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Annual Report   March 31, 2023

ClearBridge ETFs

ClearBridge All Cap Growth ESG ETF

ClearBridge Dividend Strategy ESG ETF

ClearBridge Large Cap Growth ESG ETF

 

 

 

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


What’s inside      
Letter from the president     III  
Funds overview     1  
Funds at a glance     16  
Funds expenses     19  
Funds performance     22  
Schedules of investments     28  
Statements of assets and liabilities     37  
Statements of operations     38  
Statements of changes in net assets     39  
Financial highlights     42  
Notes to financial statements     45  
Report of independent registered public accounting firm     51  
Additional information     52  
Important tax information     56  

 

 

II

   ClearBridge ETFs


Letter from the president

 

LOGO

Dear Shareholder,

We are pleased to provide the annual report of ClearBridge All Cap Growth ESG ETF, ClearBridge Dividend Strategy ESG ETF and ClearBridge Large Cap Growth ESG ETF for the twelve-month reporting period ended March 31, 2023. Please read on for a detailed look at prevailing economic and market conditions during the Funds’ reporting period and to learn how those conditions have affected each fund’s performance.

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

 

 

Fund net asset value and market price,

 

 

Market insights and commentaries from our portfolio managers, and

 

 

A host of educational resources.

We look forward to helping you meet your financial goals.

Sincerely,

 

LOGO

Patrick O’Connor

President and Chief Executive Officer — Investment Management President

April 28, 2023

 

ClearBridge ETFs  

 

III


Funds overview

 

ClearBridge All Cap Growth ESG ETF

Q. What is the Fund’s investment strategy?

A. The Fund seeks to achieve long-term capital appreciation. The Fund seeks to invest in a diversified portfolio of large, medium and small capitalization stocks that have the potential for above-average long-term earnings and/or cash flow growth and meet its financial and environmental, social and governance (“ESG”) criteria. Under normal circumstances, the Fund invests at least 80% of its net assets, plus borrowings for investment purposes, if any, in securities that meet its financial and ESG criteria. The Fund’s subadviser, ClearBridge Investments, LLC (“ClearBridge”), uses a bottom-up investment process that seeks to find inefficiently priced companies with strong fundamentals, incentive-driven management teams, dominant positions in niche markets and/or goods and services that are in high customer demand. The bottom-up process used by ClearBridge relies on extensive fundamental research that looks to identify companies with a range of growth opportunities while evaluating the company’s business model, financial structure and management acumen.

Research is conducted by the portfolio managers with input from the sector analysts of ClearBridge’s Fundamental Research Team. The team utilizes proprietary and independent research to identify companies whose projected rapid growth in earnings and cash flow is based on their participation in new products or markets. For large company growth stocks, the team seeks companies that exhibit superior balance sheets, exceptional management teams and long-term, consistent operating histories. ClearBridge attempts to complement this core group of companies with tactical stocks that reflect themes within the prevailing market environment. When looking at small- and medium-sized company growth stocks, ClearBridge focuses on companies with rapid earnings growth potential, unrecognized values, industry leadership and management teams that have a significant ownership stake.

ClearBridge anticipates using a long-term approach to investing that typically results in low portfolio turnover. ClearBridge, however, may take a more active approach to the portfolio, depending upon market conditions.

Determination of whether a company meets the Fund’s ESG standards is based on ClearBridge’s proprietary research approach. ClearBridge will exercise judgment to determine ESG best practices based on its over thirty-year history managing ESG investment strategies through an established proprietary process. ClearBridge utilizes a fundamental, bottom-up research approach that emphasizes company analysis, management and stock selection. ClearBridge’s propriety research and analysis generally incorporates information and data obtained from a variety of third-party research providers as supplementary to ClearBridge’s own proprietary research and analysis.

In addition, certain types of companies are excluded from the investment universe. Companies in the tobacco and coal industries are excluded, and companies earning a significant portion of their revenue (in general, approximately 10-15% or more) from controversial arms (e.g., nuclear, chemical and biological weapons; cluster munitions and anti-personnel landmines) or gambling are also excluded.

The ESG evaluation is integrated into a thorough assessment of investment worthiness based on financial criteria as well as ESG considerations including innovative workplace policies, employee benefits and programs; environmental management system strength, eco-efficiency, and life-cycle analysis; community involvement, strategic philanthropy, and reputation management; and strong corporate governance and independence of the board. The ESG analysis is conducted by ClearBridge’s sector analysts on a sector-specific basis, and a proprietary ESG rating is assigned to each company. The weightings of the E, S and G factors are determined by ClearBridge for each respective sector and sub-sectors.

All companies are assigned a proprietary ClearBridge ESG rating (A, AA, AAA). Companies that score a rating of “B” are considered uninvestable. ClearBridge’s proprietary ESG ratings assess whether a company focuses on ESG factors, integrates ESG factors into its business model, and measures such efforts. Companies that ClearBridge believes have not focused on ESG factors or have a poor ESG record are assigned a rating of “B.” Further, to the extent that there is a material/substantial issue with any one of the E, S or G components with respect to a company, such company will be assigned a “B” rating. ClearBridge’s ESG ratings are formally reviewed at least annually. In addition, ClearBridge’s research analysts monitor the companies included in the Fund’s portfolio on an ongoing basis to assess the continued appropriateness of such ratings. ClearBridge seeks to invest over the long-term in companies that ClearBridge considers to be of high quality with competitive advantages that can be maintained as evidenced by high returns on capital, strong balance sheets, and capable management teams that allocate capital in an efficient manner. For more information about ClearBridge’s ESG ratings system, please see the Fund’s current prospectus.

ClearBridge seeks to invest in leadership companies where the portfolio managers believe the market price underestimates the magnitude of future growth. Leadership may be assessed both quantitatively and qualitatively. ClearBridge seeks to select securities of companies that are category leaders with characteristics to sustain that position and grow market share consistently. ClearBridge performs rigorous analysis to understand company fundamentals, key competitive dynamics, and industry structure with the belief that the best business models win over time. ClearBridge seeks to identify social or economic trends that will have an impact on the economy as a whole

 

ClearBridge ETFs 2023 Annual Report    

 

1


Funds overview (cont’d)

 

to support multi-year investment opportunities, allowing for compounding of earnings and cash flow. ClearBridge seeks companies with self-funding business models with significant recurring revenue and businesses with the ability to generate superior free cash flow over time. In addition, ClearBridge takes a disciplined approach to valuation and stress tests the sustainability of profitability and growth. ClearBridge will also consider emerging companies with promising future prospects that may not yet have demonstrated substantial profitability.

ClearBridge will utilize fundamental analysis to identify investment candidates with these attributes, and evaluate industry dynamics, the strength of the business model and management skill. Valuation will be carefully examined using a variety of techniques that depend on the type of company being researched. Methods typically used are discounted cash flow analysis, market implied growth and returns relative to ClearBridge’s expectations, multiple comparisons and scenario analysis. ClearBridge will sell a security if the issuer no longer meets its financial or ESG criteria. It is also ClearBridge’s intention to engage and encourage management to improve in certain ESG areas identified by ClearBridge through the sector analysts’ lead engagement. ClearBridge engages and encourages management to improve in certain ESG areas in a variety of ways, including through ESG engagement meetings with management personnel of companies to discuss different topics relevant to the company’s business operations, such as labor standards, workforce diversity, supply chain, environmental targets, carbon intensity, reputation, and executive compensation; applying proprietary methodologies to assess the outcome and progress of these meetings to inform ClearBridge’s ESG rating of the companies; and through proxy voting.

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

A. Equity markets took a defensive shift in the 12-month period ended March 31, 2023, resulting in a -7.73% decline for the Standard & Poor’s® 500 Index (S&P® 500).i The Fund’s benchmark Russell 3000© Growth Index declined -10.88% for the period, trailing the -5.91% decline for the Russell 1000® Value Index, but paring much deeper losses with a rally to finish the period.ii

Within the benchmark, rising interest rates created headwinds for higher-multiple stocks in the communication services (-24.86%) and consumer discretionary (-22.82%) sectors, and for the rate-sensitive real estate sector (-17.08%). Energy (+0.05%) was the only sector to manage gains for the period, while consumer staples (-0.56%), industrials (-1.89%), information technology (IT, -6.51%), health care (-7.21%) also outperformed.

Coming on the heels of Russia’s invasion of Ukraine in February 2022, which further disrupted global supply chains and reduced global commodity reserves, the period started with persistent inflation prompting central banks to take more hawkish stances. The U.S. Federal Reserve (Fed) raised the federal funds target rate by 50 basis points (bps) in May and 75 bps in June 2022. These hikes jarred financial markets, significantly compressing equity multiples. Defensive sectors led the market, along with the energy sector, while mega cap growth stocks soldoff. Concerns over companies’ abilities to maintain current margins increased, as did the probability of a “hard landing” for the economy. U.S. 10-year Treasury yields rose to 3.01%.

A bear market rally followed in July 2022, with investors bidding up growth stocks in particular in the hopes a policy-engineered recession would spur a reversal in Fed policy. Such hopes were disappointed in August 2022 when candid statements by Fed Chair Jerome Powell signaled the Fed’s intent to continue raising rates beyond previous targets, regardless of the economic consequences. Higher bond yields — the 10-year Treasury yield rose to 3.83% in the third quarter of 2022 — helped strengthen the U.S. dollar, reducing overseas revenues for multinational companies.

Emerging evidence of a slowing economy, which might prompt an early Fed pivot from its tightening regime, along with some better-than-expected earnings, helped equities rebound in the fourth quarter of 2022. After edging up above 4%, the 10-year Treasury yield declined over the last three months of the period to finish at 3.47%. Part of the decline was spurred by a regional banking crisis in the U.S. that bled over to Europe, prompting a flight to safety into mega cap and growth stocks. This action led to a strong rebound for equities to finish the reporting period.

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

A. The Fund held up well through varying market conditions during a volatile year. We attribute these results to the balance we have sought to achieve through active portfolio repositioning throughout the period. Our intent with the repositioning was to expand the types of growth companies we target, while also supporting diversification and risk management, resulting in a portfolio that we believe has the potential to outperform over a variety of market environments.

Over the last year, we took advantage of attractive entry points created by ongoing market volatility to add three higher-growth disruptors early in the development of their market opportunity, including Snowflake in the IT sector as well as Airbnb and Tesla in consumer discretionary. We balanced these purchases with additions to our stable compounders category that included Accenture in the IT sector, Marsh & McLennan in financials, Estee Lauder in consumer staples and Eli Lilly in health care. Finally, we enhanced exposure to

 

 

2

    ClearBridge ETFs 2023 Annual Report


 

cyclical growth companies more tied to the economic cycle with the purchases of what we believe are best-in-class operators Sherwin-Williams and Freeport-McMoRan in the materials sector.

At the same time, we believe that we upgraded our consumer exposure by paring back on stocks most directly tied to everyday consumer spending, including Ulta Beauty (not held at period-end), Advance Auto Parts (not held at period-end) and Walt Disney. Similarly, we reduced sizeable overweighting in certain industries or subsectors of the market which included the sales of Pentair (not held at period-end) in the industrials sector, Liberty Media Corp. -Liberty Sirius XM in the communication services sector, Medtronic (not held at period-end) in the health care sector and Intel in the IT sector.

We think that the additions have improved the Fund’s overall growth profile, while maintaining high active share with a low correlation to the mega cap heavy Russell 3000® Growth Index. An ongoing focus on valuation as well as cash flow positive businesses and those with a visible path to profitability have also supported downside capture through a volatile period of normalization from the COVID-19 pandemic.

Performance review

For the 12 month period ended March 31, 2023, ClearBridge All Cap Growth ESG ETF generated a -10.51% return on a net asset value (“NAV”)iii basis and -10.46% based on its market price per share.iv

The performance table shows the Fund’s total return for the 12 months ended March 31, 2023, based on its NAV and market price as of March 31, 2023. The Fund’s broad-based market index, the Russell 3000® Growth Index, returned -10.88% over the same time frame. The Lipper Multi-Cap Growth Funds Category Average returned -13.60% for the same period.v Please note that Lipper performance returns are based on each fund’s NAV.

 

Performance Snapshot as of March 31, 2023 (unaudited)            
ClearBridge All Cap Growth ESG ETF:   6 months     12 months  

$37.69 (NAV)

    17.17     -10.51 %*† 

$37.69 (Market Price)

    17.45     -10.46 %*‡ 
Russell 3000® Growth Index     16.49     -10.88
Lipper Multi-Cap Growth Funds Category Average     13.07     -13.60

The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value and investment returns will fluctuate so shares, when sold, may be worth more or less than their original cost. Performance data current to the most recent month-end is available at www.franklintempleton.com.

