UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-23124
Franklin Templeton ETF Trust
(Exact name of registrant as specified in charter)
One Franklin Parkway, San Mateo, CA 94403-1906
(Address of principal executive offices) (Zip code)
Alison E. Baur, One Franklin Parkway, San Mateo, CA 94403-1906
(Name and address of agent for service)
Registrant’s telephone number, including area code: 650 312-2000
Date of fiscal year end: 3/31
Date of reporting period: 03/31/22
The Registrant is filing this amendment to its Form N-CSR for the period ended March 31, 2022, as originally filed with the U.S. Securities and Exchange Commission on May 27, 2022 (Accession Number 0001193125-22-162279) (the “Original Filing”), for the sole purpose of amending Item 1 “Reports to Shareholders” to correct a typographical error regarding the distribution rate on page 48 and the related footnote on page 50 of the Franklin Liberty International Aggregate Bond ETF’s report to shareholders. Except for the correction described above and the inclusion of new certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, this amendment does not amend, update or modify any other items or disclosures found in the Original Filing. In addition, this amendment does not reflect events or transactions occurring after the filing of the Original Filing. As a result, such information continues to speak as of the date of the Original Filing.
| Item 1. | Reports to Stockholders. |
ANNUAL REPORT
FRANKLIN TEMPLETON
ETF TRUST
March 31, 2022
Franklin Disruptive Commerce ETF |
Franklin Exponential Data ETF |
Franklin Genomic Advancements ETF |
Franklin Intelligent Machines ETF |
Franklin Dynamic Municipal Bond ETF Formerly, Franklin Liberty Federal Intermediate |
Franklin Liberty Federal Tax-Free Bond ETF |
Franklin Liberty High Yield Corporate ETF |
Franklin Liberty International Aggregate Bond ETF |
Franklin Liberty Investment Grade Corporate ETF |
Franklin Liberty Senior Loan ETF |
Franklin Liberty Systematic Style Premia ETF |
Franklin Liberty U.S. Core Bond ETF |
Franklin Liberty U.S. Low Volatility ETF |
Franklin Liberty U.S. Treasury Bond ETF |
Franklin Liberty Ultra Short Bond ETF |
| Not FDIC Insured | | | May Lose Value | | | No Bank Guarantee |
Visit franklintempleton.com for fund updates and documents, or to find helpful financial planning tools.
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ANNUAL REPORT
Franklin Disruptive Commerce ETF
This annual report for Franklin Disruptive Commerce ETF covers the fiscal year ended March 31, 2022.
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 are 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 other activities or developments, as outlined in more detail in the Prospectus.
Performance Overview
During the 12-month period, the Fund posted cumulative total returns of -36.61% based on market price and -36.59% 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 +11.92% 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.
Economic and Market Overview
U.S. equities, as measured by the Standard & Poor’s® 500 Index (S&P 500®), posted a +15.65% total return for the 12 months ended March 31, 2022.1 Stocks benefited from the continued economic recovery, implementation of COVID-19 vaccination programs and easing pandemic restrictions. Higher wages and strong household balance sheets contributed to
| Portfolio Composition | ||||
| 3/31/22 | ||||
% of Total Net Assets | ||||
Internet & Direct Marketing Retail | 22.5% | |||
IT Services | 17.6% | |||
Software | 10.6% | |||
Hotels, Restaurants & Leisure | 6.8% | |||
Interactive Media & Services | 6.6% | |||
Trading Companies & Distributors | 5.5% | |||
Food & Staples Retailing | 4.9% | |||
Specialty Retail | 4.6% | |||
Entertainment | 4.2% | |||
Equity Real Estate Investment Trusts (REITs) | 3.4% | |||
Commercial Services & Supplies | 2.1% | |||
Other | 8.8% | |||
Short-Term Investments & Other Net Assets | 2.4% | |||
increased consumer spending, particularly on goods. A rebound in corporate earnings and the passage of a bipartisan infrastructure bill further bolstered investor sentiment. However, elevated demand combined with supply chain disruptions led to the highest inflation since 1982. Russia’s invasion of Ukraine late in the 12-month period injected further uncertainty into financial markets, provoking significant volatility in commodity and equity prices. Rising interest rates also pressured stocks, as borrowing costs began to increase from historically low levels.
Gross domestic product growth was robust during most of the period, as strong consumer spending and business investment in growing inventories supported the economy. Both exports and imports increased significantly amid a recovery in industrial production. The continued growth of the economy helped the U.S. to surpass its pre-pandemic output in 2021’s second quarter. However, rising prices precipitated a notable decline in consumer confidence, despite high spending levels.
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 100.
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FRANKLIN DISRUPTIVE COMMERCE ETF
| Top 10 Holdings | ||||
| 3/31/22 | ||||
| Company Sector/Industry | % of Total Net Assets | |||
| Amazon.com Inc. Internet & Direct Marketing Retail | 11.7% | |||
| Shopify Inc., A IT Services | 4.9% | |||
| Adyen NV, ADR IT Services | 4.4% | |||
| ZoomInfo Technologies Inc., A Interactive Media & Services | 4.1% | |||
| Costco Wholesale Corp. Food & Staples Retailing | 3.8% | |||
| Airbnb Inc. Hotels, Restaurants & Leisure | 3.6% | |||
| Prologis Inc. Equity Real Estate Investment Trusts (REITs) | 3.4% | |||
| Mastercard Inc., A IT Services | 3.1% | |||
| Fastenal Co. Trading Companies & Distributors | 2.8% | |||
| Sea Ltd., ADR Entertainment | 2.7% | |||
The inflation rate was notably elevated during the 12-month period amid increased demand and supply chain bottlenecks. Consequently, the personal consumption expenditures index, a measure of inflation, surged during the period, representing the highest 12-month increase in decades. The unemployment rate declined from 6.0% in March 2021 to 3.6% in March 2022 as job openings increased, but a relative lack of available workers fueled wage growth, adding to some investors’ inflation concerns.
In an effort to control inflation, the U.S. Federal Reserve (Fed) raised the federal funds target rate to a range of 0.25%–0.50%, the first such increase since 2018. The Fed noted in its March 2022 meeting that strength in the U.S. job market and continued inflationary pressure, exacerbated by the war in Ukraine, meant it anticipated making further increases to the federal funds target rate. Furthermore, the Fed said it expected to begin reducing its bond holdings at a future meeting.
Investment Strategy
We use fundamental, bottom-up research analysis to identify companies positioned to capitalize on disruptive innovation or that are enabling the further development of the disruptive commerce themes in the markets in which they operate. We evaluate market segments, products, services and business models positioned to benefit significantly from disruptive innovations in commerce relative to broad securities markets,
and we seek to identify the primary beneficiaries of new trends or developments in commerce. We may invest in companies in any economic sector or of any market capitalization and may invest in companies both inside and outside of the U.S., including those in developing or emerging markets. Although we search for investments across a large number of sectors, we expect to concentrate our investments in consumer discretionary-related industries.
Manager’s Discussion
During the reporting period the information technology (IT), consumer discretionary and communication services sectors detracted from absolute performance. In IT, a host of internet commerce-enabling and payment platform companies were among the notable detractors, including Shopify, Block and Adyen. In consumer discretionary, detractors included online game platform and metaverse-based game creator ROBLOX, unique and creative goods global marketplace Etsy and online used car retailer Carvana. In communication services, Singapore-based consumer internet entertainment company Sea, media streaming service Netflix (not held at period-end) and online dating services company Match Group Holdings hurt results.
Turning to contributors, the consumer staples and materials sectors contributed to absolute performance. In consumer staples, contributors included discount retailers Costco Wholesale and Walmart. In materials, Packaging Corp. of America helped performance. Elsewhere, cybersecurity provider Crowdstrike Holdings and business intelligence data provider Zoominfo Technologies also aided results.
Thank you for your participation in Franklin Disruptive Commerce ETF. We look forward to serving your future investment needs.
Matthew J. Moberg, CPA
Portfolio Management Team
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2022, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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FRANKLIN DISRUPTIVE COMMERCE ETF
Performance Summary as of March 31, 2022
Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale 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 3/31/22
| Cumulative Total Return1 | Average Annual Total Return1 | |||||||||||||||
| Based on NAV2 | Based on market price3 | Based on NAV2 | Based on market price3 | |||||||||||||
1-Year | -36.59% | -36.61% | -36.59% | -36.61% | ||||||||||||
Since Inception (2/25/20) | +24.82% | +24.94% | +11.16% | +11.21% | ||||||||||||
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 6 for Performance Summary footnotes.
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FRANKLIN DISRUPTIVE COMMERCE ETF
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment
Total return is calculated at net asset value and represents the change in value of an investment over the periods shown. It includes any Fund fees and expenses, and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.
2/25/20–3/31/22
See page 6 for Performance Summary footnotes.
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FRANKLIN DISRUPTIVE COMMERCE ETF
PERFORMANCE SUMMARY
Distributions (4/1/21–3/31/22)
| Short-Term Capital Gains | Long-Term Capital Gains | Total | ||||||
$0.295433 | $0.022502 | $0.317935 | ||||||
Total Annual Operating Expenses5
0.50% |
All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. 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. Companies operating within consumer discretionary related industries could be affected by, among other things, overall economic conditions, interest rates, disposable income, fluctuating consumer confidence and consumer demand. Many of these companies compete aggressively on price, potentially affecting their long run profitability. Companies within consumer discretionary related industries may have extensive online operations, which could make these companies particularly vulnerable to cyber security risk. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. As a non-diversified fund, the Fund may invest in a relatively small number of issuers which may negatively impact the Fund’s performance and result in greater fluctuation in the value of the Fund’s shares. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.
Russia’s military invasion of Ukraine in February 2022, the resulting responses by the United States and other countries, and the potential for wider conflict could increase volatility and uncertainty in the financial markets and adversely affect regional and global economies. The United States and other countries have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to its invasion of Ukraine. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia’s military invasion. These sanctions, as well as any other economic consequences related to the invasion, such as additional sanctions, boycotts or changes in consumer or purchaser preferences or cyberattacks on governments, companies or individuals, may further decrease the value and liquidity of certain Russian securities and securities of issuers in other countries that are subject to economic sanctions related to the invasion.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. Total return calculations represent the cumulative and average annual changes in value of an investment over the period indicated. Return for less than one year, if any, has not been annualized.
2. Assumes reinvestment of distributions based on net asset value.
3. Assumes reinvestment of distributions based on market price.
4. Source: Morningstar. The Russell 3000 Index is market capitalization-weighted and measures the performance of the largest 3,000 U.S. companies representing the majority of the U.S. market’s total capitalization.
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. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN 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 ETFs. In addition, if transactional costs were included, your total costs would have been higher.
Actual (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||||||
| Beginning Account Value 10/1/21 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Net Annualized Expense Ratio2 | |||||||||||||||||
| $1,000.00 | $ | 631.70 | $ | 2.03 | $ | 1,022.44 | $ | 2.52 | 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 182/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
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This annual report for Franklin Exponential Data ETF covers the fiscal year ended March 31, 2022.
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 are focused on, or that the investment manager believes will 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 12-month period, the Fund posted cumulative total returns of -2.40% based on market price and 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 +11.92% 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 10.
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.
Economic and Market Overview
U.S. equities, as measured by the Standard & Poor’s 500 Index (S&P 500), posted a +15.65% total return for the 12 months ended March 31, 2022.1 Stocks benefited from the continued economic recovery, implementation of COVID-19 vaccination programs and easing pandemic restrictions. Higher wages and strong household balance sheets contributed to increased consumer spending, particularly on goods. A rebound in corporate earnings and the passage of a
| Portfolio Composition | ||||
| 3/31/22 | ||||
% of Total Net Assets | ||||
Software | 46.2 | |||
IT Services | 21.7 | |||
Interactive Media & Services | 10.7 | |||
Equity Real Estate Investment Trusts (REITs) | 7.6 | |||
Capital Markets | 5.9 | |||
Communications Equipment | 2.1 | |||
Wireless Telecommunication Services | 2.0 | |||
Other | 4.4 | |||
Short-Term Investments & Other Net Assets | (0.6) | |||
bipartisan infrastructure bill further bolstered investor sentiment. However, elevated demand combined with supply chain disruptions led to the highest inflation since 1982. Russia’s invasion of Ukraine late in the 12-month period injected further uncertainty into financial markets, provoking significant volatility in commodity and equity prices. Rising interest rates also pressured stocks, as borrowing costs began to increase from historically low levels.
Gross domestic product growth was robust during most of the period, as strong consumer spending and business investment in growing inventories supported the economy. Both exports and imports increased significantly amid a recovery in industrial production. The continued growth of the economy helped the U.S. to surpass its pre-pandemic output in 2021’s second quarter. However, rising prices precipitated a notable decline in consumer confidence, despite high spending levels.
The inflation rate was notably elevated during the 12-month period amid increased demand and supply chain bottlenecks. Consequently, the personal consumption expenditures index, a measure of inflation, surged during the period, representing the highest 12-month increase in decades. The unemployment rate declined from 6.0% in March 2021 to 3.6% in March 2022 as job openings increased, but a relative lack of available workers fueled wage growth, adding to some investors’ inflation concerns.
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 104.
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FRANKLIN EXPONENTIAL DATA ETF
| Top 10 Holdings | ||||
| 3/31/22 | ||||
| Company Sector/Industry | % of Total Net Assets | |||
| Alphabet Inc., A Interactive Media & Services | 6.8% | |||
| Datadog Inc., A Software | 5.8% | |||
| Microsoft Corp. Software | 5.0% | |||
| MongoDB Inc. IT Services | 4.9% | |||
| Fortinet Inc. Software | 4.5% | |||
| Cloudflare Inc., A IT Services | 4.3% | |||
| Zscaler Inc. Software | 4.2% | |||
| Snowflake Inc., A IT Services | 4.0% | |||
| ZoomInfo Technologies Inc., A Interactive Media & Services | 3.8% | |||
| Palo Alto Networks Inc. Software | 3.8% | |||
In an effort to control inflation, the U.S. Federal Reserve (Fed) raised the federal funds target rate to a range of 0.25%–0.50%, the first such increase since 2018. The Fed noted in its March 2022 meeting that strength in the U.S. job market and continued inflationary pressure, exacerbated by the war in Ukraine, meant it anticipated making further increases to the federal funds target rate. Furthermore, the Fed said it expected to begin reducing its bond holdings at a future meeting.
Investment Strategy
We use fundamental, bottom-up research analysis to identify companies positioned to capitalize on innovations in or that are enabling the further development of the exponential data theme in the markets in which they operate. We evaluate market segments, products, services and business models positioned to benefit significantly from innovations in data products or services or the commercialization of data relative to the broad equities market, and we seek to identify the primary beneficiaries of new trends or developments in exponential data. We may invest in companies in any economic sector or of any market capitalization and may invest in companies both inside and outside of the U.S., including those in developing or emerging markets. Although we search for investments across a large number of sectors, we expect to concentrate our investments in information technology-related industries.
Manager’s Discussion
During the reporting period, the real estate sector contributed to absolute results. Within the sector, contributors included data center and communications infrastructure REITs SBA Communications, Equinix and Crown Castle International. Elsewhere, cybersecurity companies Fortinet and Palo Alto Networks also helped results.
Turning to detractors, the communication services, health care and information technology (IT) sectors hurt absolute performance. In communication services, detractors included social media company Pinterest (not held at period-end), digital entertainment company Roku (not held at period-end) and social media company Twitter (not held at period-end). In health care, chemical simulation software company Schrodinger (not held at period-end) and biosimulation software provider Certara hurt returns. In IT, detractors included online telecommunications company Twilio, software development platform provider Gitlab and collaboration and workflow tool provider Monday.com.
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
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2022, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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FRANKLIN EXPONENTIAL DATA ETF
Performance Summary as of March 31, 2022
Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale 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 3/31/22
| Cumulative Total Return1 | Average Annual Total Return1 | |||||||||||||||
| Based on NAV2 | Based on market price3 | Based on NAV2 | Based on market price3 | |||||||||||||
1-Year | -2.40% | -2.40% | -2.40% | -2.40% | ||||||||||||
Since Inception (1/12/21) | -8.88% | -8.76% | -7.38% | -7.28% | ||||||||||||
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.
See page 12 for Performance Summary footnotes.
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FRANKLIN EXPONENTIAL DATA ETF
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment
Total return is calculated at net asset value and represents the change in value of an investment over the periods shown. It includes any Fund fees and expenses, and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.
1/12/21–3/31/22
See page 12 for Performance Summary footnotes.
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FRANKLIN EXPONENTIAL DATA ETF
PERFORMANCE SUMMARY
Total Annual Operating Expenses5
0.50% |
All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. 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, 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. Companies operating within information technology related industries may be affected by worldwide technological developments, the success of their products and services (which may be outdated quickly), anticipated products or services that are delayed or cancelled, and investor perception of the company and/or its products or services. These companies typically face intense competition and potentially rapid product obsolescence. They may also have limited product lines, markets, financial resources or personnel. Technology companies are also heavily dependent on intellectual property rights and may be adversely affected by loss or impairment of those rights. There can be no assurance these companies will be able to successfully protect their intellectual property to prevent the misappropriation of their technology, or that competitors will not develop technology that is substantially similar or superior to such companies’ technology. These companies typically engage in significant amounts of spending on research and development, and there is no guarantee that the products or services produced by these companies will be successful. Technology companies are also potential targets for cyberattacks, which can have a materially adverse impact on the performance of these companies. In addition, companies operating within the technology sector may develop and/or utilize artificial intelligence. Artificial intelligence technology could face increasing regulatory scrutiny in the future, which may limit the development of this technology and impede the growth of companies that develop and/or utilize this technology. Similarly, the collection of data from consumers and other sources could face increased scrutiny as regulators consider how the data is collected, stored, safeguarded and used. The customers and/or suppliers of technology companies may be concentrated in a particular country, region or industry. Any adverse event affecting one of these countries, regions or industries could have a negative impact on these companies. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. As a non-diversified fund, the Fund may invest in a relatively small number of issuers and, as a result, be subject to greater risk of loss with respect to its portfolio securities. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.
Russia’s military invasion of Ukraine in February 2022, the resulting responses by the United States and other countries, and the potential for wider conflict could increase volatility and uncertainty in the financial markets and adversely affect regional and global economies. The United States and other countries have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to its invasion of Ukraine. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia’s military invasion. These sanctions, as well as any other economic consequences related to the invasion, such as additional sanctions, boycotts or changes in consumer or purchaser preferences or cyberattacks on governments, companies or individuals, may further decrease the value and liquidity of certain Russian securities and securities of issuers in other countries that are subject to economic sanctions related to the invasion.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. Total return calculations represent the cumulative and average annual changes in value of an investment over the period indicated. Return for less than one year, if any, has not been annualized.
2. Assumes reinvestment of distributions based on net asset value.
3. Assumes reinvestment of distributions based on market price.
4. Source: Morningstar. The Russell 3000 Index is market capitalization-weighted and measures the performance of the largest 3,000 U.S. companies representing the majority of the U.S. market’s total capitalization.
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. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
| 12 | Annual 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 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
Actual (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||||||
| Beginning Account Value 10/1/21 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Net Annualized Expense Ratio2 | |||||||||||||||||
| $1,000.00 | $ | 838.70 | $ | 2.29 | $ | 1,022.44 | $ | 2.52 | 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 182/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
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Franklin Genomic Advancements ETF
This annual report for Franklin Genomic Advancements ETF covers the fiscal year ended March 31, 2022.
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 are focused on, that the investment manager believes will benefit from, extending and enhancing the quality of human and animal life through technological or scientific 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 12-month period, the Fund posted cumulative total returns of -14.64% based on market price and -14.26% 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 +11.92% 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 16.
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.
Economic and Market Overview
U.S. equities, as measured by the Standard & Poor’s 500 Index (S&P 500), posted a +15.65% total return for the 12 months ended March 31, 2022.1 Stocks benefited from the continued economic recovery, implementation of COVID-19 vaccination programs and easing pandemic restrictions.
| Portfolio Composition | ||||
| 3/31/22 | ||||
% of Total Net Assets | ||||
Life Sciences Tools & Services | 55.7% | |||
Biotechnology | 16.7% | |||
Pharmaceuticals | 12.5% | |||
Health Care Equipment & Supplies | 3.1% | |||
Semiconductors & Semiconductor Equipment | 2.9% | |||
Equity Real Estate Investment Trusts (REITs) | 2.5% | |||
Other | 3.5% | |||
Short-Term Investments & Other Net Assets | 3.1% | |||
Higher wages and strong household balance sheets contributed to increased consumer spending, particularly on goods. A rebound in corporate earnings and the passage of a bipartisan infrastructure bill further bolstered investor sentiment. However, elevated demand combined with supply chain disruptions led to the highest inflation since 1982. Russia’s invasion of Ukraine late in the 12-month period injected further uncertainty into financial markets, provoking significant volatility in commodity and equity prices. Rising interest rates also pressured stocks, as borrowing costs began to increase from historically low levels.
Gross domestic product growth was robust during most of the period, as strong consumer spending and business investment in growing inventories supported the economy. Both exports and imports increased significantly amid a recovery in industrial production. The continued growth of the economy helped the U.S. to surpass its pre-pandemic output in 2021’s second quarter. However, rising prices precipitated a notable decline in consumer confidence, despite high spending levels.
The inflation rate was notably elevated during the 12-month period amid increased demand and supply chain bottlenecks. Consequently, the personal consumption expenditures index, a measure of inflation, surged during the period, representing the highest 12-month increase in decades. The unemployment rate declined from 6.0% in March 2021 to 3.6% in
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 107.
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FRANKLIN GENOMIC ADVANCEMENTS ETF
| Top 10 Holdings | ||||
| 3/31/22 | ||||
| Company Sector/Industry | % of Total Net Assets | |||
| Thermo Fisher Scientific Inc. Life Sciences Tools & Services | 6.3% | |||
| Repligen Corp. Life Sciences Tools & Services | 5.7% | |||
| Danaher Corp. Life Sciences Tools & Services | 4.1% | |||
| AstraZeneca PLC, ADR Pharmaceuticals | 4.0% | |||
| Intellia Therapeutics Inc. Biotechnology | 4.0% | |||
| Catalent Inc. Pharmaceuticals | 4.0% | |||
| Bruker Corp. Life Sciences Tools & Services | 3.6% | |||
| Agilent Technologies Inc. Life Sciences Tools & Services | 3.5% | |||
| Lonza Group AG Life Sciences Tools & Services | 3.3% | |||
| Avantor Inc. Life Sciences Tools & Services | 3.3% | |||
March 2022 as job openings increased, but a relative lack of available workers fueled wage growth, adding to some investors’ inflation concerns.
In an effort to control inflation, the U.S. Federal Reserve (Fed) raised the federal funds target rate to a range of 0.25%–0.50%, the first such increase since 2018. The Fed noted in its March 2022 meeting that strength in the U.S. job market and continued inflationary pressure, exacerbated by the war in Ukraine, meant it anticipated making further increases to the federal funds target rate. Furthermore, the Fed said it expected to begin reducing its bond holdings at a future meeting.
Investment Strategy
We use fundamental, bottom-up research analysis to identify companies positioned to capitalize on disruptive innovation or are enabling the further development of the genomic advancements theme in the markets in which they operate. We evaluate market segments, products, services and business models positioned to benefit significantly from advancements in genomics relative to broad securities markets, and we seek to identify the primary beneficiaries of new trends or developments in genomics. We may invest in companies in any economic sector or of any market capitalization and may invest in companies both inside and outside of the U.S., including those in developing or emerging markets.
Although we search for investments across a large number of sectors, we expect to concentrate our investments in health care-related industries.
Manager’s Discussion
During the reporting period, the health care sector, which makes up a vast majority of the Fund’s portfolio, detracted from absolute performance. Within the sector, detractors included Natera (not held at period-end), a diagnostic company that develops and commercializes molecular testing services, Sartorius, a pharmaceutical and laboratory equipment supplier, and Guardant Health (not held at period-end), a cancer screening company. Repligen, which develops materials used in the manufacture of biological drugs, and Pacific Biosciences of California (not held at period-end), a gene sequencing equipment developer, also hurt results.
Turning to contributors, the information technology sector helped absolute returns due to the contribution of chipmaker NVIDIA. Elsewhere, contributors included therapeutics and vaccine developer Moderna, immunotherapy developer BioNTech and pharmaceuticals and biotechnology manufacturer Lonza Group.
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
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2022, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
| franklintempleton.com | Annual Report | 15 | ||||||||
FRANKLIN GENOMIC ADVANCEMENTS ETF
Performance Summary as of March 31, 2022
Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale 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 3/31/22
| Cumulative Total Return1 | Average Annual Total Return1 | |||||||||||||||
| Based on NAV2 | Based on market price3 | Based on NAV2 | Based on market price3 | |||||||||||||
1-Year | -14.26% | -14.64% | -14.26% | -14.64% | ||||||||||||
Since Inception (2/25/20) | +48.55% | +48.22% | +20.78% | +20.66% | ||||||||||||
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 18 for Performance Summary footnotes.
| 16 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN GENOMIC ADVANCEMENTS ETF
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment
Total return is calculated at net asset value and represents the change in value of an investment over the periods shown. It includes any Fund fees and expenses, and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.
2/25/20–3/31/22
See page 18 for Performance Summary footnotes.
| franklintempleton.com | Annual Report | 17 | ||||||||
FRANKLIN GENOMIC ADVANCEMENTS ETF
PERFORMANCE SUMMARY
Distributions (4/1/21–3/31/22)
| Net Investment Income |
$0.118083 |
Total Annual Operating Expenses5
0.50% |
All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. 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. Companies operating within health care related industries face intense competition and potentially rapid product obsolescence. These companies are also heavily dependent on intellectual property rights and may be adversely affected by loss or impairment of those rights. These companies typically engage in significant amounts of spending on research and development, and there is no guarantee that the products or services produced by these companies will be successful, or that competitors will not develop technology that is substantially similar or superior to such companies’ technology. The field of genomic science could face increasing regulatory scrutiny in the future, which may limit the development of this technology and impede the growth of companies that develop and/or utilize this technology. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. As a non-diversified fund, the Fund may invest in a relatively small number of issuers which may negatively impact the Fund’s performance and result in greater fluctuation in the value of the Fund’s shares. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.
Russia’s military invasion of Ukraine in February 2022, the resulting responses by the United States and other countries, and the potential for wider conflict could increase volatility and uncertainty in the financial markets and adversely affect regional and global economies. The United States and other countries have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to its invasion of Ukraine. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia’s military invasion. These sanctions, as well as any other economic consequences related to the invasion, such as additional sanctions, boycotts or changes in consumer or purchaser preferences or cyberattacks on governments, companies or individuals, may further decrease the value and liquidity of certain Russian securities and securities of issuers in other countries that are subject to economic sanctions related to the invasion.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. Total return calculations represent the cumulative and average annual changes in value of an investment over the period indicated. Return for less than one year, if any, has not been annualized.
