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Franklin Disruptive Commerce ETF

 

Franklin Investment Grade Corporate ETF

Franklin Dynamic Municipal Bond ETF

 

Franklin Municipal Green Bond ETF

Franklin Exponential Data ETF

 

Franklin Senior Loan ETF

Franklin Genomic Advancements ETF

 

Franklin Systematic Style Premia ETF

Franklin High Yield Corporate ETF

 

Franklin U.S. Core Bond ETF

Franklin Income Focus ETF

 

Franklin U.S. Low Volatility ETF

Franklin Intelligent Machines ETF

 

Franklin U.S. Treasury Bond ETF

Franklin International Aggregate Bond ETF

 

Franklin Ultra Short Bond ETF


 

 

 

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).


Contents      

 

Franklin Disruptive Commerce ETF      2  
Franklin Dynamic Municipal Bond ETF      7  
Franklin Exponential Data ETF      11  
Franklin Genomic Advancements ETF      16  
Franklin High Yield Corporate ETF      21  
Franklin Income Focus ETF      26  
Franklin Intelligent Machines ETF      31  
Franklin International Aggregate Bond ETF      36  
Franklin Investment Grade Corporate ETF      40  
Franklin Municipal Green Bond ETF      45  
Franklin Senior Loan ETF      49  
Franklin Systematic Style Premia ETF      54  
Franklin U.S. Core Bond ETF      59  
Franklin U.S. Low Volatility ETF      63  
Franklin U.S. Treasury Bond ETF      68  
Franklin Ultra Short Bond ETF      72  
Financial Highlights and Schedules of Investments      77  
Financial Statements      182  
Notes to Financial Statements      198  
Shareholder Information      221  

 

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

 

Not FDIC Insured   |   May Lose Value   |   No Bank Guarantee

 

     
franklintempleton.com    Semiannual Report          1


Franklin Disruptive Commerce ETF

 

This semiannual report for Franklin Disruptive Commerce ETF covers the period ended September 30, 2023.

Fund Overview

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation. Under normal market conditions, the Fund invests at least 80% of its net assets in equity securities, predominantly common stock, of companies that are relevant to the Fund’s investment theme of disruptive commerce. These companies include those that we believe are substantially focused on, or that the investment manager believes will benefit from, electronic commerce, auctions, the sharing economy, electronic payment capabilities, drop shipping, direct marketing, significant decreases in transport and delivery costs and related activities or developments, as outlined in more detail in the Prospectus.

Performance Overview

During the six-month period, the Fund posted cumulative total returns of +2.04% based on market price and +2.00% based on net asset value (NAV). In comparison, the Russell 3000® Index, which measures the performance of the largest 3,000 U.S. companies representing the majority of the U.S. market’s total capitalization,posted a +4.86% cumulative total return for the same period.1 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
 

Broadline Retail

     22.6%  

Hotels, Restaurants & Leisure

     12.2%  

Financial Services

     11.6%  

Trading Companies & Distributors

     9.0%  

Software

     8.6%  

Ground Transportation

     8.5%  

IT Services

     6.0%  

Consumer Staples Distribution & Retail

     5.2%  

Commercial Services & Supplies

     3.8%  

Interactive Media & Services

     2.5%  

Other

     8.6%  

Other Net Assets

     1.4%  

 

 

 

1. Source: Morningstar. Frank Russell Company is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company.

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 78.

 

           
2             

Semiannual Report

  franklintempleton.com


FRANKLIN DISRUPTIVE COMMERCE ETF

    

 

Top 10 Holdings       
9/30/23       
Company
Sector/Industry
   % of Total
Net Assets
 

Amazon.com, Inc.

Broadline Retail

     9.4%  

Shopify, Inc.

Internet Services & Infrastructure

     6.0%  

Uber Technologies, Inc.

Passenger Ground Transportation

     5.9%  

Costco Wholesale Corp.

Consumer Staples Merchandise Retail

     5.2%  

WW Grainger, Inc.

Trading Companies & Distributors

     4.7%  

DoorDash, Inc.

Restaurants

     4.4%  

MercadoLibre, Inc.

Broadline Retail

     4.4%  

Fastenal Co.

Trading Companies & Distributors

     4.3%  

Booking Holdings, Inc.

Hotels, Resorts & Cruise Lines

     3.9%  

Copart, Inc.

Diversified Support Services

     3.8%  

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

Matthew J. Moberg, CPA

Portfolio Manager

    

 

     
franklintempleton.com    Semiannual Report          3


FRANKLIN DISRUPTIVE COMMERCE 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 (2/27/20), 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 Return2      Average Annual Total Return2  
      Based on
NAV3
     Based on
market price4
     Based on
NAV3
     Based on
market price4
 

6-Month

     +2.00%        +2.04%        +2.00%        +2.04%  

1-Year

     +19.83%        +19.79%        +19.83%        +19.79%  

3-Year

     -41.81%        -41.87%        -16.52%        -16.54%  

Since Inception (2/25/20)

     -1.13%        -1.17%        -0.32%        -0.33%  

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.

 

     
4         Semiannual Report    franklintempleton.com


FRANKLIN DISRUPTIVE COMMERCE ETF

PERFORMANCE SUMMARY

    

 

Total Annual Operating Expenses5

 

  

  0.50%              

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. Equity securities are subject to price fluctuation and possible loss of principal. The Fund’s investment strategies incorporate the identification of thematic investment opportunities, and its performance may be negatively impacted if the investment manager does not correctly identify such opportunities or if the theme develops in an unexpected manner. By focusing its investments in consumer discretionary-related industries, the Fund carries much greater risks of adverse developments and price movements in such industries than a fund that invests in a wider variety of industries. 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. The portfolio is non-diversified and may invest in a relatively small number of issuers, which may negatively impact the Fund’s performance and result in greater fluctuation in the value of the Fund’s shares. The manager may consider environmental, social and governance (ESG) criteria in the research or investment process; however, ESG considerations may not be a determinative factor in security selection. In addition, the manager may not assess every investment for ESG criteria, and not every ESG factor may be identified or evaluated. 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. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

4. Assumes reinvestment of distributions based on market price.

5. 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.

 

     
franklintempleton.com    Semiannual Report          5


FRANKLIN DISRUPTIVE COMMERCE ETF

    

 

Your Fund’s Expenses

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

Actual Fund Expenses

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

Hypothetical Example for Comparison with Other Funds

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

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

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       

Beginning

Account

        Value 4/1/23

    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Net Annualized
Expense Ratio
 
  $1,000.00       $1,020.00       $2.53       $1,022.50       $2.53       0.50

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 183/366 to reflect the one-half year period.

 

     
6         Semiannual Report    franklintempleton.com


Franklin Dynamic Municipal Bond ETF

 

This semiannual report for Franklin Dynamic Municipal Bond ETF covers the period ended September 30, 2023.

Fund Overview

Your Fund’s Goal and Main Investments

The Fund seeks to provide a high level of current income that is exempt from federal income taxes, including the federal alternative minimum tax, by normally investing at least 80% of its net assets in municipal securities whose interest is free from such taxes.1 The Fund seeks to maintain a dollar-weighted average portfolio maturity (the time in which the debt must be repaid) of three to 10 years, and may invest in municipal securities in any rating category by U.S. nationally recognized rating services (or unrated or short-term rated securities of comparable quality), including securities rated below investment grade and securities of issuers that are, or are about to be, involved in reorganizations, financial restructuring, or bankruptcy.

Performance Overview

During the six-month period, the Fund posted cumulative total returns of -2.18% based on market price and -2.01% based on net asset value (NAV). In comparison, the Bloomberg Municipal 1-15 Year Index, which is a subset of the Bloomberg Municipal Bond Index (a market value-weighted index of tax-exempt, investment-grade municipal bonds with maturities of one year or more) posted a -3.25% 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 8.

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
Investments
 
Industrial Development Revenue and Pollution Control      32.36%  
Special Tax      20.15%  
Health Care      14.01%  
Education      8.02%  
Transportation      5.75%  
Housing      5.07%  
Local      4.56%  
Lease      2.59%  
State      2.21%  
Other      2.07%  
Cash      1.78%  
Utilities      1.30%  
Refunded      0.13%  

Thank you for your participation in Franklin Dynamic Municipal Bond ETF. We look forward to serving your future investment needs.

Ben Barber, CFA

Daniel Workman, CFA

Francisco Rivera

James Conn, CFA

Portfolio Management Team

 

CFA® is a trademark owned by CFA institute.

1. Dividends are generally subject to state and local taxes, if any. For investors subject to alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and redemption proceeds, U.S. investors must be properly certified on Form W-9 and non-U.S. investors on Form W-8BEN.

2. Source: Morningstar. Treasuries, if held to maturity, offer a fixed rate of return and a fixed principal value; their interest payments and principal are guaranteed.

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 81.

 

     
franklintempleton.com    Semiannual Report          7


FRANKLIN DYNAMIC MUNICIPAL 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 tables do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (9/5/17), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.

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

Performance as of 9/30/231,2

 

             Cumulative Total Return3      Average Annual Total Return3  
      Based on
NAV4
     Based on
market price5
     Based on
NAV4
     Based on
market price5
 

6-Month

     -2.01%        -2.18%        -2.01%        -2.18%  

1-Year

     +4.35%        +4.57%        +4.35%        +4.57%  

3-Year

     -2.67%        -2.60%        -0.90%        -0.88%  

5-Year

     +7.94%        +7.89%        +1.54%        +1.53%  

Since Inception (8/31/17)

     +7.01%        +6.99%        +1.12%        +1.12%  

 

Distribution Rate6    30-Day
Standardized Yield7
     Taxable Equivalent 30-Day
Standardized  Yield8
 

4.06%

     4.23%        7.15%  

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 9 for Performance Summary footnotes.

 

     
8         Semiannual Report    franklintempleton.com


FRANKLIN DYNAMIC MUNICIPAL BOND ETF

PERFORMANCE SUMMARY

    

 

Distributions (4/1/23–9/30/23)

 

Net Investment
Income

$0.461108

Total Annual Operating Expenses9

 

  0.30%              

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. 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. Low-rated, high-yield bonds are subject to greater price volatility, illiquidity and possibility of default. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value. Unrated debt securities have less public information and independent credit analysis and they may be subject to a greater risk of illiquidity, price changes or default. 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 sourced from the Fund’s prospectus available at the time of publication. Actual expenses may be higher and may impact portfolio returns.

