SEMIANNUAL REPORT
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Western Asset Bond ETF
September 30, 2023
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The Securities and Exchange Commission has adopted new regulations that will result in changes to the design and delivery of annual and semiannual shareholder reports beginning in July 2024.
If you have previously elected to receive shareholder reports electronically, you will continue to do so and need not take any action.
Otherwise, paper copies of the Fund’s shareholder reports will be mailed to you beginning in July 2024. If you would like to receive shareholder reports and other communications from the Fund electronically instead of by mail, you may make that request at any time by contacting your financial intermediary (such as a broker-dealer or bank).
Visit franklintempleton.com for fund updates and documents, or to find helpful financial planning tools.
Not FDIC Insured | | | May Lose Value | | | No Bank Guarantee |
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Semiannual Report |
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Semiannual Report |
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SEMIANNUAL REPORT
Western Asset Bond ETF
This inaugural semiannual report for Western Asset Bond ETF (the “Fund”) covers the period since the Fund’s inception on September 19, 2023, through September 30, 2023.
Your Fund’s Goal and Main Investments
The Fund seeks to maximize total return, consistent with prudent investment management and liquidity needs. Under normal market conditions, investing at least 80% of its net assets, including the amount of borrowing for investment purposes, if any, in debt and fixed income securities including corporate debt securities, U.S. and non-U.S government securities, asset-backed securities, mortgage-backed securities, collateralized debt obligations and mortgage dollar rolls. The Fund also invests in derivatives instruments that provide exposure to such investments. The types of derivatives in which the Fund invests include swaps and security-based swaps, futures and options on futures, swaptions and security options.
Performance Overview
During the period since the Fund’s inception on September 19, 2023, through September 30, 2023, the Fund posted cumulative total returns of -1.76% based on market price and -1.80% based on net asset value (NAV).1 In comparison, the Fund’s benchmark, the Bloomberg U.S. Aggregate Index, which measures the performance of the investment-grade, U.S. dollar denominated, fixed-rate taxable bond market, posted a -1.21% cumulative total return for the same period.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 4.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
Portfolio Composition | ||||
9/30/23 | ||||
% of Total Net Assets |
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U.S. Government & Agency Securities |
77.7% | |||
Corporate Bonds & Notes |
40.9% | |||
Asset-Backed Securities |
9.1% | |||
Foreign Government and Agency Securities |
1.3% | |||
Short-Term Investments & Other Net Assets |
(29.0)% |
Top 10 Holdings | ||||
9/30/23 | ||||
Issue/Issuer | % of Total Net Assets |
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U.S. Treasury Bills, 0.000%, 10/12/23 |
19.5% | |||
U.S. Treasury Bills, 0.000%, 10/19/23 |
7.5% | |||
Uniform Mortgage-Backed Security, TBA, 2.50%, 10/01/52 |
4.7% | |||
U.S. Treasury Bills, 0.000%, 12/21/23 |
4.7% | |||
Uniform Mortgage-Backed Security, TBA, 2.00%, 10/01/53 |
4.0% | |||
U.S. Treasury Notes, 4.375%, 8/31/28 |
3.0% | |||
U.S. Treasury Bonds, 3.625%, 5/15/53 |
2.7% | |||
U.S. Treasury Bills, 0.000%, 11/21/23 |
2.4% | |||
Uniform Mortgage-Backed Security, TBA, 3.00%, 10/01/53 |
2.2% | |||
Uniform Mortgage-Backed Security, TBA, 3.50%, 10/01/53 |
2.1% |
Thank you for your participation in Western Asset Bond ETF. We look forward to serving your future investment needs.
Sincerely,
Western Asset Management Company, LLC
1. Prior to the Fund’s listing on September 19, 2023, the Fund’s NAV performance is used as a proxy for the Fund’s market price returns.
2. Source: FactSet
The index is unmanaged and includes reinvestment of any income or distributions. It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Schedule of Investments (SOI). The SOI begins on page 8.
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WESTERN ASSET BOND ETF
Performance Summary as of September 30, 2023
Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table does not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.
Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (9/21/23), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/231
Cumulative Total Return | Average Annual Total Return | |||||||||||||||
Based on NAV2 |
Based on market price3 |
Based on NAV2 |
Based on market price3 |
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Since Inception (9/19/23) |
-1.80% | -1.76% | -1.80% | -1.76% |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 5 for Performance Summary footnotes.
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Semiannual Report |
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WESTERN ASSET BOND ETF
PERFORMANCE SUMMARY
Total Annual Operating Expenses4
0.35% |
Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results.
All investments involve risks, including possible loss of principal. The Fund is newly organized, with a limited history of operations. Fixed income securities involve interest rate, credit, inflation and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed income securities falls. Derivative instruments can be illiquid, may disproportionately increase losses, and have a potentially large impact on performance. Asset-backed, mortgage-backed or mortgage-related securities are subject to prepayment and extension risks. Low-rated, high-yield bonds are subject to greater price volatility, illiquidity and possibility of default. Active management does not ensure gains or protect against market declines. International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. Active and frequent trading may increase a shareholder’s tax liability and transaction costs. These and other risks are discussed in the Fund’s prospectus.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. The total annual operating expenses are as of the Fund’s prospectus available at the time of publication. Actual expenses may be higher and may impact portfolio returns.
2. Assumes reinvestment of distributions based on net asset value.
3. Assumes reinvestment of distributions based on market price.
4. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report.
See www.franklintempletondatasources.com for additional data provider information.
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Semiannual Report |
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WESTERN ASSET BOND ETF
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares; and (2) ongoing Fund costs, including management fees and other Fund expenses. All funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value.” You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 × $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
Actual (actual return after expenses) |
Hypothetical (5% annual return before expenses) |
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Beginning Account Value 9/19/23 |
Ending Account Value 9/30/23 |
Expenses Paid During Period 9/19/23–9/30/231 |
Ending Account Value 9/30/23 |
Expenses Paid During 9/19/23–9/30/231 |
Net Annualized Expense Ratio |
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$1,000.00 | $ | 982.00 | $ | 0.10 | $ | 1,023.25 | $ | 1.77 | 0.35 | % |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 11/366 to reflect the one-half year period.
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Semiannual Report |
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FRANKLIN TEMPLETON ETF TRUST
Western Asset Bond ETF
Period Ended September 30, 2023a |
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Per share operating performance (for a share outstanding throughout the period) |
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Net asset value, beginning of period |
$ | 25.00 | ||
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Income from investment operationsb: | ||||
Net investment incomec |
0.04 | |||
Net realized and unrealized gains (losses) |
(0.49 | ) | ||
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Total from investment operations |
(0.45 | ) | ||
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Net asset value, end of period |
$ | 24.55 | ||
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Total returnd |
(1.80)% | |||
Ratios to average net assetse | ||||
Total expenses |
0.35% | |||
Net investment income |
4.85% | |||
Supplemental data | ||||
Net assets, end of period (000’s) |
$41,732 | |||
Portfolio turnover ratef |
2.31%g |
aFor the period September 19, 2023 (commencement of operations) to September 30, 2023.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of Creation Unit Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year. Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period.
eRatios are annualized for periods less than one year.
fPortfolio turnover rate includes portfolio transactions that are executed as a result of the Fund offering and redeeming Creation Units solely for cash (“Cash creations”).
gPortfolio turnover rate excluding cash creations was as follows: | 2.31% |
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The accompanying notes are an integral part of these financial statements. | Semiannual Report |
