ANNUAL REPORT  

 

  
 

 

FRANKLIN TEMPLETON

ETF TRUST

 

March 31, 2023

 

       LOGO

 

LOGO     

 

Franklin FTSE Asia ex Japan ETF

 

Franklin FTSE Italy ETF

Franklin FTSE Australia ETF

 

Franklin FTSE Japan ETF

Franklin FTSE Brazil ETF

 

Franklin FTSE Japan Hedged ETF

Franklin FTSE Canada ETF

 

Franklin FTSE Latin America ETF

Franklin FTSE China ETF

 

Franklin FTSE Mexico ETF

Franklin FTSE Europe ETF

 

Franklin FTSE Saudi Arabia ETF

Franklin FTSE Europe Hedged ETF

 

Franklin FTSE South Africa ETF

Franklin FTSE France ETF

 

Franklin FTSE South Korea ETF

Franklin FTSE Germany ETF

 

Franklin FTSE Switzerland ETF

Franklin FTSE Hong Kong ETF

 

Franklin FTSE Taiwan ETF

Franklin FTSE India ETF

 

Franklin FTSE United Kingdom ETF


Contents        
Annual Report       
Economic and Market Overview      2  
Franklin FTSE Asia ex Japan ETF      3  
Franklin FTSE Australia ETF      9  
Franklin FTSE Brazil ETF      15  
Franklin FTSE Canada ETF      21  
Franklin FTSE China ETF      27  
Franklin FTSE Europe ETF      33  
Franklin FTSE Europe Hedged ETF      39  
Franklin FTSE France ETF      46  
Franklin FTSE Germany ETF      52  
Franklin FTSE Hong Kong ETF      58  
Franklin FTSE India ETF      64  
Franklin FTSE Italy ETF      70  
Franklin FTSE Japan ETF      76  
Franklin FTSE Japan Hedged ETF      82  
Franklin FTSE Latin America ETF      88  

 

    Visit franklintempleton.com for fund updates and documents, or to find helpful financial planning tools.

    

 

Franklin FTSE Mexico ETF    94
Franklin FTSE Saudi Arabia ETF    100
Franklin FTSE South Africa ETF    106
Franklin FTSE South Korea ETF    112
Franklin FTSE Switzerland ETF    118
Franklin FTSE Taiwan ETF    124
Franklin FTSE United Kingdom ETF    130
Financial Highlights and Schedules of Investments    136
Financial Statements    304
Notes to Financial Statements    327
Report of Independent Registered Public Accounting Firm    356
Tax Information    357
Board Members and Officers    359
Shareholder Information    362

 

         
Not FDIC Insured   |   May Lose Value   |   No Bank Guarantee  

 

           
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Annual Report

             1


ANNUAL REPORT

Economic and Market Overview

 

Global developed and emerging market equities, as measured by the MSCI All Country World Index-NR (net of tax withholding when dividends are paid), posted a -7.44% total return for the 12 months ended March 31, 2023.1 Inflation increased substantially in most parts of the world and remained elevated despite some signs of slowing in the second half of the period. This inflationary pressure led many of the world’s central banks to tighten monetary policy, which pressured stocks and negatively impacted the outlook for economic growth. Russia’s ongoing invasion of Ukraine and related disruptions to the global economy also increased investor uncertainty and led to substantial volatility in commodity markets. In China, COVID-19-related lockdowns sharply restricted economic activity prior to the government easing controls in December 2022.

In the U.S., gross domestic product (GDP) recovered from a slight contraction during the first half of the year, expanding in the second half of 2022 amid rising government spending and private investment. The labor market remained strong, as hiring continued at a brisk pace and unemployment reached its lowest level in over 50 years. In an effort to control inflation, the U.S. Federal Reserve (Fed) raised the federal funds target rate at each of its eight meetings during the period to end at a range of 4.75%–5.00%, a full 450 basis points higher than at the beginning of the period. Furthermore, the Fed indicated it would continue to reduce its U.S. Treasury and agency debt and mortgage-backed security holdings.

Economic growth in the eurozone was tepid during 2022, ending with zero growth in the fourth quarter. The ongoing war in Ukraine disrupted supply chains, weakened the economic outlook and contributed to record high inflation across the eurozone, as energy prices soared in the first half of the period. However, governments spent significant sums to subsidize consumers and find alternative supplies. Consequently, the price of natural gas in Europe declined notably in the period’s second half, providing a tailwind for European stocks. The European Central Bank increased interest rates in July 2022 for the first time in 11 years to curtail growing inflation and further raised rates in five subsequent meetings. In this environment, European developed market equities, as measured by the MSCI Europe Index-NR, posted a +1.38% total return for the 12 months under review.1

Asian developed and emerging market equities, as measured by the MSCI All Country Asia Index-NR, posted a -7.61% total return for the 12-month period.1 Economic activity in Japan remained slow, alternating between positive quarterly GDP growth and contraction before stalling in 2022’s fourth quarter with zero growth. On an annual basis, China’s economic growth slowed, hindered by investor concerns about the solvency of several large property developers and a period of strict COVID-19 lockdowns.

Global emerging market stocks, as measured by the MSCI Emerging Markets Index-NR, posted a -10.70% total return for the 12 months under review.1 Central bank tightening, the threat of recession, and a U.S. dollar that strengthened relative to many emerging market currencies contributed to the downturn. While most of the commodity price increases related to the war in Ukraine moderated by period-end, this volatility disrupted some emerging market economies that are dependent on energy and food imports.

 

 

The foregoing information reflects our analysis and opinions as of March 31, 2023. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.

 

 

1. Source: Morningstar.

See www.franklintempletondatasources.com for additional data provider information.

 

           
2             

Annual Report

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Franklin FTSE Asia ex Japan ETF

 

This annual report for Franklin FTSE Asia ex Japan ETF covers the fiscal year ended March 31, 2023.

Your Fund’s Goal and Main Investments

The Fund seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE Asia ex Japan RIC Capped Index (the FTSE Asia ex Japan Capped Index or the Underlying Index).1 Under normal market conditions, the Fund invests at least 80% of its assets in the component securities of the FTSE Asia ex Japan Capped Index and in depositary receipts representing such securities.

 

Top 10 Sectors/Industries       
3/31/23       
    

% of Total

Net Assets

 

 

 

Banks

     11.4%  

 

 

Semiconductors & Semiconductor Equipment

     10.0%  

 

 

Interactive Media & Services

     6.4%  

 

 

Technology Hardware, Storage & Peripherals

     5.8%  

 

 

Insurance

     4.4%  

 

 

Oil, Gas & Consumable Fuels

     3.8%  

 

 

Internet & Direct Marketing Retail

     3.5%  

 

 

Hotels, Restaurants & Leisure

     3.4%  

 

 

Real Estate Management & Development

     3.4%  

 

 

Electronic Equipment, Instruments & Components

     3.3%  

 

 

Performance Overview

During the 12-month period, the Fund posted cumulative total returns of -8.16% based on market price and -9.10% based on net asset value. In comparison, the FTSE Asia ex Japan Capped Index posted a -9.08% total return for the same period.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 5.

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

Investment Strategy

The Fund, using a “passive” or indexing investment approach, seeks investment results that closely correspond, before fees and expenses, to the performance of the FTSE Asia ex Japan Capped Index. The Fund may use either a replication strategy or representative sampling strategy. Under a replication strategy, the Fund will replicate the component securities of the Underlying Index as closely as possible (i.e., invest in all of the component securities in their respective weightings in the Underlying Index). However, it may not be possible or practicable to replicate the Underlying Index. In these circumstances, we may use a representative sampling strategy whereby we will invest in what we believe to be a representative sample of the component securities of the Underlying Index, but may not track the Underlying Index with the same degree of accuracy as would an investment vehicle replicating the entire Underlying Index. Under the representative sampling technique, we will select securities that collectively have an investment profile similar to that of the Underlying Index, including securities that resemble those included in the Underlying Index in terms of risk factors, performance attributes and other characteristics, such as market capitalization and industry weightings. The Fund will concentrate its investments (i.e., hold 25% or more of its net assets) in a particular industry or group of industries to approximately the same extent that the Underlying Index is concentrated.

 

 

1. The FTSE Asia ex Japan Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE Asia ex Japan Capped Index is based on the FTSE Asia ex Japan Index and is designed to measure the performance of large- and mid-capitalization stocks from developed and emerging Asian countries, excluding Japan. The Chinese constituents in the FTSE Asia ex Japan Capped Index are represented by H-shares, B-shares, A-shares, N-shares, Red Chips, P-Chips and S-Chips.

2. Source: FactSet.

The index is unmanaged and includes reinvestment of any income or distributions (after the deduction of certain withholding taxes). It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index.

See www.franklintempletondatasources.com for additional data provider information.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Schedule of Investments (SOI). The SOI begins on page 137.

 

           
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Annual Report

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FRANKLIN FTSE ASIA EX JAPAN ETF

 

Top 10 Holdings       
3/31/23       

Company

Sector/Industry, Country

  

% of Total

Net Assets

 

 

 

Taiwan Semiconductor Manufacturing Co. Ltd.

Semiconductors & Semiconductor Equipment, Taiwan

     6.7%  

 

 

Tencent Holdings Ltd.

Interactive Media & Services, China

     4.7%  

 

 

Samsung Electronics Co. Ltd.

Technology Hardware, Storage & Peripherals,
South Korea

     4.3%  

 

 

Alibaba Group Holding Ltd., Class A

Internet & Direct Marketing Retail, China

     3.0%  

 

 

AIA Group Ltd.

Insurance, Hong Kong

     2.0%  

 

 

Reliance Industries Ltd.

Oil, Gas & Consumable Fuels, India

     1.5%  

 

 

Meituan, Class B

Hotels, Restaurants & Leisure, China

     1.4%  

 

 

Infosys Ltd.

IT Services, India

     1.0%  

 

 

China Construction Bank Corp., Class H

Banks, China

     1.0%  

 

 

Housing Development Finance Corp. Ltd.

Financial Services, India

     0.9%  

 

 

 

Top 10 Countries       
3/31/23       
    

% of Total

Net Assets

 

 

 

China

     35.4%  

 

 

Taiwan

     16.4%  

 

 

India

     15.8%  

 

 

South Korea

     13.1%  

 

 

Hong Kong

     7.4%  

 

 

Singapore

     3.6%  

 

 

Thailand

     2.6%  

 

 

Indonesia

     2.3%  

 

 

Malaysia

     1.8%  

 

 

Philippines

     0.9%  

 

 

Manager’s Discussion

For the fiscal year ended March 31, 2023, the only sector that contributed to the Fund’s absolute performance was consumer staples. Individual holdings that lifted the Fund’s absolute return included Tencent Holdings, PDD Holdings and Trip.com Group.

CFA® is a trademark owned by CFA Institute.

For the same period, the sectors that detracted most from the Fund’s absolute performance were information technology, financials and consumer discretionary. Individual holdings that hindered the Fund’s absolute return included Taiwan Semiconductor Manufacturing Co., Alibaba Group Holding and JD.com.

Thank you for your participation in Franklin FTSE Asia ex Japan ETF. We look forward to serving your future investment needs.

Dina Ting, CFA

Hailey Harris

Joe Diederich

Basit Amin, CFA

Portfolio Management Team

 

 

The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2023, the end of the reporting period. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

 

           
4             

Annual Report

  franklintempleton.com


FRANKLIN FTSE ASIA EX JAPAN ETF

 

Performance Summary as of March 31, 2023

Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (2/9/18), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.

Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.

Performance as of 3/31/231

 

     Cumulative Total Return2      Average Annual Total Return2  
  

 

 

    

 

 

 
           Based on
NAV3
    

Based on

market price4

    

   Based on

NAV3

    

Based on

market price4

 

1-Year

     -9.10%        -8.16%        -9.10%        -8.16%  

 

 

3-Year

     +24.58%        +25.35%        +7.60%        +7.82%  

 

 

5-Year

     +1.72%        -0.62%        +0.34%        -0.12%  

 

 

Since Inception (2/6/18)

     +1.50%        +1.40%        +0.29%        +0.27%  

 

 

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

 

 

See page 7 for Performance Summary footnotes.

 

           
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Annual Report

             5


FRANKLIN FTSE ASIA EX JAPAN ETF

PERFORMANCE SUMMARY

 

Total Return Index Comparison for a Hypothetical $10,000 Investment1

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

 

LOGO

 

 

See page 7 for Performance Summary footnotes.

