflects fee waivers and/or expense reimbursements.

 

4 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class C shares did not exceed 2.09%. This expense limitation arrangement cannot be terminated prior to December 31, 2024 without the Board of Trustees’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.

 

5 

Excludes securities delivered as a result of a redemption in-kind.

 

See Notes to Financial Statements.

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

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Table of Contents

Financial highlights (cont’d)

 

 For a share of each class of beneficial interest outstanding throughout each year ended October 31:  
Class FI Shares1   2022     2021     2020     2019     2018  
Net asset value, beginning of year     $54.23       $41.24       $34.98       $37.80       $33.12  
Income (loss) from operations:          

Net investment loss

    (0.34)       (0.43)       (0.31)       (0.29)       (0.30)  

Net realized and unrealized gain (loss)

    (14.57)       16.67       9.20       2.14       6.14  

Total income (loss) from operations

    (14.91)       16.24       8.89       1.85       5.84  
Less distributions from:          

Net realized gains

    (5.45)       (3.25)       (2.63)       (4.67)       (1.16)  

Total distributions

    (5.45)       (3.25)       (2.63)       (4.67)       (1.16)  
Net asset value, end of year     $33.87       $54.23       $41.24       $34.98       $37.80  

Total return2

    (29.97)     41.14     26.89     6.28     18.24
Net assets, end of year (000s)     $4,533       $7,946       $8,726       $13,742       $12,566  
Ratios to average net assets:          

Gross expenses

    1.20     1.21     1.19     1.20     1.19

Net expenses3

    1.20 4       1.21 4       1.19 4       1.20       1.19  

Net investment loss

    (0.89)       (0.86)       (0.87)       (0.85)       (0.82)  
Portfolio turnover rate     9 %5       19 %5       21 %5       18 %5       15

 

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. Past performance is no guarantee of future results.

 

3 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class FI shares did not exceed 1.35%. This expense limitation arrangement cannot be terminated prior to December 31, 2024 without the Board of Trustees’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.

 

4 

Reflects fee waivers and/or expense reimbursements.

 

5 

Excludes securities delivered as a result of a redemption in-kind.

 

See Notes to Financial Statements.

 

 

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 For a share of each class of beneficial interest outstanding throughout each year ended October 31:  
Class R Shares1   2022     2021     2020     2019     2018  
Net asset value, beginning of year     $51.50       $39.40       $33.62       $36.61       $32.21  
Income (loss) from operations:          

Net investment loss

    (0.41)       (0.56)       (0.40)       (0.38)       (0.39)  

Net realized and unrealized gain (loss)

    (13.78)       15.91       8.81       2.06       5.95  

Total income (loss) from operations

    (14.19)       15.35       8.41       1.68       5.56  
Less distributions from:          

Net realized gains

    (5.45)       (3.25)       (2.63)       (4.67)       (1.16)  

Total distributions

    (5.45)       (3.25)       (2.63)       (4.67)       (1.16)  
Net asset value, end of year     $31.86       $51.50       $39.40       $33.62       $36.61  

Total return2

    (30.18)     40.79     26.49     5.99     17.88
Net assets, end of year (000s)     $74,632       $99,190       $72,116       $73,346       $89,301  
Ratios to average net assets:          

Gross expenses

    1.48     1.48     1.46     1.49     1.47

Net expenses3

    1.48 4       1.48 4       1.46 4       1.49       1.47 4  

Net investment loss

    (1.17)       (1.17)       (1.15)       (1.14)       (1.09)  
Portfolio turnover rate     9 %5       19 %5       21 %5       18 %5       15

 

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. Past performance is no guarantee of future results.

 

3 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class R shares did not exceed 1.60%. This expense limitation arrangement cannot be terminated prior to December 31, 2024 without the Board of Trustees’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.

 

4 

Reflects fee waivers and/or expense reimbursements.

 

5 

Excludes securities delivered as a result of a redemption in-kind.

 

See Notes to Financial Statements.

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

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Table of Contents

Financial highlights (cont’d)

 

 For a share of each class of beneficial interest outstanding throughout each year ended October 31:  
Class I Shares1   2022     2021     2020     2019     2018  
Net asset value, beginning of year     $59.18       $44.62       $37.54       $40.10       $34.97  
Income (loss) from operations:          

Net investment loss

    (0.25)       (0.33)       (0.23)       (0.21)       (0.20)  

Net realized and unrealized gain (loss)

    (16.04)       18.14       9.94       2.32       6.49  

Total income (loss) from operations

    (16.29)       17.81       9.71       2.11       6.29  
Less distributions from:          

Net realized gains

    (5.45)       (3.25)       (2.63)       (4.67)       (1.16)  

Total distributions

    (5.45)       (3.25)       (2.63)       (4.67)       (1.16)  
Net asset value, end of year     $37.44       $59.18       $44.62       $37.54       $40.10  

Total return2

    (29.77)     41.57     27.23     6.61     18.58
Net assets, end of year (millions)     $1,032       $1,700       $1,419       $1,174       $1,079  
Ratios to average net assets:          

Gross expenses

    0.90     0.91     0.90     0.91     0.90

Net expenses3

    0.90 4       0.91 4       0.90 4       0.91       0.90  

Net investment loss

    (0.59)       (0.60)       (0.60)       (0.56)       (0.51)  
Portfolio turnover rate     9 %5       19 %5       21 %5       18 %5       15

 

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. Past performance is no guarantee of future results.

 

3 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class I shares did not exceed 1.00%. This expense limitation arrangement cannot be terminated prior to December 31, 2024 without the Board of Trustees’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.

 

4 

Reflects fee waivers and/or expense reimbursements.

 

5 

Excludes securities delivered as a result of a redemption in-kind.

 

See Notes to Financial Statements.