Investors buy and sell shares of an exchange-traded fund (“ETF”) at market price (not NAV) in the secondary market throughout the trading day. These shares are not individually available for direct purchase from or direct redemption to the ETF. Market price returns shown are typically based upon the official closing price of the Fund’s shares. These returns do not represent investors’ returns had they traded shares at other times. Performance figures for periods shorter than one year represent cumulative figures and are not annualized.

Information showing the Fund’s net asset value, market price, premiums and discounts, and bid-ask spreads for various time periods is available by visiting the Fund’s website at www.franklintempleton.com.

Effective July 1, 2021, the Fund changed its name from ClearBridge All Cap Growth ETF to ClearBridge All Cap Growth ESG ETF and adopted the Fund’s current ESG-related investment strategies.

As of the Fund’s current prospectus dated July 29, 2022, the gross total annual fund operating expense ratio for the Fund was 0.53%.

* Total returns are based on changes in NAV or market price, respectively. Returns reflect the deduction of all Fund expenses. Returns do not reflect the deduction of brokerage commissions or taxes that investors pay on distributions or the sale of shares.

† Total return assumes the reinvestment of all distributions at NAV.

‡ Total return assumes the reinvestment of all distributions at market price, which typically is based upon the official closing price of the Fund’s shares.

Q. What were the leading contributors to performance?

A. Relative to the benchmark Russell 3000® Growth Index, overall stock selection and sector allocation contributed to performance. In particular, stock selection in the communication services, health care, consumer staples and materials sectors, an overweight allocation to health care and an underweight allocation to the consumer discretionary sector contributed to returns.

 

ClearBridge ETFs 2023 Annual Report    

 

3


Funds overview (cont’d)

 

In terms of individual Fund holdings, leading contributors to performance for the period included positions in Vertex Pharmaceuticals and Biogen in the health care sector, W.W. Grainger in the industrials sector, as well as Netflix and Twitter in the communication services sector.

Q. What were the leading detractors from performance?

A. Relative to the benchmark index, stock selection in the IT and consumer discretionary sectors, an overweight to communication services and an underweight to consumer staples had negative impacts on relative returns.

In terms of individual Fund holdings, leading detractors from performance for the period included positions in Amazon.com in the consumer discretionary sector, CrowdStrike Holdings, Wolfspeed and Atlassian in the IT sector, as well as Match Group in the communication services sector.

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

A. Over the course of the period, we established 11 new positions: Zoetis, Eli Lilly and Stryker in the health care sector, Marsh & McLennan in the financials sector, Estee Lauder in the consumer staples sector, Sherwin-Williams and Freeport-McMoRan in the materials sector, Airbnb and Tesla in the consumer discretionary sector, as well as Accenture and Snowflake in the IT sector. We also closed positions in Twitter and Walt Disney in the communication services sector, Advance Auto Parts and Ulta Beauty in the consumer discretionary sector, Intel and UIPath in the IT sector, Fidelity National Information Services in the financials sector, Pentair in the industrials sector, as well as Medtronic and 10X Genomics in the health care sector.

Looking for additional information?

The Fund’s daily NAV is available online at www.franklintempleton.com. The Fund is traded under the symbol “CACG” and its closing market price is available on most financial websites. In a continuing effort to provide information concerning the Fund, shareholders may call 1-877-721-1926 (toll free), Monday through Friday from 8:00 a.m. to 5:30 p.m. Eastern time, for the Fund’s current NAV, market price and other information.

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

Sincerely,

 

LOGO

Peter Bourbeau

Portfolio Manager

ClearBridge Investments, LLC

 

LOGO

Evan Bauman

Portfolio Manager

ClearBridge Investments, LLC

 

LOGO

Margaret Vitrano

Portfolio Manager

ClearBridge Investments, LLC

 

 

4

    ClearBridge ETFs 2023 Annual Report


 

LOGO

Aram E. Green

Portfolio Manager

ClearBridge Investments, LLC

April 18, 2023

RISKS: The market values of securities or other assets will fluctuate, sometimes sharply and unpredictably, due to changes in general market conditions, overall economic trends or events, governmental actions or intervention, actions taken by the U.S. Federal Reserve or foreign central banks, market disruptions caused by trade disputes or other factors, political developments, armed conflicts, economic sanctions and countermeasures in response to sanctions, major cybersecurity events, investor sentiment, the global and domestic effects of a pandemic, and other factors that may or may not be related to the issuer of the security or other asset.

Equity securities are subject to market and price fluctuations. In addition to investments in large-capitalization companies, investments may be made in speculative and/or small-cap and mid-cap companies which involve a higher degree of risk and volatility than investments in larger, more established companies. The Fund’s growth-oriented investment style may increase the risks of investing in the Fund. Growth securities typically are very sensitive to market movements because their market prices tend to reflect future expectations. When it appears, those expectations will not be met, the prices of growth securities typically fall. Growth stocks as a group may be out of favor and underperform the overall equity market while the market concentrates on value stocks. The managers’ environmental, social and governance (“ESG”) investment strategy may limit the types and number of investments available and, as a result, may forego favorable market opportunities or underperform strategies that are not subject to such criteria. There is no guarantee that the strategy’s ESG directives will be successful or will result in better performance. Although the Fund will not concentrate its investments in any one industry or industry group, it may, like many growth funds, weight its investments toward certain industries, thus increasing its exposure to factors adversely affecting issuers within those industries. Investments may also be made in depositary receipts and other securities of non-U.S. companies in developed and emerging markets which involve risks in addition to those ordinarily associated with investing in domestic securities, including the potentially negative effects of currency fluctuation, political and economic developments, foreign taxation and differences in auditing and other financial standards. These risks are magnified in emerging markets. Emerging market countries tend to have economic, political and legal systems that are less developed and are less stable than those of more developed countries. Active management and diversification do not ensure gains or protect against market declines. Distributions are not guaranteed and are subject to change. Please see the Fund’s prospectus for a more complete discussion of these and other risks and the Fund’s investment strategies.

Portfolio holdings and breakdowns are as of March 31, 2023, and are subject to change and may not be representative of the portfolio manager’s current or future investments. The Fund’s top ten holdings (as a percentage of net assets) as of March 31, 2023, were: Amazon.com Inc. (5.6%), UnitedHealth Group Inc. (5.1%), Microsoft Corp. (5.1%), Vertex Pharmaceuticals Inc. (3.7%), NVIDIA (3.6%), Visa (3.3%), Broadcom (3.0%), Meta Platforms Inc. (2.9%), W.W. Grainger (2.5%), and Comcast Corp. (2.5%). Please refer to pages 29 through 31 for a list and percentage breakdown of the Fund’s holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. The Fund’s top five sector holdings (as a percentage of net assets) as of March 31, 2023, were IT (34.8%), health care (21.2%), consumer discretionary (10.0%), communication services (9.8%), and industrials (7.7%). The Fund’s composition may differ over time.

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

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

 

i 

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

 

ii 

The Russell 3000® Growth Index is market capitalization weighted and measures the performance of those Russell 3000® Index companies with relatively higher price-to-book ratios and higher forecasted growth rates. The Russell 1000® Value Index is market capitalization weighted and measures the performance of those Russell 1000® Index companies with relatively lower price-to-book ratios and lower forecasted growth rates. Frank Russell Company is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company.

 

iii 

Net Asset Value (“NAV”) is calculated by subtracting total liabilities from total assets and dividing the results by the number of shares outstanding.

 

iv 

Market Price is determined by supply and demand. It is the price at which an investor purchases or sells shares of the Fund. The market price may differ from the Fund’s NAV.

 

v 

Lipper, Inc., a wholly-owned subsidiary of Refinitiv, provides independent insight on global collective investments. Returns are based on the 12-month period ended March 31, 2023, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 35 funds in the Fund’s Lipper category.

 

ClearBridge ETFs 2023 Annual Report    

 

5


Funds overview (cont’d)

 

ClearBridge Dividend Strategy ESG ETF

Q. What is the Fund’s investment strategy?

A. The Fund’s investment objective is to seek dividend income, growth of dividend income and long-term capital appreciation. Under normal circumstances, the Fund will invest at least 80% of its net assets, plus borrowings for investment purposes, if any, in dividend-paying stocks or other instruments with similar economic characteristics that offer the potential for income growth and capital appreciation over time and that meet its financial and environmental, social and governance (“ESG”) criteria. The Fund may also invest in companies that the Fund’s subadviser, ClearBridge Investments, LLC (“ClearBridge”), believes are making substantial progress toward becoming a leader in ESG policies.

Determination of whether a company meets the Fund’s ESG standards is based on ClearBridge’s proprietary research approach. ClearBridge will exercise judgment to determine ESG best practices based on its over thirty-year history managing ESG investment strategies through an established proprietary process. ClearBridge utilizes a fundamental, bottom-up research approach that emphasizes company analysis, management and stock selection. ClearBridge’s propriety research and analysis generally incorporates information and data obtained from a variety of third-party research providers as supplementary to ClearBridge’s own proprietary research and analysis.

In addition, certain types of companies are excluded from the investment universe. Companies in the tobacco and coal industries are excluded, and companies earning a significant portion of their revenue (in general, approximately 10-15% or more) from controversial arms (e.g., nuclear, chemical and biological weapons; cluster munitions and anti-personnel landmines) or gambling are also excluded.

The ESG evaluation is integrated into a thorough assessment of investment worthiness based on financial criteria as well as ESG considerations including innovative workplace policies, employee benefits and programs; environmental management system strength, eco-efficiency, and life-cycle analysis; community involvement, strategic philanthropy, and reputation management; and strong corporate governance and independence of the board. The ESG analysis is conducted by ClearBridge’s sector analysts on a sector-specific basis, and a proprietary ESG rating is assigned to each company. The weightings of the E, S and G factors are determined by ClearBridge for each respective sector and sub-sectors.

All companies are assigned a proprietary ClearBridge ESG rating (A, AA, AAA). Companies that score a rating of “B” are considered uninvestable. ClearBridge’s proprietary ESG ratings assess whether a company focuses on ESG factors, integrates ESG factors into its business model, and measures such efforts. Companies that ClearBridge believes have not focused on ESG factors or have a poor ESG record are assigned a rating of “B.” ClearBridge uses a variety of ESG factors, which may change from time to time, as part of its rating process, and are described in the Fund’s current prospectus. Further, to the extent that there is a material/substantial issue with any one of the E, S or G components with respect to a company, such company will be assigned a “B” rating. ClearBridge’s ESG ratings are formally reviewed at least annually. In addition, ClearBridge’s research analysts monitor the companies included in the Fund’s portfolio on an ongoing basis to assess the continued appropriateness of such ratings.

The Fund invests primarily in common stocks. Equity securities in which the fund may invest also include preferred securities, convertible securities, securities of other investment companies and of real estate investment trusts, and warrants and rights. The Fund may invest in equity securities of foreign issuers, either directly or through depositary receipts. The Fund may invest in companies of any size but focuses on large cap companies.

The portfolio managers focus on companies that they believe to be of high quality and that:

 

 

Pay an attractive dividend.

 

 

Have the potential to significantly grow their dividends.

 

 

Provide consistent and competitive risk-adjusted returns achieved by capitalizing on the convergence between a company’s investment potential and its ESG attributes.

ClearBridge uses fundamental analysis to identify companies with strong balance sheets, dominant market positions and reasonable valuations. It is also ClearBridge’s intention to engage and encourage management to improve in certain ESG areas identified by ClearBridge through the sector analysts’ lead engagement. ClearBridge engages and encourages management to improve in certain ESG areas in a variety of ways, including through ESG engagement meetings with management personnel of companies to discuss different topics relevant to the company’s business operations, such as labor standards, workforce diversity, supply chain, environmental targets, carbon intensity, reputation, and executive compensation; applying proprietary methodologies to assess the outcome and progress of

 

 

6

    ClearBridge ETFs 2023 Annual Report


 

these meetings to inform ClearBridge’s ESG rating of the companies; and through proxy voting. ClearBridge will sell a security if the issuer no longer meets its financial or ESG criteria.