 

           
6             

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FRANKLIN FTSE ASIA EX JAPAN ETF

PERFORMANCE SUMMARY

 

Distributions (4/1/22–3/31/23)
Net Investment      
Income    

$0.587567

 

 

Total Annual Operating Expenses6
    

  0.19%

  

All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. China may be subject to considerable degrees of economic, political and social instability. Investments in securities of issuers in Asian countries involve risks that are specific to Asia, including certain legal, regulatory, political and economic risks. Because the Fund invests its assets primarily in companies in a specific country or region, the Fund may also experience greater volatility than a fund that is more broadly diversified geographically. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.

ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.

1. The total annual operating expenses are as of the Fund’s prospectus available at the time of publication. Actual expenses may be higher and may impact portfolio returns.

2. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

3. Assumes reinvestment of distributions based on net asset value.

4. Assumes reinvestment of distributions based on market price.

5. Source: FactSet. The FTSE Asia ex Japan Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE Asia ex Japan Capped Index is based on the FTSE Asia ex Japan Index and is designed to measure the performance of large- and mid-capitalization stocks from developed and emerging Asian countries, excluding Japan. The Chinese constituents in the FTSE Asia ex Japan Capped Index are represented by H-shares, B-shares, N-shares, Red Chips, P-Chips and S-Chips.

6. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

 

See www.franklintempletondatasources.com for additional data provider information.

 

           
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Annual Report

             7


FRANKLIN FTSE ASIA EX JAPAN ETF

 

Your Fund’s Expenses

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares; and (2) ongoing Fund costs, including management fees and other Fund expenses. All funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value.” You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.

 

    

Actual

(actual return after expenses)

    

Hypothetical

(5% annual return before expenses)

        

Beginning

Account

Value 10/1/22

  

Ending

Account

Value 3/31/23

    

Expenses

Paid During

Period

10/1/22–3/31/231

    

Ending

Account

Value 3/31/23

    

Expenses

Paid During

Period

10/1/22–3/31/231

    

Net Annualized

Expense Ratio

 
$1,000.00      $1,157.00        $1.02        $1,023.98        $0.96        0.19 %   

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 182/365 to reflect the one-half year period.

 

           
8             

Annual Report

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Franklin FTSE Australia ETF

    

 

This annual report for Franklin FTSE Australia ETF covers the fiscal year ended March 31, 2023.

Your Fund’s Goal and Main Investments

The Fund seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE Australia RIC Capped Index (the FTSE Australia Capped Index or the Underlying Index).1 Under normal market conditions, the Fund invests at least 80% of its assets in the component securities of the FTSE Australia Capped Index and in depositary receipts representing such securities.

 

Top 10 Sectors/Industries     
3/31/23     
      % of Total
Net Assets

Metals & Mining

   23.5%

Banks

   20.9%

Biotechnology

   7.1%

Oil, Gas & Consumable Fuels

   6.3%

Consumer Staples Distribution & Retail

   4.2%

Capital Markets

   4.1%

Diversified REITs

   3.4%

Insurance

   3.3%

Broadline Retail

   3.0%

Transportation Infrastructure

   3.0%

Performance Overview

During the 12-month period, the Fund posted cumulative total returns of -8.94% based on market price and -9.90% based on net asset value. In comparison, the FTSE Australia Capped Index posted a -9.86% total return for the same period.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 11.

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

Investment Strategy

The Fund, using a “passive” or indexing investment approach, seeks investment results that closely correspond, before fees and expenses, to the performance of the FTSE Australia Capped Index. The Fund may use either a replication strategy or representative sampling strategy. Under a replication strategy, the Fund will replicate the component securities of the Underlying Index as closely as possible (i.e., invest in all of the component securities in their respective weightings in the Underlying Index). However, it may not be possible or practicable to replicate the Underlying Index. In these circumstances, we may use a representative sampling strategy whereby we will invest in what we believe to be a representative sample of the component securities of the Underlying Index, but may not track the Underlying Index with the same degree of accuracy as would an investment vehicle replicating the entire Underlying Index. Under the representative sampling technique, we will select securities that collectively have an investment profile similar to that of the Underlying Index, including securities that resemble those included in the Underlying Index in terms of risk factors, performance attributes and other characteristics, such as market capitalization and industry weightings. The Fund will concentrate its investments (i.e., hold 25% or more of its net assets) in a particular industry or group of industries to approximately the same extent that the Underlying Index is concentrated.

 

1. The FTSE Australia Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE Australia Capped Index is based on the FTSE Australia Index and is designed to measure the performance of Australian large-and mid-capitalization stocks.

2. Source: FactSet.

The index is unmanaged and includes reinvestment of any income or distributions (after the deduction of certain withholding taxes). It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index.

See www.franklintempletondatasources.com for additional data provider information.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Schedule of Investments (SOI). The SOI begins on page 174.

 

           
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FRANKLIN FTSE AUSTRALIA ETF

 

Top 10 Holdings     
3/31/23     
Company
Sector/Industry, Country
  

% of Total

Net Assets

BHP Group Ltd.

Metals & Mining, Australia

   12.2%

Commonwealth Bank of Australia

Banks, Australia

   8.5%

CSL Ltd.

Biotechnology, Australia

   7.1%

National Australia Bank Ltd.

Banks, Australia

   4.5%

Westpac Banking Corp.

Banks, Australia

   3.9%

ANZ Group Holdings Ltd.

Banks, Australia

   3.5%

Woodside Energy Group Ltd.

Oil, Gas & Consumable Fuels, Australia

   3.2%

Macquarie Group Ltd.

Capital Markets, Australia

   3.1%

Wesfarmers Ltd.

Broadline Retail, Australia

   2.9%

Woolworths Group Ltd.

Consumer Staples Distribution & Retail, Australia

   2.4%

Manager’s Discussion

For the fiscal year ended March 31, 2023, the sectors that contributed to the Fund’s absolute performance were energy and utilities. Individual holdings that lifted the Fund’s absolute return included Woodside Petroleum, Mineral Resources and Brambles.

For the same period, the sectors that detracted most from the Fund’s absolute performance were financials, materials and real estate. Individual holdings that hindered the Fund’s absolute return included Commonwealth Bank of Australia, National Australia Bank and Macquarie Group.

Thank you for your participation in Franklin FTSE Australia ETF. We look forward to serving your future investment needs.

Dina Ting, CFA

Hailey Harris

Joe Diederich

Basit Amin, CFA

Portfolio Management Team

 

 

The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2023, the end of the reporting period. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

 

           
10             

Annual Report

  franklintempleton.com


FRANKLIN FTSE AUSTRALIA ETF

 

Performance Summary as of March 31, 2023

Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (11/6/17), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.

Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.

Performance as of 3/31/231

 

           Cumulative Total Return2      Average Annual Total Return2  
     

Based on

NAV3

    

Based on

market price4

    

Based on

NAV3

     Based on
market price4
 

1-Year

     -9.90%        -8.94%        -9.90%        -8.94%  

3-Year

     +76.27%        +73.00%        +20.80%        +20.05%  

5-Year

     +35.24%        +34.40%        +6.22%        +6.09%  

Since Inception (11/2/17)

     +32.48%        +32.99%        +5.34%        +5.41%  

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

See page 13 for Performance Summary footnotes.

 

 

           
franklintempleton.com  

Annual Report

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FRANKLIN FTSE AUSTRALIA ETF

PERFORMANCE SUMMARY

 

Total Return Index Comparison for a Hypothetical $10,000 Investment1

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

11/2/17-3/31/23

 

     LOGO

 

 

See page 13 for Performance Summary footnotes.

 

 

           
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FRANKLIN FTSE AUSTRALIA ETF

PERFORMANCE SUMMARY

 

Distributions (4/1/22–3/31/23)

Net Investment

Income

$1.548986

Total Annual Operating Expenses6

 

 

  0.09%

All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in securities of Australian issuers involve risks that are specific to Australia, including certain legal, regulatory, political and economic risks. Because the Fund invests its assets primarily in companies in a specific country or region, the Fund may also experience greater volatility than a fund that is more broadly diversified geographically. As a non-diversified fund, the Fund may invest in a relatively small number of issuers which may negatively impact the Fund’s performance and result in greater fluctuation in the value of the Fund’s shares. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.

ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.

1. The total annual operating expenses are sourced from the Fund’s prospectus available at the time of publication. Actual expenses may be higher and may impact portfolio returns.

2. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

3. Assumes reinvestment of distributions based on net asset value.

4. Assumes reinvestment of distributions based on market price.

5. Source: FactSet. The FTSE Australia Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE Australia Capped Index is based on the FTSE Australia Index and is designed to measure the performance of Australian large- and mid-capitalization stocks.

6. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

See www.franklintempletondatasources.com for additional data provider information.

 

           
franklintempleton.com  

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FRANKLIN FTSE AUSTRALIA ETF

 

Your Fund’s Expenses

 

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares; and (2) ongoing Fund costs, including management fees and other Fund expenses. All funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value.” You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       

Beginning

Account

        Value 10/1/22

   

Ending

Account

Value 3/31/23

   

Expenses

Paid During

Period
10/1/22–3/31/231

   

Ending

Account

Value 3/31/23

   

Expenses

Paid During

Period

10/1/22–3/31/231

    Net Annualized
Expense Ratio
 
  $1,000.00       $1,175.80       $0.49       $1,024.48       $0.45       0.09 %      

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 182/365 to reflect the one-half year period.

 

           
14             

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Franklin FTSE Brazil ETF

    

 

This annual report for Franklin FTSE Brazil ETF covers the fiscal year ended March 31, 2023.

Your Fund’s Goal and Main Investments

The Fund seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE Brazil RIC Capped Index (the FTSE Brazil Capped Index or the Underlying Index).1 Under normal market conditions, the Fund invests at least 80% of its assets in the component securities of the FTSE Brazil Capped Index and in depositary receipts representing such securities.

 

Top 10 Sectors/Industries     

3/31/23

 

    
      % of Total
Net Assets

Metals & Mining

   20.5%

Banks

   16.6%

Oil, Gas & Consumable Fuels

   15.7%

Electric Utilities

   8.2%

Capital Markets

   4.7%

Ground Transportation

   3.9%

Beverages

   3.4%

Machinery

   3.3%

Consumer Staples Distribution & Retail

   2.9%

Food Products

   2.4%

Performance Overview

During the 12-month period, the Fund posted cumulative total returns of -19.39% based on market price and -19.57% based on net asset value. In comparison, the FTSE Brazil Capped Index posted a -19.21% total return for the same period.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 17.

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

 

Top 10 Holdings

3/31/23

 

Company

Sector/Industry, Country

  

% of Total

Net Assets

Vale SA

Metals & Mining, Brazil

   17.2%

Petroleo Brasileiro SA, 43.945%, pfd.

Oil, Gas & Consumable Fuels, Brazil

   12.6%

Itau Unibanco Holding SA, 4.349%, pfd.

Banks, Brazil

   7.1%

Banco Bradesco SA, 6.492%, pfd.

Banks, Brazil

   4.8%

B3 SA - Brasil Bolsa Balcao

Capital Markets, Brazil

   3.5%

Ambev SA

Beverages, Brazil

   3.5%

WEG SA

Machinery, Brazil

   3.3%

Centrais Eletricas Brasileiras SA

Electric Utilities, Brazil

   2.4%

Itausa SA, 4.745%, pfd.

Banks, Brazil

   2.4%

Localiza Rent a Car SA

Ground Transportation, Brazil

   2.3%

Investment Strategy

The Fund, using a “passive” or indexing investment approach, seeks investment results that closely correspond, before fees and expenses, to the performance of the FTSE Brazil Capped Index. The Fund may use either a replication strategy or representative sampling strategy. Under a replication strategy, the Fund will replicate the component securities of the Underlying Index as closely as possible

 

 

1. The FTSE Brazil Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE Brazil Capped Index is based on the FTSE Brazil Index and is designed to measure the performance of Brazilian large- and mid-capitalization stocks.

2. Source: FactSet.

The index is unmanaged and includes reinvestment of any income or distributions (after the deduction of certain withholding taxes). It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index.

See www.franklintempletondatasources.com for additional data provider information.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Schedule of Investments (SOI). The SOI begins on page 178.

 

           
franklintempleton.com  

Annual Report

             15


FRANKLIN FTSE BRAZIL ETF

 

(i.e., invest in all of the component securities in their respective weightings in the Underlying Index). However, it may not be possible or practicable to replicate the Underlying Index. In these circumstances, we may use a representative sampling strategy whereby we will invest in what we believe to be a representative sample of the component securities of the Underlying Index, but may not track the Underlying Index with the same degree of accuracy as would an investment vehicle replicating the entire Underlying Index. Under the representative sampling technique, we will select securities that collectively have an investment profile similar to that of the Underlying Index, including securities that resemble those included in the Underlying Index in terms of risk factors, performance attributes and other characteristics, such as market capitalization and industry weightings. The Fund will concentrate its investments (i.e., hold 25% or more of its net assets) in a particular industry or group of industries to approximately the same extent that the Underlying Index is concentrated.