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FRANKLIN TEMPLETON ETF TRUST
Schedule of Investments, September 30, 2023 (unaudited)
Western Asset Bond ETF
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds & Notes 40.9% | ||||||||||||||
Aerospace & Defense 1.5% | ||||||||||||||
Boeing
Co., |
United States | 60,000 | $ | 46,177 | ||||||||||
5.805%, 5/01/50 |
United States | 90,000 | 81,573 | |||||||||||
2.70%, 2/01/27 |
United States | 50,000 | 45,302 | |||||||||||
5.15%, 5/01/30 |
United States | 20,000 | 19,116 | |||||||||||
2.196%, 2/04/26 |
United States | 110,000 | 101,025 | |||||||||||
5.705%, 5/01/40 |
United States | 40,000 | 36,933 | |||||||||||
General
Dynamics Corp., |
United States | 10,000 | 8,229 | |||||||||||
3.25%, 4/01/25 |
United States | 10,000 | 9,674 | |||||||||||
4.25%, 4/01/40 |
United States | 10,000 | 8,504 | |||||||||||
L3Harris
Technologies, Inc., |
United States | 10,000 | 9,115 | |||||||||||
5.054%, 4/27/45 |
United States | 10,000 | 8,722 | |||||||||||
Lockheed
Martin Corp., |
United States | 10,000 | 9,128 | |||||||||||
4.15%, 6/15/53 |
United States | 60,000 | 47,414 | |||||||||||
3.90%, 6/15/32 |
United States | 10,000 | 8,974 | |||||||||||
Northrop
Grumman Corp., |
United States | 30,000 | 27,717 | |||||||||||
2.93%, 1/15/25 |
United States | 30,000 | 28,940 | |||||||||||
3.25%, 1/15/28 |
United States | 50,000 | 45,885 | |||||||||||
RTX
Corp., |
United States | 40,000 | 32,769 | |||||||||||
2.25%, 7/01/30 |
United States | 20,000 | 16,108 | |||||||||||
3.95%, 8/16/25 |
United States | 30,000 | 29,043 | |||||||||||
4.125%, 11/16/28 |
United States | 10,000 | 9,331 | |||||||||||
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629,679 | ||||||||||||||
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Agriculture 0.5% | ||||||||||||||
Altria
Group, Inc., |
United States | 30,000 | 29,134 | |||||||||||
3.875%, 9/16/46 |
United States | 50,000 | 32,851 | |||||||||||
5.80%, 2/14/39 |
United States | 50,000 | 46,390 | |||||||||||
BAT
Capital Corp., |
United Kingdom | 10,000 | 9,154 | |||||||||||
4.54%, 8/15/47 |
United Kingdom | 80,000 | 55,128 | |||||||||||
Philip Morris International, Inc., 2.10%, 5/01/30 |
United States | 20,000 | 15,975 | |||||||||||
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188,632 | ||||||||||||||
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Airlines 0.7% | ||||||||||||||
Delta
Air Lines, Inc., |
United States | 90,000 | 91,184 | |||||||||||
2.90%, 10/28/24 |
United States | 20,000 | 19,240 | |||||||||||
Delta
Air Lines, Inc./SkyMiles IP Ltd., |
United States | 20,000 | 19,014 | |||||||||||
a first lien, 4.50%, 10/20/25 |
United States | 20,000 | 19,434 | |||||||||||
a |
Mileage Plus Holdings LLC/Mileage Plus Intellectual Property Assets Ltd., 6.50%, 6/20/27 |
United States | 22,500 | 22,316 | ||||||||||
a |
Spirit Loyalty Cayman Ltd./Spirit IP Cayman Ltd., 8.00%, 9/20/25 |
United States | 40,000 | 40,016 | ||||||||||
a |
United Airlines, Inc., 4.625%, 4/15/29 |
United States | 70,000 | 60,240 | ||||||||||
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271,444 | ||||||||||||||
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Semiannual Report |
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FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENT
Western Asset Bond ETF (continued)
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds & Notes (continued) | ||||||||||||||
Apparel 0.2% | ||||||||||||||
NIKE,
Inc., |
United States | 20,000 | $ | 17,337 | ||||||||||
3.25%, 3/27/40 |
United States | 40,000 | 30,322 | |||||||||||
2.75%, 3/27/27 |
United States | 20,000 | 18,486 | |||||||||||
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66,145 | ||||||||||||||
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Auto Manufacturers 1.1% | ||||||||||||||
Ford Motor Credit Co. LLC, 7.35%, 3/06/30 |
United States | 200,000 | 202,756 | |||||||||||
General
Motors Co., |
United States | 20,000 | 19,987 | |||||||||||
6.25%, 10/02/43 |
United States | 20,000 | 17,938 | |||||||||||
5.60%, 10/15/32 |
United States | 10,000 | 9,345 | |||||||||||
a |
Nissan Motor Co. Ltd., 3.522%, 9/17/25 |
Japan | 200,000 | 189,006 | ||||||||||
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439,032 | ||||||||||||||
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Banks 11.0% | ||||||||||||||
Bank
of America Corp., |
United States | 80,000 | 59,212 | |||||||||||
3.97% to 3/05/28, FRN thereafter, 3/05/29 |
United States | 210,000 | 192,464 | |||||||||||
5.00%, 1/21/44 |
United States | 50,000 | 44,064 | |||||||||||
1.319% to 6/19/25, FRN thereafter, 6/19/26 |
United States | 140,000 | 128,433 | |||||||||||
4.571% to 4/27/32, FRN thereafter, 4/27/33 |
United States | 190,000 | 168,783 | |||||||||||
3.841% to 4/25/24, FRN thereafter, 4/25/25 |
United States | 40,000 | 39,440 | |||||||||||
Bank of Montreal, 1.85%, 5/01/25 |
Canada | 50,000 | 46,938 | |||||||||||
Bank
of Nova Scotia, |
Canada | 20,000 | 16,683 | |||||||||||
1.30%, 6/11/25 |
Canada | 30,000 | 27,764 | |||||||||||
a |
BNP Paribas SA, 2.219% to 6/09/25, FRN thereafter, 6/09/26 |
France | 200,000 | 186,691 | ||||||||||
Citigroup,
Inc., |
United States | 70,000 | 66,395 | |||||||||||
4.40%, 6/10/25 |
United States | 60,000 | 58,234 | |||||||||||
3.98% to 3/20/29, FRN thereafter, 3/20/30 |
United States | 90,000 | 80,872 | |||||||||||
4.412% to 3/31/30, FRN thereafter, 3/31/31 |
United States | 230,000 | 206,957 | |||||||||||
4.45%, 9/29/27 |
United States | 70,000 | 65,747 | |||||||||||
4.75%, 5/18/46 |
United States | 50,000 | 39,183 | |||||||||||
Credit
Suisse AG, |
Switzerland | 250,000 | 237,637 | |||||||||||
7.95%, 1/09/25 |
Switzerland | 500,000 | 509,031 | |||||||||||
Goldman
Sachs Group, Inc., |
United States | 40,000 | 31,262 | |||||||||||
5.15%, 5/22/45 |
United States | 50,000 | 42,911 | |||||||||||
Series VAR1.093% to 12/09/25, FRN thereafter, 12/09/26 |
United States | 60,000 | 53,701 | |||||||||||
3.625%, 2/20/24 |
United States | 20,000 | 19,813 | |||||||||||
6.75%, 10/01/37 |
United States | 20,000 | 20,271 | |||||||||||
4.75%, 10/21/45 |
United States | 50,000 | 42,146 | |||||||||||
3.691% to 6/05/27, FRN thereafter, 6/05/28 |
United States | 140,000 | 129,093 | |||||||||||
2.60%, 2/07/30 |
United States | 20,000 | 16,392 | |||||||||||
HSBC
Holdings PLC, |
United Kingdom | 400,000 | 372,945 | |||||||||||
4.762% to 3/29/32, FRN thereafter, 3/29/33 |
United Kingdom | 200,000 | 170,430 | |||||||||||
JPMorgan
Chase & Co., |
United States | 20,000 | 13,914 | |||||||||||
3.109% to 4/22/50, FRN thereafter, 4/22/51 |
United States | 20,000 | 12,427 | |||||||||||
3.509% to 1/23/28, FRN thereafter, 1/23/29 |
United States | 100,000 | 90,759 | |||||||||||
2.083% to 4/22/25, FRN thereafter, 4/22/26 |
United States | 70,000 | 65,722 | |||||||||||
2.545% to 11/08/31, FRN thereafter, 11/08/32 |
United States | 130,000 | 100,657 |
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Semiannual Report |
9 |
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENT
Western Asset Bond ETF (continued)
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds & Notes (continued) | ||||||||||||||
Banks (continued) | ||||||||||||||
Morgan
Stanley, |
United States | 60,000 | $ | 54,741 | ||||||||||
2.511% to 10/20/31, FRN thereafter, 10/20/32 |
United States | 90,000 | 68,896 | |||||||||||
PNC Financial Services Group, Inc., 5.812% to 6/12/25, FRN thereafter, 6/12/26 |
United States | 20,000 | 19,846 | |||||||||||
Royal
Bank of Canada, |
Canada | 30,000 | 27,752 | |||||||||||
3.875%, 5/04/32 |
Canada | 20,000 | 17,446 | |||||||||||
Toronto-Dominion
Bank, |
Canada | 30,000 | 27,787 | |||||||||||
4.456%, 6/08/32 |
Canada | 20,000 | 17,948 | |||||||||||
U.S.
Bancorp, |
United States | 20,000 | 19,479 | |||||||||||
5.836% to 6/10/33, FRN thereafter, 6/12/34 |
United States | 20,000 | 18,879 | |||||||||||
a |
UBS Group AG, 4.253%, 3/23/28 |
Switzerland | 400,000 | 367,937 | ||||||||||
Wells
Fargo & Co., |
United States | 240,000 | 201,889 | |||||||||||
4.478% to 4/04/30, FRN thereafter, 4/04/31 |
United States | 50,000 | 45,377 | |||||||||||
2.188% to 4/30/25, FRN thereafter, 4/30/26 |
United States | 70,000 | 65,743 | |||||||||||
2.393% to 6/02/27, FRN thereafter, 6/02/28 |
United States | 70,000 | 61,410 | |||||||||||
3.584% to 5/22/27, FRN thereafter, 5/22/28 |
United States | 110,000 | 100,764 | |||||||||||
4.75%, 12/07/46 |
United States | 100,000 | 78,170 | |||||||||||
3.35% to 3/02/32, FRN thereafter, 3/02/33 |
United States | 30,000 | 24,263 | |||||||||||
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4,575,298 | ||||||||||||||
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Banks 0.3% | ||||||||||||||
Goldman Sachs Group, Inc., 4.25%, 10/21/25 |
United States | 30,000 | 28,917 | |||||||||||
Morgan Stanley, 2.188% to 4/28/25, FRN thereafter, 4/28/26 |
United States | 50,000 | 46,989 | |||||||||||
PNC Financial Services Group, Inc., 5.582% to 6/12/28, FRN thereafter, 6/12/29 |
United States | 50,000 | 48,530 | |||||||||||
Truist Financial Corp., 6.047% to 6/08/26, FRN thereafter, 6/08/27 |
United States | 20,000 | 19,789 | |||||||||||
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144,225 | ||||||||||||||
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Beverages 0.5% | ||||||||||||||
Anheuser-Busch
Cos. LLC/Anheuser-Busch InBev Worldwide, Inc., |
United States | 80,000 | 69,774 | |||||||||||
3.65%, 2/01/26 |
Belgium | 60,000 | 57,642 | |||||||||||
Anheuser-Busch
InBev Worldwide, Inc., |
United States | 10,000 | 8,904 | |||||||||||
4.75%, 1/23/29 |
Belgium | 40,000 | 38,798 | |||||||||||