2. Effective December 1, 2022, the Fund adopted a unified fee structure whereby Management has agreed to reimburse the Fund’s acquired fund fees and expenses (if any) and pay all of the ordinary operating expenses of the Fund, excluding: (i) payments under the Fund’s Rule 12b-1 plan (if any); (ii) brokerage expenses (including any costs incidental to transactions in portfolio securities or instruments); (iii) taxes; (iv) interest (including borrowing costs and dividend expenses on securities sold short and overdraft charges); (v) 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 (vi) other non-routine or extraordinary expenses.

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

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

5. Assumes reinvestment of distributions based on market price.

6. Distribution rate is based on an annualization of the September dividend and the NAV per share on 9/30/23.

7. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.

8. Taxable equivalent yield assumes the 2023 maximum federal income tax rate of 37.00% plus 3.80% Medicare tax.

9. 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.

 

     
franklintempleton.com    Semiannual Report          9


FRANKLIN DYNAMIC MUNICIPAL BOND ETF

    

 

Your Fund’s Expenses

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

Actual Fund Expenses

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

Hypothetical Example for Comparison with Other Funds

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

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

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       
Beginning
Account
        Value 4/1/23
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Net Annualized
Expense Ratio
 
  $1,000.00       $979.90       $1.48       $1,023.50       $1.52       0.30

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 183/366 to reflect the one-half year period.

 

     
10         Semiannual Report    franklintempleton.com


Franklin Exponential Data ETF

 

This semiannual report for Franklin Exponential Data ETF covers the period ended September 30, 2023.

Fund Overview

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation. Under normal market conditions, the Fund invests at least 80% of its net assets in equity securities, predominantly common stock, of companies that are relevant to the Fund’s investment theme of exponential data. These companies include those that we believe are substantially focused on and/or are expected to substantially benefit from the use of large data sets and/or growth of data, including systems, services, hardware, software and other digital and physical infrastructure related to data products or services, as outlined in more detail in the Prospectus.

Performance Overview

During the six-month period, the Fund posted cumulative total returns of +6.65% based on market price and +6.52% based on net asset value (NAV). In comparison, the Russell 3000® Index, which measures the performance of the largest 3,000 U.S. companies representing the majority of the U.S. market’s total capitalization, posted a +4.86% cumulative total return for the same period.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 13.

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
 
Software      44.9%  
IT Services      18.7%  
Interactive Media & Services      8.5%  
Specialized REITs      7.2%  
Capital Markets      6.6%  
Communications Equipment      3.0%  
Wireless Telecommunication Services      3.0%  
Media      2.4%  
Other      2.8%  
Short-Term Investments & Other Net Assets      2.9%  

 

Top 10 Holdings       
9/30/23       

Company

Sector/Industry

   % of Total
Net Assets
 

Microsoft Corp.

Information Technology

     8.4%  

MongoDB, Inc.

Information Technology

     7.3%  

Palo Alto Networks, Inc.

Information Technology

     5.0%  

ServiceNow, Inc.

Information Technology

     5.0%  

Alphabet, Inc., Class A

Communication Services

     4.9%  

Datadog, Inc., Class A

Information Technology

     4.7%  

Equinix, Inc.

Real Estate

     4.4%  

Snowflake, Inc., Class A

Information Technology

     3.9%  

Crowdstrike Holdings, Inc., Class A

Information Technology

     3.7%  

Fair Isaac Corp.

Information Technology

     3.5%  

 

1. Source: Morningstar.

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 94.

 

     
franklintempleton.com    Semiannual Report          11


FRANKLIN EXPONENTIAL DATA ETF

    

 

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

Matthew J. Moberg, CPA

Portfolio Manager

    

 

     
12         Semiannual Report    franklintempleton.com


FRANKLIN EXPONENTIAL DATA 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 (1/14/21), 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 Return2      Average Annual Total Return2  
      Based on
NAV3
     Based on
market price4
     Based on
NAV3
     Based on
market price4
 

6-Month

     +6.52%        +6.65%        +6.52%        +6.65%  

1-Year

     +13.74%        +13.74%        +13.74%        +13.74%  

Since Inception (1/12/21)

     -28.16%        -99.98%        -11.47%        -95.83%  

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 14 for Performance Summary footnotes.

 

     
franklintempleton.com    Semiannual Report          13


FRANKLIN EXPONENTIAL DATA ETF

PERFORMANCE SUMMARY

    

 

Total Annual Operating Expenses5

  

  0.50%              

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. Equity securities are subject to price fluctuation and possible loss of principal. The Fund’s investment strategies incorporate the identification of thematic investment opportunities, and its performance may be negatively impacted if the investment manager does not correctly identify such opportunities or if the theme develops in an unexpected manner. By focusing its investments in information technology-related industries, it carries much greater risks of adverse developments and price movements in such industries than a fund that invests in a wider variety of industries. 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. 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. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

4. Assumes reinvestment of distributions based on market price.

5. 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.

 

     
14         Semiannual Report    franklintempleton.com


FRANKLIN EXPONENTIAL DATA ETF

    

 

Your Fund’s Expenses

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

Actual Fund Expenses

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

Hypothetical Example for Comparison with Other Funds

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

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

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       

Beginning

Account

        Value 4/1/23

    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Net Annualized
Expense Ratio
 
  $1,000.00       $1,065.20       $2.48       $1,022.60       $2.43       0.48

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 183/366 to reflect the one-half year period.

 

     
franklintempleton.com    Semiannual Report          15


Franklin Genomic Advancements ETF

 

This semiannual report for Franklin Genomic Advancements ETF covers the period ended September 30, 2023.

Fund Overview

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation. Under normal market conditions, the Fund invests at least 80% of its net assets in equity securities, predominantly common stock, of companies that are relevant to the Fund’s investment theme of genomic advancements. These companies include those that we believe are substantially focused on and/or are expected to substantially benefit from extending and enhancing the quality of human and other life (e.g. animals) through technological and scientific developments, improvements and advancements in such areas as genetic engineering, gene therapy, genome analysis and other uses, as outlined in more detail in the Prospectus.

Performance Overview

During the six-month period, the Fund posted cumulative total returns of -6.71% based on market price and -6.71% based on net asset value (NAV). In comparison, the Russell 3000® Index, which measures the performance of the largest 3,000 U.S. companies representing the majority of the U.S. market’s total capitalization, posted a +4.86% cumulative total return for the same period.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 18.

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
 
Life Sciences Tools & Services      48.7%  
Biotechnology      32.8%  
Pharmaceuticals      6.3%  
Chemicals      2.8%  
Health Care Providers & Services      2.5%  
Health Care Technology      2.1%  
Other      2.0%  
Other Net Assets      2.8%  

 

Top 10 Holdings       
9/30/23       

Company

Sector/Industry

   % of Total
Net Assets
 

Thermo Fisher Scientific, Inc.

Life Sciences Tools & Services

     6.2%  

Danaher Corp.

Life Sciences Tools & Services

     6.1%  

Medpace Holdings, Inc.

Life Sciences Tools & Services

     5.5%  

Repligen Corp.

Life Sciences Tools & Services

     5.1%  

Vertex Pharmaceuticals, Inc.

Biotechnology

     4.2%  

Regeneron Pharmaceuticals, Inc.

Biotechnology

     4.1%  

Sartorius AG, 0.45%

Life Sciences Tools & Services

     3.2%  

Krystal Biotech, Inc.

Biotechnology

     3.0%  

Samsung Biologics Co. Ltd.

Life Sciences Tools & Services

     2.9%  

Corteva, Inc.

Chemicals

     2.8%  

 

1. Source: Morningstar.

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 97.

 

     
16         Semiannual Report    franklintempleton.com


FRANKLIN GENOMIC ADVANCEMENTS ETF

    

 

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

Matthew J. Moberg, CPA

Portfolio Manager

    

 

     
franklintempleton.com    Semiannual Report          17


FRANKLIN GENOMIC ADVANCEMENTS 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 (2/27/20), 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 Return2      Average Annual Total Return2  
      Based on
NAV3
     Based on
market price4
     Based on
NAV3
     Based on
market price4
 

6-Month

     -6.71%        -6.71%        -6.71%        -6.71%  

1-Year

     -4.45%        -4.45%        -4.45%        -4.45%  

3-Year

     -18.70%        -18.99%        -6.67%        -6.78%  

Since Inception (2/25/20)

     +13.86%        +13.78%        +3.67%        +3.65%  

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

See page 19 for Performance Summary footnotes.

 

     
18         Semiannual Report    franklintempleton.com


FRANKLIN GENOMIC ADVANCEMENTS ETF

PERFORMANCE SUMMARY

    

 

Total Annual Operating Expenses5

  

  0.50%              

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. Equity securities are subject to price fluctuation and possible loss of principal. The Fund’s investment strategies incorporate the identification of thematic investment opportunities, and its performance may be negatively impacted if the investment manager does not correctly identify such opportunities or if the theme develops in an unexpected manner. By focusing its investments in health care-related industries, the Fund carries much greater risks of adverse developments and price movements in such industries than a fund that invests in a wider variety of industries. 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. The portfolio is non-diversified and may invest in a relatively small number of issuers, which may negatively impact the Fund’s performance and result in greater fluctuation in the value of the Fund’s shares. The manager may consider environmental, social and governance (ESG) criteria in the research or investment process; however, ESG considerations may not be a determinative factor in security selection. In addition, the manager may not assess every investment for ESG criteria, and not every ESG factor may be identified or evaluated. 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. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

4. Assumes reinvestment of distributions based on market price.

5. 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.

 

     
franklintempleton.com    Semiannual Report          19


FRANKLIN GENOMIC ADVANCEMENTS ETF

    

 

Your Fund’s Expenses

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

Actual Fund Expenses

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

Hypothetical Example for Comparison with Other Funds

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

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

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       

Beginning

Account

        Value 4/1/23

    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Net Annualized
Expense Ratio
 
  $1,000.00       $932.90       $2.42       $1,022.50       $2.53       0.50

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 183/366 to reflect the one-half year period.