2. Assumes reinvestment of distributions based on net asset value.
3. Assumes reinvestment of distributions based on market price.
4. Source: Morningstar. The Russell 3000 Index is market capitalization-weighted and measures the performance of the largest 3,000 U.S. companies representing the majority of the U.S. market’s total capitalization.
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. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
| 18 | Annual Report | franklintempleton.com | ||||||||
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 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
Actual (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||||||
| Beginning Account Value 10/1/21 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Net Annualized Expense Ratio2 | |||||||||||||||||
| $1,000.00 | $ | 709.60 | $ | 2.13 | $ | 1,022.44 | $ | 2.52 | 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 182/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
| franklintempleton.com | Annual Report | 19 | ||||||||
Franklin Intelligent Machines ETF
This annual report for Franklin Intelligent Machines ETF covers the fiscal year ended March 31, 2022.
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 are focused on, or that the investment manager believes will 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 12-month period, the Fund posted cumulative total returns of +6.80% based on market price and +7.27% 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 +11.92% 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 22.
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.
Economic and Market Overview
U.S. equities, as measured by the Standard & Poor’s 500 Index (S&P 500), posted a +15.65% total return for the 12 months ended March 31, 2022.1 Stocks benefited from the continued economic recovery, implementation of COVID-19 vaccination programs and easing pandemic restrictions. Higher wages and strong household balance sheets
| Portfolio Composition | ||||
| 3/31/22 | ||||
| % of Total Net Assets | ||||
Semiconductors & Semiconductor Equipment | 32.5% | |||
Software | 16.4% | |||
Health Care Equipment & Supplies | 13.3% | |||
Electronic Equipment, Instruments & Components | 9.7% | |||
Automobiles | 9.1% | |||
Technology Hardware, Storage & Peripherals | 6.4% | |||
Aerospace & Defense | 2.6% | |||
Other | 7.5% | |||
Short-Term Investments & Other Net Assets | 2.5% | |||
contributed to increased consumer spending, particularly on goods. A rebound in corporate earnings and the passage of a bipartisan infrastructure bill further bolstered investor sentiment. However, elevated demand combined with supply chain disruptions led to the highest inflation since 1982. Russia’s invasion of Ukraine late in the 12-month period injected further uncertainty into financial markets, provoking significant volatility in commodity and equity prices. Rising interest rates also pressured stocks, as borrowing costs began to increase from historically low levels.
Gross domestic product growth was robust during most of the period, as strong consumer spending and business investment in growing inventories supported the economy. Both exports and imports increased significantly amid a recovery in industrial production. The continued growth of the economy helped the U.S. to surpass its pre-pandemic output in 2021’s second quarter. However, rising prices precipitated a notable decline in consumer confidence, despite high spending levels.
The inflation rate was notably elevated during the 12-month period amid increased demand and supply chain bottlenecks. Consequently, the personal consumption expenditures index, a measure of inflation, surged during the period, representing the highest 12-month increase in decades. The unemployment rate declined from 6.0% in March 2021 to 3.6% in
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 110.
| 20 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN INTELLIGENT MACHINES ETF
| Top 10 Holdings | ||||
| 3/31/22 | ||||
| Company Sector/Industry | % of Total Net Assets | |||
| Tesla Inc. Automobiles | 8.8% | |||
| NVIDIA Corp. Semiconductors & Semiconductor Equipment | 6.9% | |||
| Apple Inc. Technology Hardware, Storage & Peripherals | 6.4% | |||
| Intuitive Surgical Inc. Health Care Equipment & Supplies | 5.7% | |||
| ASML Holding NV Semiconductors & Semiconductor Equipment | 3.8% | |||
| Synopsys Inc. Software | 3.5% | |||
| Taiwan Semiconductor Manufacturing Co. Ltd., Sponsored ADR Semiconductors & Semiconductor Equipment | 3.0% | |||
| DexCom Inc. Health Care Equipment & Supplies | 2.9% | |||
| The Descartes Systems Group Inc. Software | 2.9% | |||
Axon Enterprise Inc. Aerospace & Defense | 2.6% | |||
March 2022 as job openings increased, but a relative lack of available workers fueled wage growth, adding to some investors’ inflation concerns.
In an effort to control inflation, the U.S. Federal Reserve (Fed) raised the federal funds target rate to a range of 0.25%–0.50%, the first such increase since 2018. The Fed noted in its March 2022 meeting that strength in the U.S. job market and continued inflationary pressure, exacerbated by the war in Ukraine, meant it anticipated making further increases to the federal funds target rate. Furthermore, the Fed said it expected to begin reducing its bond holdings at a future meeting.
Investment Strategy
We use fundamental, bottom-up research analysis to identify companies positioned to capitalize on disruptive innovation in or are enabling the further development of the intelligent machines theme in the markets in which they operate. We evaluate market segments, products, services and business models positioned to benefit significantly from disruptive innovations in intelligent products, design, manufacturing and/or predictive maintenance relative to broad securities markets, and we seek to identify the primary beneficiaries of new trends or developments in physical applications of these innovations. We may invest in companies in any economic
sector or of any market capitalization and may invest in companies both inside and outside of the U.S., including those in developing or emerging markets. Although we search for investments across a large number of sectors, we expect to have significant investments in particular sectors, including technology.
Manager’s Discussion
During the reporting period, sectors that contributed to the Fund’s absolute performance included information technology (IT), health care and consumer discretionary. In IT, contributors included semiconductor manufacturer NVIDIA, consumer technology firm Apple and semiconductor-design software company Synopsys. In health care, contributors included Intuitive Surgical, a robotic surgical tools manufacturer, DexCom, a blood sugar monitoring device company, and Inspire Medical Systems, a developer of implantable neurostimulation systems to treat obstructive sleep apnea. In consumer discretionary, electric vehicle maker Tesla helped returns.
Turning to detractors, the industrials and materials sectors detracted from absolute performance. In industrials, detractors included custom manufacturer Proto Labs (not held at period-end), autonomous freight network company Tusimple Holdings (not held at period-end) and unmanned aerial vehicle company Aerovironment (not held at period-end). In materials, chemicals company SK IE Technology (not held at period-end) hurt results. Elsewhere, electric vehicle maker and auto technology company Rivian Automotive (not held at period-end) also hurt performance.
Thank you for your participation in Franklin Intelligent Machines ETF. We look forward to serving your future investment needs.
Matthew J. Moberg, CPA
Portfolio Manager
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2022, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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FRANKLIN INTELLIGENT MACHINES ETF
Performance Summary as of March 31, 2022
Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale 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 3/31/22
| Cumulative Total Return1 | Average Annual Total Return1 | |||||||||||||||
| Based on NAV2 | Based on market price3 | Based on NAV2 | Based on market price3 | |||||||||||||
1-Year | +7.27% | +6.80% | +7.27% | +6.80% | ||||||||||||
Since Inception (2/25/20) | +85.55% | +84.87% | +34.30% | +34.07% | ||||||||||||
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.
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FRANKLIN INTELLIGENT MACHINES ETF
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment
Total return is calculated at net asset value and represents the change in value of an investment over the periods shown. It includes any Fund fees and expenses, and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.
2/25/20–3/31/22
See page 24 for Performance Summary footnotes.
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FRANKLIN INTELLIGENT MACHINES ETF
PERFORMANCE SUMMARY
Distributions (4/1/21–3/31/22)
| Short-Term Capital Gains | Long-Term Capital Gains | Total | ||||||
$0.031956 | $0.062060 | $0.094016 | ||||||
Total Annual Operating Expenses5
0.50% |
All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. 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. The Fund has significant exposure to the technology sector. Companies operating within the technology sector may be affected by worldwide technological developments, the success of their products and services (which may be outdated quickly), anticipated products or services that are delayed or cancelled, and investor perception of the company and/or its products or services. In addition, companies operating within the technology sector may develop and/or utilize artificial intelligence. Artificial intelligence technology could face increasing regulatory scrutiny in the future, which may limit the development of this technology and impede the growth of companies that develop and/or utilize this technology. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. As a non-diversified fund, the Fund may invest in a relatively small number of issuers which may negatively impact the Fund’s performance and result in greater fluctuation in the value of the Fund’s shares. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.
Russia’s military invasion of Ukraine in February 2022, the resulting responses by the United States and other countries, and the potential for wider conflict could increase volatility and uncertainty in the financial markets and adversely affect regional and global economies. The United States and other countries have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to its invasion of Ukraine. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia’s military invasion. These sanctions, as well as any other economic consequences related to the invasion, such as additional sanctions, boycotts or changes in consumer or purchaser preferences or cyberattacks on governments, companies or individuals, may further decrease the value and liquidity of certain Russian securities and securities of issuers in other countries that are subject to economic sanctions related to the invasion.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. Total return calculations represent the cumulative and average annual changes in value of an investment over the period indicated. Return for less than one year, if any, has not been annualized.
2. Assumes reinvestment of distributions based on net asset value.
3. Assumes reinvestment of distributions based on market price.
4. Source: Morningstar. The Russell 3000 Index is market capitalization-weighted and measures the performance of the largest 3,000 U.S. companies representing the majority of the U.S. market’s total capitalization.
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. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN 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 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
Actual (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||||||
| Beginning Account Value 10/1/21 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Net Annualized Expense Ratio2 | |||||||||||||||||
| $1,000.00 | $ | 957.10 | $ | 2.44 | $ | 1,022.44 | $ | 2.52 | 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 182/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
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Franklin Dynamic Municipal Bond ETF
Formerly, Franklin Liberty Federal Intermediate Tax-Free Bond Opportunities ETF
This annual report for Franklin Dynamic Municipal Bond ETF covers the fiscal year ended March 31, 2022.
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 that pay interest 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 comparable unrated or short-term rated securities), 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 12-month period, the Fund posted cumulative total returns of -3.66% based on market price and -3.70% based on net asset value (NAV). In comparison, the Bloomberg 1-15 Year Municipal Bond Index, which is a subset of the Bloomberg Municipal Bond Index, posted a -4.21% cumulative total return for the same period.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 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 | ||||
| 3/31/22 | ||||
| % of Total Investments | ||||
Special Tax | 24.55% | |||
Industrial Development Revenue and Pollution Control | 16.98% | |||
Health Care | 11.20% | |||
Education | 7.51% | |||
Local | 7.24% | |||
Transportation | 6.69% | |||
Cash | 5.41% | |||
Utilities | 5.21% | |||
Lease | 4.92% | |||
Housing | 4.32% | |||
State | 3.26% | |||
Other | 2.15% | |||
Refunded | 0.57% | |||
Municipal Bond Market Overview
During the 12 months ending March 31, 2022, COVID-19 variants continued to be a significant driver of market forces. With each successive wave of infections, health authorities resisted returning to high levels of social distancing restrictions, allowing economic activity to improve. U.S. consumer inflation emerged as a large concern as pent-up demand for goods was met with stretched global supply chains. U.S. Treasury (UST) yields rose across the maturity curve as the U.S. Federal Reserve began removing accommodative monetary policies enacted to combat the COVID-19 induced economic slowdown.
Strong demand for municipal bonds (munis) drove valuations higher with the ratio of 30-year munis versus UST yields reaching an all-time best in June 2021. As market volatility increased, fund flows turned negative and muni performance suffered. We believe high levels of inflation in the U.S. will have a mixed impact on muni fundamentals. While higher prices should lead to more revenue from sales taxes, wages
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 113.
| 26 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN DYNAMIC MUNICIPAL BOND ETF
are typically an issuer’s largest operating expense, which could force some issuers to give employees raises to keep pace with increasing costs of living.
For the 12-month period, U.S. fixed income sectors underperformed relative to equities, as measured by the Standard & Poor’s 500 Index, which posted a +15.65% total return for the period.2 In comparison, investment-grade munis, as measured by the Bloomberg Municipal Bond Index, posted a -4.47% total return.2 USTs, as measured by the Bloomberg U.S. Treasury Index, posted a -3.67% total return, and investment-grade corporate bonds, as measured by the Bloomberg U.S. Corporate Bond Index, posted a -4.20% total return.2
Investment Strategy
We select securities that we believe will provide the best balance between risk and return within the Fund’s range of allowable investments and we typically use a buy-and-hold strategy. This means we generally hold securities in the Fund’s portfolio for income purposes, rather than trading securities for capital gains, although we may sell a security at any time if we believe it could help the Fund meet its goal. When selecting securities for the Fund’s portfolio, the investment manager may consider existing market conditions, the availability of lower-rated securities, and whether the difference in yields between higher and lower-rated securities justifies the higher risk of lower-rated securities. The Fund is an actively managed exchange-traded fund (ETF) that does not seek to replicate the performance of a specified index.
Manager’s Discussion
During the reporting period, the portfolio management team invested across the entire quality spectrum, including below investment-grade bonds, to achieve our objective of maximizing income for our investors. As credit spreads fluctuate, we will continue to seek the best opportunities in higher and lower quality securities. The yield curve flattened significantly over the reporting period, and the team focused on yield curve positioning in an effort to help our investors achieve high levels of tax-free income over the long term.
Thank you for your participation in Franklin Dynamic Municipal Bond ETF. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2022, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, state, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
| franklintempleton.com | Annual Report | 27 | ||||||||
FRANKLIN DYNAMIC MUNICIPAL BOND ETF
Performance Summary as of March 31, 2022
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 and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale 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 3/31/221
| Cumulative Total Return2 | Average Annual Total Return2 | |||||||||||||||
| Based on NAV3 | Based on market price4 | Based on NAV3 | Based on market price4 | |||||||||||||
1-Year | -3.70% | -3.66% | -3.70% | -3.66% | ||||||||||||
3-Year | +6.50% | +6.62% | +2.12% | +2.16% | ||||||||||||
Since Inception (8/31/17) | +10.10% | +10.14% | +2.12% | +2.13% | ||||||||||||
| Distribution Rate5 | 30-Day Standardized Yield6 | Taxable Equivalent 30-Day Standardized Yield7 | ||||||||||||||
| (with fee waiver) | (without fee waiver) | (with fee waiver) | (without fee waiver) | |||||||||||||
2.16% | 2.47% | 2.08% | 4.17% | 3.51% | ||||||||||||
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.
See page 30 for Performance Summary footnotes.
| 28 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN DYNAMIC MUNICIPAL BOND ETF
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return is calculated at net asset value and represents the change in value of an investment over the periods shown. It includes any Fund fees and expenses, and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.
8/31/17–3/31/22
See page 30 for Performance Summary footnotes.
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FRANKLIN DYNAMIC MUNICIPAL BOND ETF
PERFORMANCE SUMMARY
Distributions (4/1/21–3/31/22)
Net Investment Income |
$0.558100 |
Total Annual Operating Expenses9
| With Waiver | Without Waiver | |||
0.30% | 1.01% | |||
All investments involve risks, including possible loss of principal. Because municipal bonds are sensitive to interest-rate movements, the Fund’s yield and share price will fluctuate with market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. The Fund may invest in lower-rated bonds which include higher risk of default and 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. The Fund may invest a significant part of its assets in municipal securities that finance similar types of projects, such as utilities, hospitals, higher education and transportation. A change that affects one project would likely affect all similar projects, thereby increasing market risk. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.
Russia’s military invasion of Ukraine in February 2022, the resulting responses by the United States and other countries, and the potential for wider conflict could increase volatility and uncertainty in the financial markets and adversely affect regional and global economies. The United States and other countries have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to its invasion of Ukraine. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia’s military invasion. These sanctions, as well as any other economic consequences related to the invasion, such as additional sanctions, boycotts or changes in consumer or purchaser preferences or cyberattacks on governments, companies or individuals, may further decrease the value and liquidity of certain Russian securities and securities of issuers in other countries that are subject to economic sanctions related to the invasion.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. The Fund has a fee waiver and/or expense reimbursement contractually guaranteed through 7/31/22. Fund investment results reflect the expense reduction; without this reduction, the results would have been lower.
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 March dividend and the NAV per share on 3/31/22.
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. Taxable equivalent yield assumes the 2022 maximum federal income tax rate of 37.00% plus 3.80% Medicare tax.
8. Source: Morningstar. Bloomberg 1-15 Year Municipal Bond Index is a subset of the Municipal Bond Index, which is a market value-weighted index of tax-exempt, investment-grade municipal bonds with maturities of one year or more.
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. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
| 30 | Annual Report | franklintempleton.com | ||||||||
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 10/1/21 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Net Annualized Expense Ratio2 | |||||||||||||||||
| $1,000.00 | $ | 939.70 | $ | 1.45 | $ | 1,023.44 | $ | 1.51 | 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 182/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
| franklintempleton.com | Annual Report | 31 | ||||||||
Franklin Liberty Federal Tax-Free Bond ETF
This annual report for Franklin Liberty Federal Tax-Free Bond ETF covers the fiscal year ended March 31, 2022. Effective May 3, 2022, the Fund was renamed the Franklin Municipal Green Bond ETF, and under normal market conditions, the Fund will invest at least 80% of its net assets in municipal green bonds that promote environmental sustainability.
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 that pay interest 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 five to 15 years, and only buys 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 12-month period, the Fund posted cumulative total returns of -5.44% based on market price and net asset value (NAV). In comparison, the Bloomberg Municipal Bond Index, which is a market value-weighted index of tax-exempt, investment-grade bonds with maturities of one year or more, posted a -4.47% 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 34.
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 | ||||
| 3/31/22 | ||||
| % of Total Investments | ||||
Utilities | 17.90% | |||
Lease | 13.52% | |||
Special Tax | 11.63% | |||
Transportation | 11.50% | |||
Industrial Development Revenue and Pollution Control | 9.86% | |||
Health Care | 8.45% | |||
Education | 8.26% | |||
Local | 7.32% | |||
Housing | 6.96% | |||
Other | 1.94% | |||
State | 1.57% | |||
Cash | 0.57% | |||
Refunded | 0.53% | |||
Municipal Bond Market Overview
During the 12 months ending March 31, 2022, COVID-19 variants continued to be a significant driver of market forces. With each successive wave of infections, health authorities resisted returning to high levels of social distancing restrictions, allowing economic activity to improve. U.S. consumer inflation emerged as a large concern as pent-up demand for goods was met with stretched global supply chains. U.S. Treasury (UST) yields rose across the maturity curve as the
U.S. Federal Reserve began removing accommodative monetary policies enacted to combat the COVID-19 induced economic slowdown.
Strong demand for municipal bonds (munis) drove valuations higher with the ratio of 30-year munis versus UST yields reaching an all-time best in June 2021. As market volatility increased, fund flows turned negative and muni performance suffered. We believe high levels of inflation in the U.S. will have a mixed impact on muni fundamentals. While higher prices should lead to more revenue from sales taxes, wages
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 126.
| 32 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN LIBERTY FEDERAL TAX-FREE BOND ETF
are typically an issuer’s largest operating expense, which could force some issuers to give employees raises to keep pace with increasing costs of living.
For the 12-month period, U.S. fixed income sectors underperformed relative to equities, as measured by the Standard & Poor’s 500 Index, which posted a +15.65% total return for the period.2 In comparison, investment-grade munis, as measured by the Bloomberg Municipal Bond Index, posted a -4.47% total return.2 USTs, as measured by the Bloomberg U.S. Treasury Index, posted a -3.67% total return, and investment-grade corporate bonds, as measured by the Bloomberg U.S. Corporate Bond Index, posted a -4.20% total return.2
Investment Strategy
We select securities that we believe will provide the best balance between risk and return within the Fund’s range of allowable investments and we typically use a buy-and-hold strategy. This means we generally hold securities in the Fund’s portfolio for income purposes, rather than trading securities for capital gains, although we may sell a security at any time if we believe it could help the Fund meet its goal. The Fund is an actively managed exchange-traded fund (ETF) that does not seek to replicate the performance of a specified index.
Manager’s Discussion
During the reporting period, the portfolio management team invested across the investment-grade quality spectrum to achieve our objective of maximizing income for our investors. As credit spreads within investment grade fluctuate, we will continue to seek the best opportunities in higher and lower quality securities. The yield curve flattened significantly over the reporting period, and the team focused on yield curve positioning in an effort to help our investors achieve high levels of tax-free income over the long term.
Thank you for your participation in Franklin Liberty Federal Tax-Free Bond ETF. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2022, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, state, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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FRANKLIN LIBERTY FEDERAL TAX-FREE BOND ETF
Performance Summary as of March 31, 2022
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 and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale 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 3/31/221
| Cumulative Total Return2 | Average Annual Total Return2 | |||||||||||||||
| Based on NAV3 | Based on market price4 | Based on NAV3 | Based on market price4 | |||||||||||||
1-Year | -5.44% | -5.44% | -5.44% | -5.44% | ||||||||||||
3-Year | +5.33% | +5.32% | +1.74% | +1.74% | ||||||||||||
Since Inception (8/31/17) | +10.42% | +10.45% | +2.19% | +2.19% | ||||||||||||
| 30-Day Standardized Yield6 | Taxable Equivalent 30-Day Standardized Yield7 | |||||||||||||||
| Distribution Rate5 | (with fee waiver) | (without fee waiver) | (with fee waiver) | (without fee waiver) | ||||||||||||
1.82% | 2.11% | 1.75% | 3.56% | 2.96% | ||||||||||||
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 36 for Performance Summary footnotes.
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FRANKLIN LIBERTY FEDERAL TAX-FREE BOND ETF
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return is calculated at net asset value and represents the change in value of an investment over the periods shown. It includes any Fund fees and expenses, and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.
8/31/17–3/31/22
See page 36 for Performance Summary footnotes.
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FRANKLIN LIBERTY FEDERAL TAX-FREE BOND ETF
PERFORMANCE SUMMARY
Distributions (4/1/21–3/31/22)
Net Investment Income |
$0.436859 |
Total Annual Operating Expenses9
| With Waiver | Without Waiver | |||
0.30% | 0.78% | |||
All investments involve risks, including possible loss of principal. Because municipal bonds are sensitive to interest-rate movements, the Fund’s yield and share price will fluctuate with market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. 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 Fund may invest a significant part of its assets in municipal securities that finance similar types of projects, such as utilities, hospitals, higher education and transportation. A change that affects one project would likely affect all similar projects, thereby increasing market risk. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.
Russia’s military invasion of Ukraine in February 2022, the resulting responses by the United States and other countries, and the potential for wider conflict could increase volatility and uncertainty in the financial markets and adversely affect regional and global economies. The United States and other countries have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to its invasion of Ukraine. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia’s military invasion. These sanctions, as well as any other economic consequences related to the invasion, such as additional sanctions, boycotts or changes in consumer or purchaser preferences or cyberattacks on governments, companies or individuals, may further decrease the value and liquidity of certain Russian securities and securities of issuers in other countries that are subject to economic sanctions related to the invasion.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. The Fund has a fee waiver and/or expense reimbursement contractually guaranteed through 7/31/22. Fund investment results reflect the expense reduction; without this reduction, the results would have been lower.
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 March dividend and the NAV per share on 3/31/22.
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. Taxable equivalent yield assumes the 2022 maximum federal income tax rate of 37.00% plus 3.80% Medicare tax.
8. Source: Morningstar. The Bloomberg Municipal Bond Index is a market value-weighted index of tax-exempt, investment-grade municipal bond with maturities of one year or more.
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. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN LIBERTY FEDERAL TAX-FREE 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 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
Actual (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||||||
| Beginning Account Value 10/1/21 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Net Annualized Expense Ratio2 | |||||||||||||||||
| $1,000.00 | $ | 932.30 | $ | 1.45 | $ | 1,023.44 | $ | 1.51 | 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 182/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
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Franklin Liberty High Yield Corporate ETF
This annual report for Franklin Liberty High Yield Corporate ETF covers the fiscal year ended March 31, 2022.
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 12-month period, the Fund posted cumulative total returns of -1.27% based on market price and -0.69% 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 -0.30% 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 41.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
Economic and Market Overview
The U.S. bond market, as measured by the Bloomberg U.S. Aggregate Bond Index, posted a -4.15% total return for the 12 months ended March 31, 2022.1 Growing inflation amid supply chain disruptions and increased consumer spending led to tighter monetary policy, reducing the value of most bonds. Geopolitical instability disrupted financial markets late in the 12-month period following Russia’s invasion of Ukraine, contributing to significant volatility in bond markets. The yield curve flattened notably during the period, reflecting
| Portfolio Composition | ||||
| 3/31/22 | ||||
| % of Total Net Assets | ||||
Corporate Bonds & Notes | 94.4% | |||
Senior Floating Rate Interests | 2.3% | |||
Short-Term Investments & Other Net Assets | 3.3% | |||
investors’ expectations that short-term interest rates will continue to rise, while the outlook for long-term economic growth is uncertain.
In an effort to control inflation, the U.S. Federal Reserve (Fed) raised the federal funds target rate to a range of 0.25%–0.50%, the first such increase since 2018. The Fed noted in its March 2022 meeting that strength in the U.S. job market and continued inflationary pressure, exacerbated by the war in Ukraine, meant it anticipated making further increases to the federal funds target rate. Furthermore, the Fed said it expected to begin reducing its bond holdings at a future meeting.
U.S. Treasury (UST) bonds, as measured by the Bloomberg U.S. Treasury Index, posted a -3.67% total return for the 12-month period.1 The 10-year UST yield (which moves inversely to price) increased, particularly later in the period amid high inflation and the Fed’s less accommodative stance. Mortgage-backed securities (MBS), as measured by the Bloomberg U.S. MBS Index, posted a -4.92% total return for the period.1
Corporate bond prices also declined overall, constrained by inflation and rising interest rates. Furthermore, corporate yield spreads, a measure of the difference in yields between corporate bonds and similarly-dated USTs, increased, reflecting investors’ increasing risk-off preferences. However, yield spreads rose faster for investment-grade bonds than high-yield bonds, and high-yield bonds benefited from higher coupon payments. In this environment, high-yield corporate bonds, as represented by the Bloomberg U.S. Corporate High Yield Bond Index, posted a -0.66% total return, while investment-grade corporate bonds, as represented by the Bloomberg U.S. Corporate Bond Index, posted a -4.20% total return.1
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 133.
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FRANKLIN LIBERTY HIGH YIELD CORPORATE ETF
| Top 10 Sectors/Industries | ||||
| 3/31/22 | ||||
| % of Total Net Assets | ||||
Energy | 20.8% | |||
Materials | 12.7% | |||
Media & Entertainment | 11.4% | |||
Commercial & Professional Services | 6.8% | |||
Consumer Services | 5.7% | |||
Diversified Financials | 5.3% | |||
Utilities | 4.5% | |||
Pharmaceuticals, Biotechnology & Life Sciences | 4.4% | |||
Capital Goods | 4.1% | |||
Health Care Equipment & Services | 3.6% | |||
Investment Strategy
The Fund may invest up to 100% of its total assets in high yield debt securities. The Fund may buy both rated and unrated debt securities, including securities rated below B by Moody’s or Standard & Poor’s (or deemed comparable by the Fund’s investment manager). The Fund may invest in fixed or floating rate corporate loans and corporate debt securities, including covenant life loans. The Fund may also invest in defaulted debt securities. The Fund may invest in debt securities of any maturity or duration.