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

A. Equity markets took a defensive shift in the 12-month period ended March 31, 2023, resulting in a -7.73% decline for the benchmark Standard & Poor’s® 500 Index (S&P 500®)i Value stocks generally outperformed their growth counterparts, with the Russell 1000® Value Indexii returning -5.91% for the period versus the Russell 1000® Growth Index’siii return of -10.90%. Within the S&P 500® Index, rising interest rates created headwinds for higher-multiple stocks in the consumer discretionary (-19.62%) and communication services (-17.76%) sectors, and for the rate-sensitive real estate sector (-19.69%). Cyclical financials (-14.24%) and materials (-6.28%) were also lower as growing expectations of a recession overcame any perceived benefits from higher rates, which typically help net interest margins for financials, as well as growing pricing power, which many materials companies enjoy following initial inflationary periods. Russia’s invasion of Ukraine in early 2022 disrupted global supply chains and reduced global commodity reserves due to sanctions levied on Russia. Oil and gas prices spiked, lifting the energy sector (+13.63%), which led the market by a wide margin. A barrel of WTI crude was valued at $100 to begin the period and rose to as high as $122 in June 2022, before closing the period at $76 as slowing growth expectations set in later in 2022.

Emerging evidence of a slowing economy, which some thought might prompt an early U.S. Federal Reserve (Fed) pivot from its tightening regime, along with some better-than-expected earnings, helped equities regain some ground in late 2022 and early 2023, with information technology (IT), consumer discretionary and communication services bouncing back in the first quarter of 2023 from oversold levels.

As the Fed lifted short-term borrowing rates, long-term bond yields rose, with the 10-year Treasury yield rising from 2.34% to above 4.20% in October 2022, before recession concerns and expectations of monetary easing drove a retreat; U.S. Treasury yields finished the period at 3.47%.

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

A. We look advantage of a tight commodity environment and the accelerating energy transition to initiate a position in copper miner Freeport-McMoRan, which we believe should benefit from long-term supply/demand imbalances in copper, as China demand and electronification across the economy gathers pace and supply remains limited. The company has meaningfully improved its balance sheet and lowered debt in recent quarters, well positioning it to take advantage of a strong commodity environment that we believe will persist.

As pressure mounted in the real estate sector, we adjusted our positioning there, selling Boston Properties, which invests in office buildings in several major city centers in the U.S. With the near-term earnings outlook pressured by higher interest rates and lingering long-term concerns on the work-from-home impact to office fundamentals, we exited our position to pursue what we think are more attractive opportunities in the real estate sector. Specifically, we bought shares of AvalonBay Communities, a REIT focused on apartments in the U.S. In our opinion, shares of AvalonBay were discounted due to recession fears and potential weakness in rent growth, yet macro factors (high new home prices driving up rentals) and AvalonBay’s attractive suburban coastal/sunbelt markets, supporting earnings growth, belie these concerns, creating an opportunity.

In financials, heading into the second half of 2022, we were modestly overweight in the bank exposure of the benchmark (holding Bank of America, JPMorgan Chase, PNC Financial Services Group and US Bancorp). This was predicated upon three key beliefs: 1.) the benefit of rapidly rising short-term interest rates had yet to be fully reflected in earnings power (including expectations for further increases in the back half of the year); 2.) these institutions were among the best positioned to handle any credit quality disruptions stemming from the Fed’s tightening; and 3.) valuations were reasonable, given the returns on capital being generated.

Post 2022 third-quarter results, we sold US Bancorp and redeployed the proceeds into JPMorgan Chase. Our sale of US Bancorp did not reflect any fundamental concerns about its health. Rather, we concentrated our exposure in those banks with the most robust earnings power. At the time, bank investors were most concerned with increasing credit costs, and robust earnings are the best bulwark against rising credit losses. It was not credit risk, however, that we believe took down Silicon Valley Bank (SVB) (not a Fund holding). SVB held high-quality assets that were “money good” — meaning at maturity the assets would repay at par. As interest rates rose, however, the value of these assets declined and wiped out SVB’s equity.

At the onset of SVB’s troubles, we quickly repositioned our bank holdings to better reflect the new paradigm and capture appropriate risk-adjusted returns. Significantly, we exited Bank of America, concerned that the perception of interest-rate risk would put a ceiling on its valuation. Of the largest banks, Bank of America has the biggest proportion of long-duration bonds in its securities portfolio. We used the proceeds and took advantage of the broad selloff in banks to buy Capital One Financial. Unlike most banks, which take both interest-rate and credit risk, we believe that Capital One Financial’s interest-rate risk is minimal. Many of the investment securities held by

 

ClearBridge ETFs 2023 Annual Report    

 

7


Funds overview (cont’d)

 

Capital One on its balance sheet are available-for-sale and are therefore marked to market; their prices on Capital One Financial’s books fully reflect the impact of rising rates. In our view, the company is a shrewd and disciplined operator running a high-return business in an industry (credit cards) that has been one of the most profitable areas in financial services.

Performance review

For the 12 month period ended March 31, 2023, ClearBridge Dividend Strategy ESG ETF generated a -4.27% return on a net asset value (“NAV”)iv basis and -4.42% based on its market price per share.v

The performance table shows the Fund’s total return for the 12 months ended March 31, 2023, based on its NAV and market price as of March 31, 2023. The Fund’s broad-based market index, the S&P 500® Index, returned -7.73% over the same time frame. The Lipper Equity Income Funds Category Average returned -4.25% for the same period.vi Please note that Lipper performance returns are based on each fund’s NAV.

 

Performance Snapshot as of March 31, 2023
(unaudited)
 
ClearBridge Dividend Strategy ESG ETF:   6 months     12 months  

$39.71 (NAV)

    15.89     -4.27 %*† 

$39.71 (Market Price)

    15.82     -4.42 %*‡ 
S&P 500® Index     15.62     -7.73
Lipper Equity Income Funds Category Average     15.88     -4.25

The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value and investment returns will fluctuate so shares, when sold, may be worth more or less than their original cost. Performance data current to the most recent month-end is available at www.franklintempleton.com.

Investors buy and sell shares of an exchange-traded fund (“ETF”) at market price (not NAV) in the secondary market throughout the trading day. These shares are not individually available for direct purchase from or direct redemption to the ETF. Market price returns shown are typically based upon the official closing price of the Fund’s shares. These returns do not represent investors’ returns had they traded shares at other times. Performance figures for periods shorter than one year represent cumulative figures and are not annualized.

Information showing the Fund’s net asset value, market price, premiums and discounts, and bid-ask spreads for various time periods is available by visiting the Fund’s website at www.franklintempleton.com.

As of the Fund’s current prospectus dated July 29, 2022, the gross total annual fund operating expense ratio for the Fund was 0.59%.

* Total returns are based on changes in NAV or market price, respectively. Returns reflect the deduction of all Fund expenses. Returns do not reflect the deduction of brokerage commissions or taxes that investors pay on distributions or the sale of shares.

† Total return assumes the reinvestment of all distributions at NAV.

‡ Total return assumes the reinvestment of all distributions at market price, which typically is based upon the official closing price of the Fund’s shares.

Q. What were the leading contributors to performance?

A. On an absolute basis, the Fund had positive returns in five of the 11 economic sectors in which it was invested during the reporting period, with the greatest contribution to returns coming from the materials, consumer staples and consumer discretionary sectors. Relative to the benchmark S&P 500® Index, stock selection in the materials, consumer discretionary, financials, utilities, consumer staples and IT sectors proved beneficial to performance. In terms of sector allocation, overweight allocations to the energy and consumer staples sectors and underweight allocations to the consumer discretionary and communication services sectors were positive.

In terms of individual Fund holdings, leading contributors to performance for the period included Merck, SAP, Linde, Brookfield Renewable Partners and Oracle.

Q. What were the leading detractors from performance?

A. Relative to the benchmark, stock selection in the energy and industrials sectors and an underweight in the IT sector were the main detractors.

 

 

8

    ClearBridge ETFs 2023 Annual Report


 

In terms of individual Fund holdings, leading detractors from performance for the period included Bank of America, Union Pacific, TC Energy, Comcast and Walt Disney.

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

A. Aside from the portfolio activity discussed above, larger positions initiated over the period included Brookfield Renewable Partners in the utilities sector and SAP in the IT sector. Larger positions sold included TC Energy in the energy sector and NextEra Energy in the utilities sector.

Looking for additional information?

The Fund’s daily NAV is available online at www.franklintempleton.com. The Fund is traded under the symbol “YLDE” and its closing market price is available on most financial websites. In a continuing effort to provide information concerning the Fund, shareholders may call 1-877-721-1926 (toll free), Monday through Friday from 8:00 a.m. to 5:30 p.m. Eastern time, for the Fund’s current NAV, market price and other information.

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

Sincerely,

 

LOGO

John Baldi

Portfolio Manager

ClearBridge Investments, LLC

 

LOGO

Michael Clarfeld, CFA

Portfolio Manager

ClearBridge Investments, LLC

 

LOGO

Peter Vanderlee, CFA

Portfolio Manager

ClearBridge Investments, LLC

April 18, 2023

RISKS: The market values of securities or other assets will fluctuate, sometimes sharply and unpredictably, due to changes in general market conditions, overall economic trends or events, governmental actions or intervention, actions taken by the U.S. Federal Reserve or foreign central banks, market disruptions caused by trade disputes or other factors, political developments, armed conflicts, economic sanctions and countermeasures in response to sanctions, major cybersecurity events, investor sentiment, the global and domestic effects of a pandemic, and other factors that may or may not be related to the issuer of the security or other asset.

Equity securities are subject to market and price fluctuations. Dividends are not guaranteed, and a company may reduce or eliminate its dividend at any time. The managers’ environmental, social and governance (“ESG”) investment strategy may limit the types and number of investments available and, as a result, may forego favorable market opportunities or underperform strategies that are not subject to such criteria. There is no guarantee that the strategy’s ESG directives will be successful or will result in better performance.

Small- and mid-cap stocks involve greater risks and volatility than large-cap stocks. The Fund’s investments in securities of foreign issuers or issuers with significant exposure to foreign markets involve additional risk. Foreign securities are subject to certain risks of overseas investing, including currency fluctuations and social, political and economic uncertainties, which could result in significant market fluctuations. Securities or other assets in the Fund’s portfolio may underperform in comparison to the general financial markets, a particular financial market or other asset classes. Please see the Fund’s prospectus for a more complete discussion of these and other risks and the Fund’s investment strategies.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment

 

ClearBridge ETFs 2023 Annual Report    

 

9


Funds overview (cont’d)

 

decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. The Fund’s top five sector holdings (as a percentage of net assets) as of March 31, 2023, were IT (17.8%), financials (16.2%), health care (10.8%), consumer staples (10.2%) and materials (9.1%). The Fund’s composition may differ over time.

All investments are subject to risk including the possible loss of principal. Past performance is no guarantee of future results. An index is a statistical composite that tracks a specified financial market, sector or rules-based investment process. Unlike a fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by a fund. These expenses negatively impact fund performance. All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

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

 

i 

The Standard & Poor’s® 500 Index (S&P 500®) is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance.

 

ii 

The Russell 1000® Value Index is market capitalization weighted and measures the performance of those Russell 1000® Index companies with relatively lower price-to-book ratios and lower forecasted growth rates.

 

iii 

The Russell 1000® Growth Index is market capitalization weighted and measures the performance of those Russell 1000® Index companies with relatively higher price-to-book ratios and higher forecasted growth rates. Frank Russell Company is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company.

 

iv 

Net Asset Value (NAV) is calculated by subtracting total liabilities from total assets and dividing the results by the number of shares outstanding.

 

v 

Market price is determined by supply and demand. It is the price at which an investor purchases or sells shares of the Fund. The Market price may differ from the Fund’s NAV.

 

vi 

Lipper, Inc., a wholly-owned subsidiary of Refinitiv, provides independent insight on global collective investments. Returns are based on the 12-month period ended March 31, 2023, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 67 funds in the Fund’s Lipper category.

 

 

10

    ClearBridge ETFs 2023 Annual Report


 

ClearBridge Large Cap Growth ESG ETF

Q. What is the Fund’s investment strategy?

A. The Fund seeks long-term capital appreciation through investing in large-capitalization companies with the potential for high future earnings growth. Under normal circumstances, the Fund seeks to meet its investment objective by investing at least 80% of its net assets, plus borrowings for investment purposes, if any, in equity securities or other instruments with similar economic characteristics of U.S. companies with large market capitalizations that meet its financial and environmental, social and governance (“ESG”) criteria.

The Fund emphasizes investments in equity securities or related instruments of U.S. large-capitalization companies; however, it may invest in equity securities of foreign issuers with similar characteristics.