 

     
20         Semiannual Report    franklintempleton.com


Franklin High Yield Corporate ETF

 

This semiannual report for Franklin High Yield Corporate ETF covers the period ended September 30, 2023.

Fund Overview

Your Fund’s Goal and Main Investments

The Fund seeks to earn a high level of current income. Its secondary goal is to seek capital appreciation to the extent it is possible and consistent with the Fund’s principal goal. The Fund normally invests at least 80% of its net assets in high yield corporate debt securities and investments that provide exposure to high yield corporate debt securities, including bonds, notes, debentures, convertible securities, bank loans and corporate loans, and senior and subordinated debt securities.

Performance Overview

During the six-month period, the Fund posted cumulative total returns of +1.84 based on market price and +2.88% based on net asset value (NAV). In comparison, the ICE BofA U.S. High Yield Constrained Index, which tracks the performance of U.S. dollar denominated below investment-grade corporate debt publicly issued in the U.S. domestic market, posted a +2.18% cumulative total return for the same period.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 23.

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

Portfolio Composition       
9/30/23       
      % of Total
Net Assets
 
Corporate Bonds & Notes      91.9%  
Senior Floating Rate Interests      3.7%  
Common Stocks      0.7%  
Short-Term Investments & Other Net Assets      3.7%  

 

Top 10 Sectors/Industries       
9/30/23       
      % of Total
Net Assets
 
Energy      10.6%  
Media & Entertainment      8.9%  
Materials      7.8%  
Financial Services      5.9%  
Consumer Services      4.7%  
Capital Goods      4.2%  
Commercial & Professional Services      4.0%  
Utilities      3.7%  
Oil & Gas      3.6%  
Automobiles & Components      3.3%  

 

1. Source: Morningstar. Treasuries, if held to maturity, offer a fixed rate of return and a fixed principal value; their interest payments and principal are guaranteed.

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 100.

 

     
franklintempleton.com    Semiannual Report          21


FRANKLIN HIGH YIELD CORPORATE ETF

    

 

Top 10 Holdings       
9/30/23       

Company

Sector/Industry

   % of Total
Net Assets
 

Federal Home Loan Bank Discount Notes, 10/02/23

     2.6%  

Vistra Operations Co. LLC, 5.50%, 9/01/26

Utilities

     1.3%  

TransDigm, Inc., 6.25%, 3/15/26

Capital Goods

     1.2%  

Harbour Energy PLC, 5.50%, 10/15/26

Energy

     1.0%  

United Rentals North America, Inc., 5.50%, 5/15/27

Commercial Services

     1.0%  

Jaguar Land Rover Automotive PLC, 5.50%, 7/15/29

Automobiles & Components

     1.0%  

Martin Midstream Partners LP/Martin Midstream

  Finance Corp., 11.50%, 2/15/28

Pipelines

     0.9%  

DaVita, Inc., 4.625%, 6/01/30

Health Care Equipment & Services

     0.9%  

Mauser Packaging Solutions Holding Co.,

  7.875%, 8/15/26

Packaging & Containers

     0.9%  

Carnival Corp., 5.75%, 3/01/27

Consumer Services

     0.9%  

Thank you for your participation in Franklin High Yield Corporate ETF. We look forward to serving your future investment needs.

Glenn I. Voyles, CFA

Patricia O’Connor, CFA

Jonathan G. Belk, CFA

Thomas Runkel, CFA

Pururav Thoutireddy, Ph.D.

Portfolio Management Team

    

 

     
22         Semiannual Report    franklintempleton.com


FRANKLIN HIGH YIELD CORPORATE 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 tables do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (6/1/18), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.

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

Performance as of 9/30/231

 

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

6-Month

     +2.88%        +1.84%        +2.88%        +1.84%  

1-Year

     +11.59%        +12.04%        +11.59%        +12.04%  

3-Year

     +5.65%        +5.37%        +1.85%        +1.76%  

Since Inception (5/30/18)

     +23.53%        +23.49%        +4.04%        +4.03%  

 

Distribution Rate5    30-Day 
Standardized Yield6
 

6.95%

     7.89%  

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 24 for Performance Summary footnotes.

 

     
franklintempleton.com    Semiannual Report          23


FRANKLIN HIGH YIELD CORPORATE ETF

PERFORMANCE SUMMARY

    

 

Distributions (4/1/23–9/30/23)

 

Net Investment

Income

$0.784402

Total Annual Operating Expenses7

 

  0.40%              

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. 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. Distributions are not guaranteed and are subject to change. Low-rated, high-yield bonds are subject to greater price volatility, illiquidity and possibility of default. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value. Liquidity risk exists when securities or other investments become more difficult to sell, or are unable to be sold, at the price at which they have been valued. Derivative instruments can be illiquid, may disproportionately increase losses, and have a potentially large impact on performance. The manager may consider environmental, social and governance (ESG) criteria in the research or investment process; however, ESG considerations may not be a determinative factor in security selection. In addition, the manager may not assess every investment for ESG criteria, and not every ESG factor may be identified or evaluated. 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. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

4. Assumes reinvestment of distributions based on market price.

5. Distribution rate is based on an annualization of the September dividend and the NAV per share on 9/30/23.

6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.

7. 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.

 

     
24         Semiannual Report    franklintempleton.com


FRANKLIN HIGH YIELD CORPORATE ETF

    

 

Your Fund’s Expenses

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

Actual Fund Expenses

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

Hypothetical Example for Comparison with Other Funds

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

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

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       

Beginning

Account

        Value 4/1/23

    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Net Annualized
Expense Ratio
 
  $1,000.00       $1,028.80       $2.03       $1,023.00       $2.02       0.40

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 183/366 to reflect the one-half year period.

 

     
franklintempleton.com    Semiannual Report          25


Franklin Income Focus ETF

 

This inaugural semiannual report for Franklin Income Focus ETF (the “Fund”) covers the period since the Fund’s inception on June 6, 2023, through September 30, 2023.

Fund Overview

Your Fund’s Goal and Main Investments

The Fund seeks high current income while maintaining prospects for capital appreciation. Under normal market conditions, the Fund invests in a diversified portfolio of debt and equity securities, “Income Focus” in the Fund’s name refers to the Fund’s strategy of seeking to maximize income over a full market cycle by investing opportunistically across different asset classes, markets and sectors and utilizing income generation strategies. The equity securities in which the Fund invests consist primarily of common stocks and convertible preferred securities. Debt securities include all varieties of fixed, floating and variable rate instruments, including secured and unsecured bonds, senior floating rate and term loans, mortgage-backed securities and other asset-backed securities, debentures, and shorter-term instruments.

Performance Overview

Since the Fund’s inception through September 30, 2023, the Fund posted cumulative total returns of -1.49% based on market price and -1.73% based on net asset value (NAV). In comparison, the Blended Benchmark, which consists of 50% Standard & Poor’s® 500 Index (S&P 500®) and 50% Bloomberg U.S Aggregate Index, posted a -1.38% total return.1 The S&P 500® posted a +0.59% total return and the Bloomberg U.S Aggregate Index posted a -3.42% total return for the same period.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 28.

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
 
Corporate Bonds & Notes      52.5%  
Equity-Linked Securities      20.5%  
Common Stocks      19.2%  
U.S. Government & Agency Securities      6.5%  
Other Net Assets      1.3%  

 

Top 10 Long Positions       
9/30/23       

Company

Sector/Industry, Country

   % of Total
Net Assets
 

U.S. Treasury Bonds, 3.625%, 5/15/2053,

United States

     3.1%  

U.S. Treasury Notes, 3.375%, 5/15/2033,

United States

     2.4%  

Chevron Corp., Oil, Gas & Consumable Fuels,

United States

     2.2%  

Wells Fargo Bank NA, Other,

United States

     2.1%  

GS Finance Corp., Other,

United States

     2.1%  

Royal Bank of Canada, Other,

Canada

     2.0%  

Royal Bank of Canada,

Other, Canada

     2.0%  

JPMorgan Chase Financial Co. LLC, zero cpn.,

Other, United States

     1.6%  

UBS AG,

Other, Switzerland

     1.6%  

Citigroup Global Markets Holdings, Inc.,

Other, United States

     1.6%  

 

1. Source: FactSet. The Fund’s Blended Benchmark was calculated internally and was composed of 50% S&P 500® Index + 50% Bloomberg U.S. Aggregate Index.

2. Source: FactSet.

The indexes are unmanaged and include reinvestment of any income or distributions. They do 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 109.

 

     
26         Semiannual Report    franklintempleton.com


FRANKLIN INCOME FOCUS ETF

    

 

Thank you for your continued participation in Franklin

Income Focus ETF. We look forward to serving your future

investment needs.

Edward D. Perks, CFA

Todd Brighton, CFA

Brendan Circle, CFA

Portfolio Management Team

    

 

     
franklintempleton.com    Semiannual Report          27


FRANKLIN INCOME FOCUS 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 tables do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (6/8/23), 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 Return2      Average Annual Total Return2  
      Based on
NAV3
     Based on
market price4
     Based on
NAV3
     Based on
market price4
 

Since Inception (6/6/23)

     -1.73%        -1.49%        -1.73%        -1.49%  

 

Distribution Rate5    30-Day
Standardized Yield6
 

6.69%

     6.00%  

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 29 for Performance Summary footnotes.

 

     
28         Semiannual Report    franklintempleton.com


FRANKLIN INCOME FOCUS ETF

PERFORMANCE SUMMARY

    

 

Distributions (6/6/23–9/30/23)

 

Net Investment

Income

$0.325544

Total Annual Operating Expenses7

 

  0.38%              

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. Bond prices generally move in the opposite direction of interest rates. Thus, as the prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. Low-rated, high-yield bonds are subject to greater price volatility, illiquidity and possibility of default. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Investments in equity index-linked notes often have risks similar to their underlying securities, which could include management risk, market risk and, as applicable, foreign securities and currency risks. The allocation of assets among different strategies, asset classes and investments may not prove beneficial or produce the desired results. Derivative instruments can be illiquid, may disproportionately increase losses, and have a potentially large impact on performance. The manager may consider environmental, social and governance (ESG) criteria in the research or investment process; however, ESG considerations may not be a determinative factor in security selection. In addition, the manager may not assess every investment for ESG criteria, and not every ESG factor may be identified or evaluated. These and other risk considerations 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. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

4. Assumes reinvestment of distributions based on market price.

5. Distribution rate is based on an annualization of the September dividend and the NAV per share on 9/30/23.

6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.