The Fund may invest in debt securities of U.S. and foreign issuers, including those in developing or emerging markets. The Fund may enter into certain derivative transactions, principally currency and cross currency forwards; and swap agreements, including interest rate and credit default swaps (including credit default index swaps). The use of these derivative transactions may allow the Fund to obtain net long or short exposures to select currencies, interest rates, countries, durations or credit risks.
We are research driven, fundamental investors who rely on our team of analysts to provide in-depth industry expertise and use qualitative and quantitative analysis to evaluate companies. As bottom-up investors, we focus primarily on individual securities but consider sectors when choosing investments. In selecting securities, we do not rely principally on the ratings assigned by rating agencies, but perform our own independent investment analysis to evaluate the creditworthiness of the issuer. We consider a variety of factors, including the issuer’s experience and managerial strength, its sensitivity to economic conditions, and its current and prospective financial condition. The Fund is an actively managed ETF and, thus, does not seek to replicate the performance of a specified index. Accordingly, the investment manager has
discretion on a daily basis to manage the Fund’s portfolio in accordance with the Fund’s investment goals.
Manager’s Discussion
While “reflation,” meaning a return to growth, was the key driver for markets in the first quarter of 2021, “inflation” and commensurate risks of higher commodity prices took center stage over the summer and into the fall. For the high-yield (HY) market in particular, in the period leading up to the end of 2021, the sector enjoyed a favorable environment for leveraged credit. For most of last year, investor’s reach for yield remained strong and market participants focused on the positives. U.S. HY spreads ended 2021 close to the lows of the year despite a scare in the closing weeks from the Omicron variant and the U.S. Federal Reserve’s (Fed’s) hawkish pivot.
Since then, a broader risk-off tone has set in as markets have priced in more Fed tightening and the Russia-Ukraine conflict sends shock waves through the existing world order, prompting U.S. HY spreads to steadily widen to levels last seen toward the end of 2020. However, HY credit
| Top 10 Holdings | ||||
| 3/31/22 | ||||
| Company Sector/Industry | % of Total Net Assets | |||
Federal Farm Credit Discount Notes, 4/01/22 | 3.0% | |||
American Airlines Inc./AAdvantage Loyalty IP Ltd., 5.50%, 4/20/2026 Airlines | 1.4% | |||
Bausch Health Americas Inc., senior note, 144A, 9.25%, 4/01/26 Pharmaceuticals, Biotechnology & Life Sciences | 1.2% | |||
CSC Holdings LLC, senior note, 144A, Media & Entertainment | 1.2% | |||
Martin Midstream Partners LP, senior note, second lien, 144A, 11.50%, 2/28/25 Energry | 1.2% | |||
EnLink Midstream Partners LP, senior note, Energry | 1.1% | |||
TransDigm Inc., senior secured note, 144A, Capital Goods | 1.0% | |||
Cheniere Energy Inc., senior secured, 144A, Energy | 1.0% | |||
CCO Holdings LLC/CCO Holdings Capital Corp., 144A, senior bond, 144A, 4.50%, 8/15/2030 Media & Entertainment | 1.0% | |||
Carnival Corp., senior note, 144A, senior note, 144A, 5.75%, 3/01/2027 Consumer Services | 0.9% | |||
| franklintempleton.com | Annual Report | 39 | ||||||||
FRANKLIN LIBERTY HIGH YIELD CORPORATE ETF
fundamentals are entering this turbulent period in solid shape, in our view, given the default rate has been hovering near historic lows, and wide-open capital markets the past two years have allowed many issuers to build up liquidity buffers and push out maturities.
Although input cost inflation pressures and shortages could present some headwinds to the fundamental picture, we believe the majority of HY sectors are still not likely to be negatively impacted to a significant degree. The potential impacts to HY corporate bonds from the Russia-Ukraine conflict are harder to quantify, however. As sanctions are levied, the impact to HY bonds would largely depend on the type of sanctions imposed, any unintended consequences, and the resulting response from Russia.
Based on benchmark index data, HY spreads generally widened during the 12-month period under review. Most segments of the HY market posted negative absolute returns for the performance period under review. CCC rated bonds returned 0.8%, compared to returns of 0.1% and -1.0% for B and BB rated segments, respectively. From an industry standpoint, energy stood out as a key performer, followed by metals and minerals.
The Fund’s yield-curve positioning detracted from performance during the 12-month period under review. Conversely, the Fund’s ratings quality contributed to results.
The Fund’s industry allocation contributed to relative performance for the period, led by overweight positions in the energy industry and underweight positions in the media cable and wired segments. Conversely, overweighted positions in the chemicals, health care and utilities industries hindered results.
The Fund’s security selection was a headwind to performance, particularly in the gaming, automotive and technology segments. Conversely, selection in the energy, chemicals and health care industries contributed to results.
The Fund held mostly cash bonds during the period under review. The Fund had no exposure to derivatives at the end of the review period.
Thank you for your participation in Franklin Liberty 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
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2022, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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CFA® is a trademark owned by CFA Institute.
FRANKLIN LIBERTY HIGH YIELD CORPORATE ETF
Performance Summary as of March 31, 2022
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 and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale 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 3/31/22
| Cumulative Total Return1 | Average Annual Total Return1 | |||||||||||||||
| Based on NAV2 | Based on market price3 | Based on NAV2 | Based on market price3 | |||||||||||||
1-Year | -0.69% | -1.27% | -0.69% | -1.27% | ||||||||||||
3-Year | +15.22% | +14.58% | +4.84% | +4.64% | ||||||||||||
Since Inception (5/30/18) | +23.37% | +23.06% | +5.63% | +5.56% | ||||||||||||
| Distribution Rate4 | 30-Day Standardized Yield5 | |||
4.89% | 5.86% | |||
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.
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FRANKLIN LIBERTY HIGH YIELD CORPORATE ETF
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.
5/30/18–3/31/22
See page 43 for Performance Summary footnotes.
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FRANKLIN LIBERTY HIGH YIELD CORPORATE ETF
PERFORMANCE SUMMARY
Distributions (4/1/21–3/31/22)
Net Investment Income | Long-Term Capital Gain | Total | ||||||
$1.184398 | $0.074951 | $1.259349 | ||||||
Total Annual Operating Expenses7
0.40% |
All investments involve risks, including possible loss of principal. 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. Distributions to shareholders may decline when prevailing interest rates fall or when the Fund experiences defaults on debt securities it holds. The high-yield corporate debt securities and instruments in which the Fund invests tend to be rated below investment grade. Investing in higher-yielding, lower-rated corporate debt securities and instruments involves greater risk of default, which could result in loss of principal—a risk that may be heightened in a slowing economy. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The markets for particular securities or types of securities are or may become relatively illiquid. Reduced liquidity will have an adverse impact on the security’s value and on the Fund’s ability to sell such securities when necessary to meet the Fund’s liquidity needs or in response to a specific market event. Investing in derivative securities and the use of foreign currency techniques involve special risks as such may not achieve the anticipated benefits and/or may result in losses to the Fund. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.
Russia’s military invasion of Ukraine in February 2022, the resulting responses by the United States and other countries, and the potential for wider conflict could increase volatility and uncertainty in the financial markets and adversely affect regional and global economies. The United States and other countries have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to its invasion of Ukraine. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia’s military invasion. These sanctions, as well as any other economic consequences related to the invasion, such as additional sanctions, boycotts or changes in consumer or purchaser preferences or cyberattacks on governments, companies or individuals, may further decrease the value and liquidity of certain Russian securities and securities of issuers in other countries that are subject to economic sanctions related to the invasion.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. Total return calculations represent the cumulative and average annual changes in value of an investment over the period indicated. Return for less than one year, if any, has not been annualized.
2. Assumes reinvestment of distributions based on net asset value.
3. Assumes reinvestment of distributions based on market price.
4. Distribution rate is based on an annualization of the March dividend and the NAV per share on 3/31/22.
5. 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.
6. Source: Morningstar. The ICE BofA U.S. High Yield Constrained Index tracks the performance of U.S. dollar denominated below investment-grade corporate debt publicly issued in the U.S. domestic market.
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. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN LIBERTY 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 ETFs. In addition, if transactional costs were included, your total costs would have been higher.
Actual (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||||||
| Beginning Account Value 10/1/21 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Net Annualized Expense Ratio2 | |||||||||||||||||
| $1,000.00 | $ | 959.40 | $ | 1.95 | $ | 1,022.94 | $ | 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 182/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
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Franklin Liberty International Aggregate Bond ETF
This annual report for Franklin Liberty International Aggregate Bond ETF covers the fiscal year ended March 31, 2022.
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.
Performance Overview
During the 12-month period, the Fund posted cumulative total returns of -3.30% based on market price and -3.35% 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 -3.56% cumulative total return.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 48.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
Economic and Market Overview
Global aggregate bond markets posted significantly negative returns over the 12-month review period. In April 2021, the U.S. Federal Reserve (Fed) Chair Jay Powell stated that the rollout of vaccinations, in tandem with unprecedented fiscal support, had improved economic activity and employment. U.S. economic data released in May 2021 were largely positive, although strong inflation data led to significant speculation as to whether the Fed might begin to reassess its policies. Even so, the central bank made no changes to its stimulus measures in its June 2021 meeting, while admitting that rising inflation had become a matter for concern. The
| Geographic Composition | ||||
| 3/31/22 | ||||
| % of Total Net Assets | ||||
Europe | 43.9% | |||
Asia | 30.5% | |||
North America | 10.4% | |||
Supranationals | 2.2% | |||
Australia & New Zealand | 2.1% | |||
Middle East & Africa | 1.1% | |||
Latin America & Caribbean | 0.1% | |||
Short-Term Investments & Other Net Assets | 9.7% | |||
Fed also kept its policies unchanged in July 2021, stating that the U.S. economy had made progress toward reaching its goals of maximum employment and price stability. However, concerns remained about rising inflation, with data continuing to surprise on the upside. At its September 2021 meeting, the Fed indicated that it might begin tapering asset purchases earlier than previously expected, a decision that came after the Federal Open Market Committee revised U.S. growth and inflation projections upward for 2022. As strong economic data and concerns about high levels of inflation continued, the Fed announced in November 2021 that it would begin to taper its monetary support. Indeed, in December 2021, the Fed announced it would accelerate its tapering, doubling the monthly reduction rate of asset purchases from January 2022 onward.
Into the new year, the Fed moved decisively to dampen the threat from inflation by indicating its intention to raise interest rates at its meeting in March 2022. February was dominated by geopolitics, with President Putin’s decision to invade Ukraine leading to economic sanctions by Western countries on affiliates of the Russian government. U.S. inflation reached 7% during January, validating the Fed’s intention to implement multiple rates rises during 2022. In March the Fed raised interest rates and further strengthened its rhetoric on inflation, signaling potential multiple increases during 2022. Against this backdrop, benchmark U.S. Treasury yields followed a downward trajectory for the first half of the review period until rising in October 2021. U.S Treasury yields then dropped sharply at the end of November, amid worries about
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 141.
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FRANKLIN LIBERTY INTERNATIONAL AGGREGATE BOND ETF
| Portfolio Composition | ||||
| 3/31/22 | ||||
| % of Total Net Assets | ||||
Foreign Government and Agency Securities | 81.6% | |||
Corporate Bonds & Notes | 5.8% | |||
Short-Term Investments & Other Net Assets | 12.6% | |||
the economic impact of the Omicron variant. However, affected by the Fed’s hawkish language, benchmark U.S. Treasury yields rose significantly over the first quarter of 2022, in late March hitting levels last seen in May 2019.
In Europe, the European Central Bank (ECB) decided at the start of the period to keep its monetary policy unchanged, although figures showed that the region had fallen into a ‘double-dip’ recession. In May 2021, however, there were encouraging signs that the region was bouncing back. Fears that rising inflation could threaten an economic recovery were downplayed by ECB President Christine Lagarde, while several ECB policymakers emphasized that it was too soon to rein in the central bank’s expansionary monetary policies. Indeed, the central bank maintained its policies at its June 2021 meeting, notwithstanding further strong economic data. The ECB subsequently raised both its growth and inflation forecasts for 2021, although it stipulated that it expected the latter to remain below its target for the foreseeable future.
The central bank announced in July 2021 that it would shift its inflation target from ‘below but close to 2%’ to a definitive 2%. Economic data remained upbeat, with the eurozone economy moving out of recession in the second three months of the year. In September 2021, the ECB announced that it would begin moderating its emergency bond purchases over the fourth quarter. Nonetheless, concerns remained about high levels of inflation. Though the ECB kept interest rates unchanged at its October 2021 meeting, it announced that it would begin to taper its asset purchases. Rising energy prices and supply chain tensions helped push up annualized eurozone inflation in November 2021 to 5%, its highest reading on record. The ECB then committed to an increased pace of asset purchase tapering at its December 2021 meeting but stated that continued accommodation would be required to stabilize inflation at 2% over the medium term.
Figures released early in January 2022 showed that eurozone inflation had risen to a record high of 5% in December 2021, putting pressure on the ECB to reduce its monetary stimulus more quickly than planned. The February 2022 meeting of the central bank marked a hawkish shift in rhetoric, with Lagarde’s initial refusal to rule out
interest-rate increases later in the year triggering a selloff in eurozone government bonds. In March 2022, the ECB announced a more aggressive schedule for asset purchase tapering and indicated a willingness to raise interest rates. In this environment, benchmark yields on German Bunds at first followed an erratic, albeit upward overall, path until they fell significantly in November 2021. They then rebounded in December, and indeed in January 2022 moved into positive territory for the first time since 2019, although falling back in February 2022 as the conflict in Ukraine escalated. Nevertheless, in March 2022, they rose sharply, reaching their highest reading since early 2018, to end the 12-month period up considerably.
Investment Strategy
The Fund invests predominantly in fixed and floating-rate bonds issued by governments, government agencies and governmental-related or corporate issuers located outside the U.S. Bonds may be denominated and issued in the local currency or in another currency. The Fund may also invest in securities or structured products that are linked to or derive their value from another security, asset or currency of any nation. In addition, the Fund’s assets are invested in issuers located in at least three countries (excluding the U.S.). The Fund may invest without limit in developing or emerging markets.
The Fund may invest in debt securities of any maturity or duration, and the average maturity or duration of debt securities in the Fund’s portfolio will fluctuate depending on the investment manager’s outlook on changing market, economic and political conditions.
The Fund is a “non-diversified” fund, which means it generally invests a greater portion of its assets in the securities of one or more issuers and invests overall in a smaller number of issuers than a diversified fund.
When choosing investments for the Fund, we allocate the Fund’s assets based upon our assessment of changing market, political and economic conditions. We consider various factors, including evaluation of interest rates, currency exchange rate changes and credit risks. We may consider selling a security when we believe the security has become fully valued due to either its price appreciation or changes in the issuer’s fundamentals, or when we believe another security is a more attractive investment opportunity.
We seek to hedge substantially all of the Fund’s foreign currency exposure using currency related derivatives, including currency and cross currency forwards and currency futures contracts. We expect to maintain extensive positions in
| 46 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN LIBERTY INTERNATIONAL AGGREGATE BOND ETF
currency related derivative instruments as a hedging technique or to implement a currency investment strategy, which exposes a large amount of the Fund’s assets to obligations under these instruments. The results of such transactions may represent, from time to time, a significant component of the Fund’s investment returns. The use of these derivative transactions may allow the Fund to obtain net long or net negative (short) exposure to selected currencies. The Fund may also enter into various other transactions involving derivatives, including interest rate/bond futures contracts and interest rate swap agreements. These derivative instruments may be used for hedging purposes. Derivatives that provide exposure to bonds may be used to satisfy the Fund’s 80% policy.
Manager’s Discussion
During the reporting period, the Fund’s security selection and sector allocation contributed to relative returns. In government bonds, overweight exposure to German Bunds and selection in Italian sovereign debt bolstered relative results. In the corporate space, selection in investment-grade industrial issues added relative value.
The Fund’s duration and yield-curve positioning further helped relative results, mostly due to duration stances on U.K., Polish, Japanese and eurozone bonds. However, duration positioning in Chinese bonds hindered relative performance.
The Fund’s currency positioning also added to relative performance, largely owing to an underweight allocation to the British pound, which depreciated against the U.S. dollar.
In contrast, the Fund’s local market allocation detracted slightly from relative returns, namely exposures to the Chinese, Polish, eurozone and U.K. markets. However, an overweight allocation to the outperforming U.S. market and underweight position in the underperforming Russian market helped relative performance.
In terms of derivatives use, currency forwards are used in the Fund to hedge foreign-currency-denominated holdings back into the portfolio’s base currency, the U.S. dollar. Therefore, the use of the forwards is generally risk-reducing, both on an absolute basis and relative to the benchmark. However, for the period under review, derivatives use added 475 basis points to the Fund’s relative performance, as the U.S. dollar rose against most other major currencies.
Thank you for your participation in Franklin Liberty International Aggregate Bond ETF. We look forward to serving your future investment needs.
John Beck
Sonal Desai, Ph.D.
David Zahn, CFA
Patrick Klein, Ph.D.
Portfolio Management Team
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2022, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
| franklintempleton.com | Annual Report | 47 | ||||||||
FRANKLIN LIBERTY INTERNATIONAL AGGREGATE BOND ETF
Performance Summary as of March 31, 2022
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 and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale 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 3/31/22
| Cumulative Total Return1 | Average Annual Total Return1 | |||||||||||||||
| Based on NAV2 | Based on market price3 | Based on NAV2 | Based on market price3 | |||||||||||||
1-Year | -3.35% | -3.30% | -3.35% | -3.30% | ||||||||||||
3-Year | +1.29% | +1.50% | +0.43% | +0.50% | ||||||||||||
Since Inception (5/30/18) | +1.30% | +1.62% | +0.34% | +0.42% | ||||||||||||
| Distribution Rate4 | 30-Day Standardized Yield5 | |||
1.80% | 0.60% | |||
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.
See page 50 for Performance Summary footnotes.
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FRANKLIN LIBERTY INTERNATIONAL AGGREGATE BOND ETF
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.
5/30/18–3/31/22
See page 50 for Performance Summary footnotes.
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FRANKLIN LIBERTY INTERNATIONAL AGGREGATE BOND ETF
PERFORMANCE SUMMARY
Distributions (4/1/21–3/31/22)
Net Investment Income | Short-Term Capital Gains | Long-Term Capital Gains | Total | |||||||||
$0.424879 | $0.128014 | $0.000051 | $0.552944 | |||||||||
Total Annual Operating Expenses6
0.25% |
All investments involve risks, including possible loss of principal. Bond prices generally move in the opposite direction of interest rates and a rise in interest rates may cause the Fund’s share price to decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund’s investments in foreign securities involve certain risks including economic and political uncertainties. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity. Investing in derivative securities and the use of foreign currency techniques involve special risks including counterparty risk, and as such may not achieve the anticipated benefits and/or may result in losses to the Fund. Sovereign debt securities are subject to various risks in addition to those relating to debt securities and foreign securities generally, including, but not limited to, the risk that a governmental entity may be unwilling or unable to pay interest and repay principal on its sovereign debt, or otherwise meet its obligations. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.
Russia’s military invasion of Ukraine in February 2022, the resulting responses by the United States and other countries, and the potential for wider conflict could increase volatility and uncertainty in the financial markets and adversely affect regional and global economies. The United States and other countries have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to its invasion of Ukraine. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia’s military invasion. These sanctions, as well as any other economic consequences related to the invasion, such as additional sanctions, boycotts or changes in consumer or purchaser preferences or cyberattacks on governments, companies or individuals, may further decrease the value and liquidity of certain Russian securities and securities of issuers in other countries that are subject to economic sanctions related to the invasion.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. Total return calculations represent the cumulative and average annual changes in value of an investment over the period indicated. Return for less than one year, if any, has not been annualized.
2. Assumes reinvestment of distributions based on net asset value.
3. Assumes reinvestment of distributions based on market price.
4. Distribution rate is based on an annualization of the December 2021 dividend and the NAV per share on 3/31/22.
5. 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.
6. Source: Morningstar. The Bloomberg Global Aggregate Bond ex-USD Index (100% Hedged to USD) measures global investment-grade debt from 24 local currency markets. This multicurrency benchmark is 100% hedged to the U.S. dollar and includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.
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. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN LIBERTY 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 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
Actual (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||||||
| Beginning Account Value 10/1/21 | Ending Account Value 3/31/22 | �� | Expenses Paid During Period 10/1/21–3/31/221,2 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Net Annualized Expense Ratio2 | ||||||||||||||||
| $1,000.00 | $ | 961.90 | $ | 1.22 | $ | 1,023.68 | $ | 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 182/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
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Franklin Liberty Investment Grade Corporate ETF
This annual report for Franklin Liberty Investment Grade Corporate ETF covers the fiscal year ended March 31, 2022.
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 12-month period, the Fund posted cumulative total returns of -4.49% based on market price and -4.30% 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 -4.20% 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 55.
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.
Economic and Market Overview
During the 12 months under review, COVID-19 and its variants remained a significant driver of the U.S. economy. The Delta variant of the disease spread throughout the summer months reaching portions of the country that had yet to see high infection rates despite increasing vaccination levels. Many health authorities moved to reintroduce some social distancing requirements stalling the return to economic activity. Just as this strain of the disease seemed to lessen, the more contagious, milder Omicron variant pushed case rates to all-time highs in January 2022. However, state and local governments resisted returning to lockdowns which, in turn, helped the economic recovery.
| Top 10 Sectors/Industries | ||||
| 3/31/22 | ||||
% of Total Net Assets | ||||
Banks | 24.6% | |||
Electric Utilities | 8.5% | |||
Oil, Gas & Consumable Fuels | 5.8% | |||
Health Care Providers & Services | 4.4% | |||
Diversified Telecommunication Services | 3.7% | |||
Capital Markets | 3.6% | |||
Specialty Retail | 2.8% | |||
Hotels, Restaurants & Leisure | 2.7% | |||
Media | 2.6% | |||
Diversified Financial Services | 2.5% | |||
The U.S. economy grew by 5.7% in 2021 and by another annualized rate of 6.9% in the first quarter 2022 as strong fiscal support bolstered consumer spending. Although not uniform across the period, U.S. employment improved markedly over the previous 12 months, averaging 556,000 monthly new job creations. The unemployment rate dropped to 3.8% by February 2022, just 0.3 percentage points above pre-COVID levels. Industrial production recovered throughout the period with November 2021 levels exceeding February 2020 amounts, but, more recently, the pace of growth has slowed.
Although initially labeled as transitory, U.S. consumer inflation increased rapidly through the end of 2021 and into 2022 and has become more persistent. With historically high levels of savings from pandemic recovery funds, pent-up demand for consumer goods met constrained supply growth due to fast rising commodity prices and stretched global supply chains. Additionally, the February 2022 Russian invasion of Ukraine put pressure on world energy and food commodity prices. In March 2022, the year-over-year gain in the U.S. Consumer Price Index reached 7.9%, the highest since 1982, eroding real incomes as wages were not able to keep up with prices of basic goods such as energy, food, and shelter.
Throughout most of the 12 months under review, the U.S. Federal Reserve (Fed) maintained their extraordinarily loose monetary policies which included an effective lower-bound
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 146.
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FRANKLIN LIBERTY INVESTMENT GRADE CORPORATE ETF
federal funds rate and monthly purchases of assets. As U.S. inflation began to show no signs of retreating, the Fed turned hawkish ending all new asset purchases and raising short-term rates by 25 basis points at its March 2022 meeting. Median Fed projections show at least another six rate hikes in 2022 with more to come next year. Also, the Fed pledged to “normalize” its ample balance sheet by reducing its holdings of both U.S. Treasuries (UST) and agency mortgage-backed securities. This change in outlook and increased inflation put strong upward pressure on UST yields across the maturity spectrum, led by intermediate rates reaching levels last seen in 2019.
Throughout the summer months, investment-grade corporate bond spreads remained tight on a historical basis before increasing modestly towards the end of the year. Since then, spreads widened significantly after the start of the Russian/Ukraine war, but we have seen some rebound as higher all-in yields became more attractive to investors. Company earnings remained strong in the 12 months under review, which supported the sector. However, there are concerns that increased costs, specifically wage costs, could put pressure on corporate profits as we move forward.
Investment Strategy
The Fund invests primarily in U.S. dollar-denominated corporate debt securities issued by U.S. and foreign companies. The Fund may invest in debt securities of any maturity or duration.
The Fund’s focus on the credit quality of its portfolio is intended to reduce credit risk and help to preserve the Fund’s capital. The Fund may also invest a portion of its assets in convertible securities, preferred securities (including preferred stock) and U.S. Treasury securities, and generally expects to invest a portion of its assets in cash, cash equivalents and high-quality money market securities, including short-term U.S. government securities, commercial paper, repurchase agreements and affiliated or unaffiliated money market funds. The Fund may invest up to 40% of its net assets in foreign securities, including those in developing markets, and up to 15% of its net assets in non-U.S. dollar-denominated securities. The Fund may enter into certain derivative transactions to seek to enhance Fund returns, increase liquidity, gain exposure to certain instruments or markets in a more efficient or less expensive way and/or hedge risks associated with its other portfolio investments.
In choosing investments, we select securities in various market sectors based on our assessment of changing economic, market, industry and issuer conditions. We use a top-down analysis of macroeconomic trends, combined with a
| Top 10 Holdings | ||||
| 3/31/22 | ||||
| Issue/Issuer | % of Total Net Assets | |||
Bank of America Corp., senior unsecured note, sub. bond, 4.183%, 11/25/2027 | 2.3% | |||
JPMorgan Chase & Co., senior bond, FRN thereafter, 4.25%, 10/01/2027 | 2.0% | |||
Federal Farm Credit Discount Notes , | 2.0% | |||
Morgan Stanley, senior unsecured note, Series GMTN, to 1/22/24 FRN thereafter, senior note, 1.794%, 2/13/2032 | 1.9% | |||
Las Vegas Sands Corp., Senior unsecured, | 1.7% | |||
Citigroup Inc., senior bond, FRN thereafter, | 1.7% | |||
AT&T Inc., Senior unsecured, 3.55%, 9/15/2055 | 1.6% | |||
Verizon Communications Inc., senior bond, | 1.6% | |||
Imperial Brands Finance PLC, senior bond, senior note, 144A, 4.25%, 7/21/2025 | 1.6% | |||
Delta Air Lines Inc./SkyMiles IP Ltd., first lien, 144A, 4.50%, 4.50%, 10/20/2025 | 1.4% | |||
bottom-up fundamental analysis of market sectors, industries and issuers, to try to take advantage of varying sector reactions to economic events. The Fund’s portfolio is constructed by taking into account our desired duration and yield curve exposure, total return potential, as well as the appropriate diversification and risk profile at the issue, company and industry level.