 

 

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 For a share of each class of beneficial interest outstanding throughout each year ended October 31:  
Class IS Shares1   2022     2021     2020     2019     2018  
Net asset value, beginning of year     $60.25       $45.31       $38.04       $40.52       $35.29  
Income (loss) from operations:          

Net investment loss

    (0.20)       (0.26)       (0.19)       (0.16)       (0.16)  

Net realized and unrealized gain (loss)

    (16.36)       18.45       10.09       2.35       6.55  

Total income (loss) from operations

    (16.56)       18.19       9.90       2.19       6.39  
Less distributions from:          

Net realized gains

    (5.45)       (3.25)       (2.63)       (4.67)       (1.16)  

Total distributions

    (5.45)       (3.25)       (2.63)       (4.67)       (1.16)  
Net asset value, end of year     $38.24       $60.25       $45.31       $38.04       $40.52  

Total return2

    (29.68)     41.79     27.39     6.75     18.70
Net assets, end of year (millions)     $2,196       $3,479       $2,163       $1,687       $1,176  
Ratios to average net assets:          

Gross expenses

    0.78     0.77     0.78     0.77     0.78

Net expenses3

    0.78 4       0.77 4       0.78 4       0.77       0.78  

Net investment loss

    (0.47)       (0.47)       (0.48)       (0.43)       (0.39)  
Portfolio turnover rate     9 %5       19 %5       21 %5       18 %5       15

 

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. Past performance is no guarantee of future results.

 

3 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class IS shares did not exceed 0.90%. In addition, the ratio of total annual fund operating expenses for Class IS shares did not exceed the ratio of total annual fund operating expenses for Class I shares. These expense limitation arrangements cannot be terminated prior to December 31, 2024 without the Board of Trustees’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund.

 

4 

Reflects fee waivers and/or expense reimbursements.

 

5 

Excludes securities delivered as a result of a redemption in-kind.

 

See Notes to Financial Statements.

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

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Table of Contents

Notes to financial statements

 

1. Organization and significant accounting policies

ClearBridge Small Cap Growth Fund (the “Fund”) is a separate diversified investment series of Legg Mason Partners Investment 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.

As of October 1, 2013, the Fund is open for purchases and incoming exchanges only by existing Fund shareholders and certain categories of investors, with certain exceptions. For more information, please see the prospectus supplement dated March 1, 2022.

The Fund follows the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946, Financial Services — Investment Companies (“ASC 946”). The following are significant accounting policies consistently followed by the Fund 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. Equity securities for which market quotations are available are valued at the last reported sales price or official closing price on the primary market or exchange on which they trade. The valuations for fixed income securities (which may include, but are not limited to, corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and certain derivative instruments are typically the prices supplied by independent third party pricing services, which may use market prices or broker/dealer quotations or a variety of valuation techniques and methodologies. The independent third party pricing services 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 Fund holds securities or other assets that are denominated in a foreign currency, the Fund will normally use the currency exchange rates as of 4:00 p.m. (Eastern Time). If independent third party pricing services are unable to supply prices for a portfolio investment, or if the prices supplied are deemed by the manager to be unreliable, the market price may be determined by the manager using quotations from one or more broker/dealers or at the transaction price if the security has recently been purchased and no value has yet been obtained from a pricing service or pricing broker. When reliable prices are not readily available, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund values these securities as determined in accordance with procedures approved by the Fund’s Board of Trustees.

 

 

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Pursuant to policies adopted by the Board of Trustees, the Fund’s manager has been designated as the valuation designee and is responsible for the oversight of the daily valuation process. The Fund’s 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 Fund’s pricing policies, and reporting to the Fund’s manager and the Board of Trustees. When determining the reliability of third party pricing information for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the daily change in prices and reviews transactions among market participants.

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

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

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

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 Fund’s own assumptions in determining the fair value of investments)

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

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

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Table of Contents

Notes to financial statements (cont’d)

 

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

 

ASSETS  

Description

 

Quoted Prices

(Level 1)

   

Other Significant

Observable Inputs

(Level 2)

   

Significant

Unobservable

Inputs

(Level 3)

   

Total

 
Long-Term Investments†:                                

Common Stocks:

                               

Communication Services

  $ 84,285,148           $ 14,041,854     $ 98,327,002  

Information Technology

    1,040,949,771             2,405,617       1,043,355,388  

Other Common Stocks

    3,038,999,587                   3,038,999,587  

Preferred Stocks:

                               

Health Care

                5,172,929       5,172,929  

Information Technology

                7,725,938       7,725,938  
Total Long-Term Investments     4,164,234,506             29,346,338       4,193,580,844  
Short-Term Investments†     12,053,589                   12,053,589  
Total Investments   $ 4,176,288,095           $ 29,346,338     $ 4,205,634,433  

 

See Schedule of Investments for additional detailed categorizations.

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

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

(c) Foreign investment risks. The Fund’s investments in foreign securities may involve risks not present in domestic investments. Since securities may be denominated in foreign currencies, may require settlement in foreign currencies or may pay interest or dividends in foreign currencies, changes in the relationship of these foreign currencies to the U.S. dollar

 

 

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can significantly affect the value of the investments and earnings of the Fund. Foreign investments may also subject the Fund to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, all of which affect the market and/or credit risk of the investments.

(d) Counterparty risk and credit-risk-related contingent features of derivative instruments. The Fund may invest in certain securities or engage in other transactions where the Fund is exposed to counterparty credit risk in addition to broader market risks. The Fund may invest in securities of issuers, which may also be considered counterparties as trading partners in other transactions. This may increase the risk of loss in the event of default or bankruptcy by the counterparty or if the counterparty otherwise fails to meet its contractual obligations. The Fund’s subadviser attempts to mitigate counterparty risk by (i) periodically assessing the creditworthiness of its trading partners, (ii) monitoring and/or limiting the amount of its net exposure to each individual counterparty based on its assessment and (iii) requiring collateral from the counterparty for certain transactions. Market events and changes in overall economic conditions may impact the assessment of such counterparty risk by the subadviser. In addition, declines in the values of underlying collateral received may expose the Fund to increased risk of loss.

With exchange traded and centrally cleared derivatives, there is less counterparty risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, the credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default of the clearing broker or clearinghouse.

The Fund has entered into master agreements, such as an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement, with certain of its derivative counterparties that govern over-the-counter (“OTC”) derivatives and provide for general obligations, representations, agreements, collateral posting terms, netting provisions in the event of default or termination and credit related contingent features. The credit related contingent features include, but are not limited to, a percentage decrease in the Fund’s net assets or net asset value per share over a specified period of time. If these credit related contingent features were triggered, the derivatives counterparty could terminate the positions and demand payment or require additional collateral.

Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. However, absent an event of default by the counterparty or a termination of the agreement, the terms of the ISDA Master Agreements do not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the Fund and the applicable counterparty. The enforceability of the right to offset may vary by jurisdiction.