7. 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.

 

     
franklintempleton.com    Semiannual Report          29


FRANKLIN INCOME FOCUS ETF

    

 

Your Fund’s Expenses

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

Actual Fund Expenses

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

Hypothetical Example for Comparison with Other Funds

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

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

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       
Beginning
Account
        Value 6/6/23
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
6/6/23–9/30/231,2
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
6/6/23–9/30/231,2
    Net Annualized
Expense Ratio2
 
  $1,000.00       $982.70       $1.19       $1,023.10       $1.92       0.38

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 116/366 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements.

 

     
30         Semiannual Report    franklintempleton.com


Franklin Intelligent Machines ETF

 

This semiannual report for Franklin Intelligent Machines ETF covers the period ended September 30, 2023.

Fund Overview

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation. Under normal market conditions, the Fund invests at least 80% of its net assets in equity securities, predominantly common stock, of companies that are relevant to the Fund’s investment theme of intelligent machines. These companies include those that we believe are substantially focused on and/or are expected to substantially benefit from the ongoing technology-driven transformation of products, software, systems and machinery as well as product design, manufacture, logistics, distribution and maintenance, including through developments in artificial intelligence, as outlined in more detail in the Prospectus.

Performance Overview

During the six-month period, the Fund posted cumulative total returns of +0.32 based on market price and +0.18% based on net asset value (NAV). In comparison, the Russell 3000® Index, which measures the performance of the largest 3,000 U.S. companies representing the majority of the U.S. market’s total capitalization, posted a +4.86% cumulative total return for the same period.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 33.

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
 

Semiconductors & Semiconductor Equipment

     35.9%  

Software

     25.3%  

Health Care Equipment & Supplies

     9.6%  

Electronic Equipment, Instruments & Components

     7.3%  

Automobiles

     5.5%  

Computers & Peripherals

     4.7%  

Construction & Engineering

     3.0%  

Aerospace & Defense

     2.8%  

Other

     3.0%  

Other Net Assets

     2.9%  

 

Top 10 Holdings       
9/30/23       

Company

Sector/Industry

   % of Total
Net Assets
 

NVIDIA Corp.

Semiconductors & Semiconductor Equipment

     9.9%  

Tesla, Inc.

Automobiles

     5.5%  

Synopsys, Inc.

Software

     4.9%  

Cadence Design Systems, Inc.

Software

     4.8%  

Apple, Inc.

Computers & Peripherals

     4.7%  

Intuitive Surgical, Inc.

Health Care Equipment & Supplies

     4.7%  

ASML Holding NV

Semiconductors & Semiconductor Equipment

     4.2%  

Applied Materials, Inc.

Semiconductors & Semiconductor Equipment

     2.8%  

Axon Enterprise, Inc.

Aerospace & Defense

     2.8%  

Taiwan Semiconductor Manufacturing Co. Ltd.

Semiconductors & Semiconductor Equipment

     2.8%  

 

 

 

1. Source: Morningstar.

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.

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 116.

 

     
franklintempleton.com    Semiannual Report          31


FRANKLIN INTELLIGENT MACHINES ETF

    

 

Thank you for your continued participation in Franklin Intelligent Machines ETF. We look forward to serving your future investment needs.

Matthew J. Moberg, CPA

Portfolio Manager

    

 

     
32         Semiannual Report    franklintempleton.com


FRANKLIN INTELLIGENT MACHINES 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 (2/27/20), 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 Return2      Average Annual Total Return2  
      Based on
NAV3
     Based on
market price4
     Based on
NAV3
     Based on
market price4
 

6-Month

     +0.18%        +0.32%        +0.18%        +0.32%  

1-Year

     +30.81%        +31.10%        +30.81%        +31.10%  

3-Year

     +30.09%        +29.66%        +9.17%        +9.04%  

Since Inception (2/25/20)

     +77.29%        +77.21%        +17.26%        +17.24%  

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 34 for Performance Summary footnotes.

 

     
franklintempleton.com    Semiannual Report          33


FRANKLIN INTELLIGENT MACHINES ETF

PERFORMANCE SUMMARY

    

 

Total Annual Operating Expenses5

  

  0.50%              

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. Equity securities are subject to price fluctuation and possible loss of principal. The Fund’s investment strategies incorporate the identification of thematic investment opportunities, and its performance may be negatively impacted if the investment manager does not correctly identify such opportunities or if the theme develops in an unexpected manner. By focusing its investments in technology-related industries, the Fund carries much greater risks of adverse developments and price movements in such industries than a fund that invests in a wider variety of industries. The portfolio is non-diversified and may invest in a relatively small number of issuers, which may negatively impact the Fund’s performance and result in greater fluctuation in the value of the Fund’s shares. 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. The manager may consider environmental, social and governance (ESG) criteria in the research or investment process; however, ESG considerations may not be a determinative factor in security selection. In addition, the manager may not assess every investment for ESG criteria, and not every ESG factor may be identified or evaluated. 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. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

4. Assumes reinvestment of distributions based on market price.

5. 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.

 

     
34         Semiannual Report    franklintempleton.com


FRANKLIN INTELLIGENT MACHINES ETF

    

 

Your Fund’s Expenses

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

Actual Fund Expenses

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

Hypothetical Example for Comparison with Other Funds

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

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

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       
Beginning
Account
        Value 4/1/23
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Net Annualized
Expense Ratio
 
  $1,000.00       $1,001.80       $2.50       $1,022.50       $2.53       0.50

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 183/366 to reflect the one-half year period.

 

     
franklintempleton.com    Semiannual Report          35


Franklin International Aggregate Bond ETF

 

This semiannual report for Franklin International Aggregate Bond ETF covers the period ended September 30, 2023.

Fund Overview

Your Fund’s Goal and Main Investments

The Fund seeks total investment return, consistent with prudent investing, consisting of a combination of interest income and capital appreciation. Under normal market conditions, the Fund invests at least 80% of its net assets in bonds and investments that provide exposure to bonds. Bonds include debt obligations of any maturity, such as bonds, notes, bills and debentures.

Geographic Composition*

9/30/23

 

     % of Total
Net Assets
 

 

 

Europe

     55.0%  

Asia

     14.6%  

North America

     7.1%  

Latin America & Caribbean

     3.8%  

Australia & New Zealand

     3.1%  

Supranationals

     2.5%  

Middle East & Africa

     1.1%  

Short-Term Investments & Other Net Assets

     12.8%  

*Categories within the Other category are listed in full in the Fund’s Schedule of Investments (SOI), which can be found later in this report.

Performance Overview

During the six-month period, the Fund posted cumulative total returns of -1.32% based on market price and -1.02% based on net asset value (NAV). In comparison, the Fund’s benchmark, the Bloomberg Global Aggregate Bond ex-USD Index (100% Hedged to USD), which measures global investment-grade debt from 24 local currency markets, posted a -0.05% cumulative total return.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 37.

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
 

 

 

Foreign Government and Agency Securities

     81.6%  

Corporate Bonds & Notes

     5.6%  

Short-Term Investments & Other Net Assets

     12.8%  

Thank you for your participation in Franklin International Aggregate Bond ETF. We look forward to serving your future investment needs.

John W. Beck

Co-Lead Portfolio Manager

Sonal Desai, Ph.D.

Co-Lead Portfolio Manager

David Zahn, CFA

Patrick Klein, Ph.D.

Portfolio Management Team

 

1. Source: Morningstar. Treasuries, if held to maturity, offer a fixed rate of return and a fixed principal value; their interest payments and principal are guaranteed.

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 119.

 

     
36         Semiannual Report    franklintempleton.com


FRANKLIN INTERNATIONAL AGGREGATE 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 tables do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (6/1/18), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.

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

Performance as of 9/30/231

 

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

6-Month

     -1.02%        -1.32%        -1.02%        -1.32%  

1-Year

     +0.35%        +0.39%        +0.35%        +0.39%  

3-Year

     -7.75%        -7.50%        -2.65%        -2.56%  

5-Year

     -0.21%        +0.39%        -0.04%        +0.08%  

Since Inception (5/30/18)

     -2.12%        -2.06%        -0.40%        -0.39%  

 

Distribution Rate5   

30-Day

Standardized Yield6

13.87%    3.01%

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 38 for Performance Summary footnotes.

 

     
franklintempleton.com    Semiannual Report          37


FRANKLIN INTERNATIONAL AGGREGATE BOND ETF

PERFORMANCE SUMMARY

    

 

Total Annual Operating Expenses7

 

  0.25%              

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. 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. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value. 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. Derivative instruments can be illiquid, may disproportionately increase losses, and have a potentially large impact on performance. The manager may consider environmental, social and governance (ESG) criteria in the research or investment process; however, ESG considerations may not be a determinative factor in security selection. In addition, the manager may not assess every investment for ESG criteria, and not every ESG factor may be identified or evaluated. 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. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

4. Assumes reinvestment of distributions based on market price.

5. Distribution rate is based on an annualization of the September dividend and the NAV per share on 9/30/23.

6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.

7. 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.

 

     
38         Semiannual Report    franklintempleton.com


FRANKLIN INTERNATIONAL AGGREGATE BOND ETF

    

 

Your Fund’s Expenses

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

Actual Fund Expenses

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

Hypothetical Example for Comparison with Other Funds

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

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

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       
Beginning
Account
        Value 4/1/23
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Net Annualized
Expense Ratio
 
  $1,000.00       $989.80       $1.24       $1,023.75       $1.26       0.25

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 183/366 to reflect the one-half year period.

 

     
franklintempleton.com    Semiannual Report          39


Franklin Investment Grade Corporate ETF

 

This semiannual report for Franklin Investment Grade Corporate ETF covers the period ended September 30, 2023.

Fund Overview

Your Fund’s Goal and Main Investments

The Fund seeks a high level of current income as is consistent with prudent investing, while seeking preservation of capital. Under normal market conditions, the Fund invests at least 80% of its net assets in investment-grade corporate debt securities and investments.