Large capitalization companies are those companies with market capitalizations similar to companies in the Russell 1000 Growth Index (the “Index”). The size of the companies in the Index changes with market conditions and the composition of the Index. The Fund may also invest in companies that the Fund’s subadviser, ClearBridge Investments, LLC (“ClearBridge”), believes are making substantial progress toward becoming a leader in ESG policies. The Fund’s investment strategy focuses on consistent growth of capital while managing volatility.

Determination of whether a company meets the Fund’s ESG standards is based on ClearBridge’s proprietary research approach. ClearBridge will exercise judgment to determine ESG best practices based on its over thirty-year history managing ESG investment strategies through an established proprietary process. ClearBridge utilizes a fundamental, bottom-up research approach that emphasizes company analysis, management and stock selection. ClearBridge’s propriety research and analysis generally incorporates information and data obtained from a variety of third-party research providers as supplementary to the ClearBridge’s own proprietary research and analysis.

In addition, certain types of companies are excluded from the investment universe. Companies in the tobacco and coal industries are excluded, and companies earning a significant portion of their revenue (in general, approximately 10-15% or more) from controversial arms (e.g., nuclear, chemical and biological weapons; cluster munitions and anti-personnel landmines) or gambling are also excluded.

The ESG evaluation is integrated into a thorough assessment of investment worthiness based on financial criteria as well as ESG considerations including innovative workplace policies, employee benefits and programs; environmental management system strength, eco-efficiency, and life-cycle analysis; community involvement, strategic philanthropy, and reputation management; and strong corporate governance and independence of the board. The ESG analysis is conducted by ClearBridge’s sector analysts on a sector-specific basis, and a proprietary ESG rating is assigned to each company. The weightings of the E, S and G factors are determined by ClearBridge for each respective sector and sub-sectors.

All companies are assigned a proprietary ClearBridge ESG rating (A, AA, AAA). Companies that score a rating of “B” are considered uninvestable. ClearBridge’s proprietary ESG ratings assess whether a company focuses on ESG factors, integrates ESG factors into its business model, and measures such efforts. Companies that ClearBridge believes have not focused on ESG factors or have a poor ESG record are assigned a rating of “B.” ClearBridge uses a variety of ESG factors, which may change from time to time, as part of its rating process, which are described in the Fund’s current prospectus. Further, to the extent that there is a material/substantial issue with any one of the E, S or G components with respect to a company, such company will be assigned a “B” rating. ClearBridge’s ESG ratings are formally reviewed at least annually. In addition, ClearBridge’s research analysts monitor the companies included in the Fund’s portfolio on an ongoing basis to assess the continued appropriateness of such ratings.

ClearBridge seeks to invest over the long term in large-capitalization companies that are considered to be of high quality with sustainable competitive advantages as evidenced by high returns on capital, strong balance sheets, and capable management teams that allocate capital in an efficient manner. ClearBridge seeks to invest in leadership companies where the portfolio managers believe the market price underestimates the magnitude of future growth. Leadership may be assessed both quantitatively and qualitatively. ClearBridge seeks to select securities of companies that are category leaders with characteristics to sustain that position and grow market share consistently. ClearBridge performs rigorous analysis to understand company fundamentals, key competitive dynamics and industry structure with the belief that the best business models win over time. ClearBridge seeks to identify social or economic trends that will have an impact on the economy as a whole to support multi-year investment opportunities, allowing for compounding of earnings and cash flow. ClearBridge seeks companies with self-funding business models with significant recurring revenue and businesses with the ability to generate superior free cash flow over time. In addition, ClearBridge takes a disciplined approach to valuation and stress tests the sustainability of profitability and growth. ClearBridge will also consider emerging companies with promising future prospects that may not yet have demonstrated substantial profitability.

 

ClearBridge ETFs 2023 Annual Report    

 

11


Funds overview (cont’d)

 

ClearBridge will utilize fundamental analysis to identify investment candidates with these attributes, and evaluate industry dynamics, the strength of the business model and management skill. Valuation will be carefully examined using a variety of techniques that depend on the type of company being researched. Methods typically used are discounted cash flow analysis, market implied growth and returns relative to the ClearBridge’s expectations, multiple comparisons and scenario analysis.

It is also ClearBridge’s intention to engage and encourage management to improve in certain ESG areas identified by ClearBridge through the sector analysts’ lead engagement. ClearBridge engages and encourages management to improve in certain ESG areas in a variety of ways, including through ESG engagement meetings with management personnel of companies to discuss different topics relevant to the company’s business operations, such as labor standards, workforce diversity, supply chain, environmental targets, carbon intensity, reputation, and executive compensation; applying proprietary methodologies to assess the outcome and progress of these meetings to inform ClearBridge’s ESG rating of the companies; and through proxy voting.

ClearBridge will sell a security if the issuer no longer meets its financial or ESG criteria. In addition, ClearBridge will seek to replace securities when the company’s risk/reward profile is no longer favorable due to price appreciation or if the company’s investment fundamentals have deteriorated meaningfully relative to original expectations. Securities may also be sold to permit investment in an issuer considered by ClearBridge to be a more attractive alternative.

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

A. Equity markets took a defensive shift in the 12-month period ended March 31, 2023, resulting in a -10.90% decline for the benchmark Russell 1000® Growth Index.i Growth stocks underperformed their value counterparts, with the Russell 1000® Value Index returning -5.91% for the period.ii Within the Russell 1000® Growth Index, rising interest rates created headwinds for higher-multiple stocks in the communication services (-25.89%) and consumer discretionary (-23.57%) sectors, and for the rate-sensitive real estate sector (-15.27%). Cyclical financials (-8.61%) and materials (-9.92%) were also lower as growing expectations of a recession overcame any perceived benefits from higher rates as well as growing pricing power, which many materials companies enjoy following initial inflationary periods. Russia’s invasion of Ukraine in early 2022 disrupted global supply chains and reduced global commodity reserves due to sanctions levied on Russia. Oil and gas prices spiked, lifting the energy sector (+2.90%), which led the market by a wide margin. A barrel of WTI crude was valued at $100 to begin the period and rose as high as $122 in June 2022, before closing the period at $76 as slowing growth expectations set in later in 2022.

Emerging evidence of a slowing economy, which some thought might prompt an early U.S. Federal Reserve (Fed) pivot from its tightening regime, along with some better-than-expected earnings, helped equities regain some ground in late 2022 and early 2023, with information technology (IT), consumer discretionary and communication services bouncing back in the first quarter of 2023 from oversold levels. As the Fed lifted short-term borrowing rates, long-term bond yields rose, with the 10-year Treasury yield rising from 2.34% to above 4.20% in October 2022, before recession concerns and expectations of monetary easing drove a retreat; Treasury yields finished the period at 3.47%.

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

A. We believe that we have carefully constructed the Fund to thrive during different stages of a market cycle, diversifying across three types of growth companies – stable, cyclical and select – as well as driven more by their own execution than broad, macroeconomic forces. In addition, we believe our focus on companies that proactively integrate ESG considerations into their business models or demonstrate commitment to improve their practices, may promote consistent results. We are committed to participating in the most powerful secular growth trends our research efforts have identified. These include cloud computing/software-as-a-service, gaming, digital payments, electrification and expanding applications for AI.

Despite a particularly challenging first half of the reporting period, we maintained our active focus on diversification, favoring what we believed to be quality businesses and taking a defensive posture in positioning the portfolio. That balanced approach began to work in the second half of the period. After benefiting from the defensive nature of our countercyclical health care holdings in the fourth quarter of 2022, our higher-beta IT and communication services positions drove performance to start the year. Through the three years since COVID-19 struck, we have prudently transitioned the portfolio into companies that possess what we view as the most attractive growth profiles for the next three to five years. As a result, the portfolio’s differentiation from the benchmark has steadily risen, highlighted by meaningful overweighting to health care, industrials, software and services within IT and underweighting in consumer discretionary, semiconductors and hardware within IT.

Another key tenet of our approach is an emphasis on risk management. This emphasis has guided our positioning changes through the drawdown that characterized much of the year. We started becoming more countercyclical in adding to an overweight to health care stocks, with two of seven new positions for the year in the sector, animal health provider Zoetis and pharmaceutical maker Eli Lilly, which

 

 

12

    ClearBridge ETFs 2023 Annual Report


 

we think has a blockbuster opportunity with its diabetes/obesity treatment. We also initiated positions in defensively oriented growth franchises in consumer staples (Estee Lauder), financials (Marsh & McLennan) and utilities (NextEra Energy). The addition of Tesla in consumer discretionary was also a partial defensive play as not having exposure to the electric vehicle maker has hurt relative performance in “risk-on” periods.

We complemented this activity by paring back positions in consumer discretionary and more economically exposed areas of IT, with five of our nine sells coming in these areas. As long-term investors, we have approached these moves in a thoughtful way, reducing positions when short-term headwinds cause us to re-examine our investment thesis and only exiting securities when we believed with certainty that the reason for owning them no longer applies.

We see three ways to generate returns through the bear market. The first is by owning stocks delivering what we perceive to be high-quality organic growth via a combination of high-single-digit revenue growth, the use of free cash flow to drive buybacks and pulling levers to support earnings growth. We see a number of these opportunities in health care. The second strategy is to purchase stocks after they have derated and established a lower base for future earnings. These include companies like Netflix and PayPal, where we believe that final demand is normalizing after a pull-forward during the pandemic. The third strategy is buying growth companies like Sherwin-Williams with what we think are idiosyncratic or stock-specific catalysts unrelated to the direction of the market. The stock is an example of a company we categorize in our cyclical bucket that we believe should experience a step change in earnings over the medium to long term with solid execution and its ability to pass through price increases.

Performance review

For the 12 month period through March 31, 2023, ClearBridge Large Cap Growth ESG ETF generated a -9.48% return on a net asset value (“NAV”)iii basis and -9.39% based on its market priceiv per share.

The performance table shows the Fund’s total return for the 12 months ended March 31, 2023, based on its NAV and market price as of March 31, 2022. The Fund’s broad-based market index, the Russell 1000® Growth Index, returned -10.90% over the same time frame. The Lipper Large-Cap Growth Funds Category Averagev returned -13.83% for the same period. Please note that Lipper performance returns are based on each fund’s NAV.

 

Performance Snapshot as of March 31, 2023 (unaudited)  
ClearBridge Large Cap Growth ESG ETF:   6 months     12 months  

$47.67 (NAV)

    22.44     -9.48 %*† 

$47.68 (Market Price)

    22.72     -9.39 %*‡ 
Russell 1000® Growth Index     16.88     -10.90
Lipper Large-Cap Growth Funds Category Average     15.64     -13.83

The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value and investment returns will fluctuate so shares, when sold, may be worth more or less than their original cost. Performance data current to the most recent month-end is available at www.franklintempleton.com.

Investors buy and sell shares of an exchange-traded fund (“ETF”) at market price (not NAV) in the secondary market throughout the trading day. These shares are not individually available for direct purchase from or direct redemption to the ETF. Market price returns shown are typically based upon the official closing price of the Fund’s shares. These returns do not represent investors’ returns had they traded shares at other times. Performance figures for periods shorter than one year represent cumulative figures and are not annualized.

Information showing the Fund’s net asset value, market price, premiums and discounts, and bid-ask spreads for various time periods is available by visiting the Fund’s website at www.franklintempleton.com.

As of the Fund’s current prospectus dated July 29, 2022, the gross total annual fund operating expense ratio for the Fund was 0.59%.

* Total returns are based on changes in NAV or market price, respectively. Returns reflect the deduction of all Fund expenses. Returns do not reflect the deduction of brokerage commissions or taxes that investors pay on distributions or the sale of shares.

† Total return assumes the reinvestment of all distributions at NAV.

‡ Total return assumes the reinvestment of all distributions at market price, which typically is based upon the official closing price of the Fund’s shares.

Q. What were the leading contributors to performance?

A. Relative to the benchmark, overall stock selection and sector allocation effects had positive contributions to performance. In particular, stock selection in the communication services, consumer staples, industrials and health care sectors and overweight allocations to the industrials and health care sectors were the primary contributors to performance.

 

ClearBridge ETFs 2023 Annual Report    

 

13


Funds overview (cont’d)

 

In terms of individual Fund holdings, leading contributors to performance for the period included Monster Beverage in the consumer staples sector, NVIDIA and ASML in the IT sector, W.W. Grainger in the industrials sector and Netflix in the communication services sector.

Q. What were the leading detractors from performance?

A. Relative to the benchmark, stock selection in the IT sector and underweight allocations to IT and consumer staples sectors were the primary detractors from returns for the period.