Manager’s Discussion
Investment-grade corporate bond absolute performance was negative over the 12 months under review, curbed by fast rising UST yields and modestly widening corporate bond spreads. The Fund performed slightly worse than the benchmark for the reporting period.
Duration and yield curve positioning was a strong contributor to relative performance. On average over the 12 months, we maintained a duration slightly lower than the benchmark (especially in bonds with 20 or more years to maturity). This lifted returns as UST yields rose. Our overweight allocation to bonds in the energy sector and in banking, overall, was accretive to relative performance as well.
The Fund’s overweight allocation to BBB-rated bonds and its underweight allocation to A-rated bonds contributed to its outperformance, relative to the benchmark. Among BBB-rated bonds, for example, those of airline Delta and energy utility Vistra Energy boosted returns.
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FRANKLIN LIBERTY INVESTMENT GRADE CORPORATE ETF
Security selection detracted from results, led by companies within the insurance, consumer cyclical, and capital goods segments.
The Fund primarily held cash bonds during the period. The Fund also used interest-rate futures contracts to manage duration exposure. The use of futures had a small impact on total Fund returns.
Thank you for your participation in Franklin Liberty 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.
Portfolio Management Team
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2022, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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FRANKLIN LIBERTY INVESTMENT GRADE CORPORATE ETF
Performance Summary as of March 31, 2022
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 and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale 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 3/31/22
| Cumulative Total Return1 | Average Annual Total Return1 | |||||||||||||||
| Based on NAV2 | Based on market price3 | Based on NAV2 | Based on market price3 | |||||||||||||
1-Year | -4.30% | -4.49% | -4.30% | -4.49% | ||||||||||||
5-Year | +16.50% | +16.30% | +3.10% | +3.07% | ||||||||||||
Since Inception (10/3/16) | +14.37% | +14.31% | +2.48% | +2.47% | ||||||||||||
| Distribution Rate4 | 30-Day Standardized Yield5 | |||
2.80% | 3.37% | |||
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.
See page 57 for Performance Summary footnotes.
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FRANKLIN LIBERTY INVESTMENT GRADE CORPORATE ETF
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.
10/03/16–3/31/22
See page 57 for Performance Summary footnotes.
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FRANKLIN LIBERTY INVESTMENT GRADE CORPORATE ETF
PERFORMANCE SUMMARY
Distributions (4/1/21–3/31/22)
| Net Investment Income | Long-Term Capital Gains | Total | ||||||
$0.661062 | $0.051443 | $0.712505 | ||||||
Total Annual Operating Expenses7
0.35% |
All investments involve risks, including possible loss of principal. 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. Distributions to shareholders may decline when prevailing interest rates fall or when the Fund experiences defaults on debt securities it holds. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund’s investments in foreign securities involve certain risks including currency fluctuations, and economic and political uncertainties. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity. Investing in derivative securities and the use of foreign currency techniques involve special risks as such may not achieve the anticipated benefits and/or may result in losses to the Fund. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.
Russia’s military invasion of Ukraine in February 2022, the resulting responses by the United States and other countries, and the potential for wider conflict could increase volatility and uncertainty in the financial markets and adversely affect regional and global economies. The United States and other countries have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to its invasion of Ukraine. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia’s military invasion. These sanctions, as well as any other economic consequences related to the invasion, such as additional sanctions, boycotts or changes in consumer or purchaser preferences or cyberattacks on governments, companies or individuals, may further decrease the value and liquidity of certain Russian securities and securities of issuers in other countries that are subject to economic sanctions related to the invasion.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. 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.
2. Assumes reinvestment of distributions based on net asset value.
3. Assumes reinvestment of distributions based on market price.
4. Distribution rate is based on an annualization of the March dividend and the NAV per share on 3/31/22.
5. 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.
6. Source: Morningstar. The Bloomberg U.S. Corporate Investment Grade Index measures the performance of the investment grade, fixed-rate, taxable corporate bond market. It includes U.S. dollar-denominated securities publicly issued by U.S. and non-U.S. industrial, utility and financial issuers.
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. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN LIBERTY 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 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
Actual (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||||||
| Beginning Account Value 10/1/21 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Net Annualized Expense Ratio2 | |||||||||||||||||
| $1,000.00 | $ | 923.60 | $ | 1.68 | $ | 1,023.19 | $ | 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 182/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
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Franklin Liberty Senior Loan ETF
This annual report for Franklin Liberty Senior Loan ETF covers the fiscal year ended March 31, 2022.
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 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 12-month period, the Fund posted cumulative total returns of +2.67% based on market price and +2.76% based on net asset value (NAV). In comparison, the Fund’s benchmark, the S&P/LSTA U.S. Leveraged Loan 100 Index, which reflects the performance of the largest facilities in the leveraged loan market, posted a +2.30% 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 62.
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.
Economic and Market Overview
The U.S. bond market, as measured by the Bloomberg U.S. Aggregate Bond Index, posted a -4.15% total return for the 12 months ended March 31, 2022.1 Growing inflation amid supply chain disruptions and increased consumer spending led to tighter monetary policy, reducing the value of most bonds. Geopolitical instability disrupted financial markets late in the 12-month period following Russia’s invasion of Ukraine, contributing to significant volatility in bond markets. The yield curve flattened notably during the period, reflecting investors’ expectations that short-term interest rates will continue to rise, while the outlook for long-term economic growth is uncertain.
| Portfolio Composition | ||||
| 3/31/22 | ||||
% of Total Net Assets | ||||
Senior Floating Rate Interests | 92.3% | |||
Short-Term Investments & Other Net Assets | 4.9% | |||
Corporate Bonds & Notes | 2.1% | |||
Asset-Backed Securities | 0.7% | |||
In an effort to control inflation, the U.S. Federal Reserve (Fed) raised the federal funds target rate to a range of 0.25%–0.50%, the first such increase since 2018. The Fed noted in its March 2022 meeting that strength in the U.S. job market and continued inflationary pressure, exacerbated by the war in Ukraine, meant it anticipated making further increases to the federal funds target rate. Furthermore, the Fed said it expected to begin reducing its bond holdings at a future meeting.
U.S. Treasury (UST) bonds, as measured by the Bloomberg U.S. Treasury Index, posted a -3.67% total return for the 12-month period.1 The 10-year UST yield (which moves inversely to price) increased, particularly later in the period amid high inflation and the Fed’s less accommodative stance. Mortgage-backed securities (MBS), as measured by the Bloomberg U.S. MBS Index, posted a -4.92% total return for the period.1
Corporate bond prices also declined overall, constrained by inflation and rising interest rates. Furthermore, corporate yield spreads, a measure of the difference in yields between corporate bonds and similarly-dated USTs, increased, reflecting investors’ increasing risk-off preferences. However, yield spreads rose faster for investment-grade bonds than high-yield bonds, and high-yield bonds benefited from higher coupon payments. In this environment, high-yield corporate bonds, as represented by the Bloomberg U.S. Corporate High Yield Bond Index, posted a -0.66% total return, while investment-grade corporate bonds, as represented by the Bloomberg U.S. Corporate Bond Index, posted a -4.20% total return.1
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 153.
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FRANKLIN LIBERTY SENIOR LOAN ETF
| Top 10 Sector/Industries | ||||
| 3/31/22 | ||||
% of Total Net Assets | ||||
Software | 14.5% | |||
Media | 8.3% | |||
Health Care Providers & Services | 8.3% | |||
Commercial Services & Supplies | 4.9% | |||
Pharmaceuticals | 4.6% | |||
Airlines | 4.6% | |||
Diversified Financial Services | 3.8% | |||
Specialty Retail | 3.5% | |||
Chemicals | 3.5% | |||
Containers & Packaging | 2.9% | |||
Investment Strategy
The Fund invests predominantly in income-producing senior floating interest-rate corporate loans made to or issued by U.S. companies, non-U.S. entities and U.S. subsidiaries of non-U.S. entities. Floating interest rates vary with and are periodically adjusted to a generally recognized base interest rate such as the London Interbank Offered Rate (LIBOR) or the Prime Rate. The Fund may invest in companies whose financial condition is troubled or uncertain and that may be involved in bankruptcy proceedings, reorganizations or financial restructurings.
Senior loans generally have credit ratings below investment grade and may be subject to restrictions on resale. Under normal market conditions, the Fund invests at least 75% of its net assets in senior loans that are rated B- or higher at the time of purchase by a nationally recognized statistical rating organization (NRSRO) or, if unrated, are determined to be of comparable quality by the Fund’s investment manager. Under normal market conditions, the Fund may invest up to 25% of its net assets in senior loans that are rated below B- by an NRSRO or, if unrated, are determined to be of comparable quality by the investment manager.
Manager’s Discussion
Expectations of a rising rate environment over the one-year period ended March 31, 2022, contributed to favorable technical conditions for the loan market, accelerating inflows from retail investors and supporting loan valuations. Robust collateralized-loan-obligation (CLO) issuance also contributed to demand, reaching record volumes in 2021. However, new issuance to finance mergers and acquisitions and leveraged buyouts significantly increased, which limited spread compression and moderated price gains in the asset class, compared to the prior period. While volatility increased
toward the end of the period due to uncertainties surrounding the future impact of the ongoing geopolitical conflict in Ukraine and the renewal of COVID lockdowns in China, fundamental conditions in the loan market continued to improve as the default rate declined further and credit rating upgrades outpaced downgrades.
During the period, the Fund outperformed its benchmark, the S&P/LSTA U.S. Leveraged Loan 100 Index. The portfolio’s overweight in B-rated loans (as well as its underweight in higher rated loans and lower rated loans) contributed to outperformance, as the upper tier of the benchmark (including BB-rated loans) returned 2.01%, while the middle tier (B-rated loans) returned 3.19% and the lower tier (CCC-rated loans) returned -19.00% during the year. As of period-end, the Fund had 11.1% of its portfolio in upper tier loans and 80.1% in middle tier loans, compared to the benchmark, which had 37.5% in the upper tier and 60.1% in the middle tier. The Fund had 1% in lower tier loans, while the benchmark weighting was 2.5%.
| Top 10 Holdings | ||||
| 3/31/22 | ||||
Company Sector/Industry | % of Total Net Assets | |||
Federal Home Loan Bank Discount Notes , U.S. Government & Agency Securities | 5.1% | |||
Peraton Corp., Term Loan B1, 4.50%, Aerospace & Defense | 1.4% | |||
Verscend Holding Corp., 2021 Term Loan B, IT Services | 1.3% | |||
Vertical US Newco Inc., (thyssenkrupp Elevator), Term Loan B, 4.02%, 4.015%, 7/30/2027 Machinery | 1.3% | |||
eResearchTechnology Inc., 2020 1st Lien Term Loan, 5.50%, 5.50%, 2/04/2027 Pharmaceuticals, Biotechnology & Life Sciences | 1.2% | |||
Great Outdoors Group LLC, 2021 Term Loan B1, 4.50%, 4.50%, 3/06/2028 Retail REITs | 1.2% | |||
Greeneden U.S. Holdings II LLC, Initial Dollar Term Loan, 4.75%, 12/01/27 Technology Hardware, Storage & Peripherals | 1.2% | |||
Polaris Newco LLC, USD Term Loan B, Software | 1.2% | |||
Radiate Holdco LLC, 2021 Term Loan B, Media | 1.1% | |||
Athenahealth Inc., 2022 Term Loan B, 4.00%, 2/15/29 Software | 1.1% | |||
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FRANKLIN LIBERTY SENIOR LOAN ETF
Among individual investments, the top contributors to performance included investments that continued to gain from the ongoing economic recovery. The term loan of Clear Channel Outdoor (a provider of out-of-home display advertising) traded higher as the company reported improvements in their core billboard business and a resumption in travel led to expectations of increased advertising demand. Additionally, our investments in American Airlines (a global airline operator) traded higher following expectations of a further recovery in air travel. The top detractors from performance included issuers facing operational challenges due to secular issues and pandemic related disruptions. Diamond Sports (an operator of regional sports networks) detracted from performance after continued financial underperformance and uncertainty around the company’s ability to renew distributor contracts. The term loan of Klockner Pentaplast (a packaging manufacturer) declined after the company reported weak results due to continued raw materials price increases.
Thank you for your participation in Franklin Liberty Senior Loan ETF. We look forward to serving your future investment needs.
Reema Agarwal, CFA
Justin Ma, CFA
Margaret Chiu, CFA
Portfolio Management Team
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2022, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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FRANKLIN LIBERTY SENIOR LOAN ETF
Performance Summary as of March 31, 2022
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 and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale 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 3/31/22
| Cumulative Total Return1 | Average Annual Total Return1 | |||||||||||||||
| Based on NAV2 | Based on market price3 | Based on NAV2 | Based on market price3 | |||||||||||||
1-Year | +2.76% | +2.67% | +2.76% | +2.67% | ||||||||||||
3-Year | +10.48% | +10.20% | +3.38% | +3.29% | ||||||||||||
Since Inception (5/30/18) | +13.17% | +13.06% | +3.28% | +3.25% | ||||||||||||
| Distribution Rate4 | 30-Day Standardized Yield5 | |||
3.07% | 4.11% | |||
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 64 for Performance Summary footnotes.
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FRANKLIN LIBERTY SENIOR LOAN ETF
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.
5/30/18–3/31/22
See page 64 for Performance Summary footnotes.
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FRANKLIN LIBERTY SENIOR LOAN ETF
PERFORMANCE SUMMARY
Distributions (4/1/21–3/31/22)
Net Investment Income |
$0.808326 |
Total Annual Operating Expenses7
0.45% |
All investments involve risks, including possible loss of principal. Investors should be aware that the Fund’s share price and yield will fluctuate with market conditions. The senior loans and debt securities in which the Fund invests tend to be rated below investment grade. Investing in higher-yielding, lower-rated, senior loans and debt securities involves greater risk of default, which could result in loss of principal—a risk that may be heightened in a slowing economy. Interest earned on senior loans varies with changes in prevailing interest rates. Therefore, while senior loans offer higher interest income when interest rates rise, they will also generate less income when interest rates decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The markets for particular securities or types of securities are or may become relatively illiquid. Reduced liquidity will have an adverse impact on the security’s value and on the Fund’s ability to sell such securities when necessary to meet the Fund’s liquidity needs or in response to a specific market event. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.
Russia’s military invasion of Ukraine in February 2022, the resulting responses by the United States and other countries, and the potential for wider conflict could increase volatility and uncertainty in the financial markets and adversely affect regional and global economies. The United States and other countries have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to its invasion of Ukraine. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia’s military invasion. These sanctions, as well as any other economic consequences related to the invasion, such as additional sanctions, boycotts or changes in consumer or purchaser preferences or cyberattacks on governments, companies or individuals, may further decrease the value and liquidity of certain Russian securities and securities of issuers in other countries that are subject to economic sanctions related to the invasion.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. Total return calculations represent the cumulative and average annual changes in value of an investment over the period indicated. Return for less than one year, if any, has not been annualized.
2. Assumes reinvestment of distributions based on net asset value.
3. Assumes reinvestment of distributions based on market price.
4. Distribution rate is based on an annualization of the March dividend and the NAV per share on 3/31/22.
5. 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.
6. Source: Morningstar. The S&P/LSTA U.S. Leveraged Loan 100 Index reflects the performance of the largest facilities in the leveraged loan market. This rules-based index consists of the 100 largest loan facilities in the benchmark S&P/LSTA Leveraged Loan Index.
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. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN LIBERTY 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 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
Actual (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||||||
| Beginning Account Value 10/1/21 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Net Annualized Expense Ratio2 | |||||||||||||||||
| $1,000.00 | $ | 1,004.30 | $ | 2.25 | $ | 1,022.69 | $ | 2.27 | 0.45 | % | ||||||||||||
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 182/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
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Franklin Liberty Systematic Style Premia ETF
This annual report for Franklin Liberty Systematic Style Premia ETF covers the fiscal year ended March 31, 2022.
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 12-month period, the Fund posted cumulative total returns of +9.06% based on market price and +10.09% 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 +0.06% 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 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.
Economic and Market Overview
The U.S. bond market, as measured by the Bloomberg U.S. Aggregate Bond Index, posted a -4.15% total return for the 12 months ended March 31, 2022.1 Growing inflation amid supply chain disruptions and increased consumer spending led to tighter monetary policy, reducing the value of most bonds. Geopolitical instability disrupted financial markets late in the 12-month period following Russia’s invasion of Ukraine, contributing to significant volatility in bond markets. The yield curve flattened notably during the period, reflecting investors’ expectations that short-term interest rates will continue to rise, while the outlook for long-term economic growth is uncertain.
| Portfolio Composition | ||||
| 3/31/22 | ||||
% of Total Net Assets | ||||
Common Stocks | 63.2% | |||
Other Net Assets | 36.8% | |||
In an effort to control inflation, the U.S. Federal Reserve (Fed) raised the federal funds target rate to a range of 0.25%–0.50%, the first such increase since 2018. The Fed noted in its March 2022 meeting that strength in the U.S. job market and continued inflationary pressure, exacerbated by the war in Ukraine, meant it anticipated making further increases to the federal funds target rate. Furthermore, the Fed said it expected to begin reducing its bond holdings at a future meeting.
U.S. Treasury (UST) bonds, as measured by the Bloomberg U.S. Treasury Index, posted a -3.67% total return for the 12-month period.1 The 10-year UST yield (which moves inversely to price) increased, particularly later in the period amid high inflation and the Fed’s less accommodative stance. Mortgage-backed securities (MBS), as measured by the Bloomberg U.S. MBS Index, posted a -4.92% total return for the period.1
Corporate bond prices also declined overall, constrained by inflation and rising interest rates. Furthermore, corporate yield spreads, a measure of the difference in yields between corporate bonds and similarly-dated USTs, increased, reflecting investors’ increasing risk-off preferences. However, yield spreads rose faster for investment-grade bonds than high-yield bonds, and high-yield bonds benefited from higher coupon payments. In this environment, high-yield corporate bonds, as represented by the Bloomberg U.S. Corporate High Yield Bond Index, posted a -0.66% total return, while investment-grade corporate bonds, as represented by the Bloomberg U.S. Corporate Bond Index, posted a -4.20% total return.1
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 161.
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FRANKLIN LIBERTY SYSTEMATIC STYLE PREMIA ETF
| Top 10 Sector/Industries | ||||
| 3/31/22 | ||||
% of Total Net Assets | ||||
Software | 6.1% | |||
Semiconductors & Semiconductor Equipment | 4% | |||
Interactive Media & Services | 3.2% | |||
Specialty Retail | 3.1% | |||
Oil, Gas & Consumable Fuels | 3.0% | |||
Biotechnology | 2.6% | |||
IT Services | 2.6% | |||
Banks | 2.4% | |||
Pharmaceuticals | 2.3% | |||
Food & Staples Retailing | 2.0% | |||
Investment Strategy
The Fund’s top-down risk premia strategy focuses on value, momentum and carry factors in taking both long and short positions across equity, fixed income, commodity and currency asset classes.
The Fund’s bottom-up long/short equity strategy focuses on quality, value and momentum factors in determining whether to hold long or short positions in individual equity securities. Long/short equity strategies generally seek to produce returns from investments in the equity markets by taking long and short positions in stocks and stock indices (through the use of derivatives or through a short position in an exchange-traded fund). Long positions benefit from an increase in the price of the underlying instrument, while short positions benefit from a decrease in that price.
Under normal market conditions, the top-down risk premia strategy invests primarily in equity, interest rate/bond and commodity index futures; equity and commodity-linked total return swaps; and currency forwards. Under normal market conditions, the bottom-up long/short equity strategy invests primarily in equity securities and equity total return swaps, with equity total return swaps being used to obtain short exposures.
Under normal market conditions, we seek to allocate assets between the two factor-based risk premia alternative investment strategies described above according to each strategy’s estimated risk, as measured by historical returns-based risk models. The allocation to each strategy is driven by the estimated risk contribution of each individual strategy to the Fund’s overall investment strategy, which the investment manager seeks to keep within certain pre-determined bounds.
| Top 10 Long Positions | ||||
| 3/31/22 | ||||
Company Sector/Industry/Country | % of Total Net Assets | |||
FLSP Holdings Corp. Diversified Financials | 7.6% | |||
Microsoft Corp. Software & Services | 2.5% | |||
Alphabet Inc., C Software & Services | 2.1% | |||
AbbVie Inc. Pharmaceuticals, Biotechnology & Life Sciences | 1.1% | |||
Meta Platforms Inc., A Software & Services | 1.1% | |||
Shell PLC Energy | 1.0% | |||
Intel Corp. Semiconductors & Semiconductor Equipment | 1.0% | |||
Accenture PLC, A Software & Services | 1.0% | |||
McDonald’s Corp. Consumer Services | 1.0% | |||
Texas Instruments Inc. Semiconductors & Semiconductor Equipment | 1.0% | |||
Through the two strategies, we invest the Fund’s assets based on a systematic investment process for securities selection and asset allocation by utilizing quantitative models. By employing these two approaches, we seek to provide positive absolute return over time while maintaining a relatively low correlation with traditional markets. The exposure to individual factors may vary based on the market opportunity of the individual factors.
The Fund may use derivatives for both hedging and non-hedging (investment) purposes. The Fund’s derivative investments may include, among other instruments: (i) futures contracts, including futures on equity, interest rate/bond and commodity indices; (ii) swaps, including equity and commodity-linked total return swaps; and (iii) currency forward contracts. These derivatives may be used to enhance Fund returns, increase liquidity, gain long or short exposure to certain instruments, markets or factors in a more efficient or less expensive way and/or hedge risks associated with its other portfolio investments. The results of such transactions are expected to represent a material component of the Fund’s investment returns.
Manager’s Discussion
During the 12 months ended March 31, 2022, the Fund’s equities and commodities strategies drove positive performance. The long/short single equities strategy accounted for
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FRANKLIN LIBERTY SYSTEMATIC STYLE PREMIA ETF
| Top 10 Short Holdings | ||||
| 3/31/22 | ||||
Company Sector/Industry/Country | % of Total Net Assets | |||
Phoenix Group Holdings PLC Insurance, United Kingdom | -0.1% | |||
Pan American Silver Corp. Materials, Canada | -0.1% | |||
SKF AB, B Capital Goods, Sweden | -0.1% | |||
Admiral Group PLC Insurance, United Kingdom | -0.1% | |||
Just Eat Takeaway.com NV Retailing, United Kingdom | -0.1% | |||
Ritchie Bros Auctioneers Inc. Commercial & Professional Services, Netherlands | -0.1% | |||
Orkla ASA Food, Beverage & Tobacco, United States | -0.1% | |||
Kinnevik AB, B Diversified Financials, Sweden | -0.1% | |||
HEICO Corp Capital Goods, United States | -0.1% | |||
Pan Pacific International Holdings Corp. Retailing, Japan | -0.0% | * | ||
*Rounds to more than -0.1%.
the majority of contribution, while the commodities strategies accounted for more than a third. The equity indices macro strategy was also a significant contributor.
Within our long/short single stock equities component, all three of our factors—quality, value and momentum—contributed to performance at different times. Quality and momentum factors were strong contributors to performance in the last three quarters of 2021, while value bolstered performance in the first quarter of 2022. Our portfolio was long lower-volatility stocks and short higher-volatility stocks on aggregate, and this positioning also contributed to returns over the year, particularly during the first quarter of 2022, when overall market volatility was elevated. In capital terms, the portfolio was net long, and this also aided performance, alongside the lower-volatility positioning. Our equity index macro strategies also had a positive impact, based on our long positioning in South Africa, Canada, France and Australia, together with our short positions in Japan, Germany and Spain.
Commodities strategies were notable drivers of gains during the period as the global commodities complex posted its biggest quarterly gain in three decades. Crude oil futures, gasoline futures, heating oil futures and gasoil futures accounted for the majority of gains. Our commodity time series momentum strategy was the single-largest factor driver of our performance within the asset class.
Conversely, the Fund’s fixed income positioning weighed on returns overall during the period. Our fixed income macro strategies had a negative impact, as long positions in Australian bond futures and French OAT bond futures detracted more from performance than the positive contribution from short positions in German bund futures and Canadian bond futures.
The Fund’s foreign currency macro strategies had negative results during the period, driven largely by long positions in the Russian ruble, Polish zloty and Czech koruna, as well as short positions in the Israeli shekel, owing to our foreign currency carry and value factors. In contrast, short positioning in the euro, Japanese yen and Canadian dollar helped offset the losses.
Thank you for your participation in Franklin Liberty 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
Portfolio Management Team
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2022, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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FRANKLIN LIBERTY SYSTEMATIC STYLE PREMIA ETF
Performance Summary as of March 31, 2022
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 and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale 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 3/31/22
| Cumulative Total Return1 | Average Annual Total Return1 | |||||||||||||||
| Based on NAV2 | Based on market price3 | Based on NAV2 | Based on market price3 | |||||||||||||
1-Year | +10.09% | +9.06% | +10.09% | +9.06% | ||||||||||||
Since Inception (12/18/19) | -6.87% | -7.20% | -3.07% | -3.22% | ||||||||||||
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.
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FRANKLIN LIBERTY SYSTEMATIC STYLE PREMIA ETF
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.
12/18/19–3/31/22
See page 71 for Performance Summary footnotes.
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FRANKLIN LIBERTY SYSTEMATIC STYLE PREMIA ETF
PERFORMANCE SUMMARY
Distributions (4/1/21–3/31/22)
| Net Investment Income |
$0.258156 |
Total Annual Operating Expenses5
0.65% |
All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. The Fund is actively managed and could experience losses if the manager’s judgment 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 manager’s allocation of Fund 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. There can be no assurance that the factor-based risk premia investment strategies utilized by the manager will enhance Fund performance, reduce volatility or reduce potential loss. Investments in derivatives involve costs and create economic leverage, which may result in significant volatility and cause the Fund to participate in losses (as well as gains) that significantly exceed the Fund’s initial investment. Investing in derivatives and the use of foreign currency techniques involve special risks and may not achieve the anticipated benefits and/or may result in losses to the Fund. Other risks include illiquidity, mispricing or improper valuation of the derivative, and imperfect correlation between the value of the derivative and the underlying instrument. The Fund may realize losses when a counterparty fails to perform as promised. Currency management strategies could result in losses to the Fund if currencies do not perform as the manager expects. Bond prices generally move in the opposite direction of interest rates. As the prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Changes in an issuer’s financial strength or in a security’s credit rating may affect its 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’ve been valued. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments; investments in emerging markets involve heightened risks related to the same factors. To the extent the Fund focuses particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks or adverse developments in such areas of focus than a Fund that invests in a wider variety of countries, regions, industries or sectors or investments. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.