Coca-Cola Co., 2.60%, 6/01/50 |
United States | 20,000 | 12,242 | |||||||||||
Constellation Brands, Inc., 4.35%, 5/09/27 |
United States | 20,000 | 19,147 | |||||||||||
PepsiCo, Inc., 1.625%, 5/01/30 |
United States | 20,000 | 16,080 | |||||||||||
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222,587 | ||||||||||||||
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Biotechnology 0.1% | ||||||||||||||
Amgen, Inc., 4.663%, 6/15/51 |
United States | 10,000 | 8,102 | |||||||||||
Gilead
Sciences, Inc., |
United States | 10,000 | 8,574 | |||||||||||
3.50%, 2/01/25 |
United States | 40,000 | 38,866 | |||||||||||
|
|
|||||||||||||
55,542 | ||||||||||||||
|
|
|||||||||||||
Chemicals 0.4% | ||||||||||||||
b |
OCP SA, 3.75%, 6/23/31 |
Morocco | 200,000 | 158,465 | ||||||||||
|
|
|||||||||||||
Coal 0.0%† | ||||||||||||||
Teck Resources Ltd., 3.90%, 7/15/30 |
Canada | 10,000 | 8,701 | |||||||||||
|
|
10 |
Semiannual Report |
franklintempleton.com |
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENT
Western Asset Bond ETF (continued)
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds & Notes (continued) | ||||||||||||||
Commercial Services & Supplies 0.2% | ||||||||||||||
PayPal
Holdings, Inc., |
United States | 20,000 | $ | 18,723 | ||||||||||
2.30%, 6/01/30 |
United States | 10,000 | 8,180 | |||||||||||
United
Rentals North America, Inc., |
United States | 70,000 | 58,319 | |||||||||||
3.875%, 11/15/27 |
United States | 10,000 | 9,062 | |||||||||||
|
|
|||||||||||||
94,284 | ||||||||||||||
|
|
|||||||||||||
Distribution/Wholesale 0.1% | ||||||||||||||
a |
H&E Equipment Services, Inc., senior note, 3.875%, 12/15/28 |
United States | 50,000 | 42,751 | ||||||||||
|
|
|||||||||||||
Diversified Telecommunication Services 0.0%† | ||||||||||||||
Verizon Communications, Inc., 3.40%, 3/22/41 |
United States | 20,000 | 14,189 | |||||||||||
|
|
|||||||||||||
Electric 0.6% | ||||||||||||||
b |
Comision Federal de Electricidad, 3.875%, 7/26/33 |
Mexico | 200,000 | 151,798 | ||||||||||
Consolidated
Edison Co. of New York, Inc., |
United States | 10,000 | 7,404 | |||||||||||
Series 20A3.35%, 4/01/30 |
United States | 10,000 | 8,788 | |||||||||||
Duke Energy Ohio, Inc., 3.65%, 2/01/29 |
United States | 10,000 | 9,183 | |||||||||||
Exelon Corp., 5.625%, 6/15/35 |
United States | 10,000 | 9,637 | |||||||||||
FirstEnergy
Corp., |
United States | 30,000 | 27,910 | |||||||||||
Series C5.10%, 7/15/47 |
United States | 20,000 | 16,997 | |||||||||||
Pacific
Gas & Electric Co., |
United States | 10,000 | 5,965 | |||||||||||
2.50%, 2/01/31 |
United States | 20,000 | 15,230 | |||||||||||
2.10%, 8/01/27 |
United States | 10,000 | 8,557 | |||||||||||
Progress Energy, Inc., 6.00%, 12/01/39 |
United States | 10,000 | 9,692 | |||||||||||
|
|
|||||||||||||
271,161 | ||||||||||||||
|
|
|||||||||||||
Energy Equipment & Services 0.0%† | ||||||||||||||
a |
Schlumberger Holdings Corp., 3.90%, 5/17/28 |
United States | 10,000 | 9,296 | ||||||||||
|
|
|||||||||||||
Entertainment 0.2% | ||||||||||||||
Warnermedia
Holdings, Inc., |
United States | 20,000 | 20,005 | |||||||||||
3.755%, 3/15/27 |
United States | 50,000 | 46,183 | |||||||||||
5.05%, 3/15/42 |
United States | 10,000 | 7,739 | |||||||||||
4.279%, 3/15/32 |
United States | 30,000 | 25,482 | |||||||||||
|
|
|||||||||||||
99,409 | ||||||||||||||
|
|
|||||||||||||
Environmental Control 0.1% | ||||||||||||||
a |
GFL Environmental, Inc., 4.25%, 6/01/25 |
Canada | 40,000 | 38,481 | ||||||||||
Republic Services, Inc., 2.50%, 8/15/24 |
United States | 20,000 | 19,432 | |||||||||||
|
|
|||||||||||||
57,913 | ||||||||||||||
|
|
|||||||||||||
Financial Services 0.8% | ||||||||||||||
AerCap Ireland Capital DAC/AerCap Global Aviation Trust, 3.00%, 10/29/28 |
Ireland | 150,000 | 128,686 | |||||||||||
Air
Lease Corp., |
United States | 20,000 | 19,010 | |||||||||||
5.30%, 2/01/28 |
United States | 20,000 | 19,336 | |||||||||||
American Express Co., 4.05%, 5/03/29 |
United States | 30,000 | 27,937 | |||||||||||
Charles
Schwab Corp., |
United States | 50,000 | 49,855 | |||||||||||
6.136% to 8/24/33, FRN thereafter, 8/24/34 |
United States | 20,000 | 19,466 |
franklintempleton.com |
Semiannual Report |
11 |
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENT
Western Asset Bond ETF (continued)
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds & Notes (continued) | ||||||||||||||
Financial Services (continued) | ||||||||||||||
Intercontinental Exchange, Inc., 4.60%, 3/15/33 |
United States | 10,000 | $ | 9,188 | ||||||||||
Mastercard, Inc., 3.85%, 3/26/50 |
United States | 10,000 | 7,711 | |||||||||||
Visa,
Inc., |
United States | 30,000 | 25,422 | |||||||||||
2.05%, 4/15/30 |
United States | 20,000 | 16,524 | |||||||||||
3.15%, 12/14/25 |
United States | 20,000 | 19,096 | |||||||||||
|
|
|||||||||||||
342,231 | ||||||||||||||
|
|
|||||||||||||
Food 0.3% | ||||||||||||||
Kraft Heinz Foods Co., 5.20%, 7/15/45 |
United States | 70,000 | 61,230 | |||||||||||
Mars,
Inc., |
United States | 20,000 | 19,168 | |||||||||||
a 3.20%, 4/01/30 |
United States | 10,000 | 8,788 | |||||||||||
Mondelez International, Inc., 1.50%, 5/04/25 |
United States | 40,000 | 37,439 | |||||||||||
|
|
|||||||||||||
126,625 | ||||||||||||||
|
|
|||||||||||||
Gas 0.4% | ||||||||||||||
b |
Promigas
SA ESP/Gases del Pacifico SAC, |
Colombia | 200,000 | 164,806 | ||||||||||
|
|
|||||||||||||
Health Care Providers & Services 0.9% | ||||||||||||||
Centene
Corp., |
United States | 20,000 | 18,455 | |||||||||||
4.625%, 12/15/29 |
United States | 20,000 | 18,036 | |||||||||||
3.00%, 10/15/30 |
United States | 10,000 | 8,078 | |||||||||||
2.625%, 8/01/31 |
United States | 10,000 | 7,672 | |||||||||||
3.375%, 2/15/30 |
United States | 10,000 | 8,352 | |||||||||||
CVS Health Corp., 4.30%, 3/25/28 |
United States | 30,000 | 28,401 | |||||||||||
Elevance
Health, Inc., |
United States | 10,000 | 7,970 | |||||||||||
4.10%, 5/15/32 |
United States | 10,000 | 8,913 | |||||||||||
3.65%, 12/01/27 |
United States | 10,000 | 9,275 | |||||||||||
HCA,
Inc., |
United States | 20,000 | 20,479 | |||||||||||
5.875%, 2/01/29 |
United States | 10,000 | 9,842 | |||||||||||
3.50%, 9/01/30 |
United States | 30,000 | 25,392 | |||||||||||
5.50%, 6/15/47 |
United States | 20,000 | 17,091 | |||||||||||
Humana,
Inc., |
United States | 10,000 | 9,492 | |||||||||||
4.50%, 4/01/25 |
United States | 10,000 | 9,823 | |||||||||||
4.95%, 10/01/44 |
United States | 20,000 | 16,889 | |||||||||||
a |
LifePoint Health, Inc., 9.875%, 8/15/30 |
United States | 60,000 | 58,163 | ||||||||||
UnitedHealth
Group, Inc., |
United States | 40,000 | 28,521 | |||||||||||
4.20%, 5/15/32 |
United States | 40,000 | 36,522 | |||||||||||
4.00%, 5/15/29 |
United States | 20,000 | 18,727 | |||||||||||
|
|
|||||||||||||
366,093 | ||||||||||||||
|
|
|||||||||||||
Healthcare-Products 0.1% | ||||||||||||||
Abbott
Laboratories, |
United States | 10,000 | 9,510 | |||||||||||
4.90%, 11/30/46 |
United States | 20,000 | 18,232 | |||||||||||
|
|
|||||||||||||
27,742 | ||||||||||||||
|
|
|||||||||||||
Home Builders 0.0%† | ||||||||||||||
Lennar Corp., 4.75%, 11/29/27 |
United States | 10,000 | 9,639 | |||||||||||
|
|
|||||||||||||
Insurance 0.1% | ||||||||||||||
Berkshire Hathaway Finance Corp., 4.25%, 1/15/49 |
United States | 40,000 | 32,826 | |||||||||||
MetLife, Inc., 6.40%, 12/15/66 |
United States | 10,000 | 9,784 |
12 |
Semiannual Report |
franklintempleton.com |
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENT
Western Asset Bond ETF (continued)
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds & Notes (continued) | ||||||||||||||
Insurance (continued) | ||||||||||||||
a |
Principal Life Global Funding II, 1.25%, 6/23/25 |
United States | 10,000 | $ | 9,229 | |||||||||
|
|
|||||||||||||
51,839 | ||||||||||||||
|
|
|||||||||||||
Internet 1.0% | ||||||||||||||
Alphabet,
Inc., |
United States | 30,000 | 18,781 | |||||||||||
1.10%, 8/15/30 |
United States | 10,000 | 7,788 | |||||||||||
Amazon.com,
Inc., |
United States | 80,000 | 74,458 | |||||||||||
3.10%, 5/12/51 |
United States | 30,000 | 19,819 | |||||||||||
4.95%, 12/05/44 |
United States | 70,000 | 65,325 | |||||||||||
3.60%, 4/13/32 |
United States | 70,000 | 62,094 | |||||||||||
b |
Prosus NV, 3.061%, 7/13/31 |
China | 200,000 | 148,588 | ||||||||||
|
|
|||||||||||||
396,853 | ||||||||||||||
|
|
|||||||||||||
Iron/Steel 0.3% | ||||||||||||||
ArcelorMittal SA, 7.00%, 10/15/39 |
Luxembourg | 10,000 | 10,038 | |||||||||||
Vale Overseas Ltd., 6.125%, 6/12/33 |
Brazil | 100,000 | 96,703 | |||||||||||
|
|
|||||||||||||
106,741 | ||||||||||||||
|
|
|||||||||||||
Leisure Time 0.6% | ||||||||||||||
a |
Carnival Corp., 10.50%, 6/01/30 |
United States | 60,000 | 61,844 | ||||||||||
a |
NCL Corp. Ltd., 7.75%, 2/15/29 |
United States | 70,000 | 65,047 | ||||||||||
a |
Royal Caribbean Cruises Ltd., 7.25%, 1/15/30 |
United States | 60,000 | 59,535 | ||||||||||
a |
VOC Escrow Ltd., 5.00%, 2/15/28 |
United States | 70,000 | 63,738 | ||||||||||
|
|
|||||||||||||
250,164 | ||||||||||||||
|
|
|||||||||||||
Lodging 0.5% | ||||||||||||||
a |
Hilton Domestic Operating Co., Inc., 3.625%, 2/15/32 |
United States | 50,000 | 40,357 | ||||||||||
Las
Vegas Sands Corp., |
United States | 90,000 | 87,128 | |||||||||||
2.90%, 6/25/25 |
United States | 70,000 | 65,301 | |||||||||||
|
|
|||||||||||||
192,786 | ||||||||||||||
|
|
|||||||||||||
Machinery-Diversified 0.1% | ||||||||||||||
Deere
& Co., |
United States | 50,000 | 39,576 | |||||||||||
3.10%, 4/15/30 |
United States | 10,000 | 8,801 | |||||||||||
Otis Worldwide Corp., 2.056%, 4/05/25 |
United States | 10,000 | 9,444 | |||||||||||
|
|
|||||||||||||