Manager’s Discussion

For the fiscal year ended March 31, 2023, the sectors that contributed to the Fund’s absolute performance were energy and industrials. Individual holdings that lifted the Fund’s absolute return included Petroleo Brasileiro (Petrobras), WEG and Banco do Brasil.

For the same period, the sectors that detracted most from the Fund’s absolute performance were materials, financials and consumer staples. Individual holdings that hindered the Fund’s absolute return included Vale, Hapvida Participacoes e Investimentos and Banco Bradesco.

Thank you for your participation in Franklin FTSE Brazil ETF. We look forward to serving your future investment needs.

Dina Ting, CFA

Hailey Harris

Joe Diederich

Basit Amin, CFA

Portfolio Management Team

 

 

The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2023, the end of the reporting period. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

 

           
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FRANKLIN FTSE BRAZIL ETF

 

Performance Summary as of March 31, 2023

Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (11/7/17), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.

Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.

Performance as of 3/31/231

 

           Cumulative Total Return2      Average Annual Total Return2  
     

Based on

NAV3

    

Based on

market price4

    

Based on

NAV3

    

Based on

market price4

 

1-Year

     -19.57%        -19.39%        -19.57%        -19.39%  

3-Year

     +45.30%        +45.43%        +13.26%        +13.30%  

5-Year

     -18.64%        -19.26%        -4.04%        -4.19%  

Since Inception (11/3/17)

     -6.56%        -6.33%        -1.25%        -1.20%  

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

See page 19 for Performance Summary footnotes.

 

 

           
franklintempleton.com  

Annual Report

             17


FRANKLIN FTSE BRAZIL ETF

PERFORMANCE SUMMARY

 

Total Return Index Comparison for a Hypothetical $10,000 Investment1

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

11/3/17-3/31/23

 

     LOGO

 

See page 19 for Performance Summary footnotes.

 

 

           
18             

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FRANKLIN FTSE BRAZIL ETF

PERFORMANCE SUMMARY

 

Distributions (4/1/22–3/31/23)

 

Net Investment

Income

$2.065896

Total Annual Operating Expenses6

 

 

  0.19%

All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. The Brazilian economy has experienced in the past, and may continue to experience, periods of high inflation rates and political unrest. Investments in securities of Brazilian issuers involve risks that are specific to Brazil, including certain legal, regulatory, political and economic risks. Because the Fund invests its assets primarily in companies in a specific country or region, the Fund may also experience greater volatility than a fund that is more broadly diversified geographically. As a non-diversified fund, the Fund may invest in a relatively small number of issuers which may negatively impact the Fund’s performance and result in greater fluctuation in the value of the Fund’s shares. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.

ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.

1. The total annual operating expenses are sourced from the Fund’s prospectus available at the time of publication. Actual expenses may be higher and may impact portfolio returns.

2. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

3. Assumes reinvestment of distributions based on net asset value.

4. Assumes reinvestment of distributions based on market price.

5. Source: FactSet. The FTSE Brazil Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE Brazil Capped Index is based on the FTSE Brazil Index and is designed to measure the performance of Brazilian large and mid-capitalization stocks.

6. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

See www.franklintempletondatasources.com for additional data provider information.

 

           
franklintempleton.com  

Annual Report

             19


FRANKLIN FTSE BRAZIL ETF

 

Your Fund’s Expenses

 

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares; and (2) ongoing Fund costs, including management fees and other Fund expenses. All funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value.” You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       
 

Beginning

Account

    Value 10/1/22

 

 

 

   

Ending

Account

Value 3/31/23

 

 

 

   

Expenses

Paid During

Period

10/1/22–3/31/231

 

 

 

 

   

Ending
Account
Value 3/31/23
 
 
 
   

Expenses

Paid During

Period

10/1/22–3/31/231

 

 

 

 

   
Net Annualized
Expense Ratio
 
 
  $1,000.00       $989.40       $0.94       $1,023.98       $0.96       0.19

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 182/365 to reflect the one-half year period.

 

           
20             

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Franklin FTSE Canada ETF

    

 

This annual report for Franklin FTSE Canada ETF covers the fiscal year ended March 31, 2023.

Your Fund’s Goal and Main Investments

The Fund seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE Canada RIC Capped Index (the FTSE Canada Capped Index or the Underlying Index).1 Under normal market conditions, the Fund invests at least 80% of its assets in the component securities of the FTSE Canada Capped Index and in depositary receipts representing such securities.

 

Top 10 Sectors/Industries
3/31/23
     

% of Total

Net Assets

Banks

   27.1%

Oil, Gas & Consumable Fuels

   18.0%

Ground Transportation

   9.1%

Insurance

   7.8%

Metals & Mining

   7.8%

IT Services

   4.8%

Consumer Staples Distribution & Retail

   4.8%

Capital Markets

   3.5%

Chemicals

   2.5%

Software

   2.3%

Performance Overview

During the 12-month period, the Fund posted cumulative total returns of -13.44% based on market price and -12.82% based on net asset value. In comparison, the FTSE Canada Capped Index posted a -13.05% total return for the same period.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 23.

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

Investment Strategy

The Fund, using a “passive” or indexing investment approach, seeks investment results that closely correspond, before fees and expenses, to the performance of the FTSE Canada Capped Index. The Fund may use either a replication strategy or representative sampling strategy. Under a replication strategy, the Fund will replicate the component securities of the Underlying Index as closely as possible (i.e., invest in all of the component securities in their respective weightings in the Underlying Index). However, it may not be possible or practicable to replicate the Underlying Index. In these circumstances, we may use a representative sampling strategy whereby we will invest in what we believe to be a representative sample of the component securities of the Underlying Index, but may not track the Underlying Index with the same degree of accuracy as would an investment vehicle replicating the entire Underlying index. Under the representative sampling technique, we will select securities that collectively have an investment profile similar to that of the Underlying Index, including securities that resemble those included in the Underlying Index in terms of risk factors, performance attributes and other characteristics, such as market capitalization and industry weightings. The Fund will concentrate its investments (i.e., hold 25% or more of its net assets) in a particular industry or group of industries to approximately the same extent that the Underlying Index is concentrated.

 

1. The FTSE Canada Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE Canada Capped Index is based on the FTSE Canada Index and is designed to measure the performance of Canadian large-and mid-capitalization stocks.

2. Source: FactSet.

The index is unmanaged and includes reinvestment of any income or distributions (after the deduction of certain withholding taxes). It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index.

See www.franklintempletondatasources.com for additional data provider information.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Schedule of Investments (SOI). The SOI begins on page 182.

 

           
franklintempleton.com  

Annual Report

             21


FRANKLIN FTSE CANADA ETF

 

Top 10 Holdings     
3/31/23     

Company

Sector/Industry, Country

  

% of Total

Net Assets

Royal Bank of Canada

Banks, Canada

   8.6%

Toronto-Dominion Bank

Banks, Canada

   7.0%

Enbridge, Inc.

Oil, Gas & Consumable Fuels, Canada

   4.9%

Canadian Pacific Railway Ltd.

Ground Transportation, Canada

   4.6%

Canadian National Railway Co.

Ground Transportation, Canada

   4.5%

Canadian Natural Resources Ltd.

Oil, Gas & Consumable Fuels, Canada

   3.8%

Bank of Nova Scotia

Banks, Canada

   3.8%

Bank of Montreal

Banks, Canada

   3.8%

Shopify, Inc., Class A

IT Services, Canada

   3.5%

Brookfield Corp.

Capital Markets, Canada

   2.8%

Manager’s Discussion

For the fiscal year ended March 31, 2023, the sectors that contributed to the Fund’s absolute performance were consumer staples and consumer discretionary. Individual holdings that lifted the Fund’s absolute return included Alimentation Couche-Tard, Constellation Software and Thomson Reuters.

For the same period, the sectors that detracted most from the Fund’s absolute performance were financials, energy and materials. Individual holdings that hindered the Fund’s absolute return included The Toronto-Dominion Bank, Bank of Nova Scotia and Brookfield Asset Management.

Thank you for your participation in Franklin FTSE Canada ETF. We look forward to serving your future investment needs.

Dina Ting, CFA

Hailey Harris

Joe Diederich

Basit Amin, CFA

Portfolio Management Team

 

 

The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2023, the end of the reporting period. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

 

           
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FRANKLIN FTSE CANADA ETF

 

Performance Summary as of March 31, 2023

Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (11/6/17), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.

Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.

Performance as of 3/31/231

 

           Cumulative Total Return2      Average Annual Total Return2  
     

Based on

NAV3

    

Based on

market price4

    

Based on

NAV3

    

Based on

market price4

 

1-Year

     -12.82%        -13.44%        -12.82%        -13.44%  

3-Year

     +69.14%        +68.07%        +19.15%        +18.90%  

5-Year

     +46.24%        +45.89%        +7.90%        +7.85%  

Since Inception (11/2/17)

     +40.30%        +40.26%        +6.46%        +6.46%  

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

See page 25 for Performance Summary footnotes.

 

 

           
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FRANKLIN FTSE CANADA ETF

PERFORMANCE SUMMARY

 

Total Return Index Comparison for a Hypothetical $10,000 Investment1

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

 

11/2/17-3/31/23LP12

 

     LOGO

 

See page 25 for Performance Summary footnotes.

 

 

           
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FRANKLIN FTSE CANADA ETF

PERFORMANCE SUMMARY

 

Distributions (4/1/22–3/31/23)

 

Net Investment
Income

$0.654492

Total Annual Operating Expenses6

 

 

0.09%

All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in securities of Canadian issuers involve risks that are specific to Canada, including certain legal, regulatory, political and economic risks. Because the Fund invests its assets primarily in companies in a specific country or region, the Fund may also experience greater volatility than a fund that is more broadly diversified geographically. As a non-diversified fund, the Fund may invest in a relatively small number of issuers which may negatively impact the Fund’s performance and result in greater fluctuation in the value of the Fund’s shares. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.

ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.

1. The total annual operating expenses are sourced from the Fund’s prospectus available at the time of publication. Actual expenses may be higher and may impact portfolio returns.

2. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

3. Assumes reinvestment of distributions based on net asset value.

4. Assumes reinvestment of distributions based on market price.

5. Source: FactSet. The FTSE Canada Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE Canada Capped Index is based on the FTSE Canada Index and is designed to measure the performance of Canadian large- and mid-capitalization stocks.

6. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

See www.franklintempletondatasources.com for additional data provider information.

 

           
franklintempleton.com  

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FRANKLIN FTSE CANADA ETF

 

Your Fund’s Expenses

 

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares; and (2) ongoing Fund costs, including management fees and other Fund expenses. All funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value.” You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       

Beginning

Account

        Value 10/1/22

   

Ending

Account

Value 3/31/23

   

Expenses

Paid During

Period

10/1/22–3/31/231

   

Ending

Account

Value 3/31/23

   

Expenses

Paid During

Period

10/1/22–3/31/231

   

Net Annualized

Expense Ratio

 
  $1,000.00       $1,115.50       $0.47       $1,024.48       $0.45       0.09 %      

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 182/365 to reflect the one-half year period.

 

           
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Franklin FTSE China ETF

    

 

This annual report for Franklin FTSE China ETF covers the fiscal year ended March 31, 2023.

Your Fund’s Goal and Main Investments

The Fund seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE China RIC Capped Index (the FTSE China Capped Index or the Underlying Index).1 Under normal market conditions, the Fund invests at least 80% of its assets in the component securities of the FTSE China Capped Index and in depositary receipts representing such securities.

 

Top 10 Sectors/Industries     
3/31/23     
     

% of Total

Net Assets

Interactive Media & Services

   16.0%

Internet & Direct Marketing Retail

   9.9%

Banks

   9.8%

Hotels, Restaurants & Leisure

   7.0%

Automobiles

   3.9%

Insurance

   3.8%

Beverages

   3.5%

Real Estate Management & Development

   3.3%

Oil, Gas & Consumable Fuels

   2.8%

Broadline Retail

   2.6%

Performance Overview

During the 12-month period, the Fund posted cumulative total returns of -4.34% based on market price and -5.68% based on net asset value. In comparison, the FTSE China Capped Index posted a -5.70% total return for the same period.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 29.