Performance Overview

During the six-month period, the Fund posted cumulative total returns of -3.63% based on market price and -3.30% based on net asset value (NAV).1 In comparison, the Bloomberg U.S. Corporate Investment Grade Index, which measures the performance of the investment grade, fixed-rate, taxable corporate bond market, posted a -3.37% cumulative total return for the same period.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 42.

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

Top 10 Sectors/Industries       
9/30/23       
      % of Total
Net Assets
 

Banks

     21.6%  

Electric Utilities

     6.9%  

Electric

     4.9%  

Financial Services

     4.7%  

Health Care Providers & Services

     4.0%  

Biotechnology

     3.7%  

Insurance

     3.3%  

Oil, Gas & Consumable Fuels

     3.1%  

Pharmaceuticals

     3.0%  

Agriculture

     2.9%  

 

Top 10 Holdings       
9/30/23       
Issue/Issuer    % of Total
Net Assets
 

Verizon Communications, Inc., 3.40%, 3/22/41

     1.6%  

Bank of America Corp., 5.202% to 4/25/28, FRN thereafter, 4/25/29

     1.5%  

Goldman Sachs Group, Inc., 2.64% to 2/24/27, FRN thereafter, 2/24/28

     1.4%  

U.S. Treasury Notes, 4.375%, 8/31/28

     1.4%  

Amgen, Inc., 5.60%, 3/02/43

     1.3%  

Wells Fargo & Co., 4.808% to 7/25/27, FRN thereafter, 7/25/28

     1.3%  

Vistra Operations Co. LLC, 3.55%, 7/15/24

     1.3%  

T-Mobile USA, Inc., 2.875%, 2/15/31

     1.3%  

BPCE SA, 5.70%, 10/22/23

     1.2%  

Elevance Health, Inc., 4.10%, 5/15/32

     1.2%  

Effective March 2023, Josh Lohmeier was added as a portfolio manager.

 

1. Source: Morningstar. Treasuries, if held to maturity, offer a fixed rate of return and a fixed principal value; their interest payments and principal are guaranteed.

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 124.

 

     
40         Semiannual Report    franklintempleton.com


FRANKLIN INVESTMENT GRADE CORPORATE ETF

    

 

Thank you for your participation in Franklin Investment Grade Corporate ETF. We look forward to serving your future investment needs.

Marc Kremer, CFA

Shawn Lyons, CFA

Thomas Runkel, CFA

Pururav Thoutireddy, Ph.D.

Josh Lohmeier, CFA

Portfolio Management Team

    

 

     
franklintempleton.com    Semiannual Report          41


FRANKLIN INVESTMENT GRADE CORPORATE 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 tables do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (10/5/16), 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 Return2      Average Annual Total Return2  
      Based on
NAV3
     Based on
market price4
     Based on
NAV3
     Based on
market price4
 

6-Month

     -3.30%        -3.63%        -3.30%        -3.63%  

1-Year

     +3.16%        +3.05%        +3.16%        +3.05%  

3-Year

     -15.32%        -15.39%        -5.39%        -5.42%  

5-Year

     +2.80%        +2.67%        +0.55%        +0.53%  

Since Inception (10/3/16)

     +3.45%        +3.28%        +0.49%        +0.46%  

 

Distribution Rate5    30-Day
Standardized Yield6
 

4.64%

     5.56%  

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 43 for Performance Summary footnotes.

 

     
42         Semiannual Report    franklintempleton.com


FRANKLIN INVESTMENT GRADE CORPORATE ETF

PERFORMANCE SUMMARY

    

 

Distributions (4/1/23–9/30/23)

 

Net Investment
Income

$0.434617

Total Annual Operating Expenses7

 

  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. 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. Distributions are not guaranteed and are subject to change. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value. 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. Derivative instruments can be illiquid, may disproportionately increase losses, and have a potentially large impact on performance. The manager may consider environmental, social and governance (ESG) criteria in the research or investment process; however, ESG considerations may not be a determinative factor in security selection. In addition, the manager may not assess every investment for ESG criteria, and not every ESG factor may be identified or evaluated. 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. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

4. Assumes reinvestment of distributions based on market price.

5. Distribution rate is based on an annualization of the September dividend and the NAV per share on 9/30/23.

6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.

7. 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.

 

     
franklintempleton.com    Semiannual Report          43


FRANKLIN INVESTMENT GRADE CORPORATE ETF

    

 

Your Fund’s Expenses

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

Actual Fund Expenses

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

Hypothetical Example for Comparison with Other Funds

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

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

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       
Beginning
Account
        Value 4/1/23
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Net Annualized
Expense Ratio
 
  $1,000.00       $967.00       $1.72       $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 183/366 to reflect the one-half year period.

 

     
44         Semiannual Report    franklintempleton.com


Franklin Municipal Green Bond ETF

 

This semiannual report for Franklin Municipal Green Bond ETF covers the period ended September 30, 2023.

Fund Overview

Your Fund’s Goal and Main Investments

The Fund seeks to maximize income exempt from federal income taxes, including the federal alternative minimum tax, to the extent consistent with prudent investing and the preservation of shareholders’ capital, by normally investing at least 80% of its net assets in municipal securities whose interest is free from such taxes.1 In addition, the Fund invests at least 80% of its net assets in municipal green bonds. Municipal “green bonds” are bonds that promote environmental sustainability. The Fund buys predominately municipal securities rated, at the time of purchase, in one of the top four ratings categories by one or more U.S. nationally recognized rating services (or comparable unrated or short-term rated securities).

Performance Overview

During the six-month period, the Fund posted cumulative total returns of -4.12% based on market price and -4.17% based on net asset value (NAV). In comparison, the Bloomberg Municipal Bond Index, which is a market value-weighted index of tax-exempt, investment-grade municipal bonds with maturities of one year or more, posted a -4.05% 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 46.

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

Portfolio Composition       
9/30/23       
      % of Total
Investments
 
Utilities      18.04%  
Industrial Development Revenue and Pollution Control      12.97%  
Transportation      11.28%  
Lease      10.47%  
Special Tax      9.41%  
Local      8.71%  
Education      7.68%  
Housing      7.15%  
Cash      5.02%  
Other      4.78%  
Health Care      4.20%  
Refunded      0.14%  
State      0.14%  

Thank you for your participation in Franklin Municipal Green Bond ETF. We look forward to serving your future investment needs.

Ben Barber, CFA

Daniel Workman, CFA

Francisco Rivera

James Conn, CFA

Portfolio Management Team

 

1. Dividends are generally subject to state and local taxes, if any. For investors subject to alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and redemption proceeds, U.S. investors must be properly certified on Form W-9 and non-U.S. investors on Form W-8BEN

2. Source: Morningstar. Treasuries, if held to maturity, offer a fixed rate of return and a fixed principal value; their interest payments and principal are guaranteed.

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 131.

 

     
franklintempleton.com    Semiannual Report          45


FRANKLIN MUNICIPAL GREEN 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 tables do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (9/5/17), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.

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

Performance as of 9/30/231,2

 

           Cumulative Total Return3      Average Annual Total Return3  
      Based on
NAV4
     Based on
market price5
     Based on
NAV4
     Based on
market price5
 

6-Month

     -4.17%        -4.12%        -4.17%        -4.12%  

1-Year

     +3.79%        +3.98%        +3.79%        +3.98%  

3-Year

     -9.96%        -9.99%        -3.44%        -3.45%  

5-Year

     +5.59%        +5.54%        +1.09%        +1.08%  

Since Inception (8/31/17)

     +4.03%        +4.07%        +0.65%        +0.66%  

 

Distribution Rate6    30-Day
Standardized Yield7
     Taxable Equivalent 30-Day
Standardized  Yield8
 

4.02%

     3.99%        6.74%  

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

See page 47 for Performance Summary footnotes.

 

     
46         Semiannual Report    franklintempleton.com


FRANKLIN MUNICIPAL GREEN BOND ETF

PERFORMANCE SUMMARY

    

 

Distributions (4/1/23–9/30/23)

 

Net Investment
Income

$0.431455

Total Annual Operating Expenses9

 

  0.30%              

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. 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. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value. Low-rated, high-yield bonds are subject to greater price volatility, illiquidity and possibility of default. Green bonds may not result in direct environmental benefits, and the issuer may not use proceeds as intended or to appropriate new or additional projects. The manager may consider environmental, social and governance (ESG) criteria in the research or investment process; however, ESG considerations may not be a determinative factor in security selection. In addition, the manager may not assess every investment for ESG criteria, and not every ESG factor may be identified or evaluated. 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 sourced from the Fund’s prospectus available at the time of publication. Actual expenses may be higher and may impact portfolio returns.

2. Effective December 1, 2022, the Fund adopted a unified fee structure whereby Management has agreed to reimburse the Fund’s acquired fund fees and expenses (if any) and pay all of the ordinary operating expenses of the Fund, excluding: (i) payments under the Fund’s Rule 12b-1 plan (if any); (ii) brokerage expenses (including any costs incidental to transactions in portfolio securities or instruments); (iii) taxes; (iv) interest (including borrowing costs and dividend expenses on securities sold short and overdraft charges); (v) 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 (vi) other non-routine or extraordinary expenses.

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

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

5. Assumes reinvestment of distributions based on market price.

6. Distribution rate is based on an annualization of the September dividend and the NAV per share on 9/30/23.

7. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.

8. Taxable equivalent yield assumes the 2023 maximum federal income tax rate of 37.00% plus 3.80% Medicare tax.

9. 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.

 

     
franklintempleton.com    Semiannual Report          47


FRANKLIN MUNICIPAL GREEN BOND ETF

    

 

Your Fund’s Expenses

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

Actual Fund Expenses

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

Hypothetical Example for Comparison with Other Funds

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

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

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       
Beginning
Account
        Value 4/1/23
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Net Annualized
Expense Ratio
 
  $1,000.00       $958.30       $1.47       $1,023.50       $1.52       0.30

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 183/366 to reflect the one-half year period.

 

     
48         Semiannual Report    franklintempleton.com


Franklin Senior Loan ETF

 

This semiannual report for Franklin Senior Loan ETF covers the period ended September 30, 2023.