57,821 | ||||||||||||||
|
|
|||||||||||||
Media 2.1% | ||||||||||||||
a |
CCO Holdings LLC/CCO Holdings Capital Corp., 4.50%, 6/01/33 |
United States | 190,000 | 145,585 | ||||||||||
Charter
Communications Operating LLC/Charter Communications Operating
Capital, |
United States | 40,000 | 39,099 | |||||||||||
5.375%, 5/01/47 |
United States | 30,000 | 22,882 | |||||||||||
5.125%, 7/01/49 |
United States | 30,000 | 21,894 | |||||||||||
2.80%, 4/01/31 |
United States | 30,000 | 23,410 | |||||||||||
5.05%, 3/30/29 |
United States | 70,000 | 65,456 | |||||||||||
5.50%, 4/01/63 |
United States | 30,000 | 22,220 | |||||||||||
Comcast
Corp., |
United States | 50,000 | 37,152 | |||||||||||
4.15%, 10/15/28 |
United States | 90,000 | 85,288 | |||||||||||
4.25%, 10/15/30 |
United States | 50,000 | 46,076 | |||||||||||
5.65%, 6/15/35 |
United States | 10,000 | 9,887 | |||||||||||
3.90%, 3/01/38 |
United States | 50,000 | 40,881 | |||||||||||
3.375%, 8/15/25 |
United States | 70,000 | 67,341 | |||||||||||
3.45%, 2/01/50 |
United States | 30,000 | 20,304 |
franklintempleton.com |
Semiannual Report |
13 |
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENT
Western Asset Bond ETF (continued)
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds & Notes (continued) | ||||||||||||||
Media (continued) | ||||||||||||||
a |
DISH DBS Corp., 5.75%, 12/01/28 |
United States | 120,000 | $ | 92,475 | |||||||||
Fox Corp., 5.476%, 1/25/39 |
United States | 20,000 | 17,299 | |||||||||||
Time Warner Cable LLC, 6.55%, 5/01/37 |
United States | 90,000 | 81,688 | |||||||||||
Walt Disney Co., 6.20%, 12/15/34 |
United States | 20,000 | 20,796 | |||||||||||
|
|
|||||||||||||
859,733 | ||||||||||||||
|
|
|||||||||||||
Mining 1.7% | ||||||||||||||
a |
Anglo American Capital PLC, 4.75%, 4/10/27 |
South Africa | 200,000 | 191,796 | ||||||||||
Barrick
North America Finance LLC, |
Canada | 20,000 | 19,289 | |||||||||||
5.70%, 5/30/41 |
Canada | 20,000 | 19,190 | |||||||||||
BHP Billiton Finance USA Ltd., 5.00%, 9/30/43 |
Australia | 20,000 | 18,073 | |||||||||||
a |
First Quantum Minerals Ltd., 8.625%, 6/01/31 |
Zambia | 200,000 | 199,286 | ||||||||||
b |
Freeport Indonesia PT, 5.315%, 4/14/32 |
Indonesia | 200,000 | 181,786 | ||||||||||
Freeport-McMoRan, Inc., 5.45%, 3/15/43 |
United States | 50,000 | 42,695 | |||||||||||
a |
Glencore Funding LLC, 3.875%, 10/27/27 |
Australia | 20,000 | 18,626 | ||||||||||
Yamana Gold, Inc., 4.625%, 12/15/27 |
Canada | 20,000 | 18,791 | |||||||||||
|
|
|||||||||||||
709,532 | ||||||||||||||
|
|
|||||||||||||
Miscellaneous Manufacturing 0.1% | ||||||||||||||
3M
Co., |
United States | 30,000 | 21,433 | |||||||||||
3.375%, 3/01/29 |
United States | 10,000 | 8,940 | |||||||||||
2.00%, 2/14/25 |
United States | 10,000 | 9,484 | |||||||||||
3.05%, 4/15/30 |
United States | 10,000 | 8,653 | |||||||||||
Eaton Corp., 4.15%, 11/02/42 |
United States | 10,000 | 8,149 | |||||||||||
|
|
|||||||||||||
56,659 | ||||||||||||||
|
|
|||||||||||||
Oil & Gas 4.8% | ||||||||||||||
Apache
Corp., |
United States | 30,000 | 23,865 | |||||||||||
5.35%, 7/01/49 |
United States | 10,000 | 7,672 | |||||||||||
4.25%, 1/15/44 |
United States | 60,000 | 39,356 | |||||||||||
7.75%, 12/15/29 |
United States | 10,000 | 10,248 | |||||||||||
BP
Capital Markets America, Inc., |
United States | 30,000 | 17,694 | |||||||||||
3.41%, 2/11/26 |
United States | 30,000 | 28,686 | |||||||||||
3.588%, 4/14/27 |
United States | 10,000 | 9,433 | |||||||||||
1.749%, 8/10/30 |
United States | 30,000 | 23,739 | |||||||||||
Chevron Corp., 1.995%, 5/11/27 |
United States | 10,000 | 8,967 | |||||||||||
a |
Chord Energy Corp., 6.375%, 6/01/26 |
United States | 40,000 | 39,260 | ||||||||||
Continental
Resources, Inc., |
United States | 30,000 | 27,840 | |||||||||||
a 5.75%, 1/15/31 |
United States | 20,000 | 18,797 | |||||||||||
4.90%, 6/01/44 |
United States | 20,000 | 14,715 | |||||||||||
a 2.268%, 11/15/26 |
United States | 10,000 | 8,864 | |||||||||||
Coterra
Energy, Inc., |
United States | 50,000 | 46,983 | |||||||||||
4.375%, 3/15/29 |
United States | 50,000 | 46,330 | |||||||||||
Devon
Energy Corp., |
United States | 100,000 | 88,589 | |||||||||||
5.85%, 12/15/25 |
United States | 20,000 | 19,905 | |||||||||||
4.50%, 1/15/30 |
United States | 20,000 | 18,185 | |||||||||||
Diamondback
Energy, Inc., |
United States | 30,000 | 26,643 | |||||||||||
4.40%, 3/24/51 |
United States | 20,000 | 14,766 |
14 |
Semiannual Report |
franklintempleton.com |
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENT
Western Asset Bond ETF (continued)
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds & Notes (continued) | ||||||||||||||
Oil & Gas (continued) | ||||||||||||||
Ecopetrol SA, 8.875%, 1/13/33 |
Colombia | 200,000 | $ | 195,513 | ||||||||||
EOG
Resources, Inc., |
United States | 40,000 | 35,453 | |||||||||||
3.90%, 4/01/35 |
United States | 20,000 | 16,995 | |||||||||||
4.375%, 4/15/30 |
United States | 10,000 | 9,432 | |||||||||||
EQT
Corp., |
United States | 10,000 | 9,975 | |||||||||||
5.00%, 1/15/29 |
United States | 30,000 | 28,228 | |||||||||||
3.90%, 10/01/27 |
United States | 50,000 | 46,287 | |||||||||||
Exxon
Mobil Corp., |
United States | 20,000 | 18,071 | |||||||||||
4.114%, 3/01/46 |
United States | 60,000 | 48,232 | |||||||||||
3.043%, 3/01/26 |
United States | 10,000 | 9,487 | |||||||||||
b |
KazMunayGas National Co. JSC, 3.50%, 4/14/33 |
Kazakhstan | 200,000 | 150,025 | ||||||||||
Occidental
Petroleum Corp., |
United States | 20,000 | 21,247 | |||||||||||
3.20%, 8/15/26 |
United States | 40,000 | 36,775 | |||||||||||
6.625%, 9/01/30 |
United States | 60,000 | 60,860 | |||||||||||
6.60%, 3/15/46 |
United States | 50,000 | 49,189 | |||||||||||
6.45%, 9/15/36 |
United States | 40,000 | 39,320 | |||||||||||
4.40%, 4/15/46 |
United States | 20,000 | 14,698 | |||||||||||
4.625%, 6/15/45 |
United States | 30,000 | 21,610 | |||||||||||
4.50%, 7/15/44 |
United States | 20,000 | 14,123 | |||||||||||
4.20%, 3/15/48 |
United States | 40,000 | 27,680 | |||||||||||
5.55%, 3/15/26 |
United States | 20,000 | 19,756 | |||||||||||
3.40%, 4/15/26 |
United States | 20,000 | 18,696 | |||||||||||
4.10%, 2/15/47 |
United States | 50,000 | 33,084 | |||||||||||
Petrobras Global Finance BV, 6.50%, 7/03/33 |
Brazil | 200,000 | 191,101 | |||||||||||
Pioneer
Natural Resources Co., |
United States | 30,000 | 23,692 | |||||||||||
1.125%, 1/15/26 |
United States | 10,000 | 9,042 | |||||||||||
Range Resources Corp., 4.875%, 5/15/25 |
United States | 40,000 | 38,831 | |||||||||||
Shell
International Finance BV, |
Netherlands | 30,000 | 23,259 | |||||||||||
2.75%, 4/06/30 |
Netherlands | 20,000 | 17,212 | |||||||||||
3.25%, 4/06/50 |
Netherlands | 30,000 | 19,949 | |||||||||||
6.375%, 12/15/38 |
Netherlands | 10,000 | 10,675 | |||||||||||
4.375%, 5/11/45 |
Netherlands | 10,000 | 8,218 | |||||||||||
Southwestern Energy Co., 5.375%, 3/15/30 |
United States | 50,000 | 45,613 | |||||||||||
b |
Tengizchevroil Finance Co. International Ltd., 3.25%, 8/15/30 |
Kazakhstan | 200,000 | 152,322 | ||||||||||
|
|
|||||||||||||
2,005,187 | ||||||||||||||
|
|
|||||||||||||
Oil & Gas Services 0.0%† | ||||||||||||||
Halliburton
Co., |
United States | 10,000 | 9,003 | |||||||||||
5.00%, 11/15/45 |
United States | 10,000 | 8,489 | |||||||||||
|
|
|||||||||||||
17,492 | ||||||||||||||
|
|
|||||||||||||
Oil, Gas & Consumable Fuels 0.1% | ||||||||||||||
Cheniere Energy, Inc., 4.625%, 10/15/28 |
United States | 20,000 | 18,407 | |||||||||||
Chevron Corp., 3.078%, 5/11/50 |
United States | 10,000 | 6,719 | |||||||||||
|
|
|||||||||||||
25,126 | ||||||||||||||
|
|
|||||||||||||
Paper & Forest Products 0.4% | ||||||||||||||
Suzano Austria GmbH, 3.75%, 1/15/31 |
Brazil | 200,000 | 164,567 | |||||||||||
|
|
|||||||||||||
Personal Care Products 0.0%† | ||||||||||||||
Procter & Gamble Co., 3.00%, 3/25/30 |
United States | 10,000 | 8,889 | |||||||||||
|
|
franklintempleton.com |
Semiannual Report |
15 |
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENT
Western Asset Bond ETF (continued)
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds & Notes (continued) | ||||||||||||||
Personal Products 0.1% | ||||||||||||||
a |
Kenvue, Inc., 4.90%, 3/22/33 |
United States | 30,000 | $ | 28,688 | |||||||||
|
|
|||||||||||||
Pharmaceuticals 2.0% | ||||||||||||||
AbbVie,
Inc., |
United States | 30,000 | 23,772 | |||||||||||
3.20%, 11/21/29 |
United States | 80,000 | 70,637 | |||||||||||
2.60%, 11/21/24 |
United States | 130,000 | 125,373 | |||||||||||
Becton Dickinson & Co., 4.685%, 12/15/44 |
United States | 10,000 | 8,415 | |||||||||||
Bristol-Myers
Squibb Co., |
United States | 20,000 | 18,979 | |||||||||||
4.55%, 2/20/48 |
United States | 10,000 | 8,355 | |||||||||||
Cigna
Group, |
United States | 50,000 | 44,082 | |||||||||||
4.125%, 11/15/25 |
United States | 10,000 | 9,685 | |||||||||||
4.375%, 10/15/28 |
United States | 30,000 | 28,395 | |||||||||||
2.375%, 3/15/31 |
United States | 20,000 | 15,986 | |||||||||||
CVS
Health Corp., |
United States | 90,000 | 74,844 | |||||||||||
3.875%, 7/20/25 |
United States | 10,000 | 9,666 | |||||||||||
2.125%, 9/15/31 |
United States | 70,000 | 53,570 | |||||||||||
Johnson & Johnson, 3.625%, 3/03/37 |
United States | 50,000 | 42,176 | |||||||||||
Merck & Co., Inc., 1.45%, 6/24/30 |
United States | 20,000 | 15,681 | |||||||||||
Pfizer,
Inc., |
United States | 50,000 | 40,116 | |||||||||||
7.20%, 3/15/39 |
United States | 20,000 | 23,042 | |||||||||||
Teva Pharmaceutical Finance Netherlands III BV, 8.125%, 9/15/31 |
Israel | 200,000 | 207,160 | |||||||||||
|
|
|||||||||||||
819,934 | ||||||||||||||
|
|
|||||||||||||
Pipelines 3.2% | ||||||||||||||