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

Investment Strategy

The Fund, using a “passive” or indexing investment approach, seeks investment results that closely correspond, before fees and expenses, to the performance of the FTSE China Capped Index. The Fund may use either a replication strategy or representative sampling strategy. Under a replication strategy, the Fund will replicate the component securities of the Underlying Index as closely as possible (i.e., invest in all of the component securities in their respective weightings in the Underlying Index). However, it may not be possible or practicable to replicate the Underlying Index. In these circumstances, we may use a representative sampling strategy whereby we will invest in what we believe to be a representative sample of the component securities of the Underlying Index, but may not track the Underlying Index with the same degree of accuracy as would an investment vehicle replicating the entire Underlying Index. Under the representative sampling technique, we will select securities that collectively have an investment profile similar to that of the Underlying Index, including securities that resemble those included in the Underlying Index in terms of risk factors, performance attributes and other characteristics, such as market capitalization and industry weightings. The Fund will concentrate its investments (i.e., hold 25% or more of its net assets) in a particular industry or group of industries to approximately the same extent that the Underlying Index is concentrated.

 

1. The FTSE China Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE China Capped Index is based on the FTSE China Index and is designed to measure the performance of Chinese large- and mid-capitalization stocks, as represented by H-shares, B-shares, A-shares, N-shares, Red Chips, P-Chips and S-Chips.

2. Source: FactSet.

The index is unmanaged and includes reinvestment of any income or distributions (after the deduction of certain withholding taxes). It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index.

See www.franklintempletondatasources.com for additional data provider information.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Schedule of Investments (SOI). The SOI begins on page 185.

 

           
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FRANKLIN FTSE CHINA ETF

 

Top 10 Holdings     
3/31/23     
Company
Sector/Industry, Country
  

% of Total

Net Assets

Tencent Holdings Ltd.

Interactive Media & Services, China

   13.2%

Alibaba Group Holding Ltd., Class A

Internet & Direct Marketing Retail, China

   8.4%

Meituan, Class B

Hotels, Restaurants & Leisure, China

   3.9%

China Construction Bank Corp., Class H

Banks, China

   2.7%

JD.com, Inc., Class A

Broadline Retail, China

   2.3%

Baidu, Inc., Class A

Interactive Media & Services, China

   1.9%

Industrial & Commercial Bank of China Ltd., Class H

Banks, China

   1.9%

Ping An Insurance Group Co. of China Ltd., Class H

Insurance, China

   1.8%

PDD Holdings, Inc., ADR

Internet & Direct Marketing Retail, China

   1.5%

NetEase, Inc.

Entertainment, China

   1.4%

Manager’s Discussion

For the fiscal year ended March 31, 2023, the sectors that contributed to the Fund’s absolute performance were communication services and energy. Individual holdings that lifted the Fund’s absolute return included Tencent Holdings, PDD Holdings and Trip.com Group.

For the same period, the sectors that detracted most from the Fund’s absolute performance were consumer discretionary, financials and real estate. Individual holdings that hindered the Fund’s absolute return included Alibaba Group Holding, JD.com and NIO.

Thank you for your participation in Franklin FTSE China ETF. We look forward to serving your future investment needs.

Dina Ting, CFA

Hailey Harris

Joe Diederich

Basit Amin, CFA

Portfolio Management Team

 

 

The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2023, the end of the reporting period. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

 

           
28             

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  franklintempleton.com


FRANKLIN FTSE CHINA ETF

 

Performance Summary as of March 31, 2023

Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (11/6/17), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.

Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.

Performance as of 3/31/231

 

           Cumulative Total Return2      Average Annual Total Return2  
     

Based on

NAV3

    

Based on

market price4

    

Based on

NAV3

    

Based on

market price4

 

1-Year

     -5.68%        -4.34%        -5.68%        -4.34%  

3-Year

     -6.71%        -6.75%        -2.29%        -2.30%  

5-Year

     -17.19%        -18.88%        -3.70%        -4.10%  

Since Inception (11/2/17)

     -13.74%        -13.94%        -2.70%        -2.74%  

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

 

See page 31 for Performance Summary footnotes.

 

 

           
franklintempleton.com  

Annual Report

             29


FRANKLIN FTSE CHINA ETF

PERFORMANCE SUMMARY

 

Total Return Index Comparison for a Hypothetical $10,000 Investment1

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

11/2/17-3/31/23

 

     LOGO

 

 

See page 31 for Performance Summary footnotes.

 

 

           
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FRANKLIN FTSE CHINA ETF

PERFORMANCE SUMMARY

 

Distributions (4/1/22–3/31/23)

Net Investment

Income

$0.502096

Total Annual Operating Expenses6

 

 

  0.19%

All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. China may be subject to considerable degrees of economic, political and social instability. Investments in securities of Chinese issuers involve risks that are specific to China, including certain legal, regulatory, political and economic risks. Because the Fund invests its assets primarily in companies in a specific country or region, the Fund may also experience greater volatility than a fund that is more broadly diversified geographically. As a non-diversified fund, the Fund may invest in a relatively small number of issuers which may negatively impact the Fund’s performance and result in greater fluctuation in the value of the Fund’s shares. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.

ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.

1. The total annual operating expenses are sourced from the Fund’s prospectus available at the time of publication. Actual expenses may be higher and may impact portfolio returns.

2. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

3. Assumes reinvestment of distributions based on net asset value.

4. Assumes reinvestment of distributions based on market price.

5. Source: FactSet. The FTSE China Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE China Capped Index is based on the FTSE China Index and is designed to measure the performance of Chinese large and mid-capitalization stocks, as represented by H-shares, B-shares, N-shares, Red Chips, P-Chips and S-Chips.

6. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

See www.franklintempletondatasources.com for additional data provider information.

 

           
franklintempleton.com  

Annual Report

             31


FRANKLIN FTSE CHINA ETF

 

Your Fund’s Expenses

 

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares; and (2) ongoing Fund costs, including management fees and other Fund expenses. All funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value.” You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       

Beginning

Account

        Value 10/1/22

   

Ending

Account
Value 3/31/23

   

Expenses

Paid During
Period

10/1/22–3/31/231

   

Ending

Account
Value 3/31/23

   

Expenses

Paid During
Period

10/1/22–3/31/231

   

Net Annualized

Expense Ratio

 
  $1,000.00       $795.80       $0.85       $1,023.98       $0.96       0.19 %      

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 182/365 to reflect the one-half year period.

 

           
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Franklin FTSE Europe ETF

 

This annual report for Franklin FTSE Europe ETF covers the fiscal year ended March 31, 2023.

Your Fund’s Goal and Main Investments

The Fund seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE Developed Europe RIC Capped Index (the FTSE Developed Europe Capped Index or the Underlying Index).1 Under normal market conditions, the Fund invests at least 80% of its assets in the component securities of the FTSE Developed Europe Capped Index and in depositary receipts representing such securities.

 

Top 10 Sectors/Industries     
3/31/23     
      % of Total
Net Assets

Pharmaceuticals

   11.1%

Banks

   7.6%

Oil, Gas & Consumable Fuels

   5.5%

Textiles, Apparel & Luxury Goods

   5.4%

Insurance

   5.2%

Food Products

   4.4%

Semiconductors & Semiconductor Equipment

   3.8%

Chemicals

   3.3%

Machinery

   3.0%

Beverages

   2.7%

Performance Overview

During the 12-month period, the Fund posted cumulative total returns of +2.18% based on market price and +1.31% based on net asset value. In comparison, the FTSE Developed Europe Capped Index posted a +0.68% total return for the same period.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 35.

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

Investment Strategy

The Fund, using a “passive” or indexing investment approach, seeks investment results that closely correspond, before fees and expenses, to the performance of the FTSE Developed Europe Capped Index. The Fund may use either a replication strategy or representative sampling strategy. Under a replication strategy, the Fund will replicate the component securities of the Underlying Index as closely as possible (i.e., invest in all of the component securities in their respective weightings in the Underlying Index). However, it may not be possible or practicable to replicate the Underlying Index. In these circumstances, we may use a representative sampling strategy whereby we will invest in what we believe to be a representative sample of the component securities of the Underlying Index, but may not track the Underlying Index with the same degree of accuracy as would an investment vehicle replicating the entire Underlying Index. Under the representative sampling technique, we will select securities that collectively have an investment profile similar to that of the Underlying Index, including securities that resemble those included in the Underlying Index in terms of risk factors, performance attributes and other characteristics, such as market capitalization and industry weightings. The Fund will concentrate its investments (i.e., hold 25% or more of its net assets) in a particular industry or group of industries to approximately the same extent that the Underlying Index is concentrated.

 

1. The FTSE Developed Europe Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE Developed Europe Capped Index is based on the FTSE Developed Europe Index and is designed to measure the performance of large- and mid-capitalization stocks from developed European countries.

2. Source: FactSet.

The index is unmanaged and includes reinvestment of any income or distributions (after the deduction of certain withholding taxes). It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index.

See www.franklintempletondatasources.com for additional data provider information.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Schedule of Investments (SOI). The SOI begins on page 209.

 

           
franklintempleton.com  

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             33


FRANKLIN FTSE EUROPE ETF

 

Top 10 Holdings     
3/31/23     
Company
Sector/Industry, Country
   % of Total
Net Assets

Nestle SA

Food Products, Switzerland

   3.2%

ASML Holding NV

Semiconductors & Semiconductor Equipment, Netherlands

   2.6%

Novo Nordisk AS, Class B

Pharmaceuticals, Denmark

   2.4%

LVMH Moet Hennessy Louis Vuitton SE

Textiles, Apparel & Luxury Goods, France

   2.2%

AstraZeneca PLC

Pharmaceuticals, United Kingdom

   2.0%

Roche Holding AG

Pharmaceuticals, Switzerland

   2.0%

Shell PLC

Oil, Gas & Consumable Fuels, Netherlands

   1.9%

Novartis AG

Pharmaceuticals, Switzerland

   1.8%

SAP SE

Software, Germany

   1.4%

HSBC Holdings PLC

Banks, United Kingdom

   1.3%

Manager’s Discussion

For the fiscal year ended March 31, 2023, the sectors that contributed most to the Fund’s absolute performance were consumer discretionary, industrials and energy. Individual holdings that lifted the Fund’s absolute return included Novo Nordisk, LVMH Moet Hennessy Louis Vuitton and Total Energies.

For the same period, the sectors that detracted most from the Fund’s absolute performance were real estate, materials and health care. Individual holdings that hindered the Fund’s absolute return included Roche Holding, Deutsche Annington Immobilien and Anglo American.

Top 10 Countries     
3/31/23     
     

% of Total

Net Assets

United Kingdom

   19.2%

France

   17.3%

Switzerland

   14.5%

Germany

   12.8%

Netherlands

   9.0%

Sweden

   4.8%

Denmark

   4.4%

Spain

   3.9%

Italy

   3.4%

Finland

   1.9%

Thank you for your participation in Franklin FTSE Europe ETF. We look forward to serving your future investment needs.

Dina Ting, CFA

Hailey Harris

Joe Diederich

Basit Amin, CFA

Portfolio Management Team

 

 

The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2023, the end of the reporting period. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

 

           
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FRANKLIN FTSE EUROPE ETF

 

Performance Summary as of March 31, 2023

 

Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (11/6/17), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.

Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.

Performance as of 3/31/231

 

         Cumulative Total Return2      Average Annual Total Return2  
     

Based on

NAV3

    

Based on

market price4

    

Based on

NAV3

    

Based on

market price4

 

1-Year

     +1.31%        +2.18%        +1.31%        +2.18%  

3-Year

     +53.04%        +52.80%        +15.24%        +15.18%  

5-Year

     +24.64%        +24.00%        +4.50%        +4.40%  

Since Inception (11/2/17)

     +24.32%        +24.37%        +4.11%        +4.12%  

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

 

See page 37 for Performance Summary footnotes.

 

 

           
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FRANKLIN FTSE EUROPE ETF

PERFORMANCE SUMMARY

 

Total Return Index Comparison for a Hypothetical $10,000 Investment1

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

11/2/17-3/31/23

 

     LOGO

 

See page 37 for Performance Summary footnotes.

 

 

 

           
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FRANKLIN FTSE EUROPE ETF

PERFORMANCE SUMMARY

 

Distributions (4/1/22–3/31/23)

Net Investment

Income

$0.836887

Total Annual Operating Expenses6

 

0.09%

All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in securities of issuers in European countries involve risks that are specific to Europe, including certain legal, regulatory, political and economic risks. Because the Fund invests its assets primarily in companies in a specific country or region, the Fund may also experience greater volatility than a fund that is more broadly diversified geographically. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.