In terms of individual Fund holdings, the leading detractors for the period were Amazon.com and Advance Auto Parts in the consumer discretionary sector, Atlassian and Splunk in the IT sector and PayPal in the financials sector.

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

A. Significant changes to the Fund’s portfolio during the period included the initiation of new positions in Zoetis and Eli Lilly in the Health Care sector, Marsh & McLennan in the financials sector, Estee Lauder in the consumer staples sector, Sherwin-Williams in the materials sector, NextEra Energy in the utilities sector and Tesla in the consumer discretionary sector. During the reporting period, we also closed positions in CVS Health in the health care sector, Walt Disney in the communication services sector, Tractor Supply, Advance Auto Parts and Ulta Beauty in the consumer discretionary sector, Fidelity National Information Services in the financials sector, as well as UIPath and NXP Semiconductors in the IT sector.

Looking for additional information?

The Fund’s daily NAV is available online atwww.franklintempleton.com. The Fund is traded under the symbol “LRGE” and its closing market price is available on most financial websites. In a continuing effort to provide information concerning the Fund, shareholders may call 1-877-721-1926 (toll free), Monday through Friday from 8:00 a.m. to 5:30 p.m. Eastern time, for the Fund’s current NAV, market price and other information.

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

Sincerely,

 

LOGO

Peter Bourbeau

Portfolio Manager

ClearBridge Investments, LLC

 

LOGO

Margaret Vitrano

Portfolio Manager

ClearBridge Investments, LLC

April 17, 2023

RISKS: The market values of securities or other assets will fluctuate, sometimes sharply and unpredictably, due to changes in general market conditions, overall economic trends or events, governmental actions or intervention, actions taken by the U.S. Federal Reserve or foreign central banks, market disruptions caused by trade disputes or other factors, political developments, armed conflicts, economic sanctions and countermeasures in response to sanctions, major cybersecurity events, investor sentiment, the global and domestic effects of a pandemic, and other factors that may or may not be related to the issuer of the security or other asset.

Equity securities are subject to market and price fluctuations. Large-capitalization companies may fall out of favor with investors based on market and economic conditions. The managers’ environmental, social and governance (“ESG”) investment strategy may limit the types and number of investments available to the Fund and, as a result, the Fund may forego favorable market opportunities or underperform strategies that are not subject to such criteria. There is no guarantee that the strategy’s ESG directives will be successful or will result in better performance.

The Fund’s growth-oriented investment style may increase the risks of investing in the Fund. Growth securities typically are very sensitive to market movements because their market prices tend to reflect future expectations. Growth stocks as a group may be out of favor and underperform the overall equity market while the market concentrates on value stocks. Securities or other assets in the Fund’s portfolio may underperform in comparison to the general financial markets, a particular financial market or other asset classes. Please see the Fund’s prospectus for a more complete discussion of these and other risks and the Fund’s investment strategies.

 

 

14

    ClearBridge ETFs 2023 Annual Report


 

All investments are subject to risk including the possible loss of principal. Past performance is no guarantee of future results. An index is a statistical composite that tracks a specified financial market, sector or rule-based investment process. Unlike a fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by a fund. These expenses negatively impact fund performance. All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. The Fund’s top five sector holdings (as a percentage of net assets) as of March 31, 2023, were IT (32.1%), health care (17.2%), financials (11.2%), consumer discretionary (10.8%), and industrials (10.7%). The Fund’s composition may differ over time.

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

 

i 

The Russell 1000® Growth Index is market capitalization weighted and measures the performance of those Russell 1000® Index companies with relatively higher price-to-book ratios and higher forecasted growth rates.

 

ii 

The Russell 1000® Value Index is market capitalization weighted and measures the performance of those Russell 1000® Index companies with relatively lower price-to-book ratios and lower forecasted growth rates. Frank Russell Company is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company.

 

iii 

Net Asset Value (NAV) is calculated by subtracting total liabilities from total assets and dividing the results by the number of shares outstanding.

 

iv 

Market price is determined by supply and demand. It is the price at which an investor purchases or sells shares of the Fund. The market price may differ from the Fund’s NAV.

 

v 

Lipper, Inc., a wholly-owned subsidiary of Refinitiv, provides independent insight on global collective investments. Returns are based on the four-month period ended March 31, 2023, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 49 funds in the Fund’s Lipper category.

 

ClearBridge ETFs 2023 Annual Report    

 

15


Funds at a glance (unaudited)

 

ClearBridge All Cap Growth ESG ETF Investment Breakdown† (%) as a percent of total investments

 

 

LOGO

 

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

 

 

16

    ClearBridge ETFs 2023 Annual Report


 

ClearBridge Dividend Strategy ESG ETF Investment Breakdown† (%) as a percent of total investments

 

 

LOGO

 

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

 

ClearBridge ETFs 2023 Annual Report    

 

17


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

 

ClearBridge Large Cap Growth ESG ETF Investment Breakdown† (%) as a percent of total investments

 

 

LOGO

 

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

 

 

18

    ClearBridge ETFs 2023 Annual Report


Funds expenses (unaudited)

 

ClearBridge All Cap Growth ESG ETF

 

Example

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, such as brokerage commissions paid on purchases and sales of Fund shares; and (2) ongoing costs, including management fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds.

This example is based on an investment of $1,000 invested on October 1, 2022 and held for the six months ended March 31, 2023.

Actual expenses

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

Hypothetical example for comparison purposes

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

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

 

  Based on actual total return1       Based on hypothetical total return1
Actual
Total
Return2
 

Beginning

Account

Value

 

Ending

Account

Value

 

Annualized

Expense

Ratio

 

Expenses

Paid During
the Period3

      Hypothetical
Annualized
Total Return
  Beginning
Account
Value
  Ending
Account
Value
  Annualized
Expense
Ratio
  Expenses
Paid During
the Period3
    17.17%       $ 1,000.00     $ 1,171.70       0.53 %     $ 2.87         5.00 %       $1,000.00       $ 1,022.29       0.53 %     $ 2.67

 

1 

For the six months ended March 31, 2023.

 

2 

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

 

3 

Expenses (net of fee waivers and/or expense reimbursements) are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (182), then divided by 365.

 

ClearBridge ETFs 2023 Annual Report    

 

19


Funds expenses (unaudited) (cont’d)

 

ClearBridge Dividend Strategy ESG ETF

 

Example

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, such as brokerage commissions paid on purchases and sales of Fund shares; and (2) ongoing costs, including management fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds.

This example is based on an investment of $1,000 invested on October 1, 2022 and held for the six months ended March 31, 2023.

Actual expenses

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

Hypothetical example for comparison purposes

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

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

 

  Based on actual total return1       Based on hypothetical total return1

Actual

Total

Return2

 

Beginning

Account

Value

 

Ending

Account

Value

 

Annualized

Expense

Ratio

 

Expenses

Paid During

the Period3

     

Hypothetical

Annualized

Total Return

 

Beginning

Account

Value

 

Ending

Account

Value

 

Annualized

Expense

Ratio

 

Expenses

Paid During

the Period3

    15.89%       $ 1,000.00     $ 1,158.90       0.59 %     $ 3.18         5.00 %       $1,000.00       $ 1,021.99       0.59 %     $ 2.97

 

1 

For the six months ended March 31, 2023.

 

2 

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

 

3 

Expenses (net of fee waivers and/or expense reimbursements) are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (182), then divided by 365.

 

 

20

    ClearBridge ETFs 2023 Annual Report


 

ClearBridge Large Cap Growth ESG ETF

 

Example

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, such as brokerage commissions paid on purchases and sales of Fund shares; and (2) ongoing costs, including management fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds.

This example is based on an investment of $1,000 invested on October 1, 2022 and held for the six months ended March 31, 2023.

Actual expenses

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

Hypothetical example for comparison purposes

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

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

 

  Based on actual total return1       Based on hypothetical total return1

Actual

Total

Return2

 

Beginning

Account

Value

 

Ending

Account

Value

 

Annualized

Expense

Ratio

 

Expenses

Paid During

the Period3

     

Hypothetical

Annualized

Total Return

 

Beginning

Account

Value

 

Ending

Account

Value

 

Annualized

Expense

Ratio

 

Expenses

Paid During

the Period3

    22.44%       $ 1,000.00     $ 1,224.40       0.59 %     $ 3.27         5.00 %       $1,000.00       $ 1,021.99       0.59 %     $ 2.97

 

1 

For the six months ended March 31, 2023.

 

2 

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

 

3 

Expenses (net of fee waivers and/or expense reimbursements) are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (182), then divided by 365.

 

ClearBridge ETFs 2023 Annual Report    

 

21


Funds performance (unaudited)

 

ClearBridge All Cap Growth ESG ETF

 

Net Asset Value       
Average annual total returns1        
Twelve Months Ended 3/31/23      -10.51
Five Years Ended 3/31/23      8.50  
Inception date of 5/3/2017 through 3/31/23      9.53  
Cumulative total returns        
Inception date of 5/3/2017 through 3/31/23      71.26
            
Market Price       
Average annual total returns2        
Twelve Months Ended 3/31/23      -10.46
Five Years Ended 3/31/23      8.48  
Inception date of 5/3/2017 through 3/31/23      9.53  
Cumulative total returns        
Inception date of 5/3/2017 through 3/31/23      71.28

All figures represent past performance and are not a guarantee of future results. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at NAV. The returns shown do not reflect the deduction of brokerage commissions or taxes that investors would pay on distributions or the sale of shares. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.

Investors buy and sell shares of the Fund at market price, not NAV, in the secondary market throughout the trading day. These shares are not individually available for direct purchase from or direct redemption to the Fund. The Fund’s per share NAV is the value of one share of the Fund and is calculated by dividing the value of total assets less total liabilities by the number of shares outstanding. The NAV return is based on the NAV of the Fund and effective July 1, 2020, market price returns typically are based upon the official closing price of the Fund’s shares. Prior to July 1, 2020, market price returns generally were based upon the mid-point between the bid and ask on the Fund’s principal trading market when the Fund’s NAV was determined, which was typically 4:00 p.m. Eastern time (U.S.). Market price performance reported for periods prior to July 1, 2020 continue to reflect market prices calculated based upon the mid-point between the bid and ask on the Fund’s principal trading market typically as of 4:00 p.m. Eastern time (U.S.). These returns do not represent investors’ returns had they traded shares at other times. NAV and market price returns assume that dividends and capital gain distributions have been reinvested in the Fund at NAV and market price, respectively. As with other exchange-traded funds, NAV returns and market price returns may differ because of factors such as the supply and demand for Fund shares and investors’ assessment of the underlying value of the Fund’s portfolio securities.

 

1 

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

 

2 

Assumes the reinvestment of all distributions, including returns of capital, if any, at market price.

 

 

22

    ClearBridge ETFs 2023 Annual Report


 

ClearBridge All Cap Growth ESG ETF

Historical performance

Value of $10,000 invested in

ClearBridge All Cap Growth ESG ETF vs. Russell 3000 Growth Index† — May 3, 2017 - March 31, 2023

 

LOGO

All figures represent past performance and are not a guarantee of future results. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at NAV. The returns shown do not reflect the deduction of brokerage commissions or taxes that investors would pay on distributions or the sale of shares. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.

 

Hypothetical illustration of $10,000 invested in ClearBridge All Cap Growth ESG ETF on May 3, 2017 (inception date), assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value through March 31, 2023. The hypothetical illustration also assumes a $10,000 investment in the Russell 3000 Growth Index. The Fund’s per share NAV is the value of one share of the Fund and is calculated by dividing the value of total assets less total liabilities by the number of shares outstanding. The NAV return is based on the NAV of the Fund. The Russell 3000 Growth Index (the “Index”) measures the performance of the broad growth segment of the U.S. equity universe. It includes those Russell 3000 Index companies with higher price-to- book ratios and higher forecasted growth values. The Index is unmanaged and not subject to the same management and trading expenses as a fund. An index is a statistical composite that tracks a specified financial market, sector, or rules based investment process. Unlike a fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by a fund. These expenses negatively impact fund performance. All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

 

ClearBridge ETFs 2023 Annual Report    

 

23


Funds performance (unaudited)

 

ClearBridge Dividend Strategy ESG ETF

 

Net Asset Value       
Average annual total returns1        
Twelve Months Ended 3/31/23      -4.27
Five Years Ended 3/31/23      10.06  
Inception date of 5/22/2017 through 3/31/23      10.06  
Cumulative total returns        
Inception date of 5/22/2017 through 3/31/23      75.31
            
Market Price       
Average annual total returns2        
Twelve Months Ended 3/31/23      -4.42
Five Years Ended 3/31/23      10.05  
Inception date of 5/22/2017 through 3/31/23      10.05  
Cumulative total returns        
Inception date of 5/22/2017 through 3/31/23      75.28

All figures represent past performance and are not a guarantee of future results. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at NAV. The returns shown do not reflect the deduction of brokerage commissions or taxes that investors would pay on distributions or the sale of shares. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.