 

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

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Table of Contents

Notes to financial statements (cont’d)

 

Collateral requirements differ by type of derivative. Collateral or margin requirements are set by the broker or exchange clearinghouse for exchange traded derivatives while collateral terms are contract specific for OTC traded derivatives. Cash collateral that has been pledged to cover obligations of the Fund under derivative contracts, if any, will be reported separately in the Statement of Assets and Liabilities. Securities pledged as collateral, if any, for the same purpose are noted in the Schedule of Investments.

As of October 31, 2022, the Fund did not have any open OTC derivative transactions with credit related contingent features in a net liability position.

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

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

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

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

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

Management has analyzed the Fund’s tax positions taken on income tax returns for all open tax years and has concluded that as of October 31, 2022, no provision for income tax is required in the Fund’s financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.

 

 

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(j) 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 following reclassifications have been made:

 

       

Total Distributable

Earnings (Loss)

                

Paid-in

Capital

 
(a)      $ (122,629,431)                   $ 122,629,431  

 

(a) 

Reclassifications are due to a tax net operating loss, a taxable overdistribution and book/tax differences in the treatment of an in-kind distribution of securities.

2. Investment management agreement and other transactions with affiliates

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

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

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

As a result of expense limitation arrangements between the Fund and LMPFA, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class A, Class C, Class FI, Class R, Class I and Class IS shares did not exceed 1.28%, 2.09%, 1.35%, 1.60%, 1.00% and 0.90%, respectively. In addition, the ratio of total annual fund operating expenses for Class IS shares did not exceed the ratio of total annual fund operating expenses for Class I shares and the ratio of total annual fund operating expenses for Class 1 shares did not exceed the ratio of total annual fund operating expenses for Class A shares. These expense limitation arrangements cannot be terminated prior to December 31, 2024 without the Board of Trustees’ consent. In addition, the manager has agreed to waive the Fund’s management fee to an extent sufficient to offset the net management fee payable in connection with any investment in an affiliated money market fund (the “affiliated money market fund waiver”). The affiliated money market fund waiver is not subject to the recapture provision discussed below.

During the year ended October 31, 2022, fees waived and/or expenses reimbursed amounted to $9,777, which included an affiliated money market fund waiver of $9,771.

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

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Notes to financial statements (cont’d)

 

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

Franklin Templeton Investor Services, LLC (“Investor Services”) serves as the Fund’s shareholder servicing agent and acts as the Fund’s transfer agent and dividend-paying agent. Investor Services is an indirect, wholly-owned subsidiary of Franklin Resources. Franklin Distributors, LLC (“Franklin Distributors”) serves as the Fund’s sole and exclusive distributor. Franklin Distributors is an indirect, wholly-owned broker-dealer subsidiary of Franklin Resources.

There is a maximum initial sales charge of 5.50% (5.75% prior to August 15, 2022) for Class A shares. There is a contingent deferred sales charge (“CDSC”) of 1.00% on Class C shares, which applies if redemption occurs within 12 months from purchase payment. In certain cases, Class A shares have a 1.00% CDSC, which applies if redemption occurs within 18 months from purchase payment. This CDSC only applies to those purchases of Class A shares, which, when combined with current holdings of other shares of funds sold by Franklin Distributors, equal or exceed $1,000,000 in the aggregate. These purchases do not incur an initial sales charge.

For the year ended October 31, 2022, sales charges retained by and CDSCs paid to Franklin Distributors and its affiliates, if any, were as follows:

 

        Class A        Class C  
Sales charges      $ 28,897           
CDSCs        154        $ 144  

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 October 31, 2022, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) were as follows:

 

Purchases      $ 455,614,891  
Sales        530,859,730

 

*

Excludes value of securities delivered as a result of redemptions in-kind totaling $284,155,874 (Note 11).

At October 31, 2022, the aggregate cost of investments and the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:

 

     

Cost

    

Gross

Unrealized

Appreciation

    

Gross

Unrealized

Depreciation

    

Net

Unrealized

Appreciation

 
Securities    $ 3,010,598,054      $ 1,528,450,367      $ (333,413,988)      $ 1,195,036,379  

 

 

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4. Derivative instruments and hedging activities

At October 31, 2022, the Fund did not have any derivative instruments outstanding.

The following tables provide information about the effect of derivatives and hedging activities on the Fund’s Statement of Operations for the year ended October 31, 2022. The first table provides additional detail about the amounts and sources of gains (losses) realized on derivatives during the period. The second table provides additional information about the change in net unrealized appreciation (depreciation) resulting from the Fund’s derivatives and hedging activities during the period.

 

AMOUNT OF NET REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED  
      Equity
Risk
 
Written options    $ 2,952,968  

 

CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED  
      Equity
Risk
 
Written options    $ 1,112,605  

During the year ended October 31, 2022, the volume of derivative activity for the Fund was as follows:

 

        Average Market
Value
 
Written options†      $ 324,250  

 

At October 31, 2022, there were no open positions held in this derivative.

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

The Fund has adopted a Rule 12b-1 shareholder services and distribution plan and under that plan the Fund pays service and/or distribution fees with respect to its Class A, Class C, Class FI and Class R shares calculated at the annual rate of 0.25%, 1.00%, 0.25% and 0.50% of the average daily net assets of each class, respectively. Service and/or distribution fees are accrued daily and paid monthly.

For the year ended October 31, 2022, class specific expenses were as follows:

 

        Service and/or
Distribution Fees
       Transfer Agent
Fees
 
Class 1               $ 4,757  
Class A      $ 2,516,465          1,571,658  
Class C        34,563          7,498  
Class FI        14,395          10,287  
Class R        405,872          165,907  
Class I                 1,634,229  
Class IS                 148,212  
Total      $ 2,971,295        $ 3,542,548  

 

Amount shown is exclusive of expense reimbursements. For the year ended October 31, 2022, the service and/or distribution fees reimbursed amounted to $6 for Class A shares.