To the extent that the Fund has exposure to Russian investments or investments in countries affected by the invasion, the Fund’s ability to price, buy, sell, receive or deliver such investments may be impaired. The Fund could determine at any time that certain of the most affected securities have zero value. In addition, any exposure that the Fund may have to counterparties in Russia or in countries affected by the invasion could negatively impact the Fund’s portfolio. The extent and duration of Russia’s military actions and the repercussions of such actions (including any retaliatory actions or countermeasures that may be taken by those subject to sanctions) are impossible to predict, but could result in significant market disruptions, including in the oil and natural gas markets, and may negatively affect global supply chains, inflation and global growth. These and any related events could significantly impact the Fund’s performance and the value of an investment in the Fund, even beyond any direct exposure the Fund may have to Russian issuers or issuers in other countries affected by the invasion.

ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.

1. The total annual operating expenses are sourced from the Fund’s prospectus available at the time of publication. Actual expenses may be higher and may impact portfolio returns.

2. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

3. Assumes reinvestment of distributions based on net asset value.

4. Assumes reinvestment of distributions based on market price.

5. Source: FactSet. The FTSE Developed Europe Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE Developed Europe Capped Index is based on the FTSE Developed Europe Index and is designed to measure the performance of large- and mid-capitalization stocks from developed European countries.

6. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

See www.franklintempletondatasources.com for additional data provider information.

 

           
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FRANKLIN FTSE EUROPE ETF

 

Your Fund’s Expenses

 

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares; and (2) ongoing Fund costs, including management fees and other Fund expenses. All funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value.” You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       
Beginning
Account
        Value 10/1/22
   

Ending

Account

Value 3/31/23

   

Expenses

Paid During

Period

10/1/22–3/31/231,2

   

Ending

Account

Value 3/31/23

   

Expenses

Paid During

Period

10/1/22–3/31/231,2

    Net Annualized
Expense Ratio2
 
  $1,000.00       $1,325.50       $1.68       $1,023.49       $1.46       0.29 %      

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 182/365 to reflect the one-half year period.

2. Included in the expense ratio are “Other fees” described in Note 1 under Income and Deferred Taxes which are not annualized. Without these expenses, the expense ratio would have been 0.09% and the actual and hypothetical expenses paid during the period would have been $0.52 and $0.45, respectively.

 

 

 

           
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Franklin FTSE Europe Hedged ETF

 

This annual report for Franklin FTSE Europe Hedged ETF covers the fiscal year ended March 31, 2023.

On May 11, 2023, the Board of Trustees of the Trust approved changes to the Fund’s (i) name and ticker symbol, (ii) underlying index, including the designation of the primary benchmark index, (iii) investment goal, strategies and policies, and (iv) other related changes. Effective on or about August 1, 2023, the Fund will be renamed the Franklin FTSE Eurozone ETF (Ticker: FLEU). The Fund’s investment goal will change to seek to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE Developed Eurozone Index (the “Underlying Index”). Under normal market conditions, the Fund will invest at least 80% of its assets in the component securities of the Underlying Index and in depositary receipts representing such securities. The Underlying Index will also serve as the Fund’s primary benchmark.

The Underlying Index is a free float-adjusted market capitalization weighted index maintained and calculated by FTSE Russell (Index Provider). The Underlying Index is designed to measure the performance of large- and mid-capitalization stocks from developed Eurozone countries. The Eurozone is a geographic and economic region that consists of all the European Union countries that have fully incorporated the euro as their national currency. The Underlying Index currently consists of securities from the following ten developed market countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands, Portugal and Spain. FTSE Russell conducts a semi-annual review of the Underlying Index.

The Fund may make a special distribution of capital gains in connection with the investment strategy change so that new investors in the Fund would not be subject to the undistributed capital gains attributable to the old currency hedged investment strategy.

The Fund will change its non-fundamental investment policy in accordance with Rule 35d-1 under the Investment Company Act of 1940 (the “Names Rule”) to invest, under

normal market conditions, at least 80% of its assets in equity securities or investments, such as depositary receipts, that are economically tied to the particular country or geographic region suggested by the Fund’s name. For purposes of this Names Rule policy, the Fund considers the securities or investments that are economically tied to the particular country or geographic region suggested by the Fund’s name to be those securities or investments that comprise the Underlying Index.

For more information, please see the Fund’s current prospectus and SAI, as supplemented.

Your Fund’s Goal and Main Investments

The Fund seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE Developed Europe RIC Capped Hedged to USD Index (the FTSE Developed Europe Capped Hedged Index or the Underlying Index).1 Under normal market conditions, the Fund invests at least 80% of its assets in the component securities of the FTSE Developed Europe Capped Hedged Index and in depositary receipts representing such securities, including indirectly through Franklin FTSE Europe ETF (Underlying Fund).

 

Top 10 Sectors/Industries     
3/31/23     
     

% of Total

Net Assets

Pharmaceuticals

   11.1%

Banks

   7.7%

Oil, Gas & Consumable Fuels

   5.5%

Textiles, Apparel & Luxury Goods

   5.3%

Insurance

   5.2%

Food Products

   4.4%

Semiconductors & Semiconductor Equipment

   3.8%

Chemicals

   3.3%

Machinery

   3.0%

Beverages

   2.6%

 

1. The FTSE Developed Europe Capped Hedged Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE Developed Europe Capped Hedged Index is based on the FTSE Developed Europe Hedged to USD Index and is designed to measure the performance of large- and mid-capitalization stocks from developed European countries. The FTSE Developed Europe Capped Hedged Index incorporates a hedge against non-U.S. currency fluctuations by reflecting the impact of rolling monthly currency forward contracts on the currencies represented in the FTSE Developed Europe Capped Hedged Index.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Schedule of Investments (SOI). The SOI begins on page 222.

 

           
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FRANKLIN FTSE EUROPE HEDGED ETF

 

Performance Overview

During the 12-month period, the Fund posted cumulative total returns of +7.21% based on market price and +7.53% based on net asset value. In comparison, the FTSE Developed Europe Capped Hedged Index posted a -11.96% total return for the same period.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 42.

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

Investment Strategy

The Fund, using a “passive” or indexing investment approach, seeks investment results that closely correspond, before fees and expenses, to the performance of the FTSE Developed Europe Capped Hedged Index. The Fund may use either a replication strategy or representative sampling strategy. Under a replication strategy, the Fund will replicate the component securities of the Underlying Index as closely as possible (i.e., invest in all of the component securities in their respective weightings in the Underlying Index). However, it may not be possible or practicable to replicate the Underlying Index. In these circumstances, we may use a representative sampling strategy whereby we will invest in what we believe to be a representative sample of the component securities of the Underlying Index, but may not track the Underlying Index with the same degree of accuracy as would an investment vehicle replicating the entire Underlying Index. Under the representative sampling technique, we will select securities that collectively have an investment profile similar to that of the Underlying Index, including securities that resemble those included in the Underlying Index in terms of risk factors, performance attributes and other characteristics, such as market capitalization and industry weightings. We intend to enter into monthly foreign currency forward contracts and/or currency futures contracts designed to offset the Fund’s exposure to the component currencies, in order to replicate the hedge impact incorporated in the calculation of the Underlying Index. The Fund’s exposure to foreign currency forward contracts and currency futures contracts is based on

the aggregate exposure of the Fund to the component currencies. The Fund will concentrate its investments (i.e., hold 25% or more of its net assets) in a particular industry or group of industries to approximately the same extent that the Underlying Index is concentrated.

 

Top 10 Holdings     
3/31/23     
Company
Sector/Industry, Country
  

% of Total

Net Assets

Nestle SA

Food Products, Switzerland

   3.2%

ASML Holding NV

Semiconductors & Semiconductor Equipment, Netherlands

   2.6%

Novo Nordisk AS, Class B

Pharmaceuticals, Denmark

   2.4%

LVMH Moet Hennessy Louis Vuitton SE

Textiles, Apparel & Luxury Goods, France

   2.2%

AstraZeneca PLC

Pharmaceuticals, United Kingdom

   2.0%

Roche Holding AG

Pharmaceuticals, Switzerland

   2.0%

Shell PLC

Oil, Gas & Consumable Fuels, Netherlands

   1.9%

Novartis AG

Pharmaceuticals, Switzerland

   1.8%

SAP SE

Software, Germany

   1.4%

HSBC Holdings PLC

Banks, United Kingdom

   1.3%

 

2. Source: FactSet.

The index is unmanaged and includes reinvestment of any income or distributions (after the deduction of certain withholding taxes). It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index.

See www.franklintempletondatasources.com for additional data provider information.

 

           
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FRANKLIN FTSE EUROPE HEDGED ETF

 

Manager’s Discussion

For the fiscal year ended March 31, 2023, the sectors that contributed most to the Fund’s absolute performance were consumer discretionary, industrials and energy. Individual holdings that lifted the Fund’s absolute return included Novo Nordisk, LVMH Moet Hennessy Louis Vuitton and Total Energies.

For the same period, the sectors that detracted most from the Fund’s absolute performance were real estate, materials and health care. Individual holdings that hindered the Fund’s absolute return included Roche Holding, Deutsche Annington Immobilien and Anglo American.

 

Top 10 Countries     
3/31/23     
     

% of Total

Net Assets

United Kingdom    19.2%
France    17.3%
Switzerland    14.5%
Germany    12.8%
Netherlands    9.0%
Sweden    4.9%
Denmark    4.4%
Spain    3.9%
Italy    3.4%
Finland    1.9%

Thank you for your participation in Franklin FTSE Europe Hedged ETF. We look forward to serving your future investment needs.

Dina Ting, CFA

Hailey Harris

Joe Diederich

Basit Amin, CFA

Portfolio Management Team

 

 

The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2023, the end of the reporting period. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

    

 

           
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FRANKLIN FTSE EUROPE HEDGED ETF

 

Performance Summary as of March 31, 2023

 

Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (11/6/17), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.

Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.

Performance as of 3/31/231

 

     Cumulative Total Return2      Average Annual Total Return2  
     

     Based on

NAV3

    

Based on

market price4

    

Based on

NAV3

    

Based on

market price4

 

1-Year

     +7.53%        +7.21%        +7.53%        +7.21%  

3-Year

     +60.11%        +61.33%        +16.99%        +17.28%  

5-Year

     +53.01%        +50.10%        +8.88%        +8.46%  

Since Inception (11/2/17)

     +45.96%        +45.65%        +7.24%        +7.20%  

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

 

See page 44 for Performance Summary footnotes.

 

 

           
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FRANKLIN FTSE EUROPE HEDGED ETF

PERFORMANCE SUMMARY

 

Total Return Index Comparison for a Hypothetical $10,000 Investment1

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

 

11/2/17-3/31/23

 

     LOGO

 

 

See page 44 for Performance Summary footnotes.

 

 

           
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FRANKLIN FTSE EUROPE HEDGED ETF

PERFORMANCE SUMMARY

 

Distributions (4/1/22–3/31/23)      

Net Investment

Income

  

Short-Term

Capital Gain

  

Long-Term

Capital Gain

   Total

 

$0.639769

   $1.897174    $2.490279    $5.027222

 

 

Total Annual Operating Expenses6
    

0.09%                         

  

All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in securities of issuers in European countries involve risks that are specific to Europe, including certain legal, regulatory, political and economic risks. Because the Fund invests its assets primarily in companies in a specific country or region, the Fund may also experience greater volatility than a fund that is more broadly diversified geographically. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio which may result in significant volatility and cause the Fund to participate in losses on an amount that exceeds the Fund’s initial investment. The Fund may not achieve the anticipated benefits, and may realize losses when a counterparty fails to perform as promised. While the Fund’s currency hedging approach is designed to minimize the impact of currency fluctuations on Fund returns, it does not necessarily eliminate the Fund’s exposure to the currencies. The return of the currency-related derivatives will not perfectly offset the actual fluctuations between the currencies and the U.S. dollar. The Fund’s exposure to the currencies may not be hedged at all times. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.

To the extent that the Fund has exposure to Russian investments or investments in countries affected by the invasion, the Fund’s ability to price, buy, sell, receive or deliver such investments may be impaired. The Fund could determine at any time that certain of the most affected securities have zero value. In addition, any exposure that the Fund may have to counterparties in Russia or in countries affected by the invasion could negatively impact the Fund’s portfolio. The extent and duration of Russia’s military actions and the repercussions of such actions (including any retaliatory actions or countermeasures that may be taken by those subject to sanctions) are impossible to predict, but could result in significant market disruptions, including in the oil and natural gas markets, and may negatively affect global supply chains, inflation and global growth. These and any related events could significantly impact the Fund’s performance and the value of an investment in the Fund, even beyond any direct exposure the Fund may have to Russian issuers or issuers in other countries affected by the invasion.

ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.