Investors buy and sell shares of the Fund at market price, not NAV, in the secondary market throughout the trading day. These shares are not individually available for direct purchase from or direct redemption to the Fund. The Fund’s per share NAV is the value of one share of the Fund and is calculated by dividing the value of total assets less total liabilities by the number of shares outstanding. The NAV return is based on the NAV of the Fund and effective July 1, 2020, market price returns typically are based upon the official closing price of the Fund’s shares. Prior to July 1, 2020, market price returns generally were based upon the mid-point between the bid and ask on the Fund’s principal trading market when the Fund’s NAV was determined, which was typically 4:00 p.m. Eastern time (U.S.). Market price performance reported for periods prior to July 1, 2020 continue to reflect market prices calculated based upon the mid-point between the bid and ask on the Fund’s principal trading market typically as of 4:00 p.m. Eastern time (U.S.). These returns do not represent investors’ returns had they traded shares at other times. NAV and market price returns assume that dividends and capital gain distributions have been reinvested in the Fund at NAV and market price, respectively. As with other exchange-traded funds, NAV returns and market price returns may differ because of factors such as the supply and demand for Fund shares and investors’ assessment of the underlying value of the Fund’s portfolio securities.

 

1 

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

 

2 

Assumes the reinvestment of all distributions, including returns of capital, if any, at market price.

 

 

24

    ClearBridge ETFs 2023 Annual Report


 

ClearBridge Dividend Strategy ESG ETF

Historical performance

Value of $10,000 invested in

ClearBridge Dividend Strategy ESG ETF vs. S&P 500 Index† — May 22, 2017 - March 31, 2023

 

LOGO

All figures represent past performance and are not a guarantee of future results. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at NAV. The returns shown do not reflect the deduction of brokerage commissions or taxes that investors would pay on distributions or the sale of shares. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.

 

Hypothetical illustration of $10,000 invested in ClearBridge Dividend Strategy ESG ETF on May 22, 2017 (inception date), assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value through March 31, 2023. The hypothetical illustration also assumes a $10,000 investment in the S&P 500 Index. The Fund’s per share NAV is the value of one share of the Fund and is calculated by dividing the value of total assets less total liabilities by the number of shares outstanding. The NAV return is based on the NAV of the Fund. The S&P 500 Index (the “Index”) is an unmanaged index of 500 stocks and is generally representative of the performance of larger companies in the U.S. The Index is not subject to the same management and trading expenses as a fund. An index is a statistical composite that tracks a specified financial market, sector, or rules-based investment process. Unlike a fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by a fund. These expenses negatively impact fund performance. All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

 

ClearBridge ETFs 2023 Annual Report    

 

25


Funds performance (unaudited)

 

ClearBridge Large Cap Growth ESG ETF

 

Net Asset Value       
Average annual total returns1        
Twelve Months Ended 3/31/23      -9.48
Five Years Ended 3/31/23      11.28  
Inception date of 5/22/2017 through 3/31/23      12.74  
Cumulative total returns        
Inception date of 5/22/2017 through 3/31/23      101.91
       
Market Price       
Average annual total returns2        
Twelve Months Ended 3/31/23      -9.39
Five Years Ended 3/31/23      11.28  
Inception date of 5/22/2017 through 3/31/23      12.75  
Cumulative total returns        
Inception date of 5/22/2017 through 3/31/23      101.95

All figures represent past performance and are not a guarantee of future results. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at NAV. The returns shown do not reflect the deduction of brokerage commissions or taxes that investors would pay on distributions or the sale of shares. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.

Investors buy and sell shares of the Fund at market price, not NAV, in the secondary market throughout the trading day. These shares are not individually available for direct purchase from or direct redemption to the Fund. The Fund’s per share NAV is the value of one share of the Fund and is calculated by dividing the value of total assets less total liabilities by the number of shares outstanding. The NAV return is based on the NAV of the Fund and effective July 1, 2020, market price returns typically are based upon the official closing price of the Fund’s shares. Prior to July 1, 2020, market price returns generally were based upon the mid-point between the bid and ask on the Fund’s principal trading market when the Fund’s NAV was determined, which was typically 4:00 p.m. Eastern time (U.S.). Market price performance reported for periods prior to July 1, 2020 continue to reflect market prices calculated based upon the mid-point between the bid and ask on the Fund’s principal trading market typically as of 4:00 p.m. Eastern time (U.S.). These returns do not represent investors’ returns had they traded shares at other times. NAV and market price returns assume that dividends and capital gain distributions have been reinvested in the Fund at NAV and market price, respectively. As with other exchange-traded funds, NAV returns and market price returns may differ because of factors such as the supply and demand for Fund shares and investors’ assessment of the underlying value of the Fund’s portfolio securities.

 

1 

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

 

2 

Assumes the reinvestment of all distributions, including returns of capital, if any, at market price.

 

 

26

    ClearBridge ETFs 2023 Annual Report


 

ClearBridge Large Cap Growth ESG ETF

    

Historical performance

Value of $10,000 invested in

ClearBridge Large Cap Growth ESG ETF vs. Russell 1000 Growth Index† — May 22, 2017 - March 31, 2023

 

LOGO

All figures represent past performance and are not a guarantee of future results. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at NAV. The returns shown do not reflect the deduction of brokerage commissions or taxes that investors would pay on distributions or the sale of shares. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.

 

Hypothetical illustration of $10,000 invested in ClearBridge Large Cap Growth ESG ETF on May 22, 2017 (inception date), assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value through March 31, 2023. The hypothetical illustration also assumes a $10,000 investment in the Russell 1000 Growth Index. The Fund’s per share NAV is the value of one share of the Fund and is calculated by dividing the value of total assets less total liabilities by the number of shares outstanding. The NAV return is based on the NAV of the Fund. The Russell 1000 Growth Index (the “Index”) measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. The Index is unmanaged and is not subject to the same management and trading expenses as a fund. An index is a statistical composite that tracks a specified financial market, sector, or rules-based investment process. Unlike a fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by a fund. These expenses negatively impact fund performance. All index performance reflects no deductions for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

 

ClearBridge ETFs 2023 Annual Report    

 

27


Schedules of investments

March 31, 2023

 

ClearBridge All Cap Growth ESG ETF

(Percentages shown based on Fund net assets)

 

Security   Shares     Value  
Common Stocks — 96.0%                
Communication Services — 9.8%                

Entertainment — 3.5%

               

Liberty Media Corp.-Liberty Formula One, Class A Shares

    801     $ 54,067  * 

Liberty Media Corp.-Liberty Formula One, Class C Shares

    1,263       94,510  * 

Netflix Inc.

    7,264       2,509,567  * 

Sea Ltd., ADR

    6,901       597,282  * 

Warner Bros. Discovery Inc.

    25,159       379,901  * 

Total Entertainment

            3,635,327  

Interactive Media & Services — 3.3%

               

Match Group Inc.

    12,237       469,778  * 

Meta Platforms Inc., Class A Shares

    13,935       2,953,384  * 

Total Interactive Media & Services

            3,423,162  

Media — 3.0%

               

AMC Networks Inc., Class A Shares

    4,262       74,926  * 

Comcast Corp., Class A Shares

    67,092       2,543,458  

Liberty Broadband Corp., Class C Shares

    2,150       175,655  * 

Liberty Media Corp.-Liberty SiriusXM, Class A Shares

    3,416       95,955  * 

Liberty Media Corp.-Liberty SiriusXM, Class C Shares

    6,837       191,368  * 

Total Media

            3,081,362  

Total Communication Services

            10,139,851  
Consumer Discretionary — 10.0%                

Automobile Components — 0.9%

               

Aptiv PLC

    8,006       898,193  * 

Automobiles — 0.5%

               

Tesla Inc.

    2,518       522,384  * 

Broadline Retail — 6.3%

               

Amazon.com Inc.

    56,275       5,812,645  * 

Etsy Inc.

    6,835       760,941  * 

Total Broadline Retail

            6,573,586  

Hotels, Restaurants & Leisure — 0.7%

               

Airbnb Inc., Class A Shares

    6,168       767,299  * 

Textiles, Apparel & Luxury Goods — 1.6%

               

NIKE Inc., Class B Shares

    13,350       1,637,244  

Total Consumer Discretionary

            10,398,706  
Consumer Staples — 2.6%                

Beverages — 1.5%

               

Monster Beverage Corp.

    28,205       1,523,352  * 

Personal Care Products — 1.1%

               

Estee Lauder Cos. Inc., Class A Shares

    4,720       1,163,291  

Total Consumer Staples

            2,686,643  
Financials — 6.9%                

Capital Markets — 1.4%

               

S&P Global Inc.

    4,194       1,445,965  

Financial Services — 4.3%

               

PayPal Holdings Inc.

    13,270       1,007,724  * 

Visa Inc., Class A Shares

    15,005       3,383,027  

Total Financial Services

            4,390,751  

Insurance — 1.2%

               

Marsh & McLennan Cos. Inc.

    7,585       1,263,282  

Total Financials

            7,099,998  

 

See Notes to Financial Statements.

 

 

28

    ClearBridge ETFs 2023 Annual Report


 

 

ClearBridge All Cap Growth ESG ETF

(Percentages shown based on Fund net assets)

 

Security   Shares     Value  
Health Care — 21.2%                

Biotechnology — 7.3%

               

AbbVie Inc.

    8,824     $ 1,406,281  

Biogen Inc.

    6,149       1,709,607  * 

Ionis Pharmaceuticals Inc.

    15,214       543,748  * 

Vertex Pharmaceuticals Inc.

    12,249       3,859,292  * 

Total Biotechnology

            7,518,928  

Health Care Equipment & Supplies — 3.5%

               

Alcon Inc.

    16,313       1,150,719  

Insulet Corp.

    2,506       799,313  * 

Intuitive Surgical Inc.

    3,570       912,028  * 

Stryker Corp.

    2,821       805,311  

Total Health Care Equipment & Supplies

            3,667,371  

Health Care Providers & Services — 5.3%

               

Guardant Health Inc.

    11,087       259,879  * 

UnitedHealth Group Inc.

    11,179       5,283,084  

Total Health Care Providers & Services

            5,542,963  

Health Care Technology — 0.5%

               

Doximity Inc., Class A Shares

    14,827       480,098  * 

Life Sciences Tools & Services — 2.2%

               

Charles River Laboratories International Inc.

    3,553       717,067  * 

Thermo Fisher Scientific Inc.

    2,690       1,550,435  

Total Life Sciences Tools & Services

            2,267,502  

Pharmaceuticals — 2.4%

               

Eli Lilly & Co.

    2,945       1,011,372  

Zoetis Inc.

    8,786       1,462,342  

Total Pharmaceuticals

            2,473,714  

Total Health Care

            21,950,576  
Industrials — 7.7%                

Air Freight & Logistics — 1.2%

               

United Parcel Service Inc., Class B Shares

    6,633       1,286,736  

Building Products — 1.3%

               

Johnson Controls International PLC

    21,797       1,312,615  

Electrical Equipment — 1.5%

               

Eaton Corp. PLC

    9,031       1,547,372  

Ground Transportation — 1.2%

               

Lyft Inc., Class A Shares

    17,798       164,987  * 

Uber Technologies Inc.

    33,797       1,071,365  * 

Total Ground Transportation

            1,236,352  

Trading Companies & Distributors — 2.5%

               

W.W. Grainger Inc.

    3,754       2,585,793  

Total Industrials

            7,968,868  
Information Technology — 34.8%                

Electronic Equipment, Instruments & Components — 2.0%

               

TE Connectivity Ltd.

    15,609       2,047,120  

IT Services — 1.2%

               

Accenture PLC, Class A Shares

    1,933       552,471  

Snowflake Inc., Class A Shares

    4,917       758,644  * 

Total IT Services

            1,311,115  

Semiconductors & Semiconductor Equipment — 8.8%

               

ASML Holding NV, Registered Shares

    2,052       1,396,817  

 

See Notes to Financial Statements.