Cameron
LNG LLC, |
United States | 10,000 | 8,279 | |||||||||||
a 3.302%, 1/15/35 |
United States | 30,000 | 23,913 | |||||||||||
Cheniere Energy Partners LP, 3.25%, 1/31/32 |
United States | 40,000 | 31,836 | |||||||||||
Columbia
Pipelines Operating Co. LLC, |
United States | 50,000 | 48,833 | |||||||||||
a 6.544%, 11/15/53 |
United States | 20,000 | 19,575 | |||||||||||
Energy
Transfer LP, |
United States | 90,000 | 82,718 | |||||||||||
3.75%, 5/15/30 |
United States | 40,000 | 34,867 | |||||||||||
2.90%, 5/15/25 |
United States | 20,000 | 19,009 | |||||||||||
5.25%, 4/15/29 |
United States | 20,000 | 19,186 | |||||||||||
Enterprise
Products Operating LLC, |
United States | 60,000 | 50,978 | |||||||||||
3.70%, 1/31/51 |
United States | 80,000 | 56,698 | |||||||||||
Series H6.65%, 10/15/34 |
United States | 10,000 | 10,588 | |||||||||||
4.15%, 10/16/28 |
United States | 30,000 | 28,146 | |||||||||||
5.375% to 2/15/28, FRN thereafter, 2/15/78 |
United States | 10,000 | 8,340 | |||||||||||
EQM Midstream Partners LP, 5.50%, 7/15/28 |
United States | 40,000 | 37,581 | |||||||||||
Kinder
Morgan, Inc., |
United States | 60,000 | 51,628 | |||||||||||
4.30%, 6/01/25 |
United States | 10,000 | 9,747 | |||||||||||
4.30%, 3/01/28 |
United States | 10,000 | 9,416 | |||||||||||
MPLX
LP, |
United States | 10,000 | 9,811 | |||||||||||
4.875%, 12/01/24 |
United States | 20,000 | 19,723 | |||||||||||
5.20%, 3/01/47 |
United States | 50,000 | 40,893 | |||||||||||
4.50%, 4/15/38 |
United States | 20,000 | 16,220 | |||||||||||
4.80%, 2/15/29 |
United States | 20,000 | 18,986 |
16 |
Semiannual Report |
franklintempleton.com |
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENT
Western Asset Bond ETF (continued)
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds & Notes (continued) | ||||||||||||||
Pipelines (continued) | ||||||||||||||
b |
Oleoducto Central SA, 4.00%, 7/14/27 |
Colombia | 200,000 | $ | 178,397 | |||||||||
ONEOK,
Inc., |
United States | 30,000 | 29,491 | |||||||||||
6.625%, 9/01/53 |
United States | 40,000 | 39,216 | |||||||||||
5.55%, 11/01/26 |
United States | 10,000 | 9,937 | |||||||||||
5.80%, 11/01/30 |
United States | 20,000 | 19,591 | |||||||||||
Southern Natural Gas Co. LLC, 8.00%, 3/01/32 |
United States | 20,000 | 22,017 | |||||||||||
Targa Resources Corp., 4.95%, 4/15/52 |
United States | 10,000 | 7,705 | |||||||||||
Targa
Resources Partners LP/Targa Resources Partners Finance Corp., |
United States | 30,000 | 28,563 | |||||||||||
6.875%, 1/15/29 |
United States | 30,000 | 30,055 | |||||||||||
4.875%, 2/01/31 |
United States | 30,000 | 26,905 | |||||||||||
a |
Tennessee Gas Pipeline Co. LLC, 2.90%, 3/01/30 |
United States | 40,000 | 33,441 | ||||||||||
Transcontinental Gas Pipe Line Co. LLC, 7.85%, 2/01/26 |
United States | 60,000 | 62,402 | |||||||||||
a |
Venture Global Calcasieu Pass LLC, 3.875%, 11/01/33 |
United States | 50,000 | 38,875 | ||||||||||
Western
Midstream Operating LP, |
United States | 10,000 | 9,577 | |||||||||||
4.05%, 2/01/30 |
United States | 80,000 | 70,015 | |||||||||||
5.25%, 2/01/50 |
United States | 20,000 | 15,604 | |||||||||||
Williams
Cos., Inc., |
United States | 20,000 | 18,158 | |||||||||||
3.50%, 11/15/30 |
United States | 50,000 | 43,143 | |||||||||||
|
|
|||||||||||||
1,340,063 | ||||||||||||||
|
|
|||||||||||||
Retail 0.6% | ||||||||||||||
Costco
Wholesale Corp., |
United States | 20,000 | 16,070 | |||||||||||
1.375%, 6/20/27 |
United States | 40,000 | 34,988 | |||||||||||
Home
Depot, Inc., |
United States | 50,000 | 38,236 | |||||||||||
2.70%, 4/15/30 |
United States | 20,000 | 17,092 | |||||||||||
2.50%, 4/15/27 |
United States | 20,000 | 18,258 | |||||||||||
Lowe’s Cos., Inc., 4.50%, 4/15/30 |
United States | 10,000 | 9,335 | |||||||||||
McDonald’s
Corp., |
United States | 30,000 | 23,319 | |||||||||||
3.60%, 7/01/30 |
United States | 20,000 | 17,868 | |||||||||||
3.50%, 3/01/27 |
United States | 40,000 | 37,672 | |||||||||||
Walmart,
Inc., |
United States | 10,000 | 7,876 | |||||||||||
1.50%, 9/22/28 |
United States | 20,000 | 16,977 | |||||||||||
|
|
|||||||||||||
237,691 | ||||||||||||||
|
|
|||||||||||||
Semiconductors 0.7% | ||||||||||||||
a |
Broadcom, Inc., 4.926%, 5/15/37 |
United States | 90,000 | 77,619 | ||||||||||
Intel
Corp., |
United States | 30,000 | 24,831 | |||||||||||
3.70%, 7/29/25 |
United States | 10,000 | 9,684 | |||||||||||
5.125%, 2/10/30 |
United States | 20,000 | 19,636 | |||||||||||
1.60%, 8/12/28 |
United States | 20,000 | 16,922 | |||||||||||
Micron Technology, Inc., 5.875%, 2/09/33 |
United States | 10,000 | 9,561 | |||||||||||
NVIDIA
Corp., |
United States | 10,000 | 8,730 | |||||||||||
3.50%, 4/01/40 |
United States | 140,000 | 110,313 | |||||||||||
NXP BV/NXP Funding LLC/NXP USA, Inc., 2.70%, 5/01/25 |
China | 20,000 | 19,002 | |||||||||||
Texas Instruments, Inc., 1.75%, 5/04/30 |
United States | 20,000 | 16,199 | |||||||||||
|
|
|||||||||||||
312,497 | ||||||||||||||
|
|
franklintempleton.com |
Semiannual Report |
17 |
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENT
Western Asset Bond ETF (continued)
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds & Notes (continued) | ||||||||||||||
Software 0.3% | ||||||||||||||
Microsoft
Corp., |
United States | 20,000 | $ | 18,986 | ||||||||||
2.921%, 3/17/52 |
United States | 10,000 | 6,566 | |||||||||||
Oracle
Corp., |
United States | 90,000 | 73,554 | |||||||||||
1.65%, 3/25/26 |
United States | 50,000 | 45,303 | |||||||||||
|
|
|||||||||||||
144,409 | ||||||||||||||
|
|
|||||||||||||
Telecommunications 1.5% | ||||||||||||||
AT&T,
Inc., |
United States | 20,000 | 18,218 | |||||||||||
1.70%, 3/25/26 |
United States | 10,000 | 9,076 | |||||||||||
3.50%, 9/15/53 |
United States | 30,000 | 18,552 | |||||||||||
2.55%, 12/01/33 |
United States | 40,000 | 29,392 | |||||||||||
3.55%, 9/15/55 |
United States | 20,000 | 12,256 | |||||||||||
5.55%, 8/15/41 |
United States | 30,000 | 26,960 | |||||||||||
Telefonica Emisiones SA, 5.213%, 3/08/47 |
Spain | 150,000 | 119,612 | |||||||||||
T-Mobile
USA, Inc., |
United States | 80,000 | 77,212 | |||||||||||
3.00%, 2/15/41 |
United States | 10,000 | 6,631 | |||||||||||
3.375%, 4/15/29 |
United States | 50,000 | 44,023 | |||||||||||
Verizon
Communications, Inc., |
United States | 100,000 | 94,005 | |||||||||||
4.862%, 8/21/46 |
United States | 70,000 | 57,920 | |||||||||||
2.875%, 11/20/50 |
United States | 20,000 | 11,572 | |||||||||||
2.355%, 3/15/32 |
United States | 120,000 | 91,589 | |||||||||||
|
|
|||||||||||||
617,018 | ||||||||||||||
|
|
|||||||||||||
Transportation 0.3% | ||||||||||||||
Burlington Northern Santa Fe LLC, 2.875%, 6/15/52 |
United States | 10,000 | 6,166 | |||||||||||
Canadian Pacific Railway Co., 3.10%, 12/02/51 |
Canada | 20,000 | 12,528 | |||||||||||
Union
Pacific Corp., |
United States | 20,000 | 13,418 | |||||||||||
3.839%, 3/20/60 |
United States | 40,000 | 28,120 | |||||||||||
2.891%, 4/06/36 |
United States | 40,000 | 30,333 | |||||||||||
3.75%, 7/15/25 |
United States | 20,000 | 19,382 | |||||||||||
|
|
|||||||||||||
109,947 | ||||||||||||||
|
|
|||||||||||||
Wireless Telecommunication Services 0.4% | ||||||||||||||
T-Mobile USA, Inc., 3.875%, 4/15/30 |
United States | 190,000 | 168,406 | |||||||||||
|
|
|||||||||||||
Total
Corporate Bonds & Notes |
17,067,931 | |||||||||||||
|
|
|||||||||||||
U.S. Government & Agency Securities 77.7% | ||||||||||||||
Federal
Home Loan Mortgage Corp., |
United States | 424,169 | 341,654 | |||||||||||
3.00%, 9/01/40 |
United States | 256,379 | 221,094 | |||||||||||
3.65%, 10/01/29 |
United States | 100,000 | 91,991 | |||||||||||
Federal Home Loan Mortgage Corp. Multifamily Structured Pass- Through Certificates, 4.80%, 9/25/28 |
United States | 100,000 | 98,252 | |||||||||||
Federal
Home Loan Mortgage Corp. STACR REMIC Trust, |
United States | 100,000 | 98,830 | |||||||||||
a,c 7.715%, 2/25/42 |
United States | 150,000 | 151,046 | |||||||||||
a,c 8.665%, 5/25/42 |
United States | 100,000 | 103,869 | |||||||||||
Federal
National Mortgage Association, |
United States | 250,435 | 205,902 | |||||||||||
3.00%, 9/01/61 |
United States | 275,820 | 224,664 |
18 |
Semiannual Report |
franklintempleton.com |
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENT
Western Asset Bond ETF (continued)
Country | Principal Amount* | Value | ||||||||||||
U.S. Government & Agency Securities (continued) | ||||||||||||||
Government National Mortgage Association, 5.50%, 5/20/53 |
United States | 99,026 | $ | 96,190 | ||||||||||
Government
National Mortgage Association, TBA, |
United States | 500,000 | 395,371 | |||||||||||
2.50%, 10/20/53 |
United States | 900,000 | 735,713 | |||||||||||
3.00%, 10/20/53 |
United States | 900,000 | 762,891 | |||||||||||
3.50%, 10/20/53 |
United States | 500,000 | 438,008 | |||||||||||
4.00%, 10/20/53 |
United States | 300,000 | 270,316 | |||||||||||
4.50%, 10/20/53 |
United States | 500,000 | 461,934 | |||||||||||
5.00%, 10/20/53 |
United States | 500,000 | 473,828 | |||||||||||
5.50%, 10/20/53 |
United States | 300,000 | 291,141 | |||||||||||
6.00%, 10/20/53 |
United States | 400,000 | 396,375 | |||||||||||
6.50%, 10/20/53 |
United States | 100,000 | 100,570 | |||||||||||
U.S.
Treasury Bills, |
United States | 660,000 | 659,229 | |||||||||||
0.000%, 10/12/23 |
United States | 8,150,000 | 8,138,064 | |||||||||||
0.000%, 10/19/23 |
United States | 3,150,000 | 3,142,139 | |||||||||||
0.000%, 11/21/23 |
United States | 1,000,000 | 992,625 | |||||||||||
0.000%, 12/21/23 |
United States | 2,000,000 | 1,976,407 | |||||||||||
U.S. Treasury Bonds, 3.625%, 5/15/53 |
United States | 1,370,000 | 1,134,638 | |||||||||||
U.S.