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

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Table of Contents

Notes to financial statements (cont’d)

 

For the year ended October 31, 2022, waivers and/or expense reimbursements by class were as follows:

 

        Waivers/Expense
Reimbursements
 
Class 1      $ 8  
Class A        2,004  
Class C        6  
Class FI        11  
Class R        165  
Class I        2,485  
Class IS        5,098  
Total      $ 9,777  

6. Distributions to shareholders by class

 

        Year Ended
October 31, 2022
       Year Ended
October 31, 2021
 
Net Realized Gains:                      
Class 1      $ 503,606        $ 337,591  
Class A        134,389,224          79,021,338  
Class C        805,304          1,010,597  
Class FI        785,182          722,223  
Class R        10,696,689          5,933,704  
Class I        154,867,086          91,741,291  
Class IS        318,120,640          173,310,083  
Total      $ 620,167,731        $ 352,076,827  

7. Shares of beneficial interest

At October 31, 2022, the Trust had an unlimited number of shares of beneficial interest authorized with a par value of $0.00001 per share. The Fund has the ability to issue multiple classes of shares. Each class of shares represents an identical interest and has the same rights, except that each class bears certain direct expenses, including those specifically related to the distribution of its shares.

 

 

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Transactions in shares of each class were as follows:

 

     Year Ended
October 31, 2022
     Year Ended
October 31, 2021
 
      Shares      Amount      Shares      Amount  
Class 1                                    
Shares sold                            
Shares issued on reinvestment      10,775      $ 503,606        7,382      $ 337,591  
Shares repurchased      (7,632)        (340,257)        (15,765)        (832,625)  
Net increase (decrease)      3,143      $ 163,349        (8,383)      $ (495,034)  
Class A                                    
Shares sold      4,122,399      $ 153,877,697        4,057,640      $ 199,749,805  
Shares issued on reinvestment      2,823,416        125,839,670        1,683,859        74,006,672  
Shares repurchased      (5,290,451)        (200,027,640)        (5,255,554)        (259,817,177)  
Net increase      1,655,364      $ 79,689,727        485,945      $ 13,939,300  
Class C                                    
Shares sold      10,382      $ 292,882        22,421      $ 807,280  
Shares issued on reinvestment      25,793        791,314        30,640        980,185  
Shares repurchased      (86,775)        (2,363,546)        (211,705)        (7,731,395)  
Net decrease      (50,600)      $ (1,279,350)        (158,644)      $ (5,943,930)  
Class FI                                    
Shares sold      28,313      $ 1,037,677        73,582      $ 3,516,353  
Shares issued on reinvestment      17,480        785,182        16,310        722,223  
Shares repurchased      (58,476)        (2,135,276)        (154,936)        (7,703,481)  
Net decrease      (12,683)      $ (312,417)        (65,044)      $ (3,464,905)  
Class R                                    
Shares sold      749,190      $ 27,494,071        645,681      $ 30,797,227  
Shares issued on reinvestment      251,558        10,658,516        140,114        5,905,879  
Shares repurchased      (584,590)        (20,602,569)        (689,942)        (32,490,854)  
Net increase      416,158      $ 17,550,018        95,853      $ 4,212,252  
Class I                                    
Shares sold      9,257,719      $ 394,641,898        10,216,630      $ 555,742,211  
Shares issued on reinvestment      2,609,415        129,270,428        1,576,430        75,969,185  
Shares repurchased      (12,622,388)        (525,932,758)        (14,515,012)        (769,926,549)  
Shares redeemed in-kind      (415,097)        (15,848,425)        (349,295)        (19,735,165)  
Net decrease      (1,170,351)      $ (17,868,857)        (3,071,247)      $ (157,950,318)  
Class IS                                    
Shares sold      16,737,771      $ 737,864,788        20,722,593      $ 1,118,460,296  
Shares issued on reinvestment      5,163,363        260,956,378        2,890,500        141,636,645  
Shares repurchased      (16,475,416)        (700,169,631)        (12,015,512)        (663,814,608)  
Shares redeemed in-kind      (5,756,274)        (274,311,202)        (1,578,296)        (88,132,929)  
Net increase (decrease)      (330,556)      $ 24,340,333        10,019,285      $ 508,149,404  

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

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Table of Contents

Notes to financial statements (cont’d)

 

8. Transactions with affiliated companies

As defined by the 1940 Act, an affiliated company is one in which the Fund owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control with the Fund. The following companies were considered affiliated companies for all or some portion of the year ended October 31, 2022. The following transactions were effected in such companies for the year ended October 31, 2022.

 

    

Affiliate

Value at

October 31,

     Purchased      Sold  
      2021      Cost      Shares      Proceeds      Shares  
Model N Inc.    $ 65,276,171                    $ 3,305,824        103,322  
Western Asset Premier Institutional U.S. Treasury Reserves, Premium Shares      39,211,240      $ 146,019,201        146,019,201        182,819,724        182,819,724  
     $ 104,487,411      $ 146,019,201               $ 186,125,548           

 

(cont’d)    Realized
Gain (Loss)
     Dividend
Income
     Net Increase
(Decrease) in
Unrealized
Appreciation
(Depreciation)
     Affiliate
Value at
October 31,
2022
 
Model N Inc.    $ (193,364)             $ 10,638,267      $ 72,608,614  
Western Asset Premier Institutional U.S. Treasury Reserves, Premium Shares           $ 130,249               2,410,717  
     $ (193,364)      $ 130,249      $ 10,638,267      $ 75,019,331  

9. Restricted securities

The following Fund investments are restricted as to resale and, in the absence of readily ascertainable market values, are valued in good faith in accordance with procedures approved by the Board of Trustees.

 

Security    Number of
Shares
     Acquisition
Date
     Cost      Fair Value
at 10/31/2022
     Value Per
Share
     Percent of
Net Assets
 
Brain Corp., Common Shares      598,883        03/21      $ 2,617,119      $ 2,405,617      $ 4.02        0.06
Brain Corp., Preferred Shares      1,923,387        04/20, 11/20        10,146,825        7,725,938        4.02        0.18  
Caris Life Sciences Inc., Series C, Preferred Shares      2,075,035        10/20        5,727,097        4,406,523        2.12        0.10  
Caris Life Sciences Inc., Series D, Preferred Shares      360,901        05/21        2,923,298        766,406        2.12        0.02  
Klaviyo Inc., Common Shares      802,521        05/21        26,789,306        14,041,854        17.5        0.33  
                       $ 48,203,645      $ 29,346,338                 0.69

 

 

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10. Redemption facility

On February 4, 2022, the Fund, together with other U.S. registered and foreign investment funds (collectively, the “Borrowers”) managed by Franklin Resources or its affiliates, became a borrower in a joint syndicated senior unsecured credit facility totaling $2.675 billion (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 February 3, 2023.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, 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 Statement of Operations. The Fund did not utilize the Global Credit Facility during the year ended October 31, 2022.