Russia’s military invasion of Ukraine in February 2022, the resulting responses by the United States and other countries, and the potential for wider conflict could increase volatility and uncertainty in the financial markets and adversely affect regional and global economies. The United States and other countries have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to its invasion of Ukraine. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia’s military invasion. These sanctions, as well as any other economic consequences related to the invasion, such as additional sanctions, boycotts or changes in consumer or purchaser preferences or cyberattacks on governments, companies or individuals, may further decrease the value and liquidity of certain Russian securities and securities of issuers in other countries that are subject to economic sanctions related to the invasion.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. Total return calculations represent the cumulative and average annual changes in value of an investment over the period indicated. Return for less than one year, if any, has not been annualized.
2. Assumes reinvestment of distributions based on net asset value.
3. Assumes reinvestment of distributions based on market price.
4. Source: FactSet. The ICE BofA U.S. 3-Month Treasury Bill Index tracks the performance of short-term U.S. government securities with a remaining term to final maturity of less than three months.
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. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN LIBERTY 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 ETFs. In addition, if transactional costs were included, your total costs would have been higher.
Actual (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||||||
| Beginning Account Value 10/1/21 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Net Annualized Expense Ratio2 | |||||||||||||||||
| $1,000.00 | $ | 1,044.20 | $ | 3.36 | $ | 1,021.64 | $ | 3.33 | 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 182/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
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Franklin Liberty U.S. Core Bond ETF
This annual report for Franklin Liberty U.S. Core Bond ETF covers the fiscal year ended March 31, 2022.
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 12-month period, the Fund posted cumulative total returns of -4.91% based on market price and -4.72% based on net asset value (NAV). In comparison, the Bloomberg U.S. Aggregate Bond Index, which measures the performance of the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market, posted a -4.15% cumulative total return.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 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.
Economic and Market Overview
The U.S. bond market, as measured by the Bloomberg U.S. Aggregate Bond Index, posted a -4.15% total return for the 12 months ended March 31, 2022.1 Growing inflation amid supply chain disruptions and increased consumer spending led to tighter monetary policy, reducing the value of most bonds. Geopolitical instability disrupted financial markets late in the 12-month period following Russia’s invasion of Ukraine, contributing to significant volatility in bond markets. The yield curve flattened notably during the period, reflecting investors’ expectations that short-term interest rates will continue to rise, while the outlook for long-term economic growth is uncertain.
| Portfolio Composition | ||||
| 3/31/22 | ||||
% of Total Net Assets | ||||
U.S. Government & Agency Securities | 41.2% | |||
Quasi-Sovereign and Corporate Bonds | 26.0% | |||
Mortgage-Backed Securities | 18.4% | |||
Municipal Bonds | 4.3% | |||
Foreign Government and Agency Securities | 3.3% | |||
Asset-Backed Securities | 2.7% | |||
Short-Term Investments & Other Net Assets | 4.1% | |||
In an effort to control inflation, the U.S. Federal Reserve (Fed) raised the federal funds target rate to a range of 0.25%–0.50%, the first such increase since 2018. The Fed noted in its March 2022 meeting that strength in the U.S. job market and continued inflationary pressure, exacerbated by the war in Ukraine, meant it anticipated making further increases to the federal funds target rate. Furthermore, the Fed said it expected to begin reducing its bond holdings at a future meeting.
U.S. Treasury (UST) bonds, as measured by the Bloomberg U.S. Treasury Index, posted a -3.67% total return for the 12-month period.1 The 10-year UST yield (which moves inversely to price) increased, particularly later in the period amid high inflation and the Fed’s less accommodative stance. Mortgage-backed securities (MBS), as measured by the Bloomberg U.S. MBS Index, posted a -4.92% total return for the period.1
Corporate bond prices also declined overall, constrained by inflation and rising interest rates. Furthermore, corporate yield spreads, a measure of the difference in yields between corporate bonds and similarly-dated USTs, increased, reflecting investors’ increasing risk-off preferences. However, yield spreads rose faster for investment-grade bonds than high-yield bonds, and high-yield bonds benefited from higher coupon payments. In this environment, high-yield corporate bonds, as represented by the Bloomberg U.S. Corporate High Yield Bond Index, posted a -0.66% total return, while
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 177.
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FRANKLIN LIBERTY U.S. CORE BOND ETF
| Top 10 Holdings | ||||
| 3/31/22 | ||||
| Company Sector/Industry | % of Total Net Assets | |||
U.S. Treasury Note, 2.125%, 2/29/2024 | 6.6% | |||
U.S. Treasury Note, 0.375%, 11/30/2025 | 5.6% | |||
U.S. Treasury Note, 0.375%, 1/31/2026 | 3.8% | |||
U.S. Treasury Note, 0.50%, 3/31/2025 | 3.2% | |||
U.S. Treasury Note, 1.25%, 12/31/2026 | 2.1% | |||
U.S. Treasury Note, 1.50%, 3/31/2023 | 2.0% | |||
U.S. Treasury Bond, 2.25%, 8/15/2046 | 1.6% | |||
U.S. Treasury Note, 0.875%,6/30/2026 | 1.5% | |||
U.S. Treasury Note, 0.25 %, 6/30/2025 | 1.5% | |||
Federal National Mortgage Association, 2.00%, 7/1/2051 | 1.5% | |||
investment-grade corporate bonds, as represented by the Bloomberg U.S. Corporate Bond Index, posted a -4.20% total return.1
Investment Strategy
The Fund invests predominantly in investment-grade debt securities and, under normal market conditions, is generally expected to have sector, credit and duration exposures comparable to its benchmark index. However, we make investment decisions based upon our own fundamental analysis, which affects the Fund’s sector, credit and duration exposures so that they may vary from the benchmark index. The Fund’s investments in mortgage-backed securities include securities that are issued or guaranteed by the U.S. government, its agencies or instrumentalities, which include mortgage pass-through securities representing interests in pools of mortgage loans issued or guaranteed by the Government National Mortgage Association (Ginnie Mae), the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac).
In addition, the Fund may purchase or sell mortgage-backed securities on a delayed delivery or forward commitment basis through the to-be-announced (TBA) market. With TBA transactions, the particular securities to be delivered must meet specified terms and conditions.
For purposes of pursuing its investment goal, the Fund may enter into various interest-rate and credit-related derivatives, principally U.S. Treasury futures, interest-rate swaps and credit default swaps. The use of these derivative transactions may allow the Fund to obtain net long or short exposures to select interest rates, durations or credit risks. The Fund
may enter into certain derivative transactions to seek to enhance Fund returns, increase liquidity, gain exposure to certain instruments or markets in a more efficient or less expensive way and/or hedge risks associated with its other portfolio investments.
In choosing investments, we select securities in various market sectors based on our assessment of changing economic, market, industry and issuer conditions. We use a top-down analysis of macroeconomic trends, combined with a bottom-up fundamental analysis of market sectors, industries and issuers, to try to take advantage of varying sector reactions to economic events. We may consider selling a security when we believe the security has become fully valued due to either its price appreciation or changes in the issuer’s fundamentals, or when we believe another security is a more attractive investment opportunity.
Manager’s Discussion
During the 12-month period under review, the Fund posted a return of -4.72% based on net asset value, underperforming the Bloomberg U.S. Aggregate Bond Index return of -4.15%. Duration positioning was a contributor to returns over the year. Throughout the period, we maintained a duration less than that of the benchmark, especially in longer-maturity bonds. Although this detracted from returns in calendar year 2021, more recently, U.S. Treasury (UST) yields have risen dramatically, leading our underweight positioning to contribute to results. Sector allocations weighed modestly on performance over the period, led by overweight holdings of taxable and tax-exempt municipal bonds (muni) and sovereign emerging market securities. In contrast, underweight exposure to agency mortgage-backed securities (MBS) and overweight positioning in corporate credit bonds boosted returns. Relative exposures in asset-backed securities, commercial MBS (CMBS), and agency notes did not have a meaningful impact on 12-month performance returns. Security selection was a detractor from our results, with selection in emerging market bonds being a particular drag on performance. Additionally, security selection in MBS and munis weighed on returns for the period. This was partially offset by positive performance contributions from our security selection in investment-grade corporate bonds.
Thank you for your participation in Franklin Liberty U.S. Core Bond ETF. We look forward to serving your future investment needs.
David Yuen, CFA, FRM
Patrick Klein, Ph.D.
Tina Chou
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FRANKLIN LIBERTY U.S. CORE BOND ETF
Portfolio Management Team
FRM® is a trademark owned by Global Association of Risk Professionals (GARP).
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2022, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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FRANKLIN LIBERTY U.S. CORE BOND ETF
Performance Summary as of March 31, 2022
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 and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.
Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (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 3/31/22
| Cumulative Total Return1 | Average Annual Total Return1 | |||||||||||||||
| Based on NAV2 | Based on market price3 | Based on NAV2 | Based on market price3 | |||||||||||||
1-Year | -4.72% | -4.91% | -4.72% | -4.91% | ||||||||||||
Since Inception (9/17/19) | +0.29% | +0.24% | +0.11% | +0.09% | ||||||||||||
| Distribution Rate4 | 30-Day Standardized Yield5 | |||
2.16% | 2.43% | |||
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 78 for Performance Summary footnotes.
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FRANKLIN LIBERTY U.S. CORE BOND ETF
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.
9/17/19–3/31/22
See page 78 for Performance Summary footnotes.
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FRANKLIN LIBERTY U.S. CORE BOND ETF
PERFORMANCE SUMMARY
Distributions (4/1/21–3/31/22)
| Net Investment Income | Long-Term Capital Gains | Total | ||||||
$0.504065 | $0.051358 | $0.555423 | ||||||
Total Annual Operating Expenses7
0.15% |
All investments involve risks, including possible loss of principal. Interest rate movements, unscheduled mortgage prepayments and other risk factors will affect the Fund’s share price and yield. Bond prices, and thus a Fund’s share price, generally move in the opposite direction of interest rates. Therefore, 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. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.
Russia’s military invasion of Ukraine in February 2022, the resulting responses by the United States and other countries, and the potential for wider conflict could increase volatility and uncertainty in the financial markets and adversely affect regional and global economies. The United States and other countries have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to its invasion of Ukraine. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia’s military invasion. These sanctions, as well as any other economic consequences related to the invasion, such as additional sanctions, boycotts or changes in consumer or purchaser preferences or cyberattacks on governments, companies or individuals, may further decrease the value and liquidity of certain Russian securities and securities of issuers in other countries that are subject to economic sanctions related to the invasion.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. 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.
2. Assumes reinvestment of distributions based on net asset value.
3. Assumes reinvestment of distributions based on market price.
4. Distribution rate is based on an annualization of the March dividend and the NAV per share on 3/31/22.
5. 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.
6. Source: Morningstar. The Bloomberg U.S. Aggregate Bond Index measures the performance of the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable-rate mortgage pass-throughs), asset-backed securities and commercial mortgage-backed securities (agency and nonagency).
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. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN LIBERTY 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 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
Actual (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||||||
| Beginning Account Value 10/1/21 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Net Annualized Expense Ratio2 | |||||||||||||||||
| $1,000.00 | $ | 936.20 | $ | 0.72 | $ | 1,024.18 | $ | 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 182/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
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Franklin Liberty U.S. Low Volatility ETF
This annual report for Franklin Liberty U.S. Low Volatility ETF covers the fiscal year ended March 31, 2022.
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 12-month period, the Fund posted cumulative total returns of +13.98% based on market price and 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, posted a +13.27% 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 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.
Economic and Market Overview
U.S. equities, as measured by the Standard & Poor’s 500 Index (S&P 500), posted a +15.65% total return for the 12 months ended March 31, 2022.1 Stocks benefited from the continued economic recovery, implementation of COVID-19 vaccination programs and easing pandemic restrictions. Higher wages and strong household balance sheets contributed to increased consumer spending, particularly on goods. A rebound in corporate earnings and the passage of a bipartisan infrastructure bill further bolstered investor sentiment. However, elevated demand combined with supply chain disruptions led to the highest inflation since 1982. Russia’s invasion of Ukraine late in the 12-month period injected further uncertainty into financial markets, provoking significant
| Top 10 Sectors/Industries | ||||
| 3/31/22 | ||||
% of Total Net Assets | ||||
Information Technology | 26.9% | |||
Health Care | 13.5% | |||
Financials | 11.7% | |||
Consumer Discretionary | 11.4% | |||
Industrials | 8.7% | |||
Communication Services | 8.6% | |||
Consumer Staples | 5.8% | |||
Energy | 3.9% | |||
Real Estate | 3.4% | |||
Utilities | 2.7% | |||
volatility in commodity and equity prices. Rising interest rates also pressured stocks, as borrowing costs began to increase from historically low levels.
Gross domestic product growth was robust during most of the period, as strong consumer spending and business investment in growing inventories supported the economy. Both exports and imports increased significantly amid a recovery in industrial production. The continued growth of the economy helped the U.S. to surpass its pre-pandemic output in 2021’s second quarter. However, rising prices precipitated a notable decline in consumer confidence, despite high spending levels.
The inflation rate was notably elevated during the 12-month period amid increased demand and supply chain bottlenecks. Consequently, the personal consumption expenditures index, a measure of inflation, surged during the period, representing the highest 12-month increase in decades. The unemployment rate declined from 6.0% in March 2021 to 3.6% in March 2022 as job openings increased, but a relative lack of available workers fueled wage growth, adding to some investors’ inflation concerns.
In an effort to control inflation, the U.S. Federal Reserve (Fed) raised the federal funds target rate to a range of
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 187.
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FRANKLIN LIBERTY U.S. LOW VOLATILITY ETF
| Top 10 Holdings | ||||
| 3/31/22 | ||||
| Company Sector/Industry | % of Total Net Assets | |||
| Apple Inc. Information Technology | 1.6% | |||
| Automatic Data Processing Inc. Information Technology | 1.6% | |||
| Fidelity National Information Services Inc. Information Technology | 1.6% | |||
| Synopsys Inc. Information Technology | 1.6% | |||
| Accenture PLC, A Information Technology | 1.5% | |||
| Microsoft Corp. Information Technology | 1.5% | |||
| Mastercard Inc., A Information Technology | 1.5% | |||
| Texas Instruments Inc. Information Technology | 1.5% | |||
| Oracle Corp. Information Technology | 1.5% | |||
| Visa Inc., A Information Technology | 1.5% | |||
0.25%–0.50%, the first such increase since 2018. The Fed noted in its March 2022 meeting that strength in the U.S. job market and continued inflationary pressure, exacerbated by the war in Ukraine, meant it anticipated making further increases to the federal funds target rate. Furthermore, the Fed said it expected to begin reducing its bond holdings at a future meeting.
Investment Strategy
The Fund invests primarily in equity securities (principally common stocks) of U.S. companies.2 The Fund seeks capital appreciation, while providing a lower level of volatility than the broader equity market as measured by the Russell 1000® Index, meaning the Fund seeks returns that fluctuate less than the returns of the Russell 1000® Index. We apply a fundamentally driven “bottom-up” research process to create a starting universe of eligible securities across a large number of sectors derived from the holdings of a number of Franklin Templeton equity funds. We screen that universe on a quarterly basis in order to identify those securities with the lowest realized volatility relative to their corresponding sectors, while we also incorporate fundamental views of individual stocks. The Fund’s sector weightings generally are based on the
current sector weightings within the Russell 1000® Index. Individual securities in the Fund’s portfolio are generally weighted equally within each sector. The investment manager may, from time to time, make adjustments to the Fund’s portfolio as a result of corporate actions, changes to the volatility profile of the Fund’s holdings, or for risk management related purposes.
Manager’s Discussion
The Fund fared better than its benchmark, the Russell 1000® Index, for the one-year period ended March 31, 2022. Leading contributors included the industrials, health care, consumer discretionary and communication services sectors.
Stock selection in the industrials sector, the road and rail industry in particular, had a positive impact on relative results. Stock selection in the health care sector was also beneficial. Overweight positions in pharmaceuticals firm Pfizer and AbbVie, from the biotechnology industry, were top contributors. An underweight in the entertainment industry and overweight in the insurance industry contributed to relative performance in the communication services and financials sectors, respectively.
Several individual contributors helped advance the Fund’s results. Although real estate was not a top contributor at the sector level, the Fund’s overweight investment in self-storage company Public Storage added to returns. Better-than-expected subscriber growth for its streaming services and solid revenue growth at its parks, experiences and consumer products division boosted shares of the entertainment and media conglomerate Walt Disney from the communication services sector. In the information technology (IT) sector, electronic design automation company Synopsys reported strength across all product groups and geographies, prompting management to raise its outlook for the year.
In contrast, stock selection in the IT sector detracted from relative performance. Within the sector, underweighting in Apple and Microsoft undermined relative returns as shares of both companies sharply appreciated over the period. Meanwhile, overweight positions in real estate data provider Black Knight and payment services provider Fidelity National Information Services, also in the IT sector, pressured performance. From the communication services sector, shares of cable operator Liberty Broadband declined.
Thank you for your participation in Franklin Liberty U.S. Low Volatility ETF. We look forward to serving your future investment needs.
2. “U.S. companies” are those that (i) are organized under the laws of, or have a principal office in, or for whose securities the principal trading market is, the U.S.; (ii) derive 50% or more of their total revenue or profit from either goods or services produced, or sales made, in the U.S.; or (iii) have 50% or more of their assets in the U.S.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN LIBERTY U.S. LOW VOLATILITY ETF
Todd Brighton, CFA
Portfolio Manager
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2022, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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FRANKLIN LIBERTY U.S. LOW VOLATILITY ETF
Performance Summary as of March 31, 2022
Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.
Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (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 3/31/22
| Cumulative Total Return1 | Average Annual Total Return1 | |||||||||||||||
| Based on NAV2 | Based on market price3 | Based on NAV2 | Based on market price3 | |||||||||||||
1-Year | +13.98% | +13.98% | +13.98% | +13.98% | ||||||||||||
5-Year | +98.36% | +98.54% | +14.68% | +14.70% | ||||||||||||
Since Inception (9/20/16) | +115.02% | +115.37% | +14.86% | +14.89% | ||||||||||||
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 85 for Performance Summary footnotes.
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FRANKLIN LIBERTY U.S. LOW VOLATILITY ETF
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.
9/20/16–3/31/22
See page 85 for Performance Summary footnotes.
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FRANKLIN LIBERTY U.S. LOW VOLATILITY ETF
PERFORMANCE SUMMARY
Distributions (4/1/21–3/31/22)
| Net Investment Income |
$0.712390 |
Total Annual Operating Expenses5
0.29% |
All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. 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. Smaller and midsize-company stocks have historically experienced more price volatility than larger company stocks, especially over the short term. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.
Russia’s military invasion of Ukraine in February 2022, the resulting responses by the United States and other countries, and the potential for wider conflict could increase volatility and uncertainty in the financial markets and adversely affect regional and global economies. The United States and other countries have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to its invasion of Ukraine. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia’s military invasion. These sanctions, as well as any other economic consequences related to the invasion, such as additional sanctions, boycotts or changes in consumer or purchaser preferences or cyberattacks on governments, companies or individuals, may further decrease the value and liquidity of certain Russian securities and securities of issuers in other countries that are subject to economic sanctions related to the invasion.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. 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.
2. Assumes reinvestment of distributions based on net asset value.
3. Assumes reinvestment of distributions based on market price.
4. Source: Morningstar. The Russell 1000 Index is market capitalization weighted and measures 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.
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. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN LIBERTY 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 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
Actual (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||||||
| Beginning Account Value 10/1/21 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Net Annualized Expense Ratio2 | |||||||||||||||||
| $1,000.00 | $ | 1,059.30 | $ | 1.49 | $ | 1,023.49 | $ | 1.46 | 0.29 | % | ||||||||||||
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 182/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
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Franklin Liberty U.S. Treasury Bond ETF
This annual report for Franklin Liberty U.S. Treasury Bond ETF covers the fiscal year ended March 31, 2022.
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.
Performance Overview
During the 12-month period, the Fund posted cumulative total returns of -3.55% based on market price and -3.35% based on net asset value (NAV). In comparison, the Bloomberg U.S. Treasury Index, which measures the performance of U.S. Treasury bills, posted a -3.67% cumulative total return.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 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.
Economic and Market Overview
The U.S. bond market, as measured by the Bloomberg U.S. Aggregate Bond Index, posted a -4.15% total return for the 12 months ended March 31, 2022.1 Growing inflation amid supply chain disruptions and increased consumer spending led to tighter monetary policy, reducing the value of most bonds. Geopolitical instability disrupted financial markets late in the 12-month period following Russia’s invasion of Ukraine, contributing to significant volatility in bond markets. The yield curve flattened notably during the period, reflecting investors’ expectations that short-term interest rates will continue to rise, while the outlook for long-term economic growth is uncertain.
In an effort to control inflation, the U.S. Federal Reserve (Fed) raised the federal funds target rate to a range of 0.25%–0.50%, the first such increase since 2018. The Fed noted in its March 2022 meeting that strength in the U.S. job
| Portfolio Composition | ||||
| 3/31/22 | ||||
% of Total Net Assets | ||||
U.S. Government & Agency Securities | 96.5% | |||
Mortgage-Backed Securities | 1.5% | |||
Short-Term Investments & Other Net Assets | 2.0% | |||
market and continued inflationary pressure, exacerbated by the war in Ukraine, meant it anticipated making further increases to the federal funds target rate. Furthermore, the Fed said it expected to begin reducing its bond holdings at a future meeting.
U.S. Treasury (UST) bonds, as measured by the Bloomberg U.S. Treasury Index, posted a -3.67% total return for the 12-month period.1 The 10-year UST yield (which moves inversely to price) increased, particularly later in the period amid high inflation and the Fed’s less accommodative stance. Mortgage-backed securities (MBS), as measured by the Bloomberg U.S. MBS Index, posted a -4.92% total return for the period.1
Corporate bond prices also declined overall, constrained by inflation and rising interest rates. Furthermore, corporate yield spreads, a measure of the difference in yields between corporate bonds and similarly-dated USTs, increased, reflecting investors’ increasing risk-off preferences. However, yield spreads rose faster for investment-grade bonds than high-yield bonds, and high-yield bonds benefited from higher coupon payments. In this environment, high-yield corporate bonds, as represented by the Bloomberg U.S. Corporate High Yield Bond Index, posted a -0.66% total return, while investment-grade corporate bonds, as represented by the Bloomberg U.S. Corporate Bond Index, posted a -4.20% total return.1
Investment Strategy
The Fund invests at least 80% of its net assets in direct obligations of the U.S. Treasury, including Treasury bonds, bills and notes and investments that provide exposure to direct obligations of the U.S. Treasury. The Fund may also invest in securities issued or guaranteed by the U.S. government, its
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 191.
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FRANKLIN LIBERTY U.S. TREASURY BOND ETF
| Top 10 Holdings | ||||
| 3/31/22 | ||||
% of Total Net Assets | ||||
U.S. Treasury Note, 0.125%, 5/31/22 | 8.8% | |||
U.S. Treasury Note, 1.875%, 7/31/26 | 7.7% | |||
U.S. Treasury Note, 0.50%, 6/30/27 | 6.9% | |||
U.S. Treasury Note, 1.50%, 11/30/24 | 5.0% | |||
U.S. Treasury Note, 1.25%, 4/30/28 | 4.2% | |||
U.S. Treasury Note, 2.50%, 5/15/24 | 3.5% | |||
U.S. Treasury Note, 2.25%, 11/15/24 | 3.3% | |||
U.S. Treasury Note, 2.125%, 3/31/24 | 3.2% | |||
U.S. Treasury Note, 2.125%, 11/30/24 | 3.2% | |||
U.S. Treasury Note, 1.50%, 9/30/24 | 3.1% | |||
agencies, or instrumentalities, including government sponsored entities and mortgage-backed securities (MBS). In addition, the Fund may purchase or sell MBS on a delayed delivery or forward commitment basis through the to-be-announced (TBA) market. With TBA transactions, the particular securities to be delivered must meet specified terms and conditions.
To pursue its investment goal, the Fund may enter into certain interest rate-related derivative transactions, principally interest rate/bond futures contracts and interest rate swaps. The use of these derivative transactions may allow the Fund to obtain net long or short exposures to select interest rates or durations. These derivatives may be used to enhance Fund returns, increase liquidity, gain exposure to certain instruments or markets in a more efficient or less expensive way and/or hedge risks associated with its other portfolio investments.
We generally buy and hold high quality fixed income securities. Using this straightforward approach, we seek to produce current income with a high degree of credit safety from a conservatively managed portfolio of U.S. Treasury securities. We may utilize quantitative models to identify investment opportunities as part of the portfolio construction process for the Fund. Quantitative models are proprietary systems that rely on mathematical computations to identify investment opportunities. The Fund is an actively managed ETF and, thus, does not seek to replicate the performance of a specified index. Accordingly, the investment manager has discretion on a daily basis to manage the Fund’s portfolio in accordance with the Fund’s investment goal.
Manager’s Discussion
During the 12-month period, yield-curve positioning was the primary contributor to the Fund’s performance relative to its benchmark, coming mainly during the first quarter of 2022 as yields rose sharply and the Fund was underweight duration on the 5- and 10-year portions of the yield curve. Over the period, yields for Treasuries with maturities less than five years rose more than yields for Treasuries with maturities greater than five years. Our off-benchmark allocation to U.S. Treasury Inflation-Protected Securities (TIPS) was also a contributor to performance relative to the benchmark, due to strong inflation accruals. Conversely, our allocation to agency fixed-rate mortgage-backed securities detracted from results as rate volatility weighed on the sector.
Thank you for your participation in Franklin Liberty U.S. Treasury Bond ETF. We look forward to serving your future investment needs.
Warren Keyser
Patrick Klein, Ph.D.
Portfolio Management Team
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2022, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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FRANKLIN LIBERTY U.S. TREASURY BOND ETF
Performance Summary as of March 31, 2022
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 and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.
Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (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 3/31/22
| Cumulative Total Return1 | Average Annual Total Return1 | |||||||||||||||
| Based on NAV2 | Based on market price3 | Based on NAV2 | Based on market price3 | |||||||||||||
1-Year | -3.35% | -3.55% | -3.35% | -3.55% | ||||||||||||
Since Inception (6/9/20) | -6.60% | -6.60% | -3.70% | -3.70% | ||||||||||||
| Distribution Rate4 | 30-Day Standardized Yield5 | |||
1.19% | 1.95% | |||
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 91 for Performance Summary footnotes.
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FRANKLIN LIBERTY U.S. TREASURY BOND ETF
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.
6/9/20–3/31/22
See page 91 for Performance Summary footnotes.
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FRANKLIN LIBERTY U.S. TREASURY BOND ETF
PERFORMANCE SUMMARY
Distributions (4/1/21–3/31/22)
Net Investment Income |
$0.380854 |
Total Annual Operating Expenses7
0.09% |
All investments involve risks, including possible loss of principal. Interest-rate movements, unscheduled mortgage prepayments and other risk factors will affect the Fund’s share price and yield. Bond prices, and thus a Fund’s share price, generally move in the opposite direction of interest rates. Therefore, 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. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.