Treasury Notes, |
United States | 1,250,000 | 1,237,695 | |||||||||||
4.625%, 9/15/26 |
United States | 70,000 | 69,661 | |||||||||||
5.00%, 8/31/25 |
United States | 140,000 | 139,726 | |||||||||||
Uniform
Mortgage-Backed Security, TBA, |
United States | 100,000 | 71,867 | |||||||||||
2.00%, 10/01/53 |
United States | 2,200,000 | 1,673,891 | |||||||||||
2.50%, 10/01/52 |
United States | 2,500,000 | 1,984,664 | |||||||||||
3.00%, 10/01/53 |
United States | 1,100,000 | 909,691 | |||||||||||
3.50%, 10/01/53 |
United States | 1,000,000 | 860,078 | |||||||||||
4.00%, 10/01/53 |
United States | 900,000 | 801,351 | |||||||||||
4.50%, 10/01/52 |
United States | 600,000 | 550,922 | |||||||||||
5.00%, 10/01/53 |
United States | 500,000 | 471,758 | |||||||||||
5.50%, 10/01/53 |
United States | 700,000 | 676,512 | |||||||||||
6.00%, 10/01/53 |
United States | 600,000 | 592,172 | |||||||||||
6.50%, 10/01/53 |
United States | 400,000 | 401,844 | |||||||||||
|
|
|||||||||||||
Total
U.S. Government & Agency Securities |
32,444,573 | |||||||||||||
|
|
|||||||||||||
Foreign Government and Agency Securities 1.3% | ||||||||||||||
b |
Dominican Republic International Bonds, 6.000%, 2/22/33 |
Dominican Republic | 200,000 | 177,102 | ||||||||||
b |
Ivory Coast Government International Bonds, 6.125%, 6/15/33 |
Ivory Coast | 200,000 | 166,293 | ||||||||||
Mexico Government International Bonds, 4.875%, 5/19/33 |
Mexico | 200,000 | 179,612 | |||||||||||
|
|
|||||||||||||
Total
Foreign Government and Agency Securities |
523,007 | |||||||||||||
|
|
|||||||||||||
Asset-Backed Securities 9.1% | ||||||||||||||
a,c |
AB BSL CLO 4 Ltd., Series 2023-4A, Class A, 6.957%, 4/20/36 |
Cayman Islands | 200,000 | 200,350 | ||||||||||
Angel
Oak Mortgage Trust, |
United States | 105,614 | 91,997 | |||||||||||
a , Series 2023-1, Class A1, 4.75%,9/26/67 |
United States | 152,609 | 145,962 | |||||||||||
a |
Avis Budget Rental Car Funding AESOP LLC, Series 2023-8A, Class A, 6.02%, 2/20/30 |
United States | 150,000 | 149,560 | ||||||||||
a,c |
Bain Capital Credit CLO Ltd., Series 2023-1A, Class AN, 6.573%, 4/16/36 |
Jersey | 200,000 | 200,403 | ||||||||||
Bank, Series 2017-BNK7, Class A5, 3.435%, 9/15/60 |
United States | 100,000 | 91,021 | |||||||||||
Benchmark Mortgage Trust, Series 2023-B39, Class A5, 5.754%, 7/15/56 |
United States | 150,000 | 149,764 |
franklintempleton.com |
Semiannual Report |
19 |
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENT
Western Asset Bond ETF (continued)
Country | Principal Amount* | Value | ||||||||||||
Asset-Backed Securities (continued) |
||||||||||||||
BX
Commercial Mortgage Trust, |
United States | 110,000 | $ | 107,161 | ||||||||||
a,c ,Series 2023-VLT2, Class A, 7.613%,6/15/40 |
United States | 100,000 | 100,108 | |||||||||||
BX
Trust, |
United States | 130,000 | 109,829 | |||||||||||
a,c ,Series 2021-BXMF, Class A, 6.082%,10/15/26 |
United States | 110,000 | 107,799 | |||||||||||
CGMS Commercial Mortgage Trust, Series 2017-B1, Class A3, 3.197%, 8/15/50 |
United States | 164,505 | 149,310 | |||||||||||
a |
College Avenue Student Loans LLC, Series 2021-C, Class C, 3.06%, 7/26/55 |
United States | 190,000 | 161,500 | ||||||||||
a |
Domino’s Pizza Master Issuer LLC, Series 2018-1A, Class A2II, 4.328%, 7/25/48 |
United States | 180,975 | 168,488 | ||||||||||
a,c |
Dryden 87 CLO Ltd., Series 2021-87A, Class A1, 6.741%, 5/20/34 |
Cayman Islands | 350,000 | 347,389 | ||||||||||
a |
Ent Auto Receivables Trust, Series 2023-1A, Class A4, 6.26%, 11/15/29 |
United States | 100,000 | 100,095 | ||||||||||
a,c |
Extended Stay America Trust, Series 2021-ESH, Class C, 7.147%, 7/15/38 |
United States | 133,068 | 131,273 | ||||||||||
a,c |
GoldenTree Loan Management U.S. CLO 1 Ltd., Series 2021-11A, Class A, 6.718%, 10/20/34 |
Cayman Islands | 300,000 | 298,443 | ||||||||||
c |
GS Mortgage Securities Trust, Series 2018-GS10, Class A5, 4.155%, 7/10/51 |
United States | 110,000 | 99,848 | ||||||||||
a,c |
LAQ Mortgage Trust, Series 2023-LAQ, Class A, 7.424%, 3/15/36 |
United States | 201,889 | 201,475 | ||||||||||
a,c |
Nelnet Student Loan Trust, Series 2021-CA, Class AFL, 6.179%, 4/20/62 |
United States | 142,541 | 140,251 | ||||||||||
a |
SG Residential Mortgage Trust, Series 2022-2, Class A1, 5.353%, 8/25/62 |
United States | 113,332 | 109,828 | ||||||||||
UBS Commercial Mortgage Trust, Series 2017-C4, Class A3, 3.301%, 10/15/50 |
United States | 118,434 | 107,743 | |||||||||||
a |
Verus Securitization Trust, Series 2023-4, Class A1, 5.811%, 5/25/68 |
United States | 101,816 | 99,855 | ||||||||||
a,c |
Voya CLO Ltd., Series 2018-2A, Class A1, 6.57%, 7/15/31 |
Cayman Islands | 250,000 | 249,823 | ||||||||||
|
|
|||||||||||||
Total Asset-Backed Securities (Cost $3,818,236) |
3,819,275 | |||||||||||||
|
|
|||||||||||||
Total
Investments before Short-Term Investments |
53,854,786 | |||||||||||||
|
|
|||||||||||||
Short-Term Investments 2.5% | ||||||||||||||
Commercial Paper 0.6% | ||||||||||||||
Natixis SA, 6.014%, 6/17/24 |
France | 250,000 | 239,691 | |||||||||||
|
|
|||||||||||||
U.S. Government & Agency Securities 1.8% | ||||||||||||||
d |
Federal Home Loan Bank Discount Notes, 10/4/23 |
United States | 770,000 | 769,775 | ||||||||||
|
|
20 |
Semiannual Report |
franklintempleton.com |
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENT
Western Asset Bond ETF (continued)
Country | Principal Amount* | Value | ||||||||||||
Short-Term Investments (continued) | ||||||||||||||
Money Market Funds 0.1% | ||||||||||||||
e |
Invesco Government & Agency Portfolio, 4.71% |
United States | 24,830 | $ | 24,830 | |||||||||
|
|
|||||||||||||
Total Short-Term Investments (Cost $1,034,236) |
1,034,296 | |||||||||||||
|
|
|||||||||||||
Total Investments (Cost $55,495,520) 131.5% |
54,889,082 | |||||||||||||
Other Assets, less Liabilities (31.5)% |
(13,156,778 | ) | ||||||||||||
|
|
|||||||||||||
Net Assets 100.0% |
$ | 41,732,304 | ||||||||||||
|
|
*The principal amount is stated in U.S. dollars unless otherwise indicated.
†Rounds to less than 0.1% of net assets.
aSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. At September 30, 2023, the value of was $5,950,297, representing 14.3% of net assets.
bSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. At September 30, 2023, the value of was $1,629,582, representing 3.9% of net assets.
cVariable rate security. The rate shown represents the yield at period end.
dThe security was issued on a discount basis with no stated coupon rate.
eThe rate shown is the annualized seven-day effective yield at period end.
At September 30, 2023, the Fund had the following interest rate swap contracts outstanding. See Note 1(c).
Interest Rate Swap Contracts | ||||||||||||||||||||||||||||
Description |
Periodic Payment Rate Received (Paid) |
Payment Frequency |
Maturity Date |
Notional Amount |
Value |
Unamortized Upfront Payments (Receipts) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||
Interest rate contracts | ||||||||||||||||||||||||||||
Chicago Mercantile Exchange |
5.13% | Annually | 5/15/48 | $ | 1,442,000 | $ | 215,989 | $ | 163,461 | $ | 52,528 | |||||||||||||||||
LCH Limited |
4.18% | Annually | 2/29/28 | $ | 5,564,000 | $ | (39,173 | ) | $ | (25,704 | ) | $ | (13,469 | ) | ||||||||||||||
|
|
|||||||||||||||||||||||||||
$ | 39,059 | |||||||||||||||||||||||||||
|
|
At September 30, 2023, the Fund had the following credit default swap contracts outstanding. See Note 1(c).
Credit Default Swap Contracts | ||||||||||||||||||||||||||||
Description |
Periodic Payment Rate Received (Paid) |
Payment Frequency |
Maturity Date |
Notional Amount |
Value |
Unamortized Upfront Payments (Receipts) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||
Credit rate contracts | ||||||||||||||||||||||||||||
Intercontinental Exchange, Inc. |
1% | Quarterly | 12/20/28 | $ | 1,250,000 | $ | 15,265 | $ | (15,598 | ) | $ | (333 | ) | |||||||||||||||
|
|
|||||||||||||||||||||||||||
$ | (333 | ) | ||||||||||||||||||||||||||
|
|
At September 30, 2023, the Fund had the following futures contracts outstanding. See Note 1(c).
Futures Contracts | ||||||||||||||||||||
Description | Type |
Number of Contracts |
Notional Amount |
Expiration Date |
Value/Unrealized Appreciation (Depreciation) |
|||||||||||||||
Interest rate contracts | ||||||||||||||||||||
3-Month CME Term SOFR |
Long | 34 | $ | 8,109,850 | 3/18/25 | $ | 354 | |||||||||||||
3-Month CME Term SOFR |
Long | 35 | 8,403,938 | 3/17/26 | (948 | ) |
franklintempleton.com |
Semiannual Report |
21 |
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENT
Western Asset Bond ETF (continued)
Futures Contracts (continued) | ||||||||||||||||||||
Description | Type |
Number of Contracts |
Notional Amount |
Expiration Date |
Value/Unrealized Appreciation (Depreciation) |
|||||||||||||||
Interest rate contracts (continued) | ||||||||||||||||||||
U.S. Treasury 2 Yr. Note |
Long | 9 | $ | 1,824,398 | 12/29/23 | $ | 125 | |||||||||||||
U.S. Treasury 5 Yr. Note |
Long | 11 | 1,158,953 | 12/29/23 | (3,199 | ) | ||||||||||||||
U.S. Treasury Bond Long |
Long | 45 | 5,120,156 | 12/19/23 | (196,953 | ) | ||||||||||||||
U.S. Treasury Bond Ultra |
Long | 15 | 1,780,313 | 12/19/23 | (88,745 | ) | ||||||||||||||
3-Month CME Term SOFR |
Short | 38 | 8,982,250 | 3/19/24 | (1,980 | ) | ||||||||||||||
U.S. Treasury 10 Yr. Note |
Short | 31 | 3,349,937 | 12/19/23 | 29,915 | |||||||||||||||
Ultra 10 Yr. U.S. Treasury Note |
Short | 11 | 1,227,188 | 12/19/23 | 21,497 | |||||||||||||||
|
|
|||||||||||||||||||
Total Futures Contracts |
$ | (239,934 | ) | |||||||||||||||||
|
|
See Note 6 regarding other derivative information.
See Abbreviations on page 32.
22 |
Semiannual Report | The accompanying notes are an integral part of these financial statements. |
franklintempleton.com |
FRANKLIN TEMPLETON ETF TRUST
Statements of Assets and Liabilities
September 30, 2023 (unaudited)
Western Asset Bond ETF
Assets: |
||||
Investments in securities: |
||||
Cost – Unaffiliated issuers |
$ | 55,495,520 | ||
Value – Unaffiliated issuers |
$ | 54,889,082 | ||
Cash |
149,567 | |||
Receivables: |
||||
Interest |
287,718 | |||
Investment securities sold |
581,875 | |||
Variation margin on futures contracts |
26,597 | |||
Deposits with brokers for: |
||||
Futures contracts |
450,003 | |||
Swap contracts |
301,000 | |||
|
|
|||
Total assets |
56,685,842 | |||
|
|
|||
Liabilities: |
||||
Payables: |
||||
Investment securities purchased |
14,817,850 | |||
Management fees |
4,425 | |||
Variation margin on centrally cleared swap contracts |
131,263 | |||
|
|
|||
Total liabilities |
14,953,538 | |||
|
|
|||
Net assets, at value |
$ | 41,732,304 | ||
|
|
|||
Net assets consist of: |
||||
Paid-in capital |
$ | 42,500,000 | ||
Total distributable earnings (loss) |
(767,696 | ) | ||
|
|
|||
Net assets, at value |
$ | 41,732,304 | ||
|
|
|||
Shares outstanding |
1,700,000 | |||
|
|
|||
Net asset value per share |
$ | 24.55 | ||
|
|
franklintempleton.com |
The accompanying notes are an integral part of these financial statements. | Semiannual Report |
23 |
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Operations
for the period ended September 30, 2023 (unaudited)a
Western Asset Bond ETF
Investment income: |
||||
Interest: |
||||
Unaffiliated issuers |
$ | 65,801 | ||
|
|
|||
Total investment income |
65,801 | |||
|
|
|||
Expenses: |
||||
Management fees (Note 3a) |
4,426 | |||
|
|
|||
Total expenses |
4,426 | |||
|
|
|||
Net investment income |
61,375 | |||
|
|
|||
Realized and unrealized gains (losses): |
||||
Net realized gain (loss) from: |
||||
Investments: |
||||
Unaffiliated issuers |
(19,234 | ) | ||
Futures contracts |
(3,606 | ) | ||
Swap contracts |
1,415 | |||
|
|
|||
Net realized gain (loss) |
(21,425 | ) | ||
|
|
|||
Net change in unrealized appreciation (depreciation) on: |
||||
Investments: |
||||
Unaffiliated issuers |
(606,438 | ) | ||
Futures contracts |
(239,934 | ) | ||
Swap contracts |
38,726 | |||
|
|
|||
Net change in unrealized appreciation (depreciation) |
(807,646 | ) | ||
|
|
|||
Net realized and unrealized gain (loss) |
(829,071 | ) | ||
|
|
|||
Net increase (decrease) in net assets resulting from operations |
$ | (767,696 | ) | |
|
|
aFor the period September 19, 2023 (commencement of operations) to September 30, 2023.