11. Redemptions in-kind

The Fund may make payment for Fund shares redeemed wholly or in part by distributing portfolio securities to shareholders. For the years ended October 31, 2022 and October 31, 2021, the Fund had redemptions in-kind with total proceeds in the amount of $290,159,627 and $107,868,094, respectively. The net realized gain on these redemptions in-kind amounted to $160,521,767 and $64,692,709, respectively, which were not realized for tax purposes.

12. Income tax information and distributions to shareholders

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

 

        2022        2021  
Distributions paid from:                      
Net long-term capital gains      $ 620,167,731        $ 352,076,827  

As of October 31, 2022, the components of distributable earnings (loss) on a tax basis were as follows:

 

Deferred capital losses*      $ (15,239,848)  
Other book/tax temporary differences(a)        (23,671,322)  
Unrealized appreciation (depreciation)(b)        1,195,036,379  
Total distributable earnings (loss) — net      $ 1,156,125,209  

 

*

These capital losses have been deferred in the current year as either short-term or long-term losses. The losses will be deemed to occur on the first day of the next taxable year in the same character as they were originally deferred and will be available to offset future taxable capital gains.

 

(a) 

Other book/tax temporary differences are attributable to the deferral of certain late year losses for tax purposes and 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.

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

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Table of Contents

Notes to financial statements (cont’d)

 

13. Recent accounting pronouncements

In June 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2022-03, Fair Value Measurement (Topic 820) — Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendments in the ASU clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, should not be considered in measuring fair value. The ASU is effective for interim and annual reporting periods beginning after December 15, 2023, with the option of early adoption. Management is currently evaluating the impact, if any, of applying this ASU.

*  *  *

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In January 2021, the FASB issued ASU No. 2021-01, with further amendments to Topic 848. The amendments in the ASUs provide optional temporary accounting recognition and financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the LIBOR and other interbank-offered based reference rates as of the end of 2021 and 2023. The ASUs are effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of these ASUs will not have a material impact on the financial statements.

14. Other matters

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

*  *  *

On February 24, 2022, Russia engaged in military actions in the sovereign territory of Ukraine. The current political and financial uncertainty surrounding Russia and Ukraine may increase market volatility and the economic risk of investing in securities in these countries and may also cause uncertainty for the global economy and broader financial markets. The ultimate fallout and long-term impact from these events are not known. The Fund will continue to assess the impact on valuations and liquidity and will take any potential actions needed in accordance with procedures approved by the Board of Trustees.

 

 

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Report of independent registered public accounting firm

 

To the Board of Trustees of Legg Mason Partners Investment Trust and Shareholders of ClearBridge Small Cap Growth Fund

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of ClearBridge Small Cap Growth Fund (one of the funds constituting Legg Mason Partners Investment Trust, referred to hereafter as the “Fund”) as of October 31, 2022, the related statement of operations for the year ended October 31, 2022, the statement of changes in net assets for each of the two years in the period ended October 31, 2022, including the related notes, and the financial highlights for each of the five years in the period ended October 31, 2022 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of October 31, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended October 31, 2022 and the financial highlights for each of the five years in the period ended October 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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

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

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of October 31, 2022 by correspondence with the custodian and portfolio company investees. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Baltimore, Maryland

December 19, 2022

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

 

ClearBridge Small Cap Growth Fund 2022 Annual Report    

 

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Board approval of management and subadvisory agreements (unaudited)

 

At an in-person meeting of the Board of Trustees of Legg Mason Partners Investment Trust (the “Trust”) held on May 4 and 5, 2022, the Board, including the Trustees who are not considered to be “interested persons” of the Trust (the “Independent Trustees”) under the Investment Company Act of 1940, as amended (the “1940 Act”), approved for an annual period the continuation of the management agreement (the “Management Agreement”) between the Trust and Legg Mason Partners Fund Advisor, LLC (the “Manager”) with respect to ClearBridge Small Cap Growth Fund, a series of the Trust (the “Fund”), and the sub-advisory agreement pursuant to which ClearBridge Investments, LLC (“ClearBridge”) provides day-to-day management of the Fund’s portfolio, and the sub-advisory agreement pursuant to which Western Asset Management Company, LLC (“Western Asset” and, together with ClearBridge, the “Sub-Advisers”) provides day-to-day management of the Fund’s cash and short-term instruments allocated to it by the Manager. The management agreement and sub-advisory agreements are collectively referred to as the “Agreements.”

Background

The Board received extensive information in advance of the meeting to assist it in its consideration of the Agreements and asked questions and requested additional information from management. Throughout the year, the Board (including its various committees) had met with representatives of the Manager and the Subadvisers, and had received information relevant to the renewal of the Agreements. Prior to the meeting the Independent Trustees met with their independent legal counsel to discuss and consider the information provided and submitted questions to management, and they considered the responses provided. The Board received and considered a variety of information about the Manager and the Subadvisers, as well as the management, advisory and sub-advisory arrangements for the Fund and other funds overseen by the Board, certain portions of which are discussed below. The information received and considered by the Board both in conjunction with the May 2022 meeting and throughout the year was both written and oral. The contractual arrangements discussed below are the product of multiple years of review and negotiation and information received and considered by the Board during those years.

The information provided and presentations made to the Board encompassed the Fund and all funds for which the Board has responsibility. The discussion below covers both the advisory and the administrative functions being rendered by the Manager, both of which functions are encompassed by the Management Agreement, as well as the advisory functions rendered by the Subadvisers pursuant to the Sub-Advisory Agreements.

Board approval of management agreement and sub-advisory agreements

The Independent Trustees were advised by separate independent legal counsel throughout the process. Prior to voting, the Independent Trustees received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements. The Independent Trustees also reviewed the

 

 

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proposed continuation of the Management Agreement and the Sub-Advisory Agreements in private sessions with their independent legal counsel at which no representatives of the Manager and Subadvisers were present. The Independent Trustees considered the Management Agreement and each Sub-Advisory Agreement separately in the course of their review. In doing so, they noted the respective roles of the Manager and the Subadvisers in providing services to the Fund.