1. The total annual operating expenses are sourced from the Fund’s prospectus available at the time of publication. Actual expenses may be higher and may impact portfolio returns.

2. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

3. Assumes reinvestment of distributions based on net asset value.

4. Assumes reinvestment of distributions based on market price.

5. Source: FactSet. The FTSE Developed Europe Capped Hedged Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE Developed Europe Capped Hedged Index is based on the FTSE Developed Europe Hedged to USD Index and is designed to measure the performance of large- and mid-capitalization stocks from developed European countries. The FTSE Developed Europe Capped Hedged Index incorporates a hedge against non-U.S. currency fluctuations by reflecting the impact of rolling monthly currency forward contracts on the currencies represented in the FTSE Developed Europe Capped Hedged Index.

6. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

See www.franklintempletondatasources.com for additional data provider information.

 

           
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FRANKLIN FTSE EUROPE HEDGED ETF

 

Your Fund’s Expenses

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares; and (2) ongoing Fund costs, including management fees and other Fund expenses. All funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value.” You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.

 

    

Actual

(actual return after expenses)

    

Hypothetical

(5% annual return before expenses)

        

Beginning

Account

        Value 10/1/22

  

Ending

Account

Value 3/31/23

    

Expenses

Paid During

Period

10/1/22–3/31/231,2

    

Ending

Account

Value 3/31/23

    

Expenses

Paid During

Period

10/1/22–3/31/231,2

    

Net Annualized

Expense Ratio2

 

$1,000.00

     $1,219.60        $0.89        $1,024.13        $0.81        0.16 %   

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 182/365 to reflect the one-half year period.

2. Included in the expense ratio are “Other fees” described in Note 1 under Income and Deferred Taxes which are not annualized. Without these expenses, the expense ratio would have been 0.09% and the actual and hypothetical expenses paid during the period would have been $0.50 and $0.45, respectively.

 

           
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Franklin FTSE France ETF

 

This annual report for Franklin FTSE France ETF covers the fiscal year ended March 31, 2023.

Your Fund’s Goal and Main Investments

The Fund seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE France RIC Capped Index (the FTSE France Capped Index or the Underlying Index).1 Under normal market conditions, the Fund invests at least 80% of its assets in the component securities of the FTSE France Capped Index and in depositary receipts representing such securities.

 

Top 10 Sectors/Industries
3/31/23     
     

% of Total

Net Assets

Textiles, Apparel & Luxury Goods

   20.8%

Aerospace & Defense

   7.8%

Oil, Gas & Consumable Fuels

   7.2%

Pharmaceuticals

   6.5%

Electrical Equipment

   6.1%

Personal Products

   5.9%

Banks

   5.2%

Chemicals

   4.9%

Construction & Engineering

   3.8%

Insurance

   3.2%

Performance Overview

During the 12-month period, the Fund posted cumulative total returns of +9.97% based on market price and +9.84% based on net asset value. In comparison, the FTSE France Capped Index posted a +8.54% total return for the same period.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 48.

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

Investment Strategy

The Fund, using a “passive” or indexing investment approach, seeks investment results that closely correspond, before fees and expenses, to the performance of the FTSE France Capped Index. The Fund may use either a replication strategy or representative sampling strategy. Under a replication strategy, the Fund will replicate the component securities of the Underlying Index as closely as possible (i.e., invest in all of the component securities in their respective weightings in the Underlying Index). However, it may not be possible or practicable to replicate the Underlying Index. In these circumstances, we may use a representative sampling strategy whereby we will invest in what we believe to be a representative sample of the component securities of the Underlying Index, but may not track the Underlying Index with the same degree of accuracy as would an investment vehicle replicating the entire Underlying Index. Under the representative sampling technique, we will select securities that collectively have an investment profile similar to that of the Underlying Index, including securities that resemble those included in the Underlying Index in terms of risk factors, performance attributes and other characteristics, such as market capitalization and industry weightings. The Fund will concentrate its investments (i.e., hold 25% or more of its net assets) in a particular industry or group of industries to approximately the same extent that the Underlying Index is concentrated.

 

1. The FTSE France Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE France Capped Index is based on the FTSE France Index and is designed to measure the performance of French large- and mid-capitalization stocks.

2. Source: FactSet.

The index is unmanaged and includes reinvestment of any income or distributions (after the deduction of certain withholding taxes). It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index.

See www.franklintempletondatasources.com for additional data provider information.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Schedule of Investments (SOI). The SOI begins on page 236.

 

           
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FRANKLIN FTSE FRANCE ETF

 

Top 10 Holdings     
3/31/23     

Company

Sector/Industry, Country

  

% of Total

Net Assets

LVMH Moet Hennessy Louis Vuitton SE

Textiles, Apparel & Luxury Goods, France

   12.1%

Total Energies SE

Oil, Gas & Consumable Fuels, France

   7.2%

Sanofi

Pharmaceuticals, France

   6.3%

L’Oreal SA

Personal Products, France

   5.9%

Schneider Electric SE

Electrical Equipment, France

   4.7%

Air Liquide SA

Chemicals, France

   4.6%

Airbus SE

Aerospace & Defense, France

   4.0%

BNP Paribas SA

Banks, France

   3.5%

Hermes International

Textiles, Apparel & Luxury Goods, France

   3.4%

AXA SA

Insurance, France

   3.1%

Manager’s Discussion

For the fiscal year ended March 31, 2023, the sectors that contributed most to the Fund’s absolute performance were consumer discretionary, energy and industrials. Individual holdings that lifted the Fund’s absolute return included LVMH Moet Hennessy Louis Vuitton, TotalEnergies and Hermes International.

For the same period, the sectors that detracted from the Fund’s absolute performance were information technology and real estate. Individual holdings that hindered the Fund’s absolute return included Teleperformance, Dassault Systemes and Capgemini.

Thank you for your participation in Franklin FTSE France ETF. We look forward to serving your future investment needs.

Dina Ting, CFA

Hailey Harris

Joe Diederich

Basit Amin, CFA

Portfolio Management Team

 

 

The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2023, the end of the reporting period. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

 

           
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FRANKLIN FTSE FRANCE ETF

 

Performance Summary as of March 31, 2023

Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (11/6/17), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.

Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.

Performance as of 3/31/231

 

     Cumulative Total Return2      Average Annual Total Return2
     

     Based on

NAV3

    

Based on

market price4

    

Based on

NAV3

    

Based on

market price4

1-Year

     +9.84%        +9.97%        +9.84%      +9.97%

3-Year

     +71.13%        +71.36%        +19.61%      +19.66%

5-Year

     +37.55%        +34.38%        +6.58%      +6.09%

Since Inception (11/2/17)

     +37.91%        +36.70%        +6.12%      +5.95%

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

 

See page 50 for Performance Summary footnotes.

 

 

           
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FRANKLIN FTSE FRANCE ETF

PERFORMANCE SUMMARY

 

Total Return Index Comparison for a Hypothetical $10,000 Investment1

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

11/2/17-3/3/23

 

     LOGO

 

 

See page 50 for Performance Summary footnotes.

 

 

           
franklintempleton.com  

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FRANKLIN FTSE FRANCE ETF

PERFORMANCE SUMMARY

 

Distributions (4/1/22–3/31/23)

Net Investment  

Income

    

$0.794457

  

 

Total Annual Operating Expenses6
   

  0.09%

 

All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in securities of French issuers involve risks that are specific to France, including certain legal, regulatory, political and economic risks. Because the Fund invests its assets primarily in companies in a specific country or region, the Fund may also experience greater volatility than a fund that is more broadly diversified geographically. As a non-diversified fund, the Fund may invest in a relatively small number of issuers which may negatively impact the Fund’s performance and result in greater fluctuation in the value of the Fund’s shares. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.

ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.

1. The total annual operating expenses are sourced from the Fund’s prospectus available at the time of publication. Actual expenses may be higher and may impact portfolio returns.

2. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

3. Assumes reinvestment of distributions based on net asset value.

4. Assumes reinvestment of distributions based on market price.

5. Source: FactSet. The FTSE France Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE France Capped Index is based on the FTSE France Index and is designed to measure the performance of French large- and mid-capitalization stocks.

6. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

See www.franklintempletondatasources.com for additional data provider information.

 

           
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FRANKLIN FTSE FRANCE ETF

 

Your Fund’s Expenses

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares; and (2) ongoing Fund costs, including management fees and other Fund expenses. All funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value.” You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       

Beginning

Account

        Value 10/1/22

   

Ending

Account

Value 3/31/23

   

Expenses

Paid During

Period

10/1/22–3/31/231,2

   

Ending

Account

Value 3/31/23

   

Expenses

Paid During

Period

10/1/22–3/31/231,2

   

Net Annualized  

Expense Ratio2

 
  $1,000.00       $1,414.70       $2.71       $1,022.69       $2.27       0.45 %      

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 182/365 to reflect the one-half year period.

2. Included in the expense ratio are “Other fees” described in Note 1 under Income and Deferred Taxes which are not annualized. Without these expenses, the expense ratio would have been 0.09% and the actual and hypothetical expenses paid during the period would have been $0.54 and $0.45, respectively.

 

           
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Annual Report

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Franklin FTSE Germany ETF

 

 

This annual report for Franklin FTSE Germany ETF covers the fiscal year ended March 31, 2023.

Your Fund’s Goal and Main Investments

The Fund seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE Germany RIC Capped Index (the FTSE Germany Capped Index or the Underlying Index).1 Under normal market conditions, the Fund invests at least 80% of its assets in the component securities of the FTSE Germany Capped Index and in depositary receipts representing such securities.

 

Top 10 Sectors/Industries     
3/31/23     
      % of Total
Net Assets

Insurance

   11.6%

Software

   10.7%

Automobiles

   10.3%

Industrial Conglomerates

   10.0%

Pharmaceuticals

   6.5%

Diversified Telecommunication Services

   6.4%

Chemicals

   6.2%

Capital Markets

   4.3%

Multi-Utilities

   4.1%

Semiconductors & Semiconductor Equipment

   4.0%

Performance Overview

During the 12-month period, the Fund posted cumulative total returns of +3.60% based on market price and +2.41% based on net asset value. In comparison, the FTSE Germany Capped Index posted a +2.02% total return for the same period.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 54.

 

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

Investment Strategy

The Fund, using a “passive” or indexing investment approach, seeks investment results that closely correspond, before fees and expenses, to the performance of the FTSE Germany Capped Index. The Fund may use either a replication strategy or representative sampling strategy. Under a replication strategy, the Fund will replicate the component securities of the Underlying Index as closely as possible (i.e., invest in all of the component securities in their respective weightings in the Underlying Index). However, it may not be possible or practicable to replicate the Underlying Index. In these circumstances, we may use a representative sampling strategy whereby we will invest in what we believe to be a representative sample of the component securities of the Underlying Index, but may not track the Underlying Index with the same degree of accuracy as would an investment vehicle replicating the entire Underlying Index. Under the representative sampling technique, we will select securities that collectively have an investment profile similar to that of the Underlying Index, including securities that resemble those included in the Underlying Index in terms of risk factors, performance attributes and other characteristics, such as market capitalization and industry weightings. The Fund will concentrate its investments (i.e., hold 25% or more of its net assets) in a particular industry or group of industries to approximately the same extent that the Underlying Index is concentrated.

 

 

1. The FTSE Germany Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE Germany Capped Index is based on the FTSE Germany Index and is designed to measure the performance of German large-and mid-capitalization stocks.

2. Source: FactSet.

The index is unmanaged and includes reinvestment of any income or distributions (after the deduction of certain withholding taxes). It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index.

See www.franklintempletondatasources.com for additional data provider information.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Schedule of Investments (SOI). The SOI begins on page 239.

 

           
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FRANKLIN FTSE GERMANY ETF

 

Top 10 Holdings     
3/31/23     

Company

Sector/Industry, Country

   % of Total
Net Assets

SAP SE

Software, Germany

   10.4%

Siemens AG

Industrial Conglomerates, Germany

   9.0%

Allianz SE

Insurance, Germany

   6.9%

Deutsche Telekom AG

Diversified Telecommunication Services, Germany

   6.1%

Mercedes-Benz Group AG

Automobiles, Germany

   4.8%
Bayer AG
Pharmaceuticals, Germany
   4.7%

Infineon Technologies AG

Semiconductors & Semiconductor Equipment, Germany

   4.0%

Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen

Insurance, Germany

   3.6%

BASF SE

Chemicals, Germany

   3.6%

Deutsche Post AG

Air Freight & Logistics, Germany

   3.4%

Manager’s Discussion

For the fiscal year ended March 31, 2023, the sectors that contributed most to the Fund’s absolute performance were industrials, information technology and financials. Individual holdings that lifted the Fund’s absolute return included Siemens, SAP and Deutsche Telekom.