24 |
Semiannual Report | The accompanying notes are an integral part of these financial statements. |
franklintempleton.com |
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
Western Asset Bond ETF
Period Ended September 30, 2023 (unaudited)a |
||||
Increase (decrease) in net assets: |
||||
Operations: |
||||
Net investment income |
$ | 61,375 | ||
Net realized loss |
(21,425 | ) | ||
Net change in unrealized appreciation (depreciation) |
(807,646 | ) | ||
|
|
|||
Net increase (decrease) in net assets resulting from operations |
(767,696 | ) | ||
|
|
|||
Capital share transactions: (Note 2) |
42,500,000 | |||
|
|
|||
Net increase (decrease) in net assets |
41,732,304 | |||
Net assets: |
||||
Beginning of period |
— | |||
|
|
|||
End of period |
$ | 41,732,304 | ||
|
|
aFor the period September 19, 2023 (commencement of operations) to September 30, 2023.
franklintempleton.com |
The accompanying notes are an integral part of these financial statements. | Semiannual Report |
25 |
FRANKLIN TEMPLETON ETF TRUST
Notes to Financial Statements (unaudited)
1. Organization and Significant Accounting Policies
Franklin Templeton ETF Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company consisting of fifty-one separate funds, one of which is included in this report (Fund). The Fund follows the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946, Financial Services—Investment Companies (“ASC 946”), and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP), including, but not limited to, ASC 946. The Fund is an exchange traded fund (ETF) and seek to provide the investment results that closely correspond, before fees and expenses, to the performance of Fund corresponding underlying index.
The following summarizes the Fund’s significant accounting policies.
a. Financial Instrument Valuation
The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Fund’s Board of Trustees (the Board), the Board has designated the Fund’s investment manager as the valuation designee and has responsibility for oversight of valuation. The investment manager is assisted by the Fund’s administrator in performing this responsibility, including leading the cross-functional Valuation Committee (VC).
The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities, exchange trade funds and derivative financial instruments listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. London time on the
day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Investments in open-end mutual funds are valued at the closing NAV.
Certain derivative financial instruments are centrally cleared or trade in the OTC market. The Funds pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Funds’ net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on Fund business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at 4 p.m. Eastern time. In order to minimize the potential for these differences, an independent pricing service may be used to adjust the Fund’s portfolio securities to the latest indications of fair value at 4 p.m. Eastern time on
26 | Semiannual Report | franklintempleton.com |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Significant Accounting Policies (continued)
a. Financial Instrument Valuation (continued)
September 30, 2023. At September 30, 2023, certain securities may have been fair valued using these procedures, in which case the securities were categorized as Level 2 inputs within the fair value hierarchy (referred to as “market level fair value”).
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund’s NAV is not calculated, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statements of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and
losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Derivative Financial Instruments
The Fund invested in derivative financial instruments in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market movements which expose the Fund to gains or losses in excess of the amounts shown in the Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Statement of Operations.
Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce their exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination.
Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Funds include failure of the Funds to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. Early termination by the counterparty may result in an immediate payment by the Funds of any net liability owed to that counterparty under the ISDA agreement.
The Fund entered into credit default swap contracts primarily to manage and/or gain exposure to credit risk. A credit default swap is an agreement between the Fund and a counterparty whereby the buyer of the contract receives
franklintempleton.com |
Semiannual Report |
27 |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Significant Accounting Policies (continued)
c. Derivative Financial Instruments (continued)
credit protection and the seller of the contract guarantees the credit worthiness of a referenced debt obligation. These agreements may be privately negotiated in the over-thecounter market (OTC credit default swaps) or may be executed in a multilateral trade facility platform, such as a registered exchange (centrally cleared credit default swaps). The underlying referenced debt obligation may be a single issuer of corporate or sovereign debt, a credit index, a basket of issuers or indices, or a tranche of a credit index or basket of issuers or indices. In the event of a default of the underlying referenced debt obligation, the buyer is entitled to receive the notional amount of the credit default swap contract from the seller in exchange for the referenced debt obligation, a net settlement amount equal to the notional amount of the credit default swap less the recovery value of the referenced debt obligation, or other agreed upon amount. For centrally cleared credit default swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable. Over the term of the contract, the buyer pays the seller a periodic stream of payments, provided that no event of default has occurred. Such periodic payments are accrued daily as an unrealized appreciation or depreciation until the payments are made, at which time they are realized.
The Fund entered into interest rate swap contracts primarily to manage interest rate risk. An interest rate swap is an agreement between the Fund and a counterparty to exchange cash flows based on the difference between two interest rates, applied to a notional amount. These agreements may be privately negotiated in the over-the-counter market (OTC interest rate swaps) or may be executed on a registered exchange (centrally cleared interest rate swaps). For centrally cleared interest rate swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statements of Assets and Liabilities. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized appreciation or depreciation until the payments are made, at which time they are realized.
Collateral requirements differ by type of derivative. Collateral terms are contract specific for OTC derivatives. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the Fund or the applicable
counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values may be delivered by the Fund or the counterparty the next business day, or within a few business days. Collateral pledged and/or received by the Fund, if any, is held in segregated accounts with the Fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Funds’ investment objectives. To the extent that the amounts due to the Fund from its counterparties are not subject to collateralization or are not fully collateralized, the Funds bears the risk of loss from counterparty non-performance.
The Fund entered into exchange traded futures contracts primarily to manage and/or gain exposure to equity price risk. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a future date. Required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statements of Assets and Liabilities..
See Note 6 regarding other derivative information.
d. Income and Deferred Taxes
It is Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which the Fund invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.
The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on
28 | Semiannual Report | franklintempleton.com |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Significant Accounting Policies (continued)
d. Income and Deferred Taxes (continued)
its technical merits. As of September 30, 2023, Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
e. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income and capital gain distributions are recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations.
Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of Fund to the combined net assets of the Trust. Certain Fund specific expenses are allocated directly to the Fund that incurred the expense. These expenses are paid by the Fund or by the investment manager, as applicable, according to the terms of the unified management fee agreement.
f. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
g. Guarantees and Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Funds, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
Shares of the Fund are issued and redeemed at their respective NAV only in aggregations of a specified number of shares or multiples thereof (Creation Units). Only certain large institutional investors (Authorized Participants) may engage in creation or redemption transactions directly with the Fund. Once created, shares of the Fund generally trade in the secondary market in amounts less than one Creation Unit. The market price of the Fund’s shares will be based on the price in the secondary market which may be at, above or below the most recent NAV. Creation Units may be issued and redeemed in exchange for a designated portfolio of securities and/or cash (which may include cash in lieu of certain securities).
Authorized participants pay a standard transaction fee to the shareholder servicing agent when purchasing or redeeming Creation Units of the Fund regardless of the number of Creation Units that are being created or redeemed on the same day by the Authorized Participant. The standard transaction fee is imposed to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units and is not charged to or paid by the Fund. Such transactions fees are treated as increases in capital and are disclosed in the Fund’s Statements of Changes in Net Assets
In addition, for cash Creation Unit transactions, a variable fee for creation transactions and redemption transactions may be charged to the Authorized Participant to cover certain brokerage, tax, foreign exchange, execution, market impact and other costs and expenses related to the execution of trades. Variable fees, if any, are included in capital share transactions in the Statements of Changes in Net Assets.
franklintempleton.com |
Semiannual Report |
29 |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
2. Shares of Beneficial Interest (continued)
At September 30, 2023, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:
Period Ended September 30, 2023a |
||||||||
Shares | Amount | |||||||
Shares sold |
1,700,001 | $ | 42,500,025 | |||||
Shares redeemed |
(1 | ) | (25 | ) | ||||
|
|
|||||||
Net increase (decrease) |
1,700,000 | $ | 42,500,000 | |||||
|
|
aFor the period September 19, 2023 (commencement of operations) to September 30, 2023.
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Funds are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation | |
Franklin Advisers, Inc. (Advisers) |
Investment manager | |
Franklin Templeton Services, LLC (FT Services) |
Administrative manager | |
Franklin Distributors, LLC (Distributors) |
Principal underwriter |
a. Management fees
The Funds pay a unified management fee to Advisers whereby Advisers has agreed to reimburse the Funds’ acquired fund fees and expenses (if any) and pay all of the ordinary operating expenses of the Funds, including custody, transfer agency, and Trustee fees and expenses, among others, but excluding payments under the Funds’ Rule 12b-1 plan (if any), brokerage expenses (including any costs incidental to transactions in portfolio securities or instruments), taxes, interest (including borrowing costs and dividend expenses on securities sold short and overdraft charges), litigation expenses (including litigation to which the Trust or a Fund may be a party and indemnification of the Trustees and officers with respect thereto), and other non-routine or extraordinary expenses. The fee is calculated daily and paid monthly according to the terms of the management agreement.
The Fund pays gross effective investment management fees 0.35% per year on the average daily net assets of the Fund.
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on the Fund’s average daily net assets, and is not an additional expense of the Fund.
c. Other Affiliated Transactions
At September 30, 2023, the shares of Western Asset Bond ETF is owned by the following investment entity:
Funds | Shares |
Percentage of Outstanding Shares |
||||||
Western Asset Bond ETF | ||||||||
Franklin Resources Inc. |
400,000 | 23.5% | ||||||
|
|
30 | Semiannual Report | franklintempleton.com |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
4. Income Taxes
At September 30, 2023, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
Cost of investments |
$ | 55,495,520 | ||
|
|
|||
Unrealized appreciation |
$ | 9,932 | ||
Unrealized depreciation |
(616,370 | ) | ||
|
|
|||
Net unrealized appreciation (depreciation) |
$ | (606,438 | ) | |
|
|
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of financial futures transactions and gains/losses realized on in-kind shareholder redemptions.
5. Investment Transactions
Purchases and sales of investments (excluding short term securities and in-kind transactions, if any) for the period ended September 30, 2023, $26,434,630 and $588,256, respectively.
There were no In-kind transactions associated with creation and redemptions for the period ended September 30, 2023.
6. Other Derivative Information
At September 30, 2023, the Fund’s investments in derivative contracts are reflected in the Statement of Assets and Liabilities as follows:
Asset Derivatives |
Liability Derivatives |
|||||||||||
Statement of
Assets and Liabilities Location |
Fair Value | Statement of
Assets and Liabilities Location |
Fair Value | |||||||||
Interest rate contracts |
Variation margin on futures contracts |
$ | — |
Variation margin on futures contracts |
$ | 239,934 | a | |||||
Interest rate contracts |
Swap contracts |
38,726 |
Swap contracts |
— | ||||||||
|
|
|
|
aThis amount reflects the cumulative appreciation (depreciation) of future contracts as reported in the Schedule of Investments. Only the variation margin receivable/payable at year end is separately reported within the Statements of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.