Fund Overview

Your Fund’s Goal and Main Investments

The Fund seeks to provide a high level of current income. A secondary goal is preservation of capital. The Fund normally invests at least 80% of its net assets in senior loans and investments that provide exposure to senior loans. Senior loans include loans referred to as leveraged loans, bank loans and/or floating rate loans

Performance Overview

During the six-month period, the Fund posted cumulative total returns of +5.51% based on market price and +6.07% based on net asset value (NAV). In comparison, the Fund’s benchmark, the Morningstar LSTA U.S. Leveraged Loan 100 Index, which reflects the performance of the largest facilities in the leveraged loan market, posted a +6.53% cumulative total return for the same period.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 51.

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
 
Senior Floating Rate Interests      86.1%  
Corporate Bonds & Notes      5.1%  
Asset-Backed Securities      0.8%  
Short-Term Investments & Other Net Assets      8.0%  
Top 10 Sectors/Industries       
9/30/23       
      % of Total
Net Assets
 
Software      12.6
Commercial Services & Supplies      7.3
Media      6.6
Health Care Providers & Services      5.6
Chemicals      4.9
Insurance      3.8
Airlines      3.7
Pharmaceuticals      2.9
Packaging & Containers      2.6
Auto Parts & Equipment      2.5

 

Top 10 Holdings       
9/30/23       

Company

Sector/Industry

   % of Total
Net Assets
 
Federal Home Loan Bank Discount Notes, 10/2/2023      8.2
Verscend Holding Corp., 9.431%, 8/27/2025
IT Services
     1.5
Greeneden U.S. Holdings II LLC, 9.431%, 12/1/2027
Technology Hardware, Storage & Peripherals
     1.5
Navicure, Inc., 9.431%, 10/22/2026
Software
     1.3
Peraton Corp., 9.166%, 2/1/2028
Aerospace & Defense
     1.2
Charter NEX U.S., Inc., 9.181%, 12/1/2027
Containers & Packaging
     1.2
DCert Buyer, Inc., 9.316%, 10/16/2026
Software
     1.1

Amentum Government Services Holdings LLC,
9.331%, 2/15/2029

Commercial Services & Supplies

     1.1
Gainwell Acquisition Corp., 9.49%, 10/1/2027
Health Care Providers & Services
     1.1
Athenahealth Group, Inc., 8.568%, 2/15/2029
Software
     1.0

 

1. Source: Morningstar.

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 138.

 

     
franklintempleton.com    Semiannual Report          49


FRANKLIN SENIOR LOAN ETF

    

 

Thank you for your participation in Franklin Senior Loan ETF.

We look forward to serving your future investment needs.

Reema Agarwal, CFA

Co-Lead Portfolio Manager

Justin Ma, CFA

Co-Lead Portfolio Manager

Margaret Chiu, CFA

Portfolio Manager

 

     
50         Semiannual Report    franklintempleton.com


FRANKLIN SENIOR LOAN 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 tables do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (6/1/18), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.

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

Performance as of 9/30/231

 

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

6-Month

     +6.07%        +5.51%        +6.07%        +5.51%  

1-Year

     +13.37%        +13.47%        +13.37%        +13.47%  

3-Year

     +16.57%        +15.81%        +5.24%        +5.02%  

5-Year

     +20.82%        +19.99%        +3.86%        +3.71%  

Since Inception (5/30/18)

     +23.08%        +22.52%        +3.97%        +3.88%  

 

Distribution Rate5    30-Day
Standardized Yield6
 

9.36%

     9.09%  

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 52 for Performance Summary footnotes.

 

     
franklintempleton.com    Semiannual Report          51


FRANKLIN SENIOR LOAN ETF

PERFORMANCE SUMMARY

    

 

Distributions (4/1/23–9/30/23)

 

Net Investment

Income

$1.077485

Total Annual Operating Expenses7

 

  0.45%              

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. 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. Floating-rate loans and debt securities are typically rated below investment grade and are subject to greater risk of default, which could result in loss of principal. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value. Liquidity risk exists when securities or other investments become more difficult to sell, or are unable to be sold, at the price at which they have been valued. The manager may consider environmental, social and governance (ESG) criteria in the research or investment process; however, ESG considerations may not be a determinative factor in security selection. In addition, the manager may not assess every investment for ESG criteria, and not every ESG factor may be identified or evaluated. 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. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

4. Assumes reinvestment of distributions based on market price.

5. Distribution rate is based on an annualization of the September dividend and the NAV per share on 9/30/23.

6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.

7. 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.

 

     
52         Semiannual Report    franklintempleton.com


FRANKLIN SENIOR LOAN ETF

    

 

Your Fund’s Expenses

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

Actual Fund Expenses

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

Hypothetical Example for Comparison with Other Funds

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

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

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       
Beginning
Account
        Value 4/1/23
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Net Annualized
Expense Ratio
 
  $1,000.00       $1,060.70       $2.32       $1,022.75       $2.28       0.45

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/366 to reflect the one-half year period.

 

     
franklintempleton.com    Semiannual Report          53


Franklin Systematic Style Premia ETF

 

This semiannual report for Franklin Systematic Style Premia ETF covers the period ended September 30, 2023.

Fund Overview

Your Fund’s Goal and Main Investments

The Fund seeks to provide absolute return. The Fund seeks to achieve its investment goal by allocating its assets across two underlying alternative investment strategies, which represent top-down and bottom-up approaches to capturing factor-based risk premia. The strategies consist of a top-down risk premia strategy and a bottom-up long/short equity strategy.

Performance Overview

During the six-month period, the Fund posted cumulative total returns of +5.88% based on market price and +5.22% based on net asset value (NAV). In comparison, the ICE BofA U.S. 3-Month Treasury Bill Index, which tracks the performance of short-term U.S. government securities with a remaining term to final maturity of less than three months, posted a +2.50% cumulative total return for the same period.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 56.

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
 
Common Stocks      53.7%  
Short-Term Investments & Other Net Assets      46.3%  
Top 10 Sectors/Industries       
9/30/23       
      % of Total
Net Assets
 
Software      6.0%  
Biotechnology      4.1%  
Financial Services      3.7%  
Oil, Gas & Consumable Fuels      3.4%  
Insurance      2.4%  
Interactive Media & Services      2.0%  
Consumer Staples Distribution & Retail      1.9%  
Banks      1.8%  
Capital Markets      1.6%  
Hotels, Restaurants & Leisure      1.4%  

 

Top 10 Long Positions       
9/30/23       

Company

Sector/Industry, Country

   % of Total
Net Assets
 

State Street Institutional U.S. Government Money
Market Fund, 5.3%, 12/31/2030,

     14.7%  

Money Market Funds, United States

  

 

 

Meta Platforms, Inc., Class A,

Interactive Media & Services, United States

     1.2%  

Berkshire Hathaway, Inc., Class B,

Financial Services, United States

     1.1%  

Microsoft Corp.,

Software, United States

     1.0%  

Visa, Inc., Class A,

Financial Services, United States

     1.0%  

Mastercard, Inc., Class A,

Financial Services, United States

     1.0%  

AbbVie, Inc.,

Biotechnology, United States

     1.0%  

Walmart, Inc.,

Consumer Staples Distribution & Retail, United States

     0.9%  

Amgen, Inc.,

Biotechnology, United States

     0.9%  

Cisco Systems, Inc.,

Communications Equipment, United States

     0.9%  

 

1. Source: Morningstar. Treasuries, if held to maturity, offer a fixed rate of return and a fixed principal value; their interest payments and principal are guaranteed.

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 147.

 

     
54         Semiannual Report    franklintempleton.com


FRANKLIN SYSTEMATIC STYLE PREMIA ETF

    

 

Top 10 Short Holdings       
9/30/23       

Company

Sector/Industry, Country

   % of Total
Value of
Underlying
Entity
 

UnitedHealth Group, Inc.

Health Care Equipment & Services, United States

     1.5%  

AstraZeneca PLC

Pharmaceuticals, Biotechnology & Life Sciences, United Kingdom

     1.5%  

Progressive Corp.

Insurance, United States

     1.5%  

Keyence Corp.

Technology Hardware & Equipment, Japan

     1.5%  

Honeywell International, Inc

Capital Goods, United States

     1.4%  

Commonwealth Bank of Australia

Banks, Australia

     1.4%  
The Walt Disney Co.
Media & Entertainment, United States
     1.4%  

Micron Technology, Inc.

Semiconductors & Semiconductor Equipment, United States

     1.4%  
Medtronic PLC
Health Care Equipment & Services, United States
     1.4%  

Johnson & Johnson

Pharmaceuticals, Biotechnology & Life Sciences, United States

     1.4%  

Effective September 2023, Christopher W. Floyd was added as a portfolio manager.

Thank you for your participation in Franklin Systematic Style Premia ETF. We look forward to serving your future investment needs.

Chandra Seethamraju, Ph.D.

Lead Portfolio Manager

Sundaram Chettiappan, CFA

Vaneet Chadha, CFA

Christopher W. Floyd, CFA

Portfolio Management Team

    

 

     
franklintempleton.com    Semiannual Report          55


FRANKLIN SYSTEMATIC STYLE PREMIA 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 (12/20/19), 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 Return2      Average Annual Total Return2  
      Based on
NAV3
     Based on
market price4
     Based on
NAV3
     Based on
market price4
 

6-Month

     +5.22%        +5.88%        +5.22%        +5.88%  

1-Year

     +7.30%        +7.36%        +7.30%        +7.36%  

3-Year

     +12.81%        +11.54%        +4.10%        +3.71%  

Since Inception (12/18/19)

     +1.06%        +0.77%        +0.28%        +0.20%  

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

See page 57 for Performance Summary footnotes.