Russia’s military invasion of Ukraine in February 2022, the resulting responses by the United States and other countries, and the potential for wider conflict could increase volatility and uncertainty in the financial markets and adversely affect regional and global economies. The United States and other countries have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to its invasion of Ukraine. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia’s military invasion. These sanctions, as well as any other economic consequences related to the invasion, such as additional sanctions, boycotts or changes in consumer or purchaser preferences or cyberattacks on governments, companies or individuals, may further decrease the value and liquidity of certain Russian securities and securities of issuers in other countries that are subject to economic sanctions related to the invasion.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. 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.
2. Assumes reinvestment of distributions based on net asset value.
3. Assumes reinvestment of distributions based on market price.
4. Distribution rate is based on an annualization of the March dividend and the NAV per share on 3/31/22.
5. 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.
6. Source: Morningstar. The Bloomberg U.S. Treasury Index measures the performance of U.S. dollar-denominated, fixed-rate, nominal debt issued by the U.S. Treasury with at least one year until final maturity. Treasuries, if held to maturity, offer a fixed rate of return and a fixed principal value; their interest payments and principal are guaranteed.
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. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN LIBERTY 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 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
Actual (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||||||
| Beginning Account Value 10/1/21 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Net Annualized Expense Ratio2 | |||||||||||||||||
| $1,000.00 | $ | 949.50 | $ | 0.44 | $ | 1,024.48 | $ | 0.45 | 0.09 | % | ||||||||||||
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 182/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
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Franklin Liberty Ultra Short Bond ETF
This annual report for Franklin Liberty Ultra Short Bond ETF covers the fiscal year ended March 31, 2022.
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.
Performance Overview
During the 12-month period, the Fund posted cumulative total returns of -0.82% based on market price and -0.78% 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 +0.06% cumulative total return.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 95.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
Economic and Market Overview
The U.S. bond market, as measured by the Bloomberg U.S. Aggregate Bond Index, posted a -4.15% total return for the 12 months ended March 31, 2022.1 Growing inflation amid supply chain disruptions and increased consumer spending led to tighter monetary policy, reducing the value of most bonds. Geopolitical instability disrupted financial markets late in the 12-month period following Russia’s invasion of Ukraine, contributing to significant volatility in bond markets. The yield curve flattened notably during the period, reflecting investors’ expectations that short-term interest rates will continue to rise, while the outlook for long-term economic growth is uncertain.
In an effort to control inflation, the U.S. Federal Reserve (Fed) raised the federal funds target rate to a range of 0.25%–0.50%, the first such increase since 2018. The Fed noted in its March
| Top 10 Sectors/Industries | ||||
| 3/31/22 | ||||
% of Total Net Assets | ||||
Banks | 21.7% | |||
Pharmaceuticals | 10.8% | |||
Consumer Finance | 8.1% | |||
Energy Equipment & Services | 5.5% | |||
Chemicals | 4.9% | |||
Biotechnology | 4.1% | |||
Road & Rail | 4.1% | |||
Internet & Direct Marketing Retail | 4.1% | |||
Automobiles | 4.1% | |||
Insurance | 4.0% | |||
2022 meeting that strength in the U.S. job market and continued inflationary pressure, exacerbated by the war in Ukraine, meant it anticipated making further increases to the federal funds target rate. Furthermore, the Fed said it expected to begin reducing its bond holdings at a future meeting.
U.S. Treasury (UST) bonds, as measured by the Bloomberg U.S. Treasury Index, posted a -3.67% total return for the 12-month period.1 The 10-year UST yield (which moves inversely to price) increased, particularly later in the period amid high inflation and the Fed’s less accommodative stance. Mortgage-backed securities (MBS), as measured by the Bloomberg U.S. MBS Index, posted a -4.92% total return for the period.1
Corporate bond prices also declined overall, constrained by inflation and rising interest rates. Furthermore, corporate yield spreads, a measure of the difference in yields between corporate bonds and similarly-dated USTs, increased, reflecting investors’ increasing risk-off preferences. However, yield spreads rose faster for investment-grade bonds than high-yield bonds, and high-yield bonds benefited from higher coupon payments. In this environment, high-yield corporate bonds, as represented by the Bloomberg U.S. Corporate High Yield Bond Index, posted a -0.66% total return, while investment-grade corporate bonds, as represented by the Bloomberg U.S. Corporate Bond Index, posted a -4.20% total return.1
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 194.
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FRANKLIN LIBERTY ULTRA SHORT BOND ETF
| Top 10 Holdings | ||||
| 3/31/22 | ||||
| Issue/Issuer | % of Total Net Assets | |||
DuPont de Nemours Inc., senior note, FRN thereafter, 1.616%, 11/15/2023 | 4.1% | |||
Penske Truck Leasing Co. LP/PTL Finance Corp., senior note, 144A, 2.7%, 3/14/2023 | 4.1% | |||
M&T Bank Corp., senior note, FRN thereafter, 0.947%, 7/26/2023 | 4.1% | |||
AstraZeneca PLC, senior note, 1.134%, 8/17/2023 | 4.1% | |||
Citigroup Inc., senior note, FRN thereafter, | 4.1% | |||
eBay Inc., senior note, 1.169%, 1/30/2023 | 4.1% | |||
Hyundai Capital America, senior note, 144A, | 4.1% | |||
AmerisourceBergen Corp., senior note, | 4.0% | |||
Microchip Technology Inc., senior secured note, 144A, 0.983%, 9/01/2024 | 3.9% | |||
Biogen Inc., senior note, 3.625%, 9/15/2022 | 2.7% | |||
Investment Strategy
The Fund targets securities with an estimated average portfolio duration of one year or less. The Fund invests predominantly in U.S. dollar denominated, investment-grade debt securities and investments. The Fund generally expects to invest a substantial portion of its assets in cash, cash equivalents and high-quality money market securities, including commercial paper, certificates of deposit, repurchase agreements and affiliated or unaffiliated money market funds. The Fund may invest in securities issued or guaranteed by the U.S. government or by non-U.S. governments or their respective agencies or instrumentalities, including mortgage-backed securities and inflation-indexed securities issued by the U.S. Treasury. The Fund may also invest in mortgage dollar rolls, asset-backed securities and U.S. dollar denominated foreign securities, including emerging market securities.
The Fund may enter into certain interest rate-related derivatives to enhance Fund returns, increase liquidity, gain exposure to certain instruments or markets in a more efficient or less expensive way and/or hedge risks associated with its other portfolio investments.
In choosing investments, we select securities in various market sectors based on our assessment of changing economic, market, industry and issuer conditions. We use a top-down analysis of macroeconomic trends, combined with a bottom-up fundamental analysis of market sectors, industries and issuers, to try to take advantage of varying sector reactions to economic events. We may consider selling a security when we believe the security has become fully valued due to either its price appreciation or changes in the issuer’s fundamentals, or when we believe another security is a more attractive investment opportunity.
Manager’s Discussion
The Fund underperformed its benchmark for the 12-month period ended March 31, 2022. Short-term investment-grade (IG) corporate spreads widened modestly during the period under review, underperforming similar maturity U.S. Treasuries. In addition, the short end of the U.S. Treasury yield curve steepened with two-year yields up 2.18%, while 3-month U.S. Treasury bill rates rose 0.29%.
The Fund’s longer duration positioning compared to its benchmark, the ICE BofA U.S. 3-month Treasury Bill Index, was the primary detractor to relative performance. The Fund’s overweight allocation to IG corporate debt also detracted from performance. However, the Fund’s IG corporate bonds did provide positive performance versus the benchmark basket of U.S. Treasury bills.
The Fund’s sector allocation within the IG corporate bond segment did modestly contribute to returns. Our allocations to banking, health care, automotive and media aided results, while our positioning in aerospace and electric utilities detracted slightly from performance. Positive contributors from individual positions included Goldman Sachs Group, Thermo Fisher Scientific and Kinder Morgan Energy Partners, while detractors included Wells Fargo, Morgan Stanley and Bristol-Myers Squibb.
While the Fund has the ability to invest in derivative securities, it held no derivatives during the period under review.
Thank you for your participation in Franklin Liberty Ultra Short Bond ETF. We look forward to serving your future investment needs.
David Yuen, CFA, FRM
Shawn Lyons, CFA
Thomas Runkel, CFA
Kent Burns, CFA
Johnson Ng, CFA
Portfolio Management Team
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2022, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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FRANKLIN LIBERTY ULTRA SHORT BOND ETF
Performance Summary as of March 31, 2022
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 and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.
Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (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 3/31/22
| Cumulative Total Return1 | Average Annual Total Return1 | |||||||||||||||
| Based on NAV2 | Based on market price3 | Based on NAV2 | Based on market price3 | |||||||||||||
1-Year | -0.78% | -0.82% | -0.78% | -0.82% | ||||||||||||
Since Inception (7/14/20) | +0.12% | +0.08% | +0.07% | +0.04% | ||||||||||||
| Distribution Rate4 | 30-Day Standardized Yield5 | |||
0.54% | 1.45% | |||
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 97 for Performance Summary footnotes.
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FRANKLIN LIBERTY ULTRA SHORT BOND ETF
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.
Class A (7/14/20–3/31/22)
See page 97 for Performance Summary footnotes.
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FRANKLIN LIBERTY ULTRA SHORT BOND ETF
PERFORMANCE SUMMARY
Distributions (4/1/21–3/31/22)
Net Investment Income |
$0.136180 |
Total Annual Operating Expenses7
0.15% |
All investments involve risk, including possible loss of principal. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund’s focus on the credit quality of its portfolio is intended to reduce credit risk and help to preserve the Fund’s capital. The Fund is not a money market fund and does not seek to maintain a stable net value of $1.00 per share. Interest rate movements, unanticipated changes in mortgage prepayment rates and other risk factors will affect the Fund’s share price and yield. Bond prices, and thus a Fund’s share price, generally move in opposite direction of interest rates. Therefore, as the price of bonds in the Fund adjust to rise in interest rates, the Fund’s share price may decline. By focusing its investments in financials related industries, the Fund carries much greater risks of adverse developments and price movements in such industries than a fund that invests in a wide variety of industries. Because the Fund concentrates in a specific industry or group of industries, there is also the risk that the Fund will perform poorly during a slump in demand for securities of companies and such industries. The Fund’s investment in foreign securities involve certain risks including currency fluctuations, and economic and political uncertainties. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity. Investing in derivative securities involves special risks as such may not achieve the anticipated benefits and/or may result in losses to the Fund. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.
Russia’s military invasion of Ukraine in February 2022, the resulting responses by the United States and other countries, and the potential for wider conflict could increase volatility and uncertainty in the financial markets and adversely affect regional and global economies. The United States and other countries have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to its invasion of Ukraine. The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that support Russia’s military invasion. These sanctions, as well as any other economic consequences related to the invasion, such as additional sanctions, boycotts or changes in consumer or purchaser preferences or cyberattacks on governments, companies or individuals, may further decrease the value and liquidity of certain Russian securities and securities of issuers in other countries that are subject to economic sanctions related to the invasion.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. 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.
2. Assumes reinvestment of distributions based on net asset value.
3. Assumes reinvestment of distributions based on market price.
4. Distribution rate is based on an annualization of the March dividend and the NAV per share on 3/31/22.
5. 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.
6. Source: Morningstar. The ICE BofA U.S. 3-Month Treasury Bill Index tracks the performance of short-term U.S. government securities with a remaining term to final maturity of less than three months.
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. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN LIBERTY 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 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
Actual (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||||||
| Beginning Account Value 10/1/21 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Ending Account Value 3/31/22 | Expenses Paid During Period 10/1/21–3/31/221,2 | Net Annualized Expense Ratio2 | |||||||||||||||||
| $1,000.00 | $ | 989.50 | $ | 0.74 | $ | 1,024.18 | $ | 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 182/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
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FRANKLIN TEMPLETON ETF TRUST
Franklin Disruptive Commerce ETF
| Year Ended March 31, | ||||||||||||
| 2022 | 2021 | 2020a | ||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
| |||||||||||
Net asset value, beginning of year | $ | 49.21 | $ | 21.32 | $ | 25.00 | ||||||
|
| |||||||||||
| Income from investment operationsb: |
| |||||||||||
Net investment income (loss)c | (0.19 | ) | (0.21 | ) | (0.01 | ) | ||||||
Net realized and unrealized gains (losses) | (17.73 | ) | 28.10 | (3.67 | ) | |||||||
|
| |||||||||||
Total from investment operations | (17.92 | ) | 27.89 | (3.68 | ) | |||||||
|
| |||||||||||
Net realized gains | (0.32 | ) | — | — | ||||||||
|
| |||||||||||
Net asset value, end of year | $ | 30.97 | $ | 49.21 | $ | 21.32 | ||||||
|
| |||||||||||
Total returnd | (36.59)% | 130.82% | (14.72)% | |||||||||
| Ratios to average net assetse |
| |||||||||||
Expenses before waiver and payments by affiliates | 0.62% | 0.87% | 12.59% | |||||||||
Expenses net of waiver and payments by affiliates | 0.50% | 0.50% | 0.50% | |||||||||
Net investment loss | (0.40)% | (0.44)% | (0.32)% | |||||||||
| Supplemental data |
| |||||||||||
Net assets, end of year (000’s) | $18,584 | $41,827 | $2,132 | |||||||||
Portfolio turnover ratef | 89.85% | g | 45.81% | g | 0.94% | g | ||||||
aFor the period February 25, 2020 (commencement of operations) to March 31, 2020.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of Creation Unit Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year. Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period.
eRatios are annualized for periods less than one year.
fPortfolio turnover rate includes portfolio transactions that are executed as a result of the Fund offering and redeeming Creation Units solely for cash (“Cash creations”).
| gPortfolio turnover rate excluding cash creations was as follows: | 89.79% | 45.81% | 0.94% |
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 99 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Schedule of Investments, March 31, 2022
Franklin Disruptive Commerce ETF
| Country | Shares | Value | ||||||||||||
| Common Stocks 97.6% | ||||||||||||||
| Air Freight & Logistics 0.5% | ||||||||||||||
United Parcel Service Inc., B | United States | 448 | $ | 96,078 | ||||||||||
|
| |||||||||||||
| Commercial Services & Supplies 2.1% | ||||||||||||||
| a | Copart Inc. | United States | 3,068 | 384,942 | ||||||||||
|
| |||||||||||||
| Consumer Finance 0.4% | ||||||||||||||
| a | LendingClub Corp. | United States | 2,719 | 42,906 | ||||||||||
| a | Upstart Holdings Inc. | United States | 338 | 36,872 | ||||||||||
|
| |||||||||||||
| 79,778 | ||||||||||||||
|
| |||||||||||||
| Containers & Packaging 1.5% | ||||||||||||||
Packaging Corp. of America | United States | 1,734 | 270,695 | |||||||||||
|
| |||||||||||||
| Entertainment 4.2% | ||||||||||||||
| a | ROBLOX Corp., A | United States | 5,877 | 271,752 | ||||||||||
| a | Sea Ltd., ADR | Taiwan | 4,230 | 506,712 | ||||||||||
|
| |||||||||||||
| 778,464 | ||||||||||||||
|
| |||||||||||||
| Equity Real Estate Investment Trusts (REITs) 3.4% | ||||||||||||||
Prologis Inc. | United States | 3,906 | 630,741 | |||||||||||
|
| |||||||||||||
| Food & Staples Retailing 4.9% | ||||||||||||||
Costco Wholesale Corp. | United States | 1,213 | 698,506 | |||||||||||
Walmart Inc. | United States | 1,427 | 212,509 | |||||||||||
|
| |||||||||||||
| 911,015 | ||||||||||||||
|
| |||||||||||||
| Food Products 0.2% | ||||||||||||||
| a | Freshpet Inc. | United States | 407 | 41,775 | ||||||||||
|
| |||||||||||||
| Health Care Equipment & Supplies 0.3% | ||||||||||||||
| a | Figs Inc., A | United States | 2,888 | 62,150 | ||||||||||
|
| |||||||||||||
| Hotels, Restaurants & Leisure 6.8% | ||||||||||||||
| a | Airbnb Inc. | United States | 3,871 | 664,883 | ||||||||||
| a | Booking Holdings Inc. | United States | 169 | 396,888 | ||||||||||
Dominos Pizza Inc. | United States | 238 | 96,868 | |||||||||||
| a | Expedia Group Inc. | United States | 516 | 100,966 | ||||||||||
|
| |||||||||||||
| 1,259,605 | ||||||||||||||
|
| |||||||||||||
| Household Durables 1.9% | ||||||||||||||
Sony Group Corp., Sponsored ADR | Japan | 1,002 | 102,915 | |||||||||||
| a | The Lovesac Co. | United States | 4,584 | 247,811 | ||||||||||
|
| |||||||||||||
| 350,726 | ||||||||||||||
|
| |||||||||||||
| Interactive Media & Services 6.6% | ||||||||||||||
| a | Adevinta ASA | France | 4,877 | 45,100 | ||||||||||
| a | IAC/InterActiveCorp | United States | 2,236 | 224,226 | ||||||||||
| a | Match Group Inc. | United States | 1,442 | 156,803 | ||||||||||
| a,b | Trustpilot Group PLC, 144A | United Kingdom | 14,135 | 27,153 | ||||||||||
| a | ZoomInfo Technologies Inc., A | United States | 12,842 | 767,181 | ||||||||||
|
| |||||||||||||
| 1,220,463 | ||||||||||||||
|
| |||||||||||||
| Internet & Direct Marketing Retail 22.5% | ||||||||||||||
| a | Amazon.com Inc. | United States | 667 | 2,174,387 | ||||||||||
| a | Chewy Inc., A | United States | 985 | 40,168 | ||||||||||
| a,b | Delivery Hero SE, 144A | Germany | 577 | 25,590 | ||||||||||
| a | DoorDash Inc., A | United States | 446 | 52,267 | ||||||||||
eBay Inc. | United States | 4,169 | 238,717 | |||||||||||
| a | Etsy Inc. | United States | 3,432 | 426,529 | ||||||||||
| a | Fiverr International Ltd. | United States | 458 | 34,840 | ||||||||||
| a | Global-e Online Ltd. | Israel | 2,244 | 75,802 | ||||||||||
| a | Liquidity Services Inc. | United States | 11,397 | 195,117 | ||||||||||
| 100 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Disruptive Commerce ETF (continued)
| Country | Shares | Value | ||||||||||||
| Common Stocks (continued) | ||||||||||||||
| Internet & Direct Marketing Retail (continued) | ||||||||||||||
| a | MercadoLibre Inc. | Argentina | 231 | $ | 274,770 | |||||||||
| a | Overstock.com Inc. | United States | 397 | 17,470 | ||||||||||
| a | Revolve Group Inc. | United States | 5,581 | 299,644 | ||||||||||
Shutterstock Inc. | United States | 1,922 | 178,900 | |||||||||||
| a,b | Zalando SE, 144A | Germany | 795 | 40,689 | ||||||||||
Zozo Inc. | Japan | 3,976 | 107,610 | |||||||||||
|
| |||||||||||||
| 4,182,500 | ||||||||||||||
|
| |||||||||||||
| IT Services 17.6% | ||||||||||||||
| a | Adyen NV, ADR | Netherlands | 41,082 | 812,191 | ||||||||||
| a | Dlocal Ltd. | Uruguay | 5,486 | 171,492 | ||||||||||
Jack Henry & Associates Inc. | United States | 986 | 194,291 | |||||||||||
Mastercard Inc., A | United States | 1,597 | 570,736 | |||||||||||
| a | Shift4 Payments Inc., A | United States | 612 | 37,901 | ||||||||||
| a | Shopify Inc., A | Canada | 1,338 | 904,435 | ||||||||||
| a | Square Inc., A | United States | 443 | 60,071 | ||||||||||
| a | Toast Inc., A | United States | 2,285 | 49,653 | ||||||||||
| a | Twilio Inc., A | United States | 374 | 61,639 | ||||||||||
Visa Inc., A | United States | 1,848 | 409,831 | |||||||||||
|
| |||||||||||||
| 3,272,240 | ||||||||||||||
|
| |||||||||||||
| Professional Services 0.7% | ||||||||||||||
TransUnion | United States | 1,282 | 132,482 | |||||||||||
|
| |||||||||||||
| Road & Rail 1.8% | ||||||||||||||
Old Dominion Freight Line Inc. | United States | 429 | 128,134 | |||||||||||
| a | XPO Logistics Inc. | United States | 2,868 | 208,790 | ||||||||||
|
| |||||||||||||
| 336,924 | ||||||||||||||
|
| |||||||||||||
| Software 10.6% | ||||||||||||||
| a | Avalara Inc. | United States | 4,069 | 404,906 | ||||||||||
| a | Bill.com Holdings Inc. | United States | 1,487 | 337,237 | ||||||||||
| a | Coupa Software Inc. | United States | 305 | 30,997 | ||||||||||
| a | Crowdstrike Holdings Inc., A | United States | 845 | 191,883 | ||||||||||
| a | Descartes Systems Group Inc. | Canada | 3,212 | 235,311 | ||||||||||
| a | Lightspeed Commerce Inc. | Canada | 2,613 | 79,767 | ||||||||||
| a | Manhattan Associates Inc. | United States | 1,889 | 262,023 | ||||||||||
| a | Sprout Social Inc., A | United States | 2,530 | 202,704 | ||||||||||
| a | Unity Software Inc. | United States | 2,280 | 226,199 | ||||||||||
|
| |||||||||||||
| 1,971,027 | ||||||||||||||
|
| |||||||||||||
| Specialty Retail 4.6% | ||||||||||||||
| a | Carvana Co. | United States | 521 | 62,150 | ||||||||||
| a | Petco Health & Wellness Co. Inc. | United States | 9,462 | 185,171 | ||||||||||
Tractor Supply Co. | United States | 1,980 | 462,073 | |||||||||||
| a | Warby Parker Inc., A | United States | 4,456 | 150,657 | ||||||||||
|
| |||||||||||||
| 860,051 | ||||||||||||||
|
| |||||||||||||
| Textiles, Apparel & Luxury Goods 1.5% | ||||||||||||||
NIKE Inc., B | United States | 1,514 | 203,724 | |||||||||||
| a | On Holding AG, A | Switzerland | 2,838 | 71,631 | ||||||||||
|
| |||||||||||||
| 275,355 | ||||||||||||||
|
| |||||||||||||
| franklintempleton.com | Annual Report | 101 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Disruptive Commerce ETF (continued)
| Country | Shares | Value | ||||||||||||
| Common Stocks (continued) | ||||||||||||||
| Trading Companies & Distributors 5.5% | ||||||||||||||
Fastenal Co. | United States | 8,895 | $ | 528,363 | ||||||||||
W.W. Grainger Inc. | United States | 969 | 499,801 | |||||||||||
|
| |||||||||||||
| 1,028,164 | ||||||||||||||
|
| |||||||||||||
Total Investments (Cost $20,302,379) 97.6% | 18,145,175 | |||||||||||||
Other Assets, less Liabilities 2.4% | 438,604 | |||||||||||||
|
| |||||||||||||
Net Assets 100.0% | $ | 18,583,779 | ||||||||||||
|
| |||||||||||||
See Abbreviations on page 240.
aNon-income producing.
bSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. At March 31, 2022, the aggregate value of these securities was $93,432, representing 0.5% of net assets.
| 102 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin Exponential Data ETF
| Year Ended March 31, | ||||||||
| 2022 | 2021a | |||||||
| Per share operating performance (for a share outstanding throughout the year) |
| |||||||
Net asset value, beginning of year | $ | 23.34 | $ | 25.00 | ||||
|
| |||||||
| Income from investment operationsb: |
| |||||||
Net investment income (loss)c | (0.05 | ) | (— | )d | ||||
Net realized and unrealized gains (losses) | (0.51 | ) | (1.66 | ) | ||||
|
| |||||||
Total from investment operations | (0.56 | ) | (1.66 | ) | ||||
|
| |||||||
Net asset value, end of year | $ | 22.78 | $ | 23.34 | ||||
|
| |||||||
Total returne | (2.40)% | (6.64)% | ||||||
| Ratios to average net assetsf |
| |||||||
Expenses before waiver and payments by affiliates | 1.73% | 5.95% | ||||||
Expenses net of waiver and payments by affiliates | 0.38% | 0.25% | ||||||
Net investment income (loss) | (0.20)% | (0.07)% | ||||||
| Supplemental data |
| |||||||
Net assets, end of year (000’s) | $3,417 | $2,334 | ||||||
Portfolio turnover rateg | 49.72% | h | 23.20% | h | ||||
aFor the period January 12, 2021 (commencement of operations) to March 31, 2021.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of Creation Unit Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dAmount rounds to less than $0.01 per share.
eTotal return is not annualized for periods less than one year. Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period.
fRatios are annualized for periods less than one year.
gPortfolio turnover rate includes portfolio transactions that are executed as a result of the Fund offering and redeeming Creation Units solely for cash (“Cash creations”).