 

ClearBridge ETFs 2023 Annual Report    

 

29


Schedules of investments (cont’d)

March 31, 2023

 

ClearBridge All Cap Growth ESG ETF

(Percentages shown based on Fund net assets)

 

Security            Shares      Value  

Semiconductors & Semiconductor Equipment — continued

                          

Broadcom Inc.

              4,820      $ 3,092,223  

NVIDIA Corp.

              13,444        3,734,340  

Wolfspeed Inc.

              13,651        886,632  * 

Total Semiconductors & Semiconductor Equipment

                       9,110,012  

Software — 19.2%

                          

Adobe Inc.

              3,649        1,406,215  * 

Atlassian Corp., Class A Shares

              5,087        870,742  * 

Autodesk Inc.

              8,904        1,853,457  * 

CrowdStrike Holdings Inc., Class A Shares

              14,404        1,977,093  * 

DocuSign Inc.

              9,302        542,307  * 

Dolby Laboratories Inc., Class A Shares

              10,489        895,971  

HubSpot Inc.

              3,499        1,500,196  * 

Microsoft Corp.

              18,244        5,259,745  

Palo Alto Networks Inc.

              9,474        1,892,337  * 

Salesforce Inc.

              7,895        1,577,263  * 

Splunk Inc.

              11,607        1,112,879  * 

Unity Software Inc.

              4,669        151,462  * 

Workday Inc., Class A Shares

              4,013        828,845  * 

Total Software

                       19,868,512  

Technology Hardware, Storage & Peripherals — 3.6%

                          

Apple Inc.

              14,858        2,450,084  

Seagate Technology Holdings PLC

              14,047        928,788  

Western Digital Corp.

              10,420        392,521  * 

Total Technology Hardware, Storage & Peripherals

                       3,771,393  

Total Information Technology

                       36,108,152  
Materials — 1.7%                           

Chemicals — 0.9%

                          

Sherwin-Williams Co.

              4,207        945,608  

Metals & Mining — 0.8%

                          

Freeport-McMoRan Inc.

              20,654        844,955  

Total Materials

                       1,790,563  
Real Estate — 1.3%                           

Specialized REITs — 1.3%

                          

Equinix Inc.

              1,933        1,393,770  

Total Investments before Short-Term Investments (Cost — $96,205,728)

                       99,537,127  
      Rate                  
Short-Term Investments — 4.0%                           

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

(Cost — $4,106,308)

  

 

4.436

  

 

4,106,308

 

  

 

4,106,308

 (a)  

Total Investments — 100.0% (Cost — $100,312,036)

                       103,643,435  

Liabilities in Excess of Other Assets — (0.0)%††

                       (6,100)  

Total Net Assets — 100.0%

                     $ 103,637,335  

 

††

Represents less than 0.1%.

 

*

Non-income producing security.

 

(a) 

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

 

Abbreviation(s) used in this schedule:

ADR   — American Depositary Receipts

 

See Notes to Financial Statements.

 

 

30

    ClearBridge ETFs 2023 Annual Report


 

    

 

Clearbridge Dividend Strategy ESG ETF

(Percentages shown based on Fund net assets)

 

Security    Shares      Value  
Common Stocks — 93.2%                  
Communication Services — 5.0%                  

Diversified Telecommunication Services — 1.4%

                 

Verizon Communications Inc.

     10,471      $ 407,217  

Entertainment — 0.8%

                 

Walt Disney Co.

     2,503        250,625  * 

Media — 2.8%

                 

Comcast Corp., Class A Shares

     21,595        818,667  

Total Communication Services

              1,476,509  
Consumer Discretionary — 4.5%                  

Automobiles — 0.8%

                 

General Motors Co.

     7,039        258,190  

Hotels, Restaurants & Leisure — 1.6%

                 

Starbucks Corp.

     4,512        469,835  

Specialty Retail — 2.1%

                 

Home Depot Inc.

     2,100        619,752  

Total Consumer Discretionary

              1,347,777  
Consumer Staples — 10.2%                  

Beverages — 2.2%

                 

Coca-Cola Co.

     10,394        644,740  

Food Products — 4.4%

                 

Mondelez International Inc., Class A Shares

     10,144        707,240  

Nestle SA, ADR

     5,083        618,550  

Total Food Products

              1,325,790  

Household Products — 3.6%

                 

Colgate-Palmolive Co.

     4,408        331,261  

Procter & Gamble Co.

     4,917        731,109  

Total Household Products

              1,062,370  

Total Consumer Staples

              3,032,900  
Energy — 5.0%                  

Oil, Gas & Consumable Fuels — 5.0%

                 

Chesapeake Energy Corp.

     7,930        602,997  

Williams Cos. Inc.

     29,578        883,199  

Total Energy

              1,486,196  
Financials — 16.2%                  

Banks — 3.5%

                 

JPMorgan Chase & Co.

     5,458        711,232  

PNC Financial Services Group Inc.

     2,490        316,479  

Total Banks

              1,027,711  

Consumer Finance — 0.8%

                 

Capital One Financial Corp.

     2,610        250,977  

Financial Services — 7.8%

                 

Apollo Global Management Inc.

     13,888        877,166  

Mastercard Inc., Class A Shares

     1,816        659,952  

Visa Inc., Class A Shares

     3,523        794,296  

Total Financial Services

              2,331,414  

 

See Notes to Financial Statements.

 

ClearBridge ETFs 2023 Annual Report    

 

31


Schedules of investments (cont’d)

March 31, 2023

 

Clearbridge Dividend Strategy ESG ETF

(Percentages shown based on Fund net assets)

 

Security   Shares     Value  

Insurance — 4.1%

               

American International Group Inc.

    5,177     $ 260,714  

MetLife Inc.

    6,257       362,531  

Travelers Cos. Inc.

    3,496       599,249  

Total Insurance

            1,222,494  

Total Financials

            4,832,596  
Health Care — 10.8%                

Health Care Equipment & Supplies — 2.7%

               

Becton Dickinson & Co.

    3,274       810,446  

Health Care Providers & Services — 1.8%

               

UnitedHealth Group Inc.

    1,157       546,786  

Pharmaceuticals — 6.3%

               

Johnson & Johnson

    4,655       721,525  

Merck & Co. Inc.

    6,316       671,959  

Pfizer Inc.

    11,732       478,666  

Total Pharmaceuticals

            1,872,150  

Total Health Care

            3,229,382  
Industrials — 6.9%                

Air Freight & Logistics — 1.9%

               

United Parcel Service Inc., Class B Shares

    2,898       562,183  

Commercial Services & Supplies — 1.5%

               

Waste Management Inc.

    2,779       453,449  

Ground Transportation — 1.8%

               

Union Pacific Corp.

    2,669       537,163  

Industrial Conglomerates — 1.7%

               

Honeywell International Inc.

    2,639       504,366  

Total Industrials

            2,057,161  
Information Technology — 17.8%                

Communications Equipment — 1.6%

               

Cisco Systems Inc.

    8,956       468,175  

Semiconductors & Semiconductor Equipment — 3.3%

               

Broadcom Inc.

    761       488,212  

Intel Corp.

    7,547       246,560  

Texas Instruments Inc.

    1,291       240,139  

Total Semiconductors & Semiconductor Equipment

            974,911  

Software — 9.2%

               

Microsoft Corp.

    5,367       1,547,306  

Oracle Corp.

    6,366       591,529  

SAP SE, ADR

    4,727       598,202  

Total Software

            2,737,037  

Technology Hardware, Storage & Peripherals — 3.7%

               

Apple Inc.

    6,783       1,118,517  

Total Information Technology

            5,298,640  

 

See Notes to Financial Statements.

 

 

32

    ClearBridge ETFs 2023 Annual Report


 

Clearbridge Dividend Strategy ESG ETF

(Percentages shown based on Fund net assets)

 

Security          Shares     Value  
Materials — 9.2%                        

Chemicals — 4.9%

                       

Linde PLC

            2,579     $ 916,680  

PPG Industries Inc.

            3,995       533,652  

Total Chemicals

                    1,450,332  

Construction Materials — 2.1%

                       

Vulcan Materials Co.

            3,674       630,311  

Metals & Mining — 2.2%

                       

Freeport-McMoRan Inc.

            7,266       297,252  

Nucor Corp.

            2,236       345,395  

Total Metals & Mining

                    642,647  

Total Materials

                    2,723,290  
Real Estate — 3.2%                        

Residential REITs — 1.6%

                       

AvalonBay Communities Inc.

            2,840       477,290  

Specialized REITs — 1.6%

                       

American Tower Corp.

            2,319       473,865  

Total Real Estate

                    951,155  
Utilities — 4.4%                        

Electric Utilities — 1.6%

                       

Edison International

            6,738       475,636  

Multi-Utilities — 2.8%

                       

Sempra Energy

            5,551       839,089  

Total Utilities

                    1,314,725  

Total Common Stocks (Cost — $27,745,323)

                    27,750,331  
            Shares/Units         
Master Limited Partnerships — 2.3%                        

Independent Power and Renewable Electricity Producers — 2.3%

                       

Brookfield Renewable Partners LP (Cost — $600,409)

            22,264       701,539  

Total Investments before Short-Term Investments (Cost — $28,345,732)

                    28,451,870  
     Rate     Shares         
Short-Term Investments — 4.4%                        

JPMorgan 100% U.S. Treasury Securities Money Market Fund, Institutional Class (Cost — $1,308,982)

    4.436     1,308,982       1,308,982  (a) 

Total Investments — 99.9% (Cost — $29,654,714)

                    29,760,852  

Other Assets in Excess of Liabilities — 0.1%

                    21,587  

Total Net Assets — 100.0%

                  $ 29,782,439  

 

*

Non-income producing security.

(a)

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

 

 

Abbreviation(s) used in this schedule:

ADR   — American Depositary Receipts

 

See Notes to Financial Statements.

 

ClearBridge ETFs 2023 Annual Report    

 

33


Schedules of investments (cont’d)

March 31, 2023

 

Clearbridge Large Cap Growth ESG ETF

(Percentages shown based on Fund net assets)

 

Security                 Shares     Value  
Common Stocks — 98.0%                                
Communication Services — 7.7%                                

Entertainment — 4.0%

                               

Netflix Inc.

                    11,319     $ 3,910,488  * 

Sea Ltd., ADR

                    15,372       1,330,447  * 

Total Entertainment

                            5,240,935  

Interactive Media & Services — 3.7%

                               

Meta Platforms Inc., Class A Shares

                    23,043       4,883,733  * 

Total Communication Services

                            10,124,668  
Consumer Discretionary — 10.8%                                

Automobile Components — 1.3%

                               

Aptiv PLC

                    14,925       1,674,436  * 

Automobiles — 0.8%

                               

Tesla Inc.

                    4,724       980,041  * 

Broadline Retail — 6.3%

                               

Amazon.com Inc.

                    80,272       8,291,295  * 

Textiles, Apparel & Luxury Goods — 2.4%

                               

NIKE Inc., Class B Shares

                    25,842       3,169,263  

Total Consumer Discretionary

                            14,115,035  
Consumer Staples — 4.2%                                

Beverages — 2.6%

                               

Monster Beverage Corp.

                    64,184       3,466,578  * 

Personal Care Products — 1.6%

                               

Estee Lauder Cos. Inc., Class A Shares

                    8,560       2,109,697  

Total Consumer Staples

                            5,576,275  
Financials — 11.2%                                

Capital Markets — 2.5%

                               

S&P Global Inc.

                    9,433       3,252,215  

Financial Services — 6.8%

                               

PayPal Holdings Inc.

                    26,588       2,019,093  * 

Visa Inc., Class A Shares

                    30,454       6,866,159  

Total Financial Services

                            8,885,252  

Insurance — 1.9%

                               

Marsh & McLennan Cos. Inc.

                    15,492       2,580,193  

Total Financials

                            14,717,660  
Health Care — 17.2%                                

Health Care Equipment & Supplies — 7.2%

                               

Alcon Inc.

                    34,562       2,438,004  

Dexcom Inc.

                    19,118       2,221,129  * 

Intuitive Surgical Inc.

                    8,277       2,114,525  * 

Stryker Corp.

                    9,396       2,682,276  

Total Health Care Equipment & Supplies

                            9,455,934  

Health Care Providers & Services — 4.0%

                               

UnitedHealth Group Inc.

                    10,972       5,185,257  

Life Sciences Tools & Services — 2.8%

                               

Thermo Fisher Scientific Inc.

                    6,380       3,677,241  

 

See Notes to Financial Statements.