 

     
56         Semiannual Report    franklintempleton.com


FRANKLIN SYSTEMATIC STYLE PREMIA ETF

PERFORMANCE SUMMARY

    

 

Total Annual Operating Expenses5

  

  0.65%              

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. Equity securities are subject to price fluctuation and possible loss of principal. The Fund is actively managed and could experience losses if the manager’s judgement about particular investments, or its evaluation of the risks, potential returns and correlation properties of the various risk premia in which the Fund invests, prove to be incorrect. The allocation of assets among different strategies, asset classes and investments may not prove beneficial or produce the desired results. Trading models used by the manager for securities selection and asset allocation may become outdated, and the historical patterns upon which the models are based may weaken or disappear. Derivative instruments can be illiquid, may disproportionately increase losses, and have a potentially large impact on performance. Currency management strategies could result in losses to the Fund if currencies do not perform as expected. 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. Liquidity risk exists when securities or other investments become more difficult to sell, or are unable to be sold, at the price at which they have been valued. 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. To the extent the portfolio invests in a concentration of certain securities, regions or industries, it is subject to increased volatility. 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. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

4. Assumes reinvestment of distributions based on market price.

5. 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.

 

     
franklintempleton.com    Semiannual Report          57


FRANKLIN SYSTEMATIC STYLE PREMIA ETF

    

 

Your Fund’s Expenses

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

Actual Fund Expenses

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

Hypothetical Example for Comparison with Other Funds

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

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

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       

Beginning

Account

        Value 4/1/23

    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Net Annualized
Expense Ratio
 
  $1,000.00       $1,052.20       $3.33       $1,021.75       $3.29       0.65

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 183/366 to reflect the one-half year period.

 

     
58         Semiannual Report    franklintempleton.com


Franklin U.S. Core Bond ETF

 

This semiannual report for Franklin U.S. Core Bond ETF covers the period ended September 30, 2023.

Fund Overview

Your Fund’s Goal and Main Investments

The Fund seeks total return. Under normal market conditions, the Fund invests at least 80% of its net assets in bonds of U.S. issuers, including government, corporate debt, mortgage-backed and asset-backed securities. Bonds include debt obligations of any maturity, such as bonds, notes, bills and debentures.

Performance Overview

During the six-month period, the Fund posted cumulative total returns of -4.07% based on market price and -4.02% based on net asset value (NAV). In comparison, 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 -4.05% cumulative total return.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 60.

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

Portfolio Composition       
9/30/23       
      % of Total
Net Assets
 
U.S. Government & Agency Securities      46.0%  
Corporate Bonds & Notes      28.6%  
Mortgage-Backed Securities      18.2%  
Asset-Backed Securities      2.4%  
Municipal Bonds      2.0%  
Foreign Government and Agency Securities      1.0%  
Short-Term Investments & Other Net Assets      1.8%  

 

Top 10 Holdings       
9/30/23       
      % of Total
Net Assets
 
U.S. Treasury Notes, 3.25%, 6/30/27      6.3%  
U.S. Treasury Notes, 1.25%, 12/31/26      4.6%  
U.S. Treasury Notes, 0.375%, 11/30/25      3.8%  
U.S. Treasury Notes, 2.125%, 3/31/24      3.7%  
U.S. Treasury Notes, 0.375%, 1/31/26      3.1%  
U.S. Treasury Notes, 2.125%, 2/29/24      2.7%  
U.S. Treasury Bonds, 1.375%, 8/15/50      1.6%  
U.S. Treasury Notes, 0.875%, 6/30/26      1.4%  
U.S. Treasury Notes, 4.00%, 10/31/29      1.4%  
U.S. Treasury Bonds, 2.00%, 11/15/41      1.3%  

Thank you for your participation in Franklin U.S. Core Bond ETF. We look forward to serving your future investment needs.

Patrick Klein, Ph D.

Tina Chou

Joshua Lohmeier, CFA

Portfolio Management Team

 

1. Source: Morningstar. Treasuries, if held to maturity, offer a fixed rate of return and a fixed principal value; their interest payments and principal are guaranteed.

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 163.

 

     
franklintempleton.com    Semiannual Report          59


FRANKLIN U.S. CORE 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 tables do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (9/19/19), 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 Return2      Average Annual Total Return2  
      Based on
NAV3
     Based on
market price4
     Based on
NAV3
     Based on
market price4
 

6-Month

     -4.02%        -4.07%        -4.02%        -4.07%  

1-Year

     +0.74%        +0.69%        +0.74%        +0.69%  

3-Year

     -14.97%        -15.08%        -5.26%        -5.30%  

Since Inception (9/17/19)

     -8.44%        -8.49%        -2.16%        -2.18%  

 

Distribution Rate5    30-Day
Standardized Yield6
 

3.85%

     4.76%  

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 61 for Performance Summary footnotes.

 

     
60         Semiannual Report    franklintempleton.com


FRANKLIN U.S. CORE BOND ETF

PERFORMANCE SUMMARY

    

 

Distributions (4/1/23–9/30/23)

 

Net Investment

Income

$0.357382

Total Annual Operating Expenses7

 

  0.15%              

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. 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. Asset-backed, mortgage-backed or mortgage-related securities are subject to prepayment and extension risks. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value. The manager may consider environmental, social and governance (ESG) criteria in the research or investment process; however, ESG considerations may not be a determinative factor in security selection. In addition, the manager may not assess every investment for ESG criteria, and not every ESG factor may be identified or evaluated. 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. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

4. Assumes reinvestment of distributions based on market price.

5. Distribution rate is based on an annualization of the September dividend and the NAV per share on 9/30/23.

6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.

7. 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.

 

     
franklintempleton.com    Semiannual Report          61


FRANKLIN U.S. CORE BOND ETF

    

 

Your Fund’s Expenses

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

Actual Fund Expenses

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

Hypothetical Example for Comparison with Other Funds

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

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

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       

Beginning

Account

        Value 4/1/23

    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Ending
Account
Value 9/30/23
    Expenses
Paid During
Period
4/1/23–9/30/231
    Net Annualized
Expense Ratio
 
  $1,000.00       $959.80       $0.73       $1,024.25       $0.76       0.15

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 183/366 to reflect the one-half year period.

 

     
62         Semiannual Report    franklintempleton.com


Franklin U.S. Low Volatility ETF

 

This semiannual report for Franklin U.S. Low Volatility ETF covers the period ended September 30, 2023.

Fund Overview

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation with an emphasis on lower volatility. Under normal market conditions, the Fund invests at least 80% of its net assets in U.S. investments, and primarily equity securities.

Performance Overview

During the six-month period, the Fund posted cumulative total returns of +1.45% based on market price and +1.36% based on net asset value (NAV). In comparison, the Russell 1000® Index, which measures the performance of the approximately 1,000 largest companies in the Russell 3000® Index, which represents the majority of the U.S. market’s total capitalization, posted a +5.16% cumulative total return for the same period.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 65.

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

Top 10 Sectors/Industries       
9/30/23       
      % of Total
Net Assets
 
Information Technology      25.8%  
Financials      13.2%  
Health Care      13.0%  
Consumer Discretionary      10.9%  
Industrials      9.3%  
Communication Services      8.4%  
Consumer Staples      6.2%  
Energy      4.7%  
Real Estate      2.8%  
Materials      2.6%  

 

Top 10 Holdings       
9/30/23       

Company

Sector/Industry

   % of Total
Net Assets
 

Synopsys, Inc.

Information Technology

     1.7%  

Vontier Corp.

Information Technology

     1.7%  

Keysight Technologies, Inc.

Information Technology

     1.6%  

Amphenol Corp., Class A

Information Technology

     1.6%  

Intuit, Inc.

Information Technology

     1.6%  

Cisco Systems, Inc.

Information Technology

     1.6%  

Analog Devices, Inc.

Information Technology

     1.6%  

Microsoft Corp.

Information Technology

     1.6%  

Adobe, Inc.

Information Technology

     1.6%  

Texas Instruments, Inc.

Information Technology

     1.6%  

 

1. Source: Morningstar.

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 173.

 

     
franklintempleton.com    Semiannual Report          63


FRANKLIN U.S. LOW VOLATILITY ETF

    

 

Thank you for your participation in Franklin U.S. Low Volatility ETF. We look forward to serving your future investment needs.

Todd Brighton, CFA

Portfolio Manager

    

 

     
64         Semiannual Report    franklintempleton.com


FRANKLIN U.S. LOW VOLATILITY 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 tables do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (9/22/16), 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 Return2      Average Annual Total Return2  
      Based on
NAV3
     Based on
market price4
     Based on
NAV3
     Based on
market price4
 

6-Month

     +1.36%        +1.45%        +1.36%        +1.45%  

1-Year

     +16.07%        +16.07%        +16.07%        +16.07%  

3-Year

     +28.23%        +27.99%        +8.64%        +8.57%  

5-Year

     +56.77%        +56.90%        +9.41%        +9.43%  

Since Inception (9/20/16)

     +113.11%        +113.15%        +11.37%        +11.37%  

 

Distribution Rate5    30-Day
Standardized Yield6
 

2.02%

     1.80%  

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 66 for Performance Summary footnotes.

 

     
franklintempleton.com    Semiannual Report          65


FRANKLIN U.S. LOW VOLATILITY ETF

PERFORMANCE SUMMARY

    

 

Distributions (4/1/23–9/30/23)

 

Net Investment
Income

$0.383918

Total Annual Operating Expenses7

 

  0.29%              

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. Equity securities are subject to price fluctuation and possible loss of principal. There can be no guarantee that the Fund’s volatility strategy will be successful, and achieving the Fund’s volatility strategy does not mean the Fund will achieve a positive or competitive return. The volatility strategy can also be expected to limit the Fund’s participation in market price appreciation when compared to similar funds that do not attempt this strategy. Small- and mid-cap stocks involve greater risks and volatility than large-cap stocks. 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. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

4. Assumes reinvestment of distributions based on market price.

5. Distribution rate is based on an annualization of the September dividend and the NAV per share on 9/30/23.

6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.

7. 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.

 

     
66         Semiannual Report    franklintempleton.com


FRANKLIN U.S. LOW VOLATILITY ETF

    

 

Your Fund’s Expenses

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

Actual Fund Expenses

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

Hypothetical Example for Comparison with Other Funds

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

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

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       

Beginning

Account

        Value 4/1/23

   

Ending

Account

Value 9/30/23

   

Expenses

Paid During

Period

4/1/23–9/30/231

   

Ending

Account

Value 9/30/23

   

Expenses

Paid During

Period

4/1/23–9/30/231

   

Net Annualized

Expense Ratio

 
  $1,000.00       $1,013.60       $1.46       $1,023.55       $1.47       0.29

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/366 to reflect the one-half year period.