For the same period, the sectors that detracted most from the Fund’s absolute performance were real estate, health care and consumer discretionary. Individual holdings that hindered the Fund’s absolute return included Deutsche Annington Immobilien, Adidas and Bayer.

Thank you for your participation in Franklin FTSE Germany ETF. We look forward to serving your future investment needs.

Dina Ting, CFA

Hailey Harris

Joe Diederich

Basit Amin, CFA

Portfolio Management Team

 

 

The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2023, the end of the reporting period. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

 

           
franklintempleton.com  

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             53


FRANKLIN FTSE GERMANY ETF

 

Performance Summary as of March 31, 2023

 

Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (11/6/17), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.

Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.

Performance as of 3/31/231

 

           Cumulative Total Return2                Average Annual Total Return2  
      Based on
NAV3
     Based on
market price4
             Based on
NAV3
     Based on
market price4
 

1-Year

     +2.41%        +3.60%                 +2.41%        +3.60%  

3-Year

     +44.54%        +45.50%                 +13.06%        +13.32%  

5-Year

     +3.50%        +3.14%                 +0.69%        +0.62%  

Since Inception (11/2/17)

     -0.35%        -0.41%                 -0.06%        -0.08%  

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

 

See page 56 for Performance Summary footnotes.

 

           
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FRANKLIN FTSE GERMANY ETF

PERFORMANCE SUMMARY

 

Total Return Index Comparison for a Hypothetical $10,000 Investment1

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

11/2/17-3/31/23

 

     LOGO

See page 56 for Performance Summary footnotes.

 

           
franklintempleton.com  

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FRANKLIN FTSE GERMANY ETF

PERFORMANCE SUMMARY

 

Distributions (4/1/22–3/31/23)

 

Net Investment

Income

$0.673099

Total Annual Operating Expenses6

 

 

  0.09%

All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in securities of German issuers involve risks that are specific to Germany, including certain legal, regulatory, political and economic risks. Because the Fund invests its assets primarily in companies in a specific country or region, the Fund may also experience greater volatility than a fund that is more broadly diversified geographically. As a non-diversified fund, the Fund may invest in a relatively small number of issuers which may negatively impact the Fund’s performance and result in greater fluctuation in the value of the Fund’s shares. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.

ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.

1. The total annual operating expenses are sourced from the Fund’s prospectus available at the time of publication. Actual expenses may be higher and may impact portfolio returns.

2. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

3. Assumes reinvestment of distributions based on net asset value.

4. Assumes reinvestment of distributions based on market price.

5. Source: FactSet. The FTSE Germany Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE Germany Capped Index is based on the FTSE Germany Index and is designed to measure the performance of German large- and mid-capitalization stocks.

6. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

See www.franklintempletondatasources.com for additional data provider information.

 

           
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FRANKLIN FTSE GERMANY ETF

 

Your Fund’s Expenses

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares; and (2) ongoing Fund costs, including management fees and other Fund expenses. All funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value.” You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       

Beginning

Account

        Value 10/1/22

   

Ending

Account

Value 3/31/23

   

Expenses

Paid During
Period

10/1/22–3/31/231

   

Ending

Account

Value 3/31/23

   

Expenses

Paid During

Period

10/1/22–3/31/231

   

Net Annualized

Expense Ratio

 
  $1,000.00       $1,432.70       $0.55       $1,024.48       $0.45       0.09 %      

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 182/365 to reflect the one-half year period.

 

           
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Franklin FTSE Hong Kong ETF

 

This annual report for Franklin FTSE Hong Kong ETF covers the fiscal year ended March 31, 2023.

Your Fund’s Goal and Main Investments

The Fund seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE Hong Kong RIC Capped Index (the FTSE Hong Kong Capped Index or the Underlying Index).1 Under normal market conditions, the Fund invests at least 80% of its assets in the component securities of the FTSE Hong Kong Capped Index and in depositary receipts representing such securities.

 

Top 10 Sectors/Industries     
3/31/23     
     

% of Total

Net Assets

Real Estate Management & Development

   21.9%

Insurance

   19.7%

Capital Markets

   12.9%

Hotels, Restaurants & Leisure

   7.0%

Banks

   5.3%

Electric Utilities

   5.1%

Diversified REITs

   3.9%

Household Durables

   3.8%

Industrial Conglomerates

   2.5%

Gas Utilities

   2.2%

Performance Overview

During the 12-month period, the Fund posted cumulative total returns of -5.24% based on market price and -5.39% based on net asset value. In comparison, the FTSE Hong Kong Capped Index posted a -5.37% total return for the same period.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 60.

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

Investment Strategy

The Fund, using a “passive” or indexing investment approach, seeks investment results that closely correspond, before fees and expenses, to the performance of the FTSE Hong Kong Capped Index. The Fund may use either a replication strategy or representative sampling strategy. Under a replication strategy, the Fund will replicate the component securities of the Underlying Index as closely as possible (i.e., invest in all of the component securities in their respective weightings in the Underlying Index). However, it may not be possible or practicable to replicate the Underlying Index. In these circumstances, we may use a representative sampling strategy whereby we will invest in what we believe to be a representative sample of the component securities of the Underlying Index, but may not track the Underlying Index with the same degree of accuracy as would an investment vehicle replicating the entire Underlying Index. Under the representative sampling technique, we will select securities that collectively have an investment profile similar to that of the Underlying Index, including securities that resemble those included in the Underlying Index in terms of risk factors, performance attributes and other characteristics, such as market capitalization and industry weightings. The Fund will concentrate its investments (i.e., hold 25% or more of its net assets) in a particular industry or group of industries to approximately the same extent that the Underlying Index is concentrated.

 

 

1. The FTSE Hong Kong Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE Hong Kong Capped Index is based on the FTSE Hong Kong Index and is designed to measure the performance of Hong Kong large- and mid-capitalization stocks.

2. Source: FactSet.

The index is unmanaged and includes reinvestment of any income or distributions (after the deduction of certain withholding taxes). It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index.

See www.franklintempletondatasources.com for additional data provider information.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Schedule of Investments (SOI). The SOI begins on page 242.

 

           
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Top 10 Holdings     
3/31/23     

Company

Sector/Industry, Country

  

% of Total

Net Assets

AIA Group Ltd.

Insurance, Hong Kong

   19.7%

Hong Kong Exchanges & Clearing Ltd.

Capital Markets, Hong Kong

   12.8%

Sun Hung Kai Properties Ltd.

Real Estate Management & Development, Hong Kong

   4.5%

CK Hutchison Holdings Ltd., Class A

Real Estate Management & Development, United Kingdom

   3.7%

Link REIT

Diversified REITs, Hong Kong

   3.7%

Galaxy Entertainment Group Ltd.

Hotels, Restaurants & Leisure, Macau

   3.3%

Techtronic Industries Co. Ltd.

Household Durables, Hong Kong

   3.2%

CLP Holdings Ltd.

Electric Utilities, Hong Kong

   2.7%

CK Asset Holdings Ltd.

Real Estate Management & Development, Hong Kong

   2.7%

BOC Hong Kong Holdings Ltd.

Banks, China

   2.6%

Manager’s Discussion

For the fiscal year ended March 31, 2023, the sectors that contributed to the Fund’s absolute performance were consumer discretionary and information technology. Individual holdings that lifted the Fund’s absolute return included AIA Group, Sun Hung Kai Properties and Sands China.

For the same period, the sectors that detracted most from the Fund’s absolute performance were industrials, utilities and real estate. Individual holdings that hindered the Fund’s absolute return included Techtronic Industries, CLP Holdings and Link REIT.

Thank you for your participation in Franklin FTSE Hong Kong ETF. We look forward to serving your future investment needs.

Dina Ting, CFA

Hailey Harris

Joe Diederich

Basit Amin, CFA

Portfolio Management Team

 

 

The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2023, the end of the reporting period. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

 

           
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FRANKLIN FTSE HONG KONG ETF

 

Performance Summary as of March 31, 2023

Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (11/6/17), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.

Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.

Performance as of 3/31/231

 

           Cumulative Total Return2      Average Annual Total Return2  
     

Based on

NAV3

    

Based on

market price4

    

Based on

NAV3

    

Based on

market price4

 

1-Year

     -5.39%        -5.24%        -5.39%        -5.24%  

3-Year

     +14.30%        +14.84%        +4.56%        +4.72%  

5-Year

     -5.10%        -6.77%        -1.04%        -1.39%  

Since Inception (11/2/17)

     -1.58%        -1.43%        -0.29%        -0.27%  

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

See page 62 for Performance Summary footnotes.

 

 

           
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FRANKLIN FTSE HONG KONG ETF

PERFORMANCE SUMMARY

 

Total Return Index Comparison for a Hypothetical $10,000 Investment1

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

11/2/17-3/31/23

 

     LOGO

 

See page 62 for Performance Summary footnotes.

 

 

           
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FRANKLIN FTSE HONG KONG ETF

PERFORMANCE SUMMARY

 

Distributions (4/1/22–3/31/23)

 

Net Investment

Income

$0.825229

Total Annual Operating Expenses6

 

 

0.09%

All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in securities of Hong Kong issuers involve risks that are specific to Hong Kong, including certain legal, regulatory, political and economic risks. Because the Fund invests its assets primarily in companies in a specific country or region, the Fund may also experience greater volatility than a fund that is more broadly diversified geographically. As a non-diversified fund, the Fund may invest in a relatively small number of issuers which may negatively impact the Fund’s performance and result in greater fluctuation in the value of the Fund’s shares. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.

ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.

1. The total annual operating expenses are sourced from the Fund’s prospectus available at the time of publication. Actual expenses may be higher and may impact portfolio returns.

2. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

3. Assumes reinvestment of distributions based on net asset value.

4. Assumes reinvestment of distributions based on market price.

5. Source: FactSet. The FTSE Hong Kong Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE Hong Kong Capped Index is based on the FTSE Hong Kong Index and is designed to measure the performance of Hong Kong large- and mid-capitalization stocks.

6. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

See www.franklintempletondatasources.com for additional data provider information.

 

           
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FRANKLIN FTSE HONG KONG ETF

 

Your Fund’s Expenses

 

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares; and (2) ongoing Fund costs, including management fees and other Fund expenses. All funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value.” You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       
Beginning
Account
        Value 10/1/22
   

Ending

Account

Value 3/31/23

   

Expenses

Paid During

Period

10/1/22–3/31/231

   

Ending

Account

Value 3/31/23

   

Expenses

Paid During

Period

10/1/22–3/31/231

   

Net Annualized

Expense Ratio

 
  $1,000.00       $1,159.20       $0.48       $1,024.48       $0.45       0.09 %      

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 182/365 to reflect the one-half year period.

 

           
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Franklin FTSE India ETF

 

This annual report for Franklin FTSE India ETF covers the fiscal year ended March 31, 2023.

Your Fund’s Goal and Main Investments

The Fund seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE India RIC Capped Index (the FTSE India Capped Index or the Underlying Index).1 Under normal market conditions, the Fund invests at least 80% of its assets in the component securities of the FTSE India Capped Index and in depositary receipts representing such securities.

 

Top 10 Sectors/Industries     
3/31/23     
     

% of Total

Net Assets

IT Services

   14.5%

Oil, Gas & Consumable Fuels

   12.0%

Banks

   7.5%

Financial Services

   7.2%

Automobiles

   5.3%

Chemicals

   4.6%

Metals & Mining

   3.9%

Pharmaceuticals

   3.9%

Construction Materials

   3.0%

Consumer Finance

   3.0%

Performance Overview

During the 12-month period, the Fund posted cumulative total returns of -10.43% based on market price and -11.65% based on net asset value. In comparison, the FTSE India Capped Index posted a -12.28% total return for the same period.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 66.

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

Investment Strategy

The Fund, using a “passive” or indexing investment approach, seeks investment results that closely correspond, before fees and expenses, to the performance of the FTSE India Capped Index. The Fund may use either a replication strategy or representative sampling strategy. Under a replication strategy, the Fund will replicate the component securities of the Underlying Index as closely as possible (i.e., invest in all of the component securities in their respective weightings in the Underlying Index). However, it may not be possible or practicable to replicate the Underlying Index. In these circumstances, we may use a representative sampling strategy whereby we will invest in what we believe to be a representative sample of the component securities of the Underlying Index, but may not track the Underlying Index with the same degree of accuracy as would an investment vehicle replicating the entire Underlying Index. Under the representative sampling technique, we will select securities that collectively have an investment profile similar to that of the Underlying Index, including securities that resemble those included in the Underlying Index in terms of risk factors, performance attributes and other characteristics, such as market capitalization and industry weightings. The Fund will concentrate its investments (i.e., hold 25% or more of its net assets) in a particular industry or group of industries to approximately the same extent that the Underlying Index is concentrated.