 

 

34

    ClearBridge ETFs 2023 Annual Report


 

 

Clearbridge Large Cap Growth ESG ETF

(Percentages shown based on Fund net assets)

 

Security                 Shares     Value  

Pharmaceuticals — 3.2%

                               

Eli Lilly & Co.

                    3,129     $ 1,074,561  

Zoetis Inc.

                    18,619       3,098,947  

Total Pharmaceuticals

                            4,173,508  

Total Health Care

                            22,491,940  
Industrials — 10.7%                                

Air Freight & Logistics — 2.0%

                               

United Parcel Service Inc., Class B Shares

                    13,496       2,618,089  

Electrical Equipment — 2.4%

                               

Eaton Corp. PLC

                    18,237       3,124,728  

Ground Transportation — 1.5%

                               

Uber Technologies Inc.

                    59,973       1,901,144  * 

Industrial Conglomerates — 2.0%

                               

Honeywell International Inc.

                    14,061       2,687,338  

Trading Companies & Distributors — 2.8%

                               

W.W. Grainger Inc.

                    5,417       3,731,284  

Total Industrials

                            14,062,583  
Information Technology — 32.1%                                

Semiconductors & Semiconductor Equipment — 8.2%

                               

ASML Holding NV, Registered Shares

                    3,760       2,559,470  

Intel Corp.

                    29,122       951,416  

NVIDIA Corp.

                    26,207       7,279,518  

Total Semiconductors & Semiconductor Equipment

                            10,790,404  

Software — 19.1%

                               

Adobe Inc.

                    5,588       2,153,448  * 

Atlassian Corp., Class A Shares

                    8,973       1,535,908  * 

Microsoft Corp.

                    38,262       11,030,935  

Palo Alto Networks Inc.

                    16,995       3,394,581  * 

Salesforce Inc.

                    16,198       3,236,036  * 

Splunk Inc.

                    17,352       1,663,710  * 

Unity Software Inc.

                    8,442       273,858  * 

Workday Inc., Class A Shares

                    8,278       1,709,738  * 

Total Software

                            24,998,214  

Technology Hardware, Storage & Peripherals — 4.8%

                               

Apple Inc.

                    38,070       6,277,743  

Total Information Technology

                            42,066,361  
Materials — 1.4%                                

Chemicals — 1.4%

                               

Sherwin-Williams Co.

                    8,095       1,819,513  
Real Estate — 1.7%                                

Specialized REITs — 1.7%

                               

Equinix Inc.

                    3,049       2,198,451  
Utilities — 1.0%                                

Electric Utilities — 1.0%

                               

NextEra Energy Inc.

                    17,628       1,358,766  

Total Investments before Short-Term Investments (Cost — $145,463,686)

                            128,531,252  

 

See Notes to Financial Statements.

 

ClearBridge ETFs 2023 Annual Report    

 

35


Schedules of investments (cont’d)

March 31, 2023

 

Clearbridge Large Cap Growth ESG ETF

(Percentages shown based on Fund net assets)

 

Security   Rate     Shares     Value  
Short-Term Investments — 2.0%                        

JPMorgan 100% U.S. Treasury Securities Money Market Fund, Institutional Class (Cost — $2,596,076)

    4.436     2,596,076     $ 2,596,076  (a) 

Total Investments — 100.0% (Cost — $148,059,762)

                    131,127,328  

Liabilities in Excess of Other Assets — (0.0)%††

                    (37,222

Total Net Assets — 100.0%

                  $ 131,090,106  

 

††

Represents less than 0.1%.

 

*

Non-income producing security.

 

(a)

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

 

Abbreviation(s) used in this schedule:

ADR   — American Depositary Receipts

 

See Notes to Financial Statements.

 

 

36

    ClearBridge ETFs 2023 Annual Report


Statements of assets and liabilities

March 31, 2023

 

     ClearBridge
All Cap Growth ESG ETF
    ClearBridge
Dividend Strategy ESG ETF
    ClearBridge
Large Cap Growth ESG ETF
 
Assets:                        

Investments, at value
(Cost — $100,312,036, $29,654,714 and $148,059,762, respectively)

  $ 103,643,435     $ 29,760,852     $ 131,127,328  

Dividends and interest receivable

    49,885       36,128       27,234  

Total Assets

    103,693,320       29,796,980       131,154,562  
Liabilities:                        

Investment management fee payable

    55,985       14,541       64,456  

Total Liabilities

    55,985       14,541       64,456  
Total Net Assets   $ 103,637,335     $ 29,782,439     $ 131,090,106  
Net Assets:                        

Par value (Note 5)

  $ 28       $8     $ 28  

Paid-in capital in excess of par value

    102,991,541       30,913,489       157,145,846  

Total distributable earnings (loss)

    645,766       (1,131,058)       (26,055,768)  
Total Net Assets   $ 103,637,335     $ 29,782,439     $ 131,090,106  
Shares Outstanding     2,750,000       750,000       2,750,000  
Net Asset Value     $37.69       $39.71       $47.67  

 

See Notes to Financial Statements.

 

ClearBridge ETFs 2023 Annual Report    

 

37


Statements of operations

For the Year Ended March 31, 2023

 

     ClearBridge
All Cap Growth ESG ETF
    ClearBridge
Dividend Strategy ESG ETF
    ClearBridge
Large Cap Growth ESG ETF
 
Investment Income:                        

Dividends

  $ 1,219,905     $ 570,244     $ 1,229,138  

Interest

    101,312       15,759       70,172  

Less: Foreign taxes withheld

    (7,536)       (5,280)       (6,989)  

Total Investment Income

    1,313,681       580,723       1,292,321  
Expenses:                        

Investment management fee (Note 2)

    798,086       136,310       977,038  

Interest expense

    24              

Total Expenses

    798,110       136,310       977,038  
Net Investment Income     515,571       444,413       315,283  
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions (Notes 1 and 3):

 

Net Realized Gain From:

                       

Investment transactions

    11,581,591       (774,633)       4,234,323  

Foreign currency transactions

          (91)        

Net Realized Gain (Loss) From Investment Transactions

    11,581,591       (774,724)       4,234,323  

Change in Net Unrealized Appreciation (Depreciation) From:

                       

Investments

    (38,108,844)       (507,068)       (29,683,797)  

Foreign currencies

          (29)        

Change in Net Unrealized Appreciation (Depreciation) From Investments

    (38,108,844)       (507,097)       (29,683,797)  
Net Loss on Investments and Foreign Currency Transactions     (26,527,253)       (1,281,821)       (25,449,474)  
Decrease in Net Assets From Operations   $ (26,011,682)     $ (837,408)     $ (25,134,191)  

 

See Notes to Financial Statements.

 

 

38

    ClearBridge ETFs 2023 Annual Report


Statements of changes in net assets

ClearBridge All Cap Growth ESG ETF

 

For the Year Ended March 31, 2023, the Period Ended March 31, 2022

and the Year Ended September 30, 2021

   2023      2022†      2021  
Operations:                           

Net investment income

   $ 515,571      $ 129,059      $ 632,880  

Net realized gain

     11,581,591        14,880,764        16,902,181  

Change in net unrealized appreciation (depreciation)

     (38,108,844)        (22,545,394)        25,366,016  

Increase (Decrease) in Net Assets From Operations

     (26,011,682)        (7,535,571)        42,901,077  
Distributions to Shareholders From (Note 1):                           

Total distributable earnings

     (9,288,298)        (6,430,701)        (960,002)  

Decrease in Net Assets From Distributions to Shareholders

     (9,288,298)        (6,430,701)        (960,002)  
Fund Share Transactions (Note 5):                           

Net proceeds from sale of shares (500,000, 50,000 and 500,000 shares issued, respectively)

     19,529,883        2,255,610        23,691,687  

Cost of shares repurchased (2,050,000, 250,000 and 600,000 shares repurchased, respectively)

     (75,052,065)        (12,426,427)        (28,611,753)  

Decrease in Net Assets From Fund Share Transactions

     (55,522,182)        (10,170,817)        (4,920,066)  

Increase (Decrease) in Net Assets

     (90,822,162)        (24,137,089)        37,021,009  
Net Assets:                           

Beginning of year

     194,459,497        218,596,586        181,575,577  

End of year

   $ 103,637,335      $ 194,459,497      $ 218,596,586  

 

For the period October 1, 2021 through March 31, 2022

 

See Notes to Financial Statements.

 

ClearBridge ETFs 2023 Annual Report    

 

39


Statements of changes in net assets (cont’d)

ClearBridge Dividend Strategy ESG ETF

 

For the Year Ended March 31, 2023, the Period Ended March 31, 2022

and the Year Ended November 30, 2021

   2023      2022†      2021  
Operations:                           

Net investment income

   $ 444,413      $ 113,417      $ 196,273  

Net realized gain (loss)

     (774,724)        963,694        3,787,475  

Change in net unrealized appreciation (depreciation)

     (507,097)        (446,335)        (1,169,435)  

Increase (Decrease) in Net Assets From Operations

     (837,408)        630,776        2,814,313  
Distributions to Shareholders From (Note 1):                           

Total distributable earnings

     (448,501)        (137,200)        (201,900)  

Decrease in Net Assets From Distributions to Shareholders

     (448,501)        (137,200)        (201,900)  
Fund Share Transactions (Note 5):                           

Net proceeds from sale of shares (300,000, 150,000 and 450,000 shares issued, respectively)

     11,940,021        6,429,069        17,711,085  

Cost of shares repurchased (50,000, 150,000 and 300,000 shares repurchased, respectively)

     (2,004,321)        (6,294,295)        (12,060,325)  

Increase in Net Assets From Fund Share Transactions

     9,935,700        134,774        5,650,760  

Increase in Net Assets

     8,649,791        628,350        8,263,173  
Net Assets:                           

Beginning of year

     21,132,648        20,504,298        12,241,125  

End of year

   $ 29,782,439      $ 21,132,648      $ 20,504,298  

 

For the period December 1, 2021 through March 31, 2022.

 

See Notes to Financial Statements.

 

 

40

    ClearBridge ETFs 2023 Annual Report


ClearBridge Large Cap Growth ESG ETF

 

For the Year Ended March 31, 2023, the Period Ended March 31, 2022

and the Year Ended November 30, 2021

   2023      2022†      2021  
Operations:                           

Net investment income

   $ 315,283      $ 16,072      $ 113,280  

Net realized gain

     4,234,323        20,094,581        5,530,533  

Change in net unrealized appreciation (depreciation)

     (29,683,797)        (46,199,379)        28,210,940  

Increase (Decrease) in Net Assets From Operations

     (25,134,191)        (26,088,726)        33,854,753  
Distributions to Shareholders From (Note 1):                           

Total distributable earnings

     (3,004,181)        (2,518,597)        (490,001)  

Decrease in Net Assets From Distributions to Shareholders

     (3,004,181)        (2,518,597)        (490,001)  
Fund Share Transactions (Note 5):                           

Net proceeds from sale of shares (700,000, 2,300,000 and 550,000 shares issued, respectively)

     30,815,534        128,530,187        28,894,189  

Cost of shares repurchased (2,100,000, 1,150,000 and 100,000 shares repurchased, respectively)

     (94,560,163)        (58,595,045)        (5,158,502)  

Increase (Decrease) in Net Assets From Fund Share Transactions

     (63,744,629)        69,935,142        23,735,687  

Increase (Decrease) in Net Assets

     (91,883,001)        41,327,819        57,100,439  
Net Assets:                           

Beginning of year

     222,973,107        181,645,288        124,544,849  

End of year

   $ 131,090,106      $ 222,973,107      $ 181,645,288  

 

For the period December 1, 2021 through March 31, 2022.

 

See Notes to Financial Statements.

 

ClearBridge ETFs 2023 Annual Report    

 

41


Financial highlights

Clearbridge All Cap Growth ESG ETF

 

For a share of beneficial interest outstanding throughout each year ended March 31,
unless otherwise noted:
 
     20231     20221,2     20211,3     20201,3     20191,3     20181,3  
Net asset value, beginning of year     $45.22       $48.58       $39.47       $31.66       $31.39       $26.16  
Income (loss) from operations:            

Net investment income

    0.13       0.03       0.14       0.21       0.24       0.17  

Net realized and unrealized gain (loss)

    (5.25)       (1.91)       9.18       7.86       0.21       5.13  

Total income (loss) from operations

    (5.12)       (1.88)       9.32       8.07       0.45       5.30  
Less distributions from:            

Net investment income

    (0.11)       (0.10)       (0.21)