 

     
franklintempleton.com    Semiannual Report          67


Franklin U.S. Treasury Bond ETF

 

This semiannual report for Franklin U.S. Treasury Bond ETF covers the period ended September 30, 2023.

Fund Overview

Your Fund’s Goal and Main Investments

The Fund seeks income. Under normal market conditions, the Fund invests at least 80% of its net assets in direct obligations of the U.S. Treasury, including Treasury bonds, bills, notes and Treasury Inflation-Protected Securities (TIPS), and investments that provide exposure to direct obligations of the U.S. Treasury.

Performance Overview

During the six-month period, the Fund posted cumulative total returns of -4.16% based on market price and -4.21% based on net asset value (NAV). In comparison, the Bloomberg U.S. Treasury Index, which measures the performance of U.S. dollar-denominated, fixed-rate, nominal debt issued by the U.S. with at least one year until final maturity, posted a -4.40% cumulative total return.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 69.

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
 

 

 

U.S. Government & Agency Securities

     99.2%  

 

 

Short-Term Investments & Other Net Assets

     0.9%  

 

 

Top 10 Holdings

9/30/23

 

     % of Total
Net Assets
 

 

 

U.S. Treasury Notes, 0.25%, 7/31/25

     9.0%  

 

 

U.S. Treasury Notes, 1.50%, 9/30/24

     8.7%  

 

 

U.S. Treasury Notes, 0.75%, 5/31/26

     7.3%  

 

 

U.S. Treasury Bonds, 1.875%, 11/15/51

     5.4%  

 

 

U.S. Treasury Bonds, 3.125%, 11/15/41

     3.8%  

 

 

U.S. Treasury Notes, 0.50%, 6/30/27

     3.7%  

 

 

U.S. Treasury Bonds, 3.00%, 5/15/42

     3.3%  

 

 

U.S. Treasury Notes, 0.375%, 1/31/26

     3.1%  

 

 

U.S. Treasury Notes, 1.50%, 11/30/24

     3.0%  

 

 

U.S. Treasury Notes, 0.375%, 9/30/27

     3.0%  

 

 

Thank you for your participation in Franklin U.S. Treasury Bond ETF. We look forward to serving your future investment needs.

Warren Keyser

Patrick Klein, Ph.D.

Portfolio Management Team

 

1. Source: Morningstar. Treasuries, if held to maturity, offer a fixed rate of return and a fixed principal value; their interest payments and principal are guaranteed.

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 177.

 

     
68         Semiannual Report    franklintempleton.com


FRANKLIN U.S. TREASURY 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 tables do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (6/11/20), 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 Return2      Average Annual Total Return2  
      Based on
NAV3
     Based on
market price4
     Based on
NAV3
     Based on
market price4
 

6-Month

     -4.21%        -4.16%        -4.21%        -4.16%  

1-Year

     -0.83%        -0.78%        -0.83%        -0.78%  

Since Inception (6/9/20)

     -14.06%        -14.02%        -4.47%        -4.46%  

 

Distribution Rate5    30-Day
Standardized Yield6
 

3.93%

     4.78%  

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 70 for Performance Summary footnotes.

 

     
franklintempleton.com    Semiannual Report          69


FRANKLIN U.S. TREASURY BOND ETF

PERFORMANCE SUMMARY

    

 

Distributions (4/1/23–9/30/23)

 

Net Investment
Income

$0.367754

Total Annual Operating Expenses7

 

  0.09%              

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. 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. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value. 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. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

4. Assumes reinvestment of distributions based on market price.

5. Distribution rate is based on an annualization of the September dividend and the NAV per share on 9/30/23.

6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.

7. 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.

 

     
70         Semiannual Report    franklintempleton.com


FRANKLIN U.S. TREASURY BOND ETF

    

 

Your Fund’s Expenses

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

Actual Fund Expenses

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

Hypothetical Example for Comparison with Other Funds

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

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

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       

Beginning

Account

      Value 4/1/23

   

Ending

Account

Value 9/30/23

   

Expenses

Paid During

Period

4/1/23–9/30/231

    Ending
Account
Value 9/30/23
   

Expenses

Paid During
Period
4/1/23–9/30/231

    Net Annualized
Expense Ratio
 
  $1,000.00       $957.90       $0.44       $1,024.55       $0.46       0.09

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/366 to reflect the one-half year period.

 

     
franklintempleton.com    Semiannual Report          71


Franklin Ultra Short Bond ETF

 

This semiannual report for Franklin Ultra Short Bond ETF covers the period ended September 30, 2023.

Fund Overview

Your Fund’s Goal and Main Investments

The Fund seeks to provide a high level of current income as is consistent with prudent investing, while seeking preservation of capital. Under normal market conditions, the Fund invests at least 80% of its net assets in bonds and investments that provide exposure to bonds. The Fund targets an estimated average portfolio duration of one year or less.

Performance Overview

During the six-month period, the Fund posted cumulative total returns of +2.92% based on market price and +3.09% based on net asset value (NAV). In comparison, the ICE BofA U.S. 3-Month Treasury Bill Index, which tracks the performance of short-term U.S. government securities with a remaining term to final maturity of less than three months, posted a +2.50% cumulative total return.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 74.

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

Top 10 Sectors/Industries       
9/30/23       
      % of Total
Net Assets
 
Banks      32.3%  
Telecommunications      10.2%  
Insurance      8.1%  
Financial Services      8.0%  
Healthcare-Products      4.0%  
Miscellaneous Manufacturing      4.0%  
Pipelines      2.0%  
Retail      2.0%  
Electric Utilities      2.0%  

 

Top 10 Holdings       
9/30/23       
Issue/Issuer    % of Total
Net Assets
 
Verizon Communications, Inc., 6.726%, 5/15/25      6.1%  
Westpac Banking Corp., 6.436%, 2/26/24      6.1%  
Bank of America Corp., 6.022%, 4/22/25      6.1%  
Goldman Sachs Group, Inc., 6.796%, 5/15/26      4.1%  
AT&T, Inc., 6.852%, 6/12/24      4.1%  
Citibank Credit Card Issuance Trust, 6.058%, 4/22/26      4.1%  
Discover Card Execution Note Trust, 6.047%, 12/15/26      4.0%  
Pacific Life Global Funding II, 6.145%, 3/30/25      4.0%  
Thermo Fisher Scientific, Inc., 0.797%, 10/18/23      4.0%  
Brighthouse Financial Global Funding, secured note, 1.20%, 12/15/23      4.0%  

 

1. Source: Morningstar. Treasuries, if held to maturity, offer a fixed rate of return and a fixed principal value; their interest payments and principal are guaranteed.

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 180.

 

     
72         Semiannual Report    franklintempleton.com


FRANKLIN ULTRA SHORT BOND ETF

    

 

Thank you for your participation in Franklin Ultra Short Bond ETF. We look forward to serving your future investment needs.

Shawn Lyons, CFA

Thomas Runkel, CFA

Kent Burns, CFA

Johnson Ng, CFA

Portfolio Management Team

    

 

     
franklintempleton.com    Semiannual Report          73


FRANKLIN ULTRA SHORT 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 tables do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (7/16/20), 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 Return2      Average Annual Total Return2  
      Based on
NAV3
     Based on
market price4
     Based on
NAV3
     Based on
market price4
 

6-Month

     +3.09%        +2.92%        +3.09%        +2.92%  

1-Year

     +5.23%        +5.15%        +5.23%        +5.15%  

Since Inception (7/14/20)

     +5.27%        +5.23%        +1.61%        +1.60%  

 

Distribution Rate5   

30-Day

Standardized Yield6

 

4.98%

     5.52%  

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 75 for Performance Summary footnotes.

 

     
74         Semiannual Report    franklintempleton.com


FRANKLIN ULTRA SHORT BOND ETF

PERFORMANCE SUMMARY

    

 

Distributions (4/1/23–9/30/23)

 

Net Investment
Income

$0.588365

Total Annual Operating Expenses7

 

  0.15%              

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. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value. 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. The Fund should not be considered an alternative to money market funds or certificates of deposit (CDs). To the extent the portfolio invests in a concentration of certain securities, regions or industries, it is subject to increased volatility. 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. Derivative instruments can be illiquid, may disproportionately increase losses, and have a potentially large impact on performance. The manager may consider environmental, social and governance (ESG) criteria in the research or investment process; however, ESG considerations may not be a determinative factor in security selection. In addition, the manager may not assess every investment for ESG criteria, and not every ESG factor may be identified or evaluated. 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. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

4. Assumes reinvestment of distributions based on market price.

5. Distribution rate is based on an annualization of the September dividend and the NAV per share on 9/30/23.

6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.

7. 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.

 

     
franklintempleton.com    Semiannual Report          75


FRANKLIN ULTRA SHORT BOND ETF

    

 

Your Fund’s Expenses

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

Actual Fund Expenses

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

Hypothetical Example for Comparison with Other Funds

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

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

 

     

Actual

(actual return after expenses)

   

Hypothetical

(5% annual return before expenses)

       

Beginning

Account

        Value 4/1/23

   

Ending

Account

Value 9/30/23

   

Expenses

Paid During

Period

4/1/23–9/30/231

    Ending
Account
Value 9/30/23
   

Expenses

Paid During

Period

4/1/23–9/30/231

    Net Annualized
Expense Ratio
 
  $1,000.00       $1,030.90       $0.20       $1,024.80       $0.20       0.04

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 183/366 to reflect the one-half year period.

 

     
76         Semiannual Report    franklintempleton.com


FRANKLIN TEMPLETON ETF TRUST

    

 

Financial Highlights

Franklin Disruptive Commerce ETF

 

   

Six Months Ended
September 30, 2023

(unaudited)

     Year Ended March 31,  
      2023      2022      2021      2020a  

Per share operating performance

(for a share outstanding throughout the period)

             

Net asset value, beginning of period

    $24.05        $30.97        $49.21        $21.32        $25.00  

Income from investment operationsb:

             

Net investment income (loss)c

    (0.01      0.02        (0.19      (0.21      (0.01

Net realized and unrealized gains (losses)

    0.49        (6.94     <