In approving the Agreements, the Board, including the Independent Trustees, considered a variety of factors, including those factors discussed below. No single factor reviewed by the Board was identified by the Board as the principal factor in determining whether to approve the Management Agreement and the Sub-Advisory Agreements. Each Trustee may have attributed different weight to the various factors in evaluating the Management Agreement and each Sub-Advisory Agreement.

After considering all relevant factors and information, the Board, exercising its business judgment, determined that the continuation of the Agreements was in the best interests of the Fund and its shareholders and approved the continuation of each such agreement for another year.

Nature, extent and quality of the services under the management agreement and sub-advisory agreements

The Board received and considered information regarding the nature, extent and quality of services provided to the Fund by the Manager and the Subadvisers under the Management Agreement and the Sub-Advisory Agreements, respectively, during the past year. The Board noted information received at regular meetings throughout the year related to the services rendered by the Manager in its management of the Fund’s affairs and the Manager’s role in coordinating the activities of the Fund’s other service providers. The Board’s evaluation of the services provided by the Manager and the Subadvisers took into account the Board’s knowledge gained as Trustees of funds in the fund complex overseen by the Trustees, including knowledge gained regarding the scope and quality of the investment management and other capabilities of the Manager and the Subadvisers, and the quality of the Manager’s administrative and other services. The Board observed that the scope of services provided by the Manager and the Subadvisers, and of the undertakings required of the Manager and Subadvisers in connection with those services, including maintaining and monitoring their own and the Fund’s compliance programs, liquidity management programs and cybersecurity programs, had expanded over time as a result of regulatory, market and other developments. The Board also noted that on a regular basis it received and reviewed information from the Manager regarding the Fund’s compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. The Board also considered the risks associated with the Fund borne by the Manager and its affiliates (such as entrepreneurial,

operational, reputational, litigation and regulatory risk), as well as the Manager’s and each Subadviser’s risk management processes.

 

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Board approval of management and subadvisory agreements (unaudited) (cont’d)

 

The Board reviewed the qualifications, backgrounds and responsibilities of the Manager’s and each Subadviser’s senior personnel and the team of investment professionals primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered, based on its knowledge of the Manager and the Manager’s affiliates, the financial resources of Franklin Resources, Inc., the parent organization of the Manager and the Subadvisers. The Board recognized the importance of having a fund manager with significant resources.

The Board considered the division of responsibilities among the Manager and the Subadvisers and the oversight provided by the Manager. The Board also considered the policies and practices of the Manager and the Subadvisers regarding the selection of brokers and dealers and the execution of portfolio transactions. The Board considered management’s periodic reports to the Board on, among other things, its business plans, any organizational changes and portfolio manager compensation.

The Board received and considered performance information for the Fund as well as for a group of funds (the “Performance Universe”) selected by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, based on classifications provided by Thomson Reuters Lipper (“Lipper”). The Board was provided with a description of the methodology used to determine the similarity of the Fund with the funds included in the Performance Universe. It was noted that while the Board found the Broadridge data generally useful, they recognized its limitations, including that the data may vary depending on the end date selected and that the results of the performance comparisons may vary depending on the selection of the peer group and its composition over time. The Board also noted that it had received and discussed with management information throughout the year at periodic intervals comparing the Fund’s performance against its benchmark and against the Fund’s peers. The Board also considered the Fund’s performance in light of overall financial market conditions.

The information comparing the Fund’s performance to that of its Performance Universe, consisting of all retail and institutional funds (including the Fund) classified as small-cap growth funds by Lipper, showed, among other data, that the performance of the Fund’s Class I shares for the 1-, 3-, 5- and 10-year periods ended December 31, 2021 was above the median performance of the funds in the Performance Universe for each period and ranked in the first quintile of the funds in the Performance Universe for the 5- and 10-year periods.

 

 

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The Board concluded that, overall, the nature, extent and quality of services provided (and expected to be provided), including performance, under the Management Agreement and each Sub-Advisory Agreement were sufficient for renewal.

Management fees and expense ratios

The Board reviewed and considered the contractual management fee payable by the Fund to the Manager (the “Contractual Management Fee”) and the actual management fees paid by the Fund to the Manager (the “Actual Management Fee”) in light of the nature, extent and quality of the management and sub-advisory services provided by the Manager and the Subadvisers, respectively. The Board also considered that fee waiver and/or expense reimbursement arrangements are currently in place for the Fund. The Board also noted that the compensation paid to the Subadvisers is the responsibility and expense of the Manager, not the Fund.

The Board received and considered information provided by Broadridge comparing the Contractual Management Fee and the Actual Management Fee and the Fund’s total actual expenses with those of funds in both the relevant expense group and a broader group of funds, each selected by Broadridge based on classifications provided by Lipper. It was noted that while the Board found the Broadridge data generally useful, they recognized its limitations, including that the data may vary depending on the selection of the peer group. The Board also reviewed information regarding fees charged by the Manager and/or the Subadvisers to other U.S. clients investing primarily in an asset class similar to that of the Fund, including, where applicable, institutional separate and commingled accounts and retail managed accounts.

The Manager reviewed with the Board the differences in services provided to these different types of accounts, noting that the Fund is provided with certain administrative services, office facilities, and Fund officers (including the Fund’s chief executive, chief financial and chief compliance officers), and that the Manager coordinates and oversees the provision of services to the Fund by other Fund service providers. The Board considered the fee comparisons in light of the differences in management of these different types of accounts, and the differences in the degree of entrepreneurial and other risks borne by the Manager in managing the Fund and in managing other types of accounts.

The Board considered the overall management fee, the fees of each of the Subadvisers and the amount of the management fee retained by the Manager after payment of the subadvisory fees, in each case in light of the services rendered for those amounts. The Board also received an analysis of complex-wide management fees provided by the Manager, which, among other things, set out a framework of fees based on asset classes.

 

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Board approval of management and subadvisory agreements (unaudited) (cont’d)

 

The Board also received and considered information comparing the Fund’s Contractual Management Fee and Actual Management Fee as well as its actual total expense ratio with those of a group of institutional funds consisting of 20 small-cap growth funds (including the Fund) selected by Broadridge to be comparable to the Fund (the “Expense Group”), and a broader group of funds selected by Broadridge consisting of all institutional small-cap growth funds (including the Fund) (the “Expense Universe”). This information showed that the Fund’s Contractual Management Fee was approximately equivalent to the median of management fees payable by the funds in the Expense Group and that the Fund’s Actual Management Fee was below the median of management fees paid by the funds in the Expense Group and at the median of management fees paid by the funds in the Expense Universe. This information also showed that the Fund’s actual total expense ratio was approximately equivalent to the median of the total expense ratios of the funds in the Expense Group and below the median of the actual total expense ratios of the funds in the Expense Universe. The Board also considered that the current limitation on the Fund’s expenses is expected to continue until and expire on December 31, 2023.