 

 

1. The FTSE India Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE India Capped Index is based on the FTSE India Index and is designed to measure the performance of Indian large- and mid-capitalization stocks.

2. Source: FactSet.

The index is unmanaged and includes reinvestment of any income or distributions (after the deduction of certain withholding taxes). It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index.

See www.franklintempletondatasources.com for additional data provider information.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Schedule of Investments (SOI). The SOI begins on page 246.

 

           
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Top 10 Holdings     
3/31/23     
Company
Sector/Industry, Country
  

% of Total

Net Assets

Reliance Industries Ltd.

Oil, Gas & Consumable Fuels, India

   9.4%

Infosys Ltd.

IT Services, India

   6.3%

Housing Development Finance Corp. Ltd.

Financial Services, India

   5.7%

Tata Consultancy Services Ltd.

IT Services, India

   4.0%

Hindustan Unilever Ltd.

Household Products, India

   2.8%

Axis Bank Ltd.

Banks, India

   2.4%

Bharti Airtel Ltd.

Wireless Telecommunication Services, India

   2.2%

Larsen & Toubro Ltd.

Construction & Engineering, India

   1.8%

ICICI Bank Ltd.

Banks, India

   1.7%

Bajaj Finance Ltd.

Consumer Finance, India

   1.6%

Manager’s Discussion

For the fiscal year ended March 31, 2023, the only sector that contributed to the Fund’s absolute performance was consumer staples. Individual holdings that lifted the Fund’s absolute return included ITC, Hindustan Unilever and Mahindra & Mahindra.

For the same period, the sectors that detracted most from the Fund’s absolute performance were information technology, energy and utilities. Individual holdings that hindered the Fund’s absolute return included Infosys, Reliance Industries and Tata Consultancy Services.

Thank you for your participation in Franklin FTSE India ETF. We look forward to serving your future investment needs.

Dina Ting, CFA

Hailey Harris

Joe Diederich

Basit Amin, CFA

Portfolio Management Team

 

 

The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2023, the end of the reporting period. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

 

           
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FRANKLIN FTSE INDIA ETF

 

Performance Summary as of March 31, 2023

 

Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (2/9/18), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.

Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.

Performance as of 3/31/231

 

           Cumulative Total Return2      Average Annual Total Return2  
     

Based on

NAV3

    

Based on

market price4

    

Based on

NAV3

    

Based on

market price4

 

1-Year

     -11.65%        -10.43%        -11.65%        -10.43%  

3-Year

     +78.83%        +82.25%        +21.38%        +22.15%  

5-Year

     +27.94%        +26.71%        +5.05%        +4.85%  

Since Inception (2/6/18)

     +22.66%        +23.67%        +4.05%        +4.21%  

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

 

See page 68 for Performance Summary footnotes.

 

 

           
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PERFORMANCE SUMMARY

 

Total Return Index Comparison for a Hypothetical $10,000 Investment1

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

2/6/18-3/31/23

 

     LOGO

 

 

 

See page 68 for Performance Summary footnotes.

 

           
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FRANKLIN FTSE INDIA ETF

PERFORMANCE SUMMARY

 

Distributions (4/1/22–3/31/23)

 

Net Investment

Income

$0.212110

Total Annual Operating Expenses6

 

 

  0.19%

All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. There are special risks associated with investments in India, including exposure to currency fluctuations, less liquidity, expropriation, confiscatory taxation, and exchange control regulations (including currency blockage). Investments in securities of Indian issuers involve risks that are specific to India, including certain legal, regulatory, political and economic risks. Because the Fund invests its assets primarily in companies in a specific country or region, the Fund may also experience greater volatility than a fund that is more broadly diversified geographically. As a non-diversified fund, the Fund may invest in a relatively small number of issuers which may negatively impact the Fund’s performance and result in greater fluctuation in the value of the Fund’s shares. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.

ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.

1. The total annual operating expenses are sourced from the Fund’s prospectus available at the time of publication. Actual expenses may be higher and may impact portfolio returns.

2. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

3. Assumes reinvestment of distributions based on net asset value.

4. Assumes reinvestment of distributions based on market price.

5. Source: FactSet. The FTSE India Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE India Capped Index is based on the FTSE India Index and is designed to measure the performance of Indian large-and mid-capitalization stocks.

6. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

See www.franklintempletondatasources.com for additional data provider information.

 

           
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FRANKLIN FTSE INDIA ETF

 

Your Fund’s Expenses

 

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares; and (2) ongoing Fund costs, including management fees and other Fund expenses. All funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value.” You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       
Beginning
Account
        Value 10/1/22
   

Ending

Account

Value 3/31/23

   

Expenses

Paid During

Period

10/1/22–3/31/231

   

Ending

Account

Value 3/31/23

   

Expenses

Paid During

Period

10/1/22–3/31/231

    Net Annualized
Expense Ratio
 
  $1,000.00       $960.80       $0.93       $1,023.98       $0.96       0.19 %      

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 182/365 to reflect the one-half year period.

 

           
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Franklin FTSE Italy ETF

 

 

This annual report for Franklin FTSE Italy ETF covers the fiscal year ended March 31, 2023.

Your Fund’s Goal and Main Investments

The Fund seeks to provide investment results that closely

correspond, before fees and expenses, to the performance

of the FTSE Italy RIC Capped Index (the FTSE Italy Capped

Index or the Underlying Index).1 Under normal market

conditions, the Fund invests at least 80% of its assets in the

component securities of the FTSE Italy Capped Index and in

depositary receipts representing such securities.

 

Top 10 Sectors/Industries     
3/31/23     
     

% of Total

Net Assets

Banks

   23.0%

Automobiles

   15.0%

Electric Utilities

   13.2%

Oil, Gas & Consumable Fuels

   6.7%

Insurance

   6.4%

Machinery

   4.9%

Gas Utilities

   4.4%

Textiles, Apparel & Luxury Goods

   3.6%

Diversified Telecommunication Services

   3.3%

Electrical Equipment

   3.3%

Performance Overview

During the 12-month period, the Fund posted cumulative total returns of +8.58% based on market price and +7.51% based on net asset value. In comparison, the FTSE Italy Capped Index posted a +7.13% total return for the same period.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 72.

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when

you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

Investment Strategy

The Fund, using a “passive” or indexing investment approach, seeks investment results that closely correspond, before fees and expenses, to the performance of the FTSE Italy Capped Index. The Fund may use either a replication strategy or representative sampling strategy. Under a replication strategy, the Fund will replicate the component securities of the Underlying Index as closely as possible (i.e., invest in all of the component securities in their respective weightings in the Underlying Index). However, it may not be possible or practicable to replicate the Underlying Index. In these circumstances, we may use a representative sampling strategy whereby we will invest in what we believe to be a representative sample of the component securities of the Underlying Index, but may not track the Underlying Index with the same degree of accuracy as would an investment vehicle replicating the entire Underlying Index. Under the representative sampling technique, we will select securities that collectively have an investment profile similar to that of the Underlying Index, including securities that resemble those included in the Underlying Index in terms of risk factors, performance attributes and other characteristics, such as market capitalization and industry weightings. The Fund will concentrate its investments (i.e., hold 25% or more of its net assets) in a particular industry or group of industries to approximately the same extent that the Underlying Index is concentrated.

 

1. The FTSE Italy Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE Italy Capped Index is based on the FTSE Italy Index and is designed to measure the performance of Italian large- and mid-capitalization stocks.

2. Source: FactSet.

The index is unmanaged and includes reinvestment of any income or distributions (after the deduction of certain withholding taxes). It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index.

See www.franklintempletondatasources.com for additional data provider information.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Schedule of Investments (SOI). The SOI begins on page 251.

 

           
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FRANKLIN FTSE ITALY ETF

 

Top 10 Holdings     
3/31/23     

Company

Sector/Industry, Country

  

% of Total

Net Assets

Enel SpA

Electric Utilities, Italy

   9.8%

Intesa Sanpaolo SpA

Banks, Italy

   8.6%

Stellantis NV

Automobiles, United States

   8.0%

UniCredit SpA

Banks, Italy

   7.5%

Ferrari NV

Automobiles, Italy

   7.1%

Eni SpA

Oil, Gas & Consumable Fuels, Italy

   6.7%

Assicurazioni Generali SpA

Insurance, Italy

   4.5%

Moncler SpA

Textiles, Apparel & Luxury Goods, Italy

   3.6%

CNH Industrial NV

Machinery, United Kingdom

   3.4%

Snam SpA

Gas Utilities, Italy

   3.4%

Manager’s Discussion

For the fiscal year ended March 31, 2023, the sectors that contributed most to the Fund’s absolute performance were financials, consumer discretionary and industrials. Individual holdings that lifted the Fund’s absolute return included UniCredit, Intesa Sanpaolo and Ferrari.

For the same period, the sectors that detracted most from the Fund’s absolute performance were utilities, information technology and health care. Individual holdings that hindered the Fund’s absolute return included Enel, Assicurazioni Generali and Nexi.

Thank you for your participation in Franklin FTSE Italy ETF. We look forward to serving your future investment needs.

Dina Ting, CFA

Hailey Harris

Joe Diederich

Basit Amin, CFA

Portfolio Management Team

 

 

The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2023, the end of the reporting period. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

 

           
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             71


FRANKLIN FTSE ITALY ETF

 

Performance Summary as of March 31, 2023

Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (11/6/17), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.

Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.

Performance as of 3/31/231

 

           Cumulative Total Return2      Average Annual Total Return2  
     

Based on

NAV3

    

Based on

market price4

    

Based on

NAV3

    

Based on

market price4

 

1-Year

     +7.51%        +8.58%        +7.51%        +8.58%  

3-Year

     +61.02%        +61.85%        +17.21%        +17.41%  

5-Year

     +15.13%        +17.38%        +2.86%        +3.26%  

Since Inception (11/2/17)

     +18.80%        +19.00%        +3.24%        +3.27%  

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

 

See page 74 for Performance Summary footnotes.

 

           
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FRANKLIN FTSE ITALY ETF

PERFORMANCE SUMMARY

 

Total Return Index Comparison for a Hypothetical $10,000 Investment1

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

11/2/17-3/31/23

 

     LOGO

 

 

See page 74 for Performance Summary footnotes.

 

           
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FRANKLIN FTSE ITALY ETF

PERFORMANCE SUMMARY

 

Distributions (4/1/22–3/31/23)

 

Net Investment

Income

$1.071052

Total Annual Operating Expenses6

 

 

  0.09%

All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in securities of Italian issuers involve risks that are specific to Italy, including certain legal, regulatory, political and economic risks. Because the Fund invests its assets primarily in companies in a specific country or region, the Fund may also experience greater volatility than a fund that is more broadly diversified geographically. As a non-diversified fund, the Fund may invest in a relatively small number of issuers which may negatively impact the Fund’s performance and result in greater fluctuation in the value of the Fund’s shares. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.

ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.

1. The total annual operating expenses are sourced from the Fund’s prospectus available at the time of publication. Actual expenses may be higher and may impact portfolio returns.

2. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

3. Assumes reinvestment of distributions based on net asset value.

4. Assumes reinvestment of distributions based on market price.

5. Source: FactSet. The FTSE Italy Capped Index is a free float-adjusted market capitalization-weighted index maintained and calculated by FTSE Russell with a capping methodology applied quarterly to issuer weights so that no single issuer of a component exceeds 25% of the index weight, and all issuers with weights above 5% do not cumulatively exceed 50% of the index’s weight. The FTSE Italy Capped Index is based on the FTSE Italy Index and is designed to measure the performance of Italian large-and mid-capitalization stocks.

6. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

See www.franklintempletondatasources.com for additional data provider information.

 

           
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Annual Report

  franklintempleton.com


FRANKLIN FTSE ITALY ETF

 

Your Fund’s Expenses

 

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares; and (2) ongoing Fund costs, including management fees and other Fund expenses. All funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value.” You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       

Beginning

Account

        Value 10/1/22

   

Ending

Account

Value 3/31/23

   

Expenses

Paid During

Period

10/1/22–3/31/231

   

Ending

Account

Value 3/31/23

   

Expenses

Paid During

Period

10/1/22–3/31/231

   

Net Annualized

Expense Ratio

 
  $1,000.00       $1,442.00       $0.55       $1,024.48       $0.45       0.09 %      

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 182/365 to reflect the one-half year period.