For the period ended September 30, 2023, the effect of derivative contracts in the Fund’s Statement of Operations was as follows:
Derivative Contracts Not Accounted for as Hedging Instruments |
Statement of Operations Locations |
NetRealized for the Period |
Statement of Operations Locations |
Net Change in Unrealized Appreciation (Depreciation) for the Period |
||||||||
Net realized gain (loss) from: |
Net change in unrealized appreciation (depreciation) on: |
|||||||||||
Interest rate contracts |
Futures contracts |
$ | (3,606 | ) |
Futures contracts |
$ | (239,934 | ) | ||||
Credit contracts |
Swap contracts |
— |
Swap Contracts |
(333 | ) | |||||||
Interest rate contracts |
Swap contracts |
1,415 |
Swap contracts |
39,059 | ||||||||
|
|
|
|
|||||||||
Totals |
$ | (2,191 | ) | $ | (201,208 | ) | ||||||
|
|
|
|
For the period ended September 30, 2023, the average month end notional amount of futures contracts and swap contracts were as follows:
Western Asset Bond ETF |
||||
Credit default contracts |
$ | 1,265,265 | ||
Interest rate contracts |
$ | 1,442,000 | ||
Futures contracts |
$ | 40,295,781 |
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FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
7. Fair Value Measurements
The Fund follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s financial instruments and are summarized in the following fair value hierarchy:
• |
Level 1 – quoted prices in active markets for identical financial instruments |
• |
Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.) |
• |
Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments) |
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
A summary of inputs used as of September 30, 2023, in valuing the Fund’s assets and liabilities carried at fair value, is as follows
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Western Asset Bond ETF | ||||||||||||||||
Assets: | ||||||||||||||||
Investments in Securities:a |
||||||||||||||||
Corporate Bonds & Notes |
$ | — | $ | 17,067,931 | $ | — | $ | 17,067,931 | ||||||||
Foreign Government and Agency Securities |
— | 523,007 | — | 523,007 | ||||||||||||
Asset-Backed Securities |
— | 3,819,275 | — | 3,819,275 | ||||||||||||
U.S. Government & Agency Securities |
— | 33,214,348 | — | 33,214,348 | ||||||||||||
Short-Term Investments |
24,830 | 239,691 | — | 264,521 | ||||||||||||
|
|
|||||||||||||||
Total Investments in Securities |
$ | 24,830 | $ | 54,864,252 | $ | — | $ | 54,889,082 | ||||||||
|
|
|||||||||||||||
Other Financial Instruments: |
||||||||||||||||
Futures Contracts |
$ | 51,891 | $ | — | $ | — | $ | 51,891 | ||||||||
Interest Rate Swaps |
— | 52,528 | — | 52,528 | ||||||||||||
|
|
|||||||||||||||
Total Other Financial Instruments |
$ | 51,891 | $ | 52,528 | $ | — | $ | 104,419 | ||||||||
|
|
|||||||||||||||
Liabilities: | ||||||||||||||||
Other Financial Instruments: |
||||||||||||||||
Futures Contracts |
$ | 291,825 | $ | — | $ | — | $ | 291,825 | ||||||||
Interest Rate Swaps |
— | 13,469 | — | 13,469 | ||||||||||||
Credit Default Swap Contracts |
— | 333 | — | 333 | ||||||||||||
|
|
|||||||||||||||
Total Other Financial Instruments |
$ | 291,825 | $ | 13,802 | $ | — | $ | 305,627 | ||||||||
|
|
aFor detailed categories, see the accompanying Schedules of Investments.
8. New Accounting Pronouncements
In June 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2022-03, Fair Value Measurement (Topic 820) – Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendments in the ASU clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, should not be considered in measuring fair value. The ASU is effective for interim and annual reporting periods beginning after December 15, 2023, with the option of early adoption. Management has reviewed the requirements and Concluded that the adoption of this ASU does not have material impact on the financial statements. As permitted, Management has elected to early adopt the provisions.
9. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.
CLO | Collateralized Loan Obligation |
32 | Semiannual Report | franklintempleton.com |
FRANKLIN TEMPLETON ETF TRUST
Board Approval of Investment Management Agreements
FRANKLIN TEMPLETON ETF TRUST
Western Asset Bond ETF
(Fund)
At a meeting held on March 3, 2023 (Meeting), the Board of Trustees (Board) of Franklin Templeton ETF Trust (Trust), including a majority of the trustees who are not “interested persons” as defined in the Investment Company Act of 1940 (Independent Trustees), reviewed and approved (i) an investment management agreement between Franklin Advisers, Inc. (FAV) and the Trust; (ii) an investment sub-advisory agreement between FAV and Western Asset Management Company, LLC (Western Asset); and (iii) sub-subadvisory agreements between Western Asset and Western Asset Management Company Limited in London (Western Asset London), Western Asset Management Company Pte. Ltd. in Singapore (Western Asset Singapore), and Western Asset Management Company Ltd in Japan (Western Asset Japan) on behalf of the Fund, for an initial two-year period (each a Management Agreement). The Independent Trustees received advice from and met separately with Independent Trustee counsel in considering whether to approve each Management Agreement. FAV, Western Asset, Western Asset London, Western Asset Singapore and Western Asset Japan are each referred to herein as a Manager.
In considering the approval of each Management Agreement, the Board reviewed and considered information provided by each Manager at the Meeting and throughout the year at meetings of the Board and its committees. The Board reviewed and considered all of the factors it deemed relevant in approving each Management Agreement, including, but not limited to: (i) the nature, extent and quality of the services to be provided by each Manager; (ii) the costs of the services to be provided by each Manager; and (iii) the extent to which economies of scale may be realized as the Fund grows. The Board also reviewed and considered the form of the Management Agreement and the terms of the Management Agreement which were explained at the Meeting. The Board noted that FAV would provide general investment management and administrative services and that the Fund would operate under a unified management fee structure whereby FAV would reimburse the Fund for all acquired fund fees and expenses and pay all of the ordinary operating expenses of the Fund, except for certain excluded items (Unified Fee). The Board also noted that the Unified Fee was consistent with the current management fee structure for the existing Franklin Templeton (FT) exchange-traded funds.
In approving each Management Agreement, the Board, including a majority of the Independent Trustees, determined that the terms of the proposed Management Agreements are fair and reasonable and that such Management Agreements are in the best interests of the Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s determination.
Nature, Extent and Quality of Services
The Board reviewed and considered information regarding the nature, extent and quality of investment management services to be provided by the applicable Managers and their affiliates to the Fund and its shareholders. This information included, among other things, the Fund’s proposed investment strategies and the ability of the applicable Managers to implement such investment strategies; the qualifications, background and experience of the investment personnel that will be responsible for the day-to-day portfolio management of the Fund; each Manager’s experience as the Manager of other funds and accounts, including other series of the Trust and other funds in the FT family of funds; each Manager’s strength and reputation within the industry; the personnel, operations, financial condition, and investment management capabilities, methodologies and resources of each Manager; and each Manager’s compliance capabilities. Following consideration of such information, the Board was satisfied with the nature, extent and quality of services to be provided by each Manager and its affiliates to the Fund and its shareholders.
Fund Performance
The Board noted that, as the Fund had not yet commenced investment operations, there was no investment performance for the Fund. The Board also considered the proposed performance benchmark for the Fund and how such benchmark would be utilized to measure performance of each Manager.
Comparative Fees and Expenses
The Board reviewed and considered information regarding the Fund’s estimated total expense ratio, noting that the Fund will pay a Unified Fee. The Board considered the estimated total expense ratio and, separately, the proposed contractual Unified Fee, without the effect of fee waivers, if any (Management Rate) of the Fund in comparison to the median expense ratio and median Management Rate, respectively, of other exchange-traded funds deemed comparable to and with a similar expense structure as the
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FRANKLIN TEMPLETON ETF TRUST
SHAREHOLDER INFORMATION
Fund (Expense Group) as selected by Broadridge Financial Solutions, Inc. (Broadridge), an independent provider of investment company data. Broadridge fee and expense data is based upon information taken from each fund’s most recent annual report (excluding the Fund), which reflects historical asset levels that may be quite different from those currently existing, particularly in a period of market volatility. While recognizing such inherent limitation and the fact that expense ratios and Management Rates generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Broadridge to be an appropriate measure of comparative fees and expenses. The Broadridge Management Rate includes administrative charges. The Board received a description of the methodology used by Broadridge to select the exchange-traded funds included in the Expense Group.
The Expense Group for the Fund was comprised of actively managed exchange-traded funds, which included the Fund, seven other core plus bond funds and one core bond fund. The Board noted that the proposed Management Rate for the Fund was equal to the median of its Expense Group and the estimated total expense ratio for the Fund was below the median of its Expense Group. The Board further noted that pursuant to the proposed Unified Fee arrangement FAV would reimburse the Fund for all of its acquired fund fees and expenses (if any) and pay all of the ordinary operating expenses of the Fund, except for (i) the Fund’s Unified Fee, (ii) payments under the Fund’s Rule 12b-1 plan (if any), (iii) brokerage expenses (including any costs incidental to transactions in portfolio securities or instruments), (iv) taxes, (v) interest (including borrowing costs and dividend expenses on securities sold short and overdraft charges), (vi) litigation expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto), and (vii) other non-routine or extraordinary expenses. The Board also noted that Western Asset would be paid by FAV out of the Unified Fee FAV receives from the Fund and that the allocation of the fee between FAV and Western Asset reflected the services provided by Western Asset to the Fund. The Board also noted that Western Asset London, Western Asset Singapore and Western Asset Japan would each be paid by Western Asset from the fee FAV pays to Western Asset and this fee reflects the services provided by the sub-subadvisers to the Fund. After consideration of the above, the Board concluded that the Management Rate to be charged to the Fund, the sub-advisory fee to be paid to Western Asset and the sub-subadvisory fees to be paid to Western Asset London, Western Asset Singapore and Western Asset Japan are reasonable.
Profitability
The Board noted that the Managers (and their affiliates) could not report any financial results from its relationship with the Fund because the Fund has not yet commenced investment operations, and thus, the Board could not evaluate each Manager’s (or its affiliates’) profitability with respect to the Fund.
Economies of Scale
The Board reviewed and considered the extent to which each Manager may realize economies of scale, if any, as the Fund grows larger and whether the Fund’s management fee structure reflects any economies of scale for the benefit of shareholders. With respect to possible economies of scale in the future, the Board noted that it is not anticipated that the Fund will generate significant, if any, profit for the Managers and/or their affiliates for some time.
Conclusion
Based on its review, consideration and evaluation of all factors it believed relevant, including the above-described factors and conclusions, the Board unanimously approved each Management Agreement for the Fund for an initial two-year period.
Proxy Voting Policies and Procedures
The Trust’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Trust’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.
Quarterly Schedule of Investments
The Trust files a complete schedule of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year as an exhibit to its report on Form N-PORT. Shareholders may view the filed Form N-PORT by visiting the Commission’s website at sec.gov.
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FRANKLIN TEMPLETON ETF TRUST
SHAREHOLDER INFORMATION
The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.
Premium/Discount Information
Information about the differences between the daily market price on the secondary market for the shares of each Fund and each Fund’s net asset value may be found on each Fund’s website at franklintempleton.com.
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35 |
Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other information; please read it carefully before investing.
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Semiannual Report Western Asset Bond ETF |
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Investment Manager | Distributor | Investor Services | ||||
Franklin Advisers, Inc. | Franklin Distributors, LLC | Transfer Agent | ||||
(800) DIAL BEN®/342-5236 | State Street Bank and | |||||
Subadvisor | franklintempleton.com | Trust Company | ||||
Western Asset Management | 1 Heritage Drive | |||||
Company, LLC | Mail Stop OHD0100 | |||||
North Quincy, MA 02171 | ||||||
© 2023 Franklin Templeton Investments. All rights reserved. | WABF S 11/23 |