Taking all of the above into consideration, as well as the factors identified below, the Board determined that the management fee and the subadvisory fees for the Fund were reasonable in light of the nature, extent and quality of the services provided to the Fund under the Management Agreement and the Sub-Advisory Agreements.

Manager profitability

The Board received and considered an analysis of the profitability of the Manager and its affiliates in providing services to the Fund. The Board also received profitability information with respect to the Legg Mason Funds complex as a whole. The Board received information with respect to the Manager’s allocation methodologies used in preparing this profitability data. It was noted that the allocation methodologies had been reviewed by an outside consultant. The profitability of the Manager and its affiliates was considered by the Board not excessive in light of the nature, extent and quality of the services provided to the Fund.

Economies of scale

The Board received and discussed information concerning whether the Manager realizes economies of scale with respect to the management of the Fund as the Fund’s assets grow.

The Board determined that the management fee structure for the Fund was reasonable.

Other benefits to the manager and the subadvisers

The Board considered other benefits received by the Manager, the Subadvisers and their affiliates as a result of their relationship with the Fund, including the opportunity to offer additional products and services to Fund shareholders, including the recent appointment of an affiliate of the Manager as the transfer agent of the Fund.

In light of the costs of providing investment management and other services to the Fund and the ongoing commitment of the Manager and the Subadvisers to the Fund, the Board considered that the ancillary benefits that the Manager, the Subadvisers and their affiliates received were reasonable.

 

 

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Statement regarding liquidity risk management program (unaudited)

 

Each Franklin Templeton and Legg Mason Fund has adopted and implemented a written Liquidity Risk Management Program (the “LRMP”) as required by Rule 22e-4 under the Investment Company Act of 1940 (the “Liquidity Rule”). The LRMP is designed to assess and manage each Fund’s liquidity risk, which is defined as the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of remaining investors’ interests in the Fund. In accordance with the Liquidity Rule, the LRMP includes policies and procedures that provide for: (1) assessment, management, and review (no less frequently than annually) of each Fund’s liquidity risk; (2) classification of each Fund’s portfolio holdings into one of four liquidity categories (Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid); (3) for Funds that do not primarily hold assets that are Highly Liquid, establishing and maintaining a minimum percentage of the Fund’s net assets in Highly Liquid investments (called a “Highly Liquid Investment Minimum” or “HLIM”); and (4) prohibiting the Fund’s acquisition of Illiquid investments that would result in the Fund holding more than 15% of its net assets in Illiquid assets. The LRMP also requires reporting to the Securities and Exchange Commission (“SEC”) (on a non-public basis) and to the Board if the Fund’s holdings of Illiquid assets exceed 15% of the Fund’s net assets. Funds with HLIMs must have procedures for addressing HLIM shortfalls, including reporting to the Board and, with respect to HLIM shortfalls lasting more than seven consecutive calendar days, reporting to the SEC (on a non-public basis).

The Director of Liquidity Risk within the Investment Risk Management Group (the “IRMG”) is the appointed Administrator of the LRMP. The IRMG maintains the Investment Liquidity Committee (the “ILC”) to provide oversight and administration of policies and procedures governing liquidity risk management for Franklin Templeton and Legg Mason products and portfolios. The ILC includes representatives from Franklin Templeton’s Risk, Trading, Global Compliance, Legal, Investment Compliance, Investment Operations, Valuation Committee, Product Management and Global Product Strategy.

In assessing and managing each Fund’s liquidity risk, the ILC considers, as relevant, a variety of factors, including the Fund’s investment strategy and the liquidity of its portfolio investments during both normal and reasonably foreseeable stressed conditions; its short and long-term cash flow projections; and its cash holdings and access to other funding sources including the Funds’ interfund lending facility and line of credit. Classification of the Fund’s portfolio holdings in the four liquidity categories is based on the number of days it is reasonably expected to take to convert the investment to cash (for Highly Liquid and Moderately Liquid holdings) or sell or dispose of the investment (for Less Liquid and Illiquid investments), in current market conditions without significantly changing the investment’s market value.

 

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

 

Each Fund primarily holds liquid assets that are defined under the Liquidity Rule as “Highly Liquid Investments,” and therefore is not required to establish an HLIM. Highly Liquid Investments are defined as cash and any investment reasonably expected to be convertible to cash in current market conditions in three business days or less without the conversion to cash significantly changing the market value of the investment.

At meetings of the Funds’ Board of Trustees/Directors held in May 2022, the Program Administrator provided a written report to the Board addressing the adequacy and effectiveness of the program for the year ended December 31, 2021. The Program Administrator report concluded that (i.) the LRMP, as adopted and implemented, remains reasonably designed to assess and manage each Fund’s liquidity risk; (ii.) the LRMP, including the Highly Liquid Investment Minimum (“HLIM”) where applicable, was implemented and operated effectively to achieve the goal of assessing and managing each Fund’s liquidity risk; and (iii.) each Fund was able to meet requests for redemption without significant dilution of remaining investors’ interests in the Fund.

 

 

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Additional information (unaudited)

Information about Trustees and Officers

 

The business and affairs of ClearBridge Small Cap Growth Fund (the “Fund”) 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, 100 International Drive, 11th Floor, Baltimore, Maryland 21202.

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

 

 Independent Trustees†
Paul R. Ades  
Year of birth   1940
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 1983
Principal occupation(s) during the past five years   Paul R. Ades, PLLC (law firm) (since 2000)
Number of funds in fund complex overseen by Trustee   57
Other board memberships held by Trustee during the past five years   None
Andrew L. Breech  
Year of birth   1952
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 1991
Principal occupation(s) during the past five years   President, Dealer Operating Control Service, Inc. (automotive retail management) (since 1985)
Number of funds in fund complex overseen by Trustee   57
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   57
Other board memberships held by Trustee during the past five years   Formerly, Non-Executive Director, Rokos Capital Management LLP (2019 to 2020)

 

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Additional information (unaudited) (cont’d)

Information about Trustees and Officers

 

 Independent Trustees† (cont’d)    
Stephen R. Gross  
Year of birth   1947
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 1986
Principal occupation(s) during the past five years   Chairman Emeritus (since 2011) and formerly, Chairman, HLB Gross Collins, P.C. (accounting and consulting firm) (1979 to 2011); Executive Director of Business Builders Team, LLC (since 2005); Principal, Gross Consulting Group, LLC (since 2011); CEO, Gross Capital Partners, LLC (since 2014); CEO, Trusted CFO Solutions, LLC (since 2011)
Number of funds in fund complex overseen by Trustee   57
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   57
Other board memberships held by Trustee during the past five years   Formerly, Director, Lincoln Savings Bank FSB (1991 to 1994); Director, Trump Shuttle, Inc. (air transportation) (1989 to 1990); Director, Alexander’s Inc. (department store) (1987 to 1990)
Howard J. Johnson  
Year of birth   1938
Position(s) with Trust   Trustee
Term of office1 and length of time served2   From 1981 to 1998 and since 2000
Principal occupation(s) during the past five years   Retired; formerly, Chief Executive Officer, Genesis Imaging LLC (technology company) (2003 to 2012)
Number of funds in fund complex overseen by Trustee   57
Other board memberships held by Trustee during the past five years   None

 

 

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 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   57
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   57
Other board memberships held by Trustee during the past five years   Director of HSBC Managed Portfolios Limited and HSBC Specialist Funds Limited (since 2020); formerly, Director of Cheyne Capital International Limited (investment advisory firm) (2005 to 2020); Director/ Trustee of Legg Mason Institutional Funds plc, Western Asset Fixed Income Funds plc and Western Asset Debt Securities Fund plc. (2007 to 2011)
Jerome H. Miller  
Year of birth   1938
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 1995
Principal occupation(s) during the past five years   Retired; formerly, President, Shearson Lehman Asset Management (1991 to 1993), Vice Chairman, Shearson Lehman Hutton Inc. (1989 to 1992) and Senior Executive Vice President, E.F. Hutton Group Inc. (1986 to 1989)
Number of funds in fund complex overseen by Trustee   57
Other board memberships held by Trustee during the past five years   None
Ken Miller  
Year of birth   1942
Position(s) with Trust   Trustee
Term of office1 and length of time served2   Since 1983
Principal occupation(s) during the past five years   Retired; formerly, President, Young Stuff Apparel Group, Inc. (apparel manufacturer), division of Li & Fung (1963 to 2012)
Number of funds in fund complex overseen by Trustee   57
Other board memberships held by Trustee during the past five years   None

 

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Additional information (unaudited) (cont’d)

Information about Trustees and Officers

 

 Independent Trustees† (cont’d)    
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 57 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   57
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)
 
 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 128 funds associated with LMPFA or its affiliates (since 2015); President and Chief Executive Officer of LMPFA (since 2015); formerly, Senior Managing Director (2018 to 2020) and Managing Director (2016 to 2018) of Legg Mason & Co., LLC (“Legg Mason & Co.”); Senior Vice President of LMPFA (2015)
Number of funds in fund complex overseen by Trustee   128
Other board memberships held by Trustee during the past five years   None

 

 

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 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 LMPFA (since 2006); Chief Compliance Officer of certain funds associated with Legg Mason & Co. or its affiliates (since 2006); formerly, Director of Global Compliance at Legg Mason, Inc. (2006 to 2020); Managing Director of Compliance of Legg Mason & Co. (2005 to 2020)

Susan Kerr

Franklin Templeton

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)

 

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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 LMPFA (since 2006); Assistant Secretary of certain funds associated with Legg Mason & Co. or its affiliates (since 2006); Secretary of LM Asset Services, LLC (“LMAS”) (since 2002) and Legg Mason Fund Asset Management, Inc. (“LMFAM”) (since 2013) (formerly registered investment advisers); formerly, Managing Director and Deputy General Counsel of Legg Mason & Co. (2005 to 2020)

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 LMPFA (since 2006); President and Chief Executive Officer of LMAS and LMFAM (since 2015); formerly, Managing Director of Legg Mason & Co. (2005 to 2020); Senior Vice President of LMFAM (2013 to 2015)

 

Trustees who are not “interested persons” of the Fund 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 Fund, as defined in the 1940 Act, because of her position with LMPFA and/or certain of its affiliates.

 

 

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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 Fund is required to be furnished to shareholders with respect to income earned and distributions paid during its fiscal year.

The Fund hereby reports the following amounts, or if subsequently determined to be different, the maximum allowable amounts, for the fiscal year ended October 31, 2022:

 

        Pursuant to:        Amount Reported  
Long-Term Capital Gain Dividends Distributed      § 852(b)(3)(C)          $620,167,731  

 

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ClearBridge

Small Cap Growth Fund

 

Trustees

Paul R. Ades

Andrew L. Breech

Althea L. Duersten

Chair

Stephen R. Gross

Susan M. Heilbron

Howard J. Johnson

Arnold L. Lehman

Robin J. W. Masters

Jerome H. Miller

Ken Miller

G. Peter O’Brien

Thomas F. Schlafly

Jane Trust

Investment manager

Legg Mason Partners Fund Advisor, LLC

Subadviser

ClearBridge Investments, LLC

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 22, 2022, Franklin Templeton Investor Services, LLC replaced BNY Mellon Investment Servicing (US) Inc. as Transfer Agent.

 

ClearBridge Small Cap Growth Fund

The Fund is a separate investment series of Legg Mason Partners Investment Trust, a Maryland statutory trust.

ClearBridge Small Cap Growth Fund

Legg Mason Funds

620 Eighth Avenue, 47th Floor

New York, NY 10018

 

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

Information on how the Fund 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 Fund uses to determine how to vote proxies related to portfolio transactions are available (1) without charge, upon request, by calling the Fund 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 ClearBridge Small Cap Growth Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by a current prospectus.

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

www.franklintempleton.com

© 2022 Franklin Distributors, LLC, Member FINRA/SIPC. All rights reserved.


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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.

 

 

NOT PART OF THE ANNUAL REPORT


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

 

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 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


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www.franklintempleton.com

© 2022 Franklin Distributors, LLC, Member FINRA/SIPC. All rights reserved.

FDXX010732 12/22 SR22-4551


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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.