| hPortfolio turnover rate excluding cash creations was as follows: | 49.72% | 23.20% |
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 103 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Schedule of Investments, March 31, 2022
| Country | Shares | Value | ||||||||||||
| Common Stocks 100.6% | ||||||||||||||
| Capital Markets 5.9% | ||||||||||||||
FactSet Research Systems Inc. | United States | 75 | $ | 32,561 | ||||||||||
Moody’s Corp. | United States | 100 | 33,741 | |||||||||||
MSCI Inc. | United States | 133 | 66,883 | |||||||||||
S&P Global Inc. | United States | 164 | 67,270 | |||||||||||
|
| |||||||||||||
| 200,455 | ||||||||||||||
|
| |||||||||||||
| Communications Equipment 2.1% | ||||||||||||||
| a | Arista Networks Inc. | United States | 516 | 71,714 | ||||||||||
|
| |||||||||||||
| Electronic Equipment, Instruments & Components 1.9% | ||||||||||||||
| a | Keysight Technologies Inc. | United States | 416 | 65,715 | ||||||||||
|
| |||||||||||||
| Equity Real Estate Investment Trusts (REITs) 7.6% | ||||||||||||||
Crown Castle International Corp. | United States | 490 | 90,454 | |||||||||||
Equinix Inc. | United States | 112 | 83,061 | |||||||||||
SBA Communications Corp. | United States | 247 | 84,993 | |||||||||||
|
| |||||||||||||
| 258,508 | ||||||||||||||
|
| |||||||||||||
| Health Care Equipment & Supplies 1.2% | ||||||||||||||
| a | DexCom Inc. | United States | 79 | 40,416 | ||||||||||
|
| |||||||||||||
| Health Care Technology 0.2% | ||||||||||||||
| a | Certara Inc. | United States | 391 | 8,399 | ||||||||||
|
| |||||||||||||
| Interactive Media & Services 10.7% | ||||||||||||||
| a | Alphabet Inc., A | United States | 84 | 233,634 | ||||||||||
| a | ZoomInfo Technologies Inc., A | United States | 2,195 | 131,129 | ||||||||||
|
| |||||||||||||
| 364,763 | ||||||||||||||
|
| |||||||||||||
| IT Services 21.7% | ||||||||||||||
Accenture PLC, A | United States | 106 | 35,746 | |||||||||||
| a | Cloudflare Inc., A | United States | 1,222 | 146,274 | ||||||||||
| a | Gartner Inc. | United States | 225 | 66,929 | ||||||||||
| a | MongoDB Inc. | United States | 381 | 169,008 | ||||||||||
| a | Okta Inc. | United States | 371 | 56,006 | ||||||||||
| a | Perficient Inc. | United States | 302 | 33,247 | ||||||||||
| a | Snowflake Inc., A | United States | 601 | 137,707 | ||||||||||
| a | TaskUS Inc., A | Philippines | 279 | 10,730 | ||||||||||
| a | Thoughtworks Holding Inc. | United States | 699 | 14,546 | ||||||||||
| a | Twilio Inc., A | United States | 426 | 70,209 | ||||||||||
|
| |||||||||||||
| 740,402 | ||||||||||||||
|
| |||||||||||||
| Professional Services 1.1% | ||||||||||||||
TransUnion | United States | 378 | 39,063 | |||||||||||
|
| |||||||||||||
| Software 46.2% | ||||||||||||||
| a | Asana Inc., A | United States | 944 | 37,732 | ||||||||||
| a | Confluent Inc., A | United States | 2,733 | 112,053 | ||||||||||
| a | Crowdstrike Holdings Inc., A | United States | 561 | 127,392 | ||||||||||
| a | CS Disco Inc. | United States | 268 | 9,104 | ||||||||||
| a | Datadog Inc., A | United States | 1,303 | 197,365 | ||||||||||
| a | Digital Turbine Inc. | United States | 220 | 9,638 | ||||||||||
| a | Fair Isaac Corp. | United States | 135 | 62,972 | ||||||||||
| a | Fortinet Inc. | United States | 451 | 154,125 | ||||||||||
| a | Gitlab Inc., A | United States | 1,161 | 63,216 | ||||||||||
| a | HubSpot Inc. | United States | 68 | 32,296 | ||||||||||
Microsoft Corp. | United States | 553 | 170,495 | |||||||||||
| a | Monday.com Ltd. | United States | 110 | 17,388 | ||||||||||
| a | Palantir Technologies Inc., A | United States | 1,053 | 14,458 | ||||||||||
| a | Palo Alto Networks Inc. | United States | 208 | 129,482 | ||||||||||
| a | Qualtrics International Inc., A | United States | 595 | 16,987 | ||||||||||
| 104 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Exponential Data ETF (continued)
| Country | Shares | Value | ||||||||||||
| Common Stocks (continued) | ||||||||||||||
| Software (continued) | ||||||||||||||
| a | salesforce.com Inc. | United States | 159 | $ | 33,759 | |||||||||
| a | SentinelOne Inc., A | United States | 696 | 26,963 | ||||||||||
| a | ServiceNow Inc. | United States | 119 | 66,270 | ||||||||||
| a | Sprinklr Inc., A | United States | 412 | 4,903 | ||||||||||
| a | Sprout Social Inc., A | United States | 215 | 17,226 | ||||||||||
| a | Tenable Holdings Inc. | United States | 337 | 19,475 | ||||||||||
| a | The Trade Desk Inc., A | United States | 541 | 37,464 | ||||||||||
Trend Micro Inc. | Japan | 705 | 41,589 | |||||||||||
| a | Varonis Systems Inc. | United States | 648 | 30,806 | ||||||||||
| a | Zscaler Inc. | United States | 601 | 145,009 | ||||||||||
|
| |||||||||||||
| 1,578,167 | ||||||||||||||
|
| |||||||||||||
| Wireless Telecommunication Services 2.0% | ||||||||||||||
| a | T-Mobile US Inc. | United States | 529 | 67,897 | ||||||||||
|
| |||||||||||||
Total Investments before Short Term Investments | 3,435,499 | |||||||||||||
|
| |||||||||||||
| Short Term Investments (Cost $591) 0.0%† | ||||||||||||||
| Money Market Funds 0.0%† | ||||||||||||||
| b,c | Institutional Fiduciary Trust Portfolio, 0.01% | United States | 591 | 591 | ||||||||||
|
| |||||||||||||
Total Investments (Cost $3,246,009) 100.6% | 3,436,090 | |||||||||||||
Other Assets, less Liabilities (0.6)% | (18,964 | ) | ||||||||||||
|
| |||||||||||||
Net Assets 100.0% | $ | 3,417,126 | ||||||||||||
|
| |||||||||||||
See Abbreviations on page 240.
†Rounds to less than 0.1% of net assets.
aNon-income producing.
bThe rate shown is the annualized seven-day effective yield at period end.
cSee Note 3(d) regarding investments in affiliated management investment companies.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 105 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin Genomic Advancements ETF
| Year Ended March 31, | ||||||||||||
| 2022 | 2021 | 2020a | ||||||||||
| Per share operating performance (for a share outstanding throughout the year) | ||||||||||||
Net asset value, beginning of year | $ | 43.26 | $ | 22.58 | $ | 25.00 | ||||||
|
| |||||||||||
| Income from investment operationsb: |
| |||||||||||
Net investment income (loss)c | (0.15 | ) | (0.18 | ) | (0.01 | ) | ||||||
Net realized and unrealized gains (losses) | (5.99 | ) | 20.92 | (2.41 | ) | |||||||
|
| |||||||||||
Total from investment operations | (6.14 | ) | 20.74 | (2.42 | ) | |||||||
|
| |||||||||||
| Less distributions from: |
| |||||||||||
Net investment income | (0.12 | ) | (0.01 | ) | — | |||||||
Net realized gains | — | (0.05 | ) | — | ||||||||
|
| |||||||||||
Total Distributions | (0.12 | ) | (0.06 | ) | — | |||||||
|
| |||||||||||
Net asset value, end of year | $ | 37.00 | $ | 43.26 | $ | 22.58 | ||||||
|
| |||||||||||
Total returnd | (14.26)% | 91.81% | (9.68)% | |||||||||
| Ratios to average net assetse |
| |||||||||||
Expenses before waiver and payments by affiliates | 0.66% | 1.84% | 12.22% | |||||||||
Expenses net of waiver and payments by affiliates | 0.50% | 0.50% | 0.50% | |||||||||
Net investment loss | (0.32)% | (0.45)% | (0.37)% | |||||||||
| Supplemental data |
| |||||||||||
Net assets, end of year (000’s) | $14,799 | $15,140 | $2,258 | |||||||||
Portfolio turnover ratef | 61.43% | g | 46.58% | g | 2.20% | g | ||||||
aFor the period February 25, 2020 (commencement of operations) to March 31, 2020.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of Creation Unit Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year. Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period.
eRatios are annualized for periods less than one year.
fPortfolio turnover rate includes portfolio transactions that are executed as a result of the Fund offering and redeeming Creation Units solely for cash (“Cash creations”).
| gPortfolio turnover rate excluding cash creations was as follows: | 59.54% | 44.75% | 2.20% |
| 106 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Schedule of Investments, March 31, 2022
Franklin Genomic Advancements ETF
| Country | Shares | Value | ||||||||||||
| Common Stocks 94.2% | ||||||||||||||
| Biotechnology 16.7% | ||||||||||||||
| a | Avid Bioservices Inc. | United States | 10,426 | $ | 212,378 | |||||||||
| a | Beam Therapeutics Inc. | United States | 2,267 | 129,899 | ||||||||||
| a | BioNTech SE, ADR | Germany | 1,831 | 312,295 | ||||||||||
| a | Dynavax Technologies Corp. | United States | 6,659 | 72,184 | ||||||||||
| a | Editas Medicine Inc. | United States | 1,052 | 20,009 | ||||||||||
| a | Intellia Therapeutics Inc. | United States | 8,132 | 590,952 | ||||||||||
| a | Krystal Biotech Inc. | United States | 1,757 | 116,911 | ||||||||||
| a | Ligand Pharmaceuticals Inc. | United States | 780 | 87,742 | ||||||||||
| a | Moderna Inc. | United States | 1,270 | 218,770 | ||||||||||
| a | Regeneron Pharmaceuticals Inc. | United States | 644 | 449,782 | ||||||||||
| a | Taysha Gene Therapies Inc. | United States | 201 | 1,311 | ||||||||||
| a | Veracyte Inc. | United States | 915 | 25,227 | ||||||||||
| a | Vertex Pharmaceuticals Inc. | United States | 894 | 233,307 | ||||||||||
|
| |||||||||||||
| 2,470,767 | ||||||||||||||
|
| |||||||||||||
| Chemicals 1.6% | ||||||||||||||
Corteva Inc. | United States | 2,087 | 119,961 | |||||||||||
FMC Corp. | United States | 898 | 118,150 | |||||||||||
|
| |||||||||||||
| 238,111 | ||||||||||||||
|
| |||||||||||||
| Equity Real Estate Investment Trusts (REITs) 2.5% | ||||||||||||||
Alexandria Real Estate Equities Inc. | United States | 1,830 | 368,287 | |||||||||||
|
| |||||||||||||
| Health Care Equipment & Supplies 0.5% | ||||||||||||||
| a | CryoPort Inc. | United States | 1,921 | 67,062 | ||||||||||
|
| |||||||||||||
| Health Care Providers & Services 1.2% | ||||||||||||||
| a | Fulgent Genetics Inc. | United States | 1,145 | 71,459 | ||||||||||
| a | Laboratory Corp. of America Holdings | United States | 275 | 72,507 | ||||||||||
UnitedHealth Group Inc. | United States | 72 | 36,718 | |||||||||||
|
| |||||||||||||
| 180,684 | ||||||||||||||
|
| |||||||||||||
| Health Care Technology 0.7% | ||||||||||||||
| a | Doximity Inc., A | United States | 651 | 33,910 | ||||||||||
| a | Veeva Systems Inc. | United States | 326 | 69,262 | ||||||||||
|
| |||||||||||||
| 103,172 | ||||||||||||||
|
| |||||||||||||
| Life Sciences Tools & Services 55.6% | ||||||||||||||
Agilent Technologies Inc. | United States | 3,936 | 520,851 | |||||||||||
| a | Avantor Inc. | United States | 14,312 | 484,032 | ||||||||||
| a | Bio-Rad Laboratories Inc., A | United States | 832 | 468,607 | ||||||||||
Bio-Techne Corp. | United States | 417 | 180,578 | |||||||||||
Bruker Corp. | United States | 8,241 | 529,896 | |||||||||||
| a | Charles River Laboratories International Inc. | United States | 1,503 | 426,807 | ||||||||||
| a | Codex DNA Inc. | United States | 6,801 | 36,521 | ||||||||||
Danaher Corp. | United States | 2,082 | 610,713 | |||||||||||
| a | Evotec SE | Germany | 6,041 | 184,170 | ||||||||||
| a | ICON PLC | Ireland | 1,531 | 372,370 | ||||||||||
| a | Illumina Inc. | United States | 747 | 261,002 | ||||||||||
| a | IQVIA Holdings Inc. | United States | 1,620 | 374,560 | ||||||||||
Lonza Group AG | Switzerland | 668 | 487,943 | |||||||||||
| a | Maravai LifeSciences Holdings Inc., A | United States | 1,045 | 36,857 | ||||||||||
| a | Medpace Holdings Inc. | United States | 2,763 | 451,999 | ||||||||||
| a | NanoString Technologies Inc. | United States | 132 | 4,587 | ||||||||||
| a | Olink Holding AB, ADR | Sweden | 640 | 11,303 | ||||||||||
| a | Oxford Nanopore Technologies PLC | United Kingdom | 11,687 | 61,243 | ||||||||||
PerkinElmer Inc. | United States | 1,602 | 279,485 | |||||||||||
| a | QIAGEN NV | Netherlands | 3,942 | 193,158 | ||||||||||
| a | Repligen Corp. | United States | 4,488 | 844,148 | ||||||||||
| franklintempleton.com | Annual Report | 107 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Genomic Advancements ETF (continued)
| Country | Shares | Value | ||||||||||||
| Common Stocks (continued) | ||||||||||||||
| Life Sciences Tools & Services (continued) | ||||||||||||||
| a,b | Samsung Biologics Co. Ltd., 144A | South Korea | 699 | $ | 476,938 | |||||||||
Thermo Fisher Scientific Inc. | United States | 1,586 | 936,771 | |||||||||||
|
| |||||||||||||
| 8,234,539 | ||||||||||||||
|
| |||||||||||||
| Pharmaceuticals 12.5% | ||||||||||||||
AstraZeneca PLC, ADR | United Kingdom | 8,910 | 591,089 | |||||||||||
Bristol-Myers Squibb Co. | United States | 5,514 | 402,688 | |||||||||||
| a | Catalent Inc. | United States | 5,290 | 586,661 | ||||||||||
Eli Lilly & Co. | United States | 142 | 40,665 | |||||||||||
GlaxoSmithKline PLC, ADR | United Kingdom | 5,256 | 228,951 | |||||||||||
|
| |||||||||||||
| 1,850,054 | ||||||||||||||
|
| |||||||||||||
| Semiconductors & Semiconductor Equipment 2.9% | ||||||||||||||
Brooks Automation Inc. | United States | 1,976 | 163,771 | |||||||||||
NVIDIA Corp. | United States | 984 | 268,494 | |||||||||||
|
| |||||||||||||
| 432,265 | ||||||||||||||
|
| |||||||||||||
| Preferred Stocks 2.6% | ||||||||||||||
| Health Care Equipment & Supplies 2.6% | ||||||||||||||
| c | Sartorius AG, 0.314%, pfd. | Germany | 870 | 388,848 | ||||||||||
|
| |||||||||||||
| Rights 0.1% | ||||||||||||||
| Life Sciences Tools & Services 0.1% | ||||||||||||||
| a | Samsung Biologics Co. Ltd., rts. | South Korea | 52 | 8,066 | ||||||||||
|
| |||||||||||||
Total Investments (Cost $17,138,284) 96.9% | 14,341,855 | |||||||||||||
Other Assets, less Liabilities 3.1% | 456,822 | |||||||||||||
|
| |||||||||||||
Net Assets 100.0% | $ | 14,798,677 | ||||||||||||
|
| |||||||||||||
See Abbreviations on page 240.
aNon-income producing.
bSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. At March 31, 2022, the value of this security was $476,938, representing 3.2% of net assets.
cVariable rate security. The rate shown represents the yield at period end.
| 108 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin Intelligent Machines ETF
| Year Ended March 31, | ||||||||||||
| 2022 | 2021 | 2020a | ||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
| |||||||||||
Net asset value, beginning of year | $ | 43.24 | $ | 20.67 | $ | 25.00 | ||||||
|
| |||||||||||
| Income from investment operationsb: |
| |||||||||||
Net investment income (loss)c | (0.10 | ) | (0.06 | ) | — | |||||||
Net realized and unrealized gains (losses) | 3.25 | 22.63 | (4.33 | ) | ||||||||
|
| |||||||||||
Total from investment operations | 3.15 | 22.57 | (4.33 | ) | ||||||||
|
| |||||||||||
| Less distributions from: | ||||||||||||
Net investment income | — | (0.00 | )d | — | ||||||||
Net realized gains | (0.09 | ) | — | — | ||||||||
|
| |||||||||||
Total distributions | (0.09 | ) | — | — | ||||||||
|
| |||||||||||
Net asset value, end of year | $ | 46.30 | $ | 43.24 | $ | 20.67 | ||||||
|
| |||||||||||
Total returne | 7.27% | 109.21% | (17.32)% | |||||||||
| Ratios to average net assetsf |
| |||||||||||
Expenses before waiver and payments by affiliates | 0.77% | 2.19% | 12.91% | |||||||||
Expenses net of waiver and payments by affiliates | 0.50% | 0.50% | 0.50% | |||||||||
Net investment income (loss) | (0.21)% | (0.17)% | 0.20% | |||||||||
| Supplemental data |
| |||||||||||
Net assets, end of year (000’s) | $11,574 | $10,809 | $2,067 | |||||||||
Portfolio turnover rateg | 35.98% | h | 75.25% | h | —% | h | ||||||
aFor the period February 25, 2020 (commencement of operations) to March 31, 2020.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of Creation Unit Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dAmount rounds to less than $0.001 per share.
eTotal return is not annualized for periods less than one year. Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period.
fRatios are annualized for periods less than one year.
gPortfolio turnover rate includes portfolio transactions that are executed as a result of the Fund offering and redeeming Creation Units solely for cash (“Cash creations”).
| hPortfolio turnover rate excluding cash creations was as follows: | 35.98% | 75.25% |
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 109 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Schedule of Investments, March 31, 2022
Franklin Intelligent Machines ETF
| Country | Shares | Value | ||||||||||||
| Common Stocks 97.5% | ||||||||||||||
| Aerospace & Defense 2.6% | ||||||||||||||
| a | Axon Enterprise Inc. | United States | 2,181 | $ | 300,389 | |||||||||
|
| |||||||||||||
| Auto Components 0.5% | ||||||||||||||
| a | Aptiv PLC | United States | 517 | 61,890 | ||||||||||
|
| |||||||||||||
| Automobiles 9.1% | ||||||||||||||
| a | Lucid Group Inc. | United States | 1,113 | 28,270 | ||||||||||
| a | Tesla Inc. | United States | 947 | 1,020,487 | ||||||||||
|
| |||||||||||||
| 1,048,757 | ||||||||||||||
|
| |||||||||||||
| Construction & Engineering 0.7% | ||||||||||||||
Quanta Services Inc. | United States | 408 | 53,697 | |||||||||||
Valmont Industries Inc. | United States | 125 | 29,825 | |||||||||||
|
| |||||||||||||
| 83,522 | ||||||||||||||
|
| |||||||||||||
| Electrical Equipment 1.6% | ||||||||||||||
Eaton Corp. PLC | United States | 401 | 60,856 | |||||||||||
Rockwell Automation Inc. | United States | 402 | 112,572 | |||||||||||
| a | Sunrun Inc. | United States | 282 | 8,564 | ||||||||||
|
| |||||||||||||
| 181,992 | ||||||||||||||
|
| |||||||||||||
| Electronic Equipment, Instruments & Components 9.7% | ||||||||||||||
Amphenol Corp., A | United States | 3,312 | 249,559 | |||||||||||
Cognex Corp. | United States | 300 | 23,145 | |||||||||||
Keyence Corp. | Japan | 440 | 207,539 | |||||||||||
| a | Keysight Technologies Inc. | United States | 738 | 116,582 | ||||||||||
Samsung SDI Co. Ltd. | South Korea | 419 | 206,034 | |||||||||||
TE Connectivity Ltd. | United States | 418 | 54,750 | |||||||||||
| a | Zebra Technologies Corp., A | United States | 640 | 264,768 | ||||||||||
|
| |||||||||||||
| 1,122,377 | ||||||||||||||
|
| |||||||||||||
| Health Care Equipment & Supplies 13.3% | ||||||||||||||
| a | Align Technology Inc. | United States | 119 | 51,884 | ||||||||||
| a | DexCom Inc. | United States | 667 | 341,237 | ||||||||||
| a | IDEXX Laboratories Inc. | United States | 390 | 213,354 | ||||||||||
| a | Insulet Corp. | United States | 574 | 152,908 | ||||||||||
| a | Intuitive Surgical Inc. | United States | 2,184 | 658,869 | ||||||||||
ResMed Inc. | United States | 232 | 56,262 | |||||||||||
Stryker Corp. | United States | 228 | 60,956 | |||||||||||
|
| |||||||||||||
| 1,535,470 | ||||||||||||||
|
| |||||||||||||
| Health Care Technology 1.4% | ||||||||||||||
| a | Inspire Medical Systems Inc. | United States | 618 | 158,634 | ||||||||||
|
| |||||||||||||
| Household Durables 0.4% | ||||||||||||||
Panasonic Corp. | Japan | 5,246 | 51,369 | |||||||||||
|
| |||||||||||||
| Industrial Conglomerates 1.9% | ||||||||||||||
Honeywell International Inc. | United States | 276 | 53,704 | |||||||||||
Roper Technologies Inc. | United States | 250 | 118,057 | |||||||||||
Siemens AG | Germany | 376 | 52,571 | |||||||||||
|
| |||||||||||||
| 224,332 | ||||||||||||||
|
| |||||||||||||
| IT Services 1.0% | ||||||||||||||
| a | Endava PLC, ADR | United Kingdom | 416 | 55,341 | ||||||||||
| a | Globant SA | United States | 218 | 57,131 | ||||||||||
|
| |||||||||||||
| 112,472 | ||||||||||||||
|
| |||||||||||||
| Semiconductors & Semiconductor Equipment 32.5% | ||||||||||||||
| a | Advanced Micro Devices Inc. | United States | 1,064 | 116,338 | ||||||||||
| 110 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Intelligent Machines ETF (continued)
| Country | Shares | Value | ||||||||||||
| Common Stocks (continued) | ||||||||||||||
| Semiconductors & Semiconductor Equipment (continued) | ||||||||||||||
Analog Devices Inc. | United States | 724 | $ | 119,590 | ||||||||||
Applied Materials Inc. | United States | 1,876 | 247,257 | |||||||||||
ASM International NV | Netherlands | 317 | 117,135 | |||||||||||
ASML Holding NV | Netherlands | 657 | 438,830 | |||||||||||
Brooks Automation Inc. | United States | 1,181 | 97,881 | |||||||||||
| a | Enphase Energy Inc. | United States | 815 | 164,451 | ||||||||||
Entegris Inc. | United States | 1,972 | 258,845 | |||||||||||
Infineon Technologies AG | Germany | 2,910 | 100,324 | |||||||||||
KLA Corp. | United States | 440 | 161,066 | |||||||||||
Lam Research Corp. | United States | 216 | 116,124 | |||||||||||
Marvell Technology Inc. | United States | 1,520 | 108,999 | |||||||||||
Microchip Technology Inc. | United States | 763 | 57,332 | |||||||||||
NVIDIA Corp. | United States | 2,938 | 801,663 | |||||||||||
NXP Semiconductors NV | China | 285 | 52,748 | |||||||||||
| a | SiTime Corp. | United States | 580 | 143,735 | ||||||||||
| a | SolarEdge Technologies Inc. | United States | 232 | 74,790 | ||||||||||
Taiwan Semiconductor Manufacturing Co. Ltd., Sponsored ADR | Taiwan | 3,299 | 343,954 | |||||||||||
Teradyne Inc. | United States | 1,102 | 130,289 | |||||||||||
Texas Instruments Inc. | United States | 619 | 113,574 | |||||||||||
|
| |||||||||||||
| 3,764,925 | ||||||||||||||
|
| |||||||||||||
| Software 16.4% | ||||||||||||||
| a | Altair Engineering Inc. | United States | 1,688 | 108,707 | ||||||||||
| a | ANSYS Inc. | United States | 352 | 111,813 | ||||||||||
| a | Asana Inc., A | United States | 1,164 | 46,525 | ||||||||||
| a | Atlassian Corp. PLC | United States | 462 | 135,750 | ||||||||||
| a | Autodesk Inc. | United States | 297 | 63,662 | ||||||||||
Bentley Systems Inc., B | United States | 293 | 12,945 | |||||||||||
| a | Cadence Design Systems Inc. | United States | 1,600 | 263,136 | ||||||||||
Constellation Software Inc. | Canada | 70 | 119,763 | |||||||||||
Dassault Systemes SE | France | 4,671 | 232,392 | |||||||||||
| a | PTC Inc. | United States | 506 | 54,506 | ||||||||||
| a | Synopsys Inc. | United States | 1,229 | 409,589 | ||||||||||
| a | The Descartes Systems Group Inc. | Canada | 4,604 | 337,380 | ||||||||||
|
| |||||||||||||
| 1,896,168 | ||||||||||||||
|
| |||||||||||||
| Technology Hardware, Storage & Peripherals 6.4% | ||||||||||||||
Apple Inc. | United States | 4,258 | 743,489 | |||||||||||
|
| |||||||||||||
Total Investments (Cost $9,187,863) 97.5% | 11,285,786 | |||||||||||||
Other Assets, less Liabilities 2.5% | 288,030 | |||||||||||||
|
| |||||||||||||
Net Assets 100.0% | $ | 11,573,816 | ||||||||||||
|
| |||||||||||||
See Abbreviations on page 240.
aNon-income producing.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 111 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin Dynamic Municipal Bond ETFa
| Year Ended March 31, | ||||||||||||||||||||
| 2022 | 2021 | 2020 | 2019 | 2018b | ||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
| |||||||||||||||||||
Net asset value, beginning of year | $ | 26.32 | $ | 24.72 | $ | 24.97 | $ | 24.40 | $ | 25.00 | ||||||||||
|
| |||||||||||||||||||
| Income from investment operationsc: |
| |||||||||||||||||||
Net investment incomed | 0.61 | 0.59 | 0.58 | 0.63 | 0.22 | |||||||||||||||
Net realized and unrealized gains (losses) | (1.56 | ) | 1.59 | (0.17 | ) | 0.57 | (0.60 | ) | ||||||||||||
|
| |||||||||||||||||||
Total from investment operations | (0.95 | ) | 2.18 | 0.41 | 1.20 | (0.38 | ) | |||||||||||||
|
| |||||||||||||||||||
Less distributions from net investment income | (0.56 | ) | (0.58 | ) | (0.66 | ) | (0.63 | ) | (0.22 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of year | $ | 24.81 | $ | 26.32 | $ | 24.72 | $ | 24.97 | $ | 24.40 | ||||||||||
|
| |||||||||||||||||||
Total returne | (3.70)% | 8.84% | 1.61% | 4.99% | (1.53)% | |||||||||||||||
| Ratios to average net assetsf |
| |||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.75% | 1.01% | 1.46% | 2.15% | 1.71% | |||||||||||||||
Expenses net of waiver and payments by affiliates | 0.30% | 0.30% | 0.30% | 0.30% | 0.30% | |||||||||||||||
Net investment income | 2.32% | 2.29% | 2.29% | 2.57% | 1.55% | |||||||||||||||
| Supplemental data |
| |||||||||||||||||||
Net assets, end of year (000’s) | $76,908 | $42,112 | $12,362 | $7,490 | $7,319 | |||||||||||||||
Portfolio turnover rateg | 27.62% | h | 14.05% | h | 35.28% | h | 35.63% | 17.49% | ||||||||||||
aEffective January 31, 2022, Franklin Liberty Federal Intermediate Tax-Free Bond Opportunities ETF was renamed Franklin Dynamic Municipal Bond ETF.
bFor the period August 31, 2017 (commencement of operations) to March 31, 2018.
cThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of Creation Unit Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
dBased on average daily shares outstanding.
eTotal return is not annualized for periods less than one year. Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period.
fRatios are annualized for periods less than one year.
gPortfolio turnover rate includes portfolio transactions that are executed as a result of the Fund offering and redeeming Creation Units solely for cash (“Cash creations”).
| hPortfolio turnover rate excluding cash creations was as follows: | 27.62% | 14.05% | 35.28% |
| 112 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Schedule of Investments, March 31, 2022
Franklin Dynamic Municipal Bond ETF
| Principal Amount* | Value | |||||||||
| Municipal Bonds 96.4% | ||||||||||
| Alabama 2.4% | ||||||||||
Black Belt Energy Gas District, Refunding, VRDN, 4.00%, 6/01/51 | 1,000,000 | $ | 1,085,066 | |||||||
County of Mobile, Gomesa Projects, 4.00%, 11/01/45 | 100,000 | 91,149 | ||||||||
Homewood Educational Building Authority, Samford University, Refunding, Series 2019A, 4.00%, 12/01/33 | 100,000 | 107,001 | ||||||||
Southeast Energy Authority, Cooperative District, Series 2021A, VRDN, 4.00%, 11/01/51 | 500,000 | 526,891 | ||||||||
|
| |||||||||
| 1,810,107 | ||||||||||
|
| |||||||||
| Alaska 0.3% | ||||||||||
Alaska Industrial Development & Export Authority, Greater Fairbanks Community Hospital Foundation Obligated Group, Refunding, 4.00%, 4/01/32 | 100,000 | 107,755 | ||||||||
Borough of Matanuska-Susitna, State of Alaska Department of Administration, Refunding, 4.00%, 9/01/30 | 150,000 | 156,245 | ||||||||
|
| |||||||||
| 264,000 | ||||||||||
|
| |||||||||
| Arizona 1.4% | ||||||||||
Arizona Health Facilities Authority, Banner Health Obligated Group, Series 2015C, Daily, VRDN, 0.34%, 1/01/46 | 100,000 | 100,000 | ||||||||
City of Phoenix Civic Improvement Corp., Wastewater Revenue, Series 2018A, 5.00%, 7/01/25 | 100,000 | 109,281 | ||||||||
Glendale Industrial Development Authority, 4.00%, 5/15/31 | 160,000 | 166,209 | ||||||||
Industrial Development Authority of the City of Phoenix, Downtown Phoenix Student Housing II LLC, 5.00%, 7/01/31 | 100,000 | 111,960 | ||||||||
La Paz County Industrial Development Authority, | ||||||||||
5.00%, 2/15/28 | 100,000 | 107,213 | ||||||||
5.00%, 2/15/31 | 100,000 | 112,197 | ||||||||
Maricopa County Union High School District No 210-Phoenix, Series 2020C, 5.00%, 7/01/31 | 170,000 | 200,506 | ||||||||
Tempe Industrial Development Authority, Tempe Life Care Village Obligated Group, Refunding, 4.00%, 12/01/31 | 200,000 | 205,647 | ||||||||
|
| |||||||||
| 1,113,013 | ||||||||||
|
| |||||||||
| Arkansas 0.3% | ||||||||||
Arkansas Development Finance Authority, | 100,000 | 107,022 | ||||||||
Baptist Memorial Health Care Obligated Group, Refunding, 5.00%, 9/01/32 | 100,000 | 115,300 | ||||||||
|
| |||||||||
| 222,322 | ||||||||||
|
| |||||||||
| California 13.5% | ||||||||||
California Municipal Finance Authority, | 100,000 | 111,368 | ||||||||
Series 2020B, 4.00%, 9/01/30 | 50,000 | 52,316 | ||||||||
AMT, Sereis 2018A, 3.50%, 12/31/35 | 100,000 | 99,643 | ||||||||
Series 2021A, 4.00%, 9/01/30 | 205,000 | 213,426 | ||||||||
Caritas Corp., Refunding, Series 2021B, 3.00%, 8/15/31 | 200,000 | 181,594 | ||||||||
Series 2021C, 4.00%, 9/01/31 | 295,000 | 301,986 | ||||||||
Republic Services, Inc., AMT, VRDN, .375%, 7/01/51 | 2,000,000 | 1,994,578 | ||||||||
California Pollution Control Financing Authority, | ||||||||||
a CalPlant I LLC, AMT, 7.50%, 7/01/32 | 250,000 | 150,000 | ||||||||
Rialto Bioenergy Facility LLC, AMT, 6.75%, 12/01/28 | 110,000 | 89,071 | ||||||||
California School Finance Authority, | 100,000 | 109,960 | ||||||||
Classical Academy Obligated Group, Series 2020A, 3.00%, 10/01/30 | 215,000 | 212,824 | ||||||||
California Statewide Communities Development Authority, | 50,000 | 50,278 | ||||||||
Community Facilities District No 2015-01, 5.00%, 9/01/27 | 75,000 | 79,981 | ||||||||
Community Facilities District No 2018, 4.00%, 9/01/30 | 150,000 | 156,277 | ||||||||
Community Facilities District No 2016-02, 4.00%, 9/01/30 | 130,000 | 134,958 | ||||||||
Community Facilities District No 2015, 4.00%, 9/01/29 | 110,000 | 115,831 | ||||||||
Special Assessment, Series 2020B, 4.00%, 9/02/30 | 125,000 | 129,904 | ||||||||
4.00%, 9/01/31 | 200,000 | 206,181 | ||||||||
| franklintempleton.com | Annual Report | 113 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Dynamic Municipal Bond ETF (continued)
| Principal Amount* | Value | |||||||||
| Municipal Bonds (continued) | ||||||||||
| California (continued) | ||||||||||
Special Assessment, Series 2021A, 4.00%, 9/02/31 | 150,000 | $ | 152,953 | |||||||
Special Assessment, 4.00%, 9/02/28 | 250,000 | 257,469 | ||||||||
Special Assessment, 4.00%, 9/02/31 | 100,000 | 101,297 | ||||||||
Southern California Edison Co, Refunding, 1.75%, 9/01/29 | 600,000 | 543,737 | ||||||||
Chino Community Facilities District, 4.00%, 9/01/30 | 150,000 | 157,508 | ||||||||
Chula Vista Community Facilities District, 4.00%, 9/01/31 | 100,000 | 104,433 | ||||||||
City of Calimesa, Community Facilities District No 2018-1, 4.00%, 9/01/33 | 150,000 | 156,574 | ||||||||
City of Fontana, Community Facilities District No 85, 4.00%, 9/01/30 | 150,000 | 157,733 | ||||||||
City of Gardena, 2.066%, 4/01/26 | 1,000,000 | 967,130 | ||||||||
City of Ontario, Community Facilities District No 45, 4.00%, 9/01/31 | 150,000 | 157,209 | ||||||||
City of Palm Desert, Community Facilities District No 2021-1, Refunding, 3.00%, 9/01/31 | 100,000 | 93,649 | ||||||||
City of Rancho Cordova, Community Facilities District No 2014-1, 4.00%, 9/01/28 | 215,000 | 224,821 | ||||||||
City of Sacramento, Greenbriar Community Facilities District No 2018-03, 4.00%, 9/01/31 | 200,000 | 207,974 | ||||||||
Corona-Norco Unified School District, Corona-Norco Unified School District Community Facilities District No 17-1, 4.00%, 9/01/34 | 105,000 | 109,465 | ||||||||
County of Orange, Village of Esencia, No 2017-1, Series 2018A, 5.00%, 8/15/28 | 100,000 | 113,156 | ||||||||
CSCDA Community Improvement Authority, 2.875%, 8/01/41 | 250,000 | 227,898 | ||||||||
Elsinore Valley Municipal Water District, Community Facilities District No 2020, Series 2021A, 4.00%, 9/01/27 | 100,000 | 100,791 | ||||||||
Irvine Unified School District, Series 2020A, 5.00%, 9/01/32 | 250,000 | 291,287 | ||||||||
Jurupa Community Services District, 4.00%, 9/01/28 | 145,000 | 152,310 | ||||||||
Marina Redevelopment Agency Successor Agency, Series 2020A, 4.00%, 9/01/32 | 135,000 | 140,232 | ||||||||
Perris Joint Powers Authority, Refunding, Series 2017B, 5.00%, 9/01/25 | 100,000 | 108,280 | ||||||||
Poway Unified School District, 5.00%, 9/01/32 | 250,000 | 294,570 | ||||||||
River Islands Public Financing Authority, Series 2021A-2, 4.00%, 9/01/30 | 200,000 | 205,177 | ||||||||
Riverside Unified School District, 4.00%, 9/01/30 | 245,000 | 257,447 | ||||||||
Romoland School District, Series 2020A, 4.00%, 9/01/33 | 140,000 | 145,512 | ||||||||
Sacramento Municipal Utility District, Electric System Revenue, 5.00%, 8/15/30 | 250,000 | 302,976 | ||||||||
Sierra View Local Health Care District, Tulare County, Refunding, 5.00%, 7/01/30 | 100,000 | 117,739 | ||||||||
Three Rivers Levee Improvement Authority, Refunding, 4.00%, 9/01/31 | 100,000 | 104,717 | ||||||||
|
| |||||||||
| 10,344,220 | ||||||||||
|
| |||||||||
| Colorado 2.2% | ||||||||||
Colorado Educational & Cultural Facilities Authority, Golden View Classical Academy, Refunding, 4.00%, 1/01/32 | 200,000 | 213,425 | ||||||||
Colorado Health Facilities Authority, | ||||||||||
Christian Living Neighborhoods Obligated Group, Refunding, 4.00%, 1/01/29 | 100,000 | 102,854 | ||||||||
Boulder Community Health Obligated Group, Refunding, 5.00%, 10/01/32 | 150,000 | 176,331 | ||||||||
Series 2019A-1, 5.00%, 8/01/33 | 160,000 | 182,312 | ||||||||
Grand County School District No 2 East Grand, 5.00%, 12/01/31 | 350,000 | 427,858 | ||||||||
Regional Transportation District, | ||||||||||
Refunding, 5.00%, 1/15/32 | 250,000 | 285,070 | ||||||||
Sales Tax Revenue, Refunding, Series 2013A, 5.00%, 11/01/27 | 100,000 | 115,184 | ||||||||
Southglenn Metropolitan District, Refunding, 5.00%, 12/01/30 | 100,000 | 102,257 | ||||||||
Southlands Metropolitan District No 1, Refunding, Series 2017A-1, 3.50%, 12/01/27 | 100,000 | 100,232 | ||||||||
|
| |||||||||
| 1,705,523 | ||||||||||
|
| |||||||||
| Connecticut 2.2% | ||||||||||
Connecticut Housing Finance Authority, Refunding, Series 2016A-1, 2.875%, 11/15/30 | 150,000 | 150,008 | ||||||||
Connecticut State Health & Educational Facilities Authority, | ||||||||||
Series 2020A, 5.00%, 1/01/30 | 150,000 | 161,554 | ||||||||
Series 2017I-1, 5.00%, 7/01/29 | 135,000 | 151,611 | ||||||||
State of Connecticut, Social Bond, Sereis 2021B, 3.00%, 6/01/32 | 1,000,000 | 1,006,638 | ||||||||
Steel Point Infrastructure Improvement District, Steelpointe Harbor Project, 4.00%, 4/01/31 | 200,000 | 199,401 | ||||||||
|
| |||||||||
| 1,669,212 | ||||||||||
|
| |||||||||
| Delaware 0.1% | ||||||||||
County of Kent, CHF-Dover LLC, 5.00%, 7/01/29 | 100,000 | 107,844 | ||||||||
|
| |||||||||
| 114 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Dynamic Municipal Bond ETF (continued)
| Principal Amount* | Value | |||||||||
| Municipal Bonds (continued) | ||||||||||
| Florida 15.6% | ||||||||||
Artisan Lakes East Community Development District, Special Assessment, Series 2021-2, 2.30%, 5/01/26 | 195,000 | $ | 184,880 | |||||||
Astonia Community Development District, Assessment Area One Project, Special Assessment, 3.375%, 5/01/30 | 145,000 | 142,081 | ||||||||
Avalon Groves Community Development District, Assessment Area 3, Special Assessment, 2.375%, 5/01/26 | 150,000 | 145,010 | ||||||||
Avalon Park West Community Development District, Special Assessment, Refunding, 3.25%, 5/01/30 | 100,000 | 95,785 | ||||||||
Avenir Community Development District, Assessment Area 2, Special Assessment, Series 2021A, 2.75%, 5/01/31 | 90,000 | 84,245 | ||||||||
Babcock Ranch Community Independent Special District, | ||||||||||
Assessment Area 2C, Special Assessment, 3.00%, 5/01/30 | 50,000 | 48,597 | ||||||||
Assessment Area 3B, Special Assessment, 3.00%, 5/01/30 | 145,000 | 139,642 | ||||||||
Bannon Lakes Community Development District, Special Assessment, 3.00%, 5/01/31 | 200,000 | 189,062 | ||||||||
Belmond Reserve Community Development District, Special Assessment, Series 2020, 3.25%, 5/01/30 | 100,000 | 96,956 | ||||||||
Berry Bay Community Development District, Assessment Area 1, Special Assessment, 3.125%, 5/01/31 | 100,000 | 94,673 | ||||||||
Capital Projects Finance Authority, University Project, Series 2020A-1, 5.00%, 10/01/32 | 105,000 | 117,630 | ||||||||
Capital Trust Agency, Inc., | ||||||||||
Liza Jackson Preparatory School, Inc., 4.00%, 8/01/30 | 100,000 | 103,636 | ||||||||
Lutz Preparatory School, Inc., Refunding, 4.00%, 6/01/31 | 200,000 | 208,579 | ||||||||
Educational Growth Fund LLC, 3.375%, 7/01/31 | 100,000 | 96,407 | ||||||||
WFCS Holdings II LLC, Series 2021A, 3.30%, 1/01/31 | 150,000 | 133,685 | ||||||||
3.00%, 7/01/31 | 125,000 | 116,613 | ||||||||
Celebration Community Development District, Assessment Area One Project, Special Assessment, 2.25%, 5/01/26 | 105,000 | 99,484 | ||||||||
CFM Community Development District, Special Assessment, 2.40%, 5/01/26 | 100,000 | 96,468 | ||||||||
Coral Keys Homes Community Development District, Special Assessment, 3.125%, 5/01/30 | 165,000 | 158,844 | ||||||||
Cordoba Ranch Community Development District, Special Assessment, Refunding, 3.00%, 5/01/31 | 100,000 | 93,044 | ||||||||
Cordova Palms Community Development District, Special Assessment, 2.80%, 5/01/31 | 100,000 | 92,165 | ||||||||
County of Osceola, Refunding, Series 2020A-2, zero cpn., 10/01/32 | 150,000 | 103,084 | ||||||||
Crestview II Community Development District, Special Assessment, Refunding, 4.00%, 5/01/31 | 126,000 | 131,258 | ||||||||
Cypress Bluff Community Development District, Special Assessment, Series 2020A, 3.125%, 5/01/30 | 60,000 | 57,530 | ||||||||
DW Bayview Community Development District, Special Assessment, 3.00%, 5/01/32 | 100,000 | 92,083 | ||||||||
East Bonita Beach Road Community Development District, Special Assessment, 3.00%, 5/01/32 | 100,000 | 91,261 | ||||||||
East Nassau Stewardship District, Special Assessment, 2.40%, 5/01/26 | 100,000 | 96,630 | ||||||||
Edgewater East Community Development District, Special Assessment, 3.10%, 5/01/31 | 100,000 | 95,857 | ||||||||
Enbrook Community Development District, Special Assessment, 3.00%, 5/01/30 | 100,000 | 96,166 | ||||||||
Entrada Community Development District, Special Assessment, 2.125%, 5/01/26 | 100,000 | 96,796 | ||||||||
Epperson North Community Development District, Assessment Area 2, Special Assessment, 3.00%, 5/01/31 | 95,000 | 87,543 | ||||||||
Florida Development Finance Corp, Brightline Trains Florida LLC, AMT, 6.75%, 12/01/56 | 250,000 | 242,738 | ||||||||
Florida Development Finance Corp., | ||||||||||
Brightline Trains Florida LLC, AMT, VRDN, 6.375%, 1/01/49 | 175,000 | 175,435 | ||||||||
Glenridge on Palmer Ranch Obligated Group, Refunding, 5.00%, 6/01/31 | 100,000 | 108,561 | ||||||||
4.00%, 6/01/31 | 100,000 | 104,124 | ||||||||
Shands Jacksonville Medical Center Obligated Group, Refunding, 5.00%, 2/01/38 | 1,000,000 | 1,126,978 | ||||||||
Forest Lake Community Development District, Assessment Area 1 Project, Special Assessment, 3.25%, 5/01/30 | 145,000 | 141,532 | ||||||||
Grand Oaks Community Development District, Special Assessment, 4.00%, 5/01/30 | 150,000 | 151,546 | ||||||||
Hammock Reserve Community Development District, Assessment Area One Project, Special Assessment, 3.25%, 5/01/30 | 100,000 | 96,495 | ||||||||
Herons Glen Recreation District, Special Assessment, Refunding, 3.00%, 5/01/32 | 100,000 | 100,682 | ||||||||
| franklintempleton.com | Annual Report | 115 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Dynamic Municipal Bond ETF (continued)
| Principal Amount* | Value | |||||||||
| Municipal Bonds (continued) | ||||||||||
| Florida (continued) | ||||||||||
Hills of Minneola Community Development District, | ||||||||||
South Parcel Assessment Area, Special Assessment, 3.50%, 5/01/31 | 100,000 | $ | 97,447 | |||||||
South Parcel Assessment Area, Special Assessment, 2.375%, 5/01/26 | 75,000 | 71,127 | ||||||||
Holly Hill Road East Community Development District, Assessment Area 3 Project, Special Assessment, 4.00%, 11/01/25 | 85,000 | 85,960 | ||||||||
Indigo Community Development District, 2021 Assessment Area, Phase A1, Special Assessment, 2.70%, 5/01/31 | 100,000 | 92,276 | ||||||||
Kindred Community Development District II, | ||||||||||
Special Assessment, 3.00%, 5/01/30 | 155,000 | 150,331 | ||||||||
Special Assessment, 2.20%, 5/01/26 | 70,000 | 67,683 | ||||||||
Kingman Gate Community Development District, | ||||||||||
Special Assessment, 3.125%, 6/15/30 | 110,000 | 108,206 | ||||||||
Special Assessment, 2.50%, 6/15/26 | 100,000 | 97,615 | ||||||||
Lakes of Sarasota Community Development District, | ||||||||||
Special Assessment, Series 2021A-1, 3.40%, 5/01/31 | 135,000 | 126,076 | ||||||||
Special Assessment, Series 2021B-1, 3.00%, 5/01/26 | 115,000 | 110,577 | ||||||||
Lakewood Ranch Stewardship District, | ||||||||||
Special Assessment, 3.125%, 5/01/30 | 60,000 | 58,194 | ||||||||
Special Assessment, 3.20%, 5/01/30 | 175,000 | 170,645 | ||||||||
Northeast Sector Project, Special Assessment, Refunding, 3.20%, 5/01/30 | 100,000 | 97,285 | ||||||||
Star Farms at Lakewood Ranch Proj-Phase 1/2, Special Assessment, 2.70%, 5/01/31 | 100,000 | 92,558 | ||||||||
Laurel Road Community Development District, Special Assessment, Series 2021A-1, 2.60%, 5/01/26 | 100,000 | 96,019 | ||||||||
Magnolia Park Community Development District, Special Assessment, Refunding, 4.00%, 5/01/31 | 47,000 | 48,958 | ||||||||
Meadow View at Twin Creeks Community Development District, Phase 4, Special Assessment, 3.00%, 5/01/31 | 75,000 | 68,496 | ||||||||
Miami Health Facilities Authority, Miami Jewish Health Systems Obligated Group, Refunding, 5.00%, 7/01/28 | 150,000 | 146,611 | ||||||||
Mirada Community Development District, Assessment Area Four, Special Assessment, 3.25%, 5/01/32 | 200,000 | 186,867 | ||||||||
Mirada II Community Development District, Special Assessment, 3.125%, 5/01/31 | 100,000 | 94,232 | ||||||||
North AR-1 Pasco Community Development District, Assessment Area Two, Special Assessment, Series 2021A, 3.25%, 5/01/31 | 100,000 | 91,942 | ||||||||
Old Hickory Community Development District, Special Assessment, 3.00%, 6/15/30 | 100,000 | 96,322 | ||||||||
| b | Orange County Health Facilities Authority, Presbyterian Retirement Communities Inc Obligated Group, Refunding , Series 2023A, 5.00%, 8/01/32 | 500,000 | 544,301 | |||||||
Parkview at Long Lake Ranch Community Development District, Special Assessment, 3.125%, 5/01/30 | 100,000 | 96,661 | ||||||||
Parrish Plantation Community Development District, Special Assessment, 3.125%, 5/01/31 | 100,000 | 94,379 | ||||||||
Pine Ridge Plantation Community Development District, Subordinate Lien, Special Assessment, Refunding, Series 2020A-2, 3.30%, 5/01/30 | 150,000 | 145,434 | ||||||||
Preserve at South Branch Community Development District, Special Assessment, Series 2021, 3.00%, 5/01/31 | 100,000 | 94,422 | ||||||||
Reunion East Community Development District, Special Assessment, 2.85%, 5/01/31 | 100,000 | 91,511 | ||||||||
River Hall Community Development District, | ||||||||||
Assessment Area 3, Special Assessment, Series 2020A, 3.25%, 5/01/31 | 100,000 | 95,601 | ||||||||
Special Assessment, Refunding, Series 2021A-2, 3.00%, 5/01/22 | 65,000 | 65,036 | ||||||||
Special Assessment, Refunding, Series 2021A-2, 3.00%, 5/01/23 | 35,000 | 35,188 | ||||||||
Special Assessment, Refunding, Series 2021A-2, 3.00%, 5/01/24 | 30,000 | 30,168 | ||||||||
Special Assessment, Refunding, Series 2021A-2, 3.00%, 5/01/25 | 40,000 | 40,034 | ||||||||
Rivers Edge II Community Development District, Special Assessment, 3.00%, 5/01/31 | 100,000 | 91,570 | ||||||||
Rivers Edge III Community Development District, Special Assessment, 2.40%, 5/01/26 | 100,000 | 96,630 | ||||||||
Saddle Creek Preserve of Polk County Community Development District, Special Assessment, 3.00%, 6/15/30 | 80,000 | 77,058 | ||||||||
Sanctuary Cove Community Development District, Special Assessment, 2.125%, 5/01/26 | 135,000 | 126,973 | ||||||||
| 116 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Dynamic Municipal Bond ETF (continued)
| Principal Amount* | Value | |||||||||
| Municipal Bonds (continued) | ||||||||||
| Florida (continued) | ||||||||||
Sandmine Road Community Development District, | ||||||||||
Assessment Area One, Special Assessment, 3.125%, 5/01/30 | 100,000 | $ | 96,934 | |||||||
Assessment Area Two, Special Assessment, 2.30%, 11/01/26 | 50,000 | 47,362 | ||||||||
Sandridge Community Development District, Special Assessment, Series 2021A1, 2.875%, 5/01/26 | 140,000 | 136,645 | ||||||||
Sarasota National Community Development District, Special Assessment, Refunding, 3.50%, 5/01/31 | 100,000 | 100,370 | ||||||||
Sawyers Landing Community Development District, Special Assessment, 3.75%, 5/01/31 | 150,000 | 148,743 | ||||||||
Shingle Creek at Bronson Community Development District, Special Assessment, 3.10%, 6/15/31 | 100,000 | 94,205 | ||||||||
Six Mile Creek Community Development District, Assessment Area 2, Phase 3, Special Assessment, 3.10%, 5/01/31 | 75,000 | 68,327 | ||||||||
Stillwater Community Development District, 2021 Project, Special Assessment, 3.00%, 6/15/31 | 100,000 | 94,732 | ||||||||
Summer Woods Community Development District, Assessment Area Three Project, Special Assessment, 3.15%, 5/01/31 | 75,000 | 68,865 | ||||||||
Tamarindo Community Development District, Special Assessment, 3.00%, 5/01/31 | 100,000 | 92,176 | ||||||||
Timber Creek Southwest Community Development District, Special Assessment, Series 2020, 3.00%, 6/15/30 | 150,000 | 143,642 | ||||||||
Tohoqua Community Development District, | ||||||||||
Special Assessment, 2.875%, 5/01/31 | 100,000 | 93,209 | ||||||||
Special Assessment, 2.50%, 5/01/26 | 140,000 | 135,969 | ||||||||
Tradition Community Development District No 9, Special Assessment, 2.70%, 5/01/31 | 100,000 | 92,569 | ||||||||
Trevesta Community Development District, Special Assessment, 3.25%, 5/01/30 | 100,000 | 96,407 | ||||||||
V-Dana Community Development District, | ||||||||||
Assessment Area One, Special Assessment, 3.50%, 5/01/31 | 150,000 | 147,223 | ||||||||
Assessment Area One-2021 Project, Special Assessment, Series 2021P, 3.125%, 5/01/31 | 100,000 | 94,717 | ||||||||
Veranda Community Development District II, Special Assessment, Refunding, 3.10%, 5/01/31 | 100,000 | 94,741 | ||||||||
Viera Stewardship District, Village 2, Special Assessment, Series 2021, 2.80%, 5/01/31 | 130,000 | 119,909 | ||||||||
Village Community Development District No 13, Limited Offering, Special Assessment, 3.00%, 5/01/29 | 100,000 | 99,018 | ||||||||
West Villages Improvement District, Unit of Development No 7, Special Assessment, 3.125%, 5/01/31 | 100,000 | 95,339 | ||||||||
Windward Community Development District, Special Assessment, Series 2020A-1, 3.65%, 5/01/30 | 100,000 | 98,397 | ||||||||
|
| |||||||||
| 11,973,677 | ||||||||||
|
| |||||||||
| Georgia 5.0% | ||||||||||
Athens-Clarke County Unified Government Development Authority, University of Georgia Athletic Association, Inc., Series 2005B, Daily, VRDN, 0.37%, 7/01/35 | 100,000 | 100,000 | ||||||||
Development Authority of Rockdale County, AHPC Terraces at Fieldstone LLC, Series 2021B-S, 4.50%, 12/01/36 | 100,000 | 87,905 | ||||||||
George L Smith II Congress Center Authority, Signia Hotel Management LLC, 3.625%, 1/01/31 | 350,000 | 335,672 | ||||||||
Main Street Natural Gas, Inc., | ||||||||||
Series 2021C, VRDN, 4.00%, 5/01/52 | 500,000 | 527,867 | ||||||||
Series 2022A, VRDN, 4.00%, 9/01/52 | 1,000,000 | 1,061,772 | ||||||||
Series 2019A, 5.00%, 5/15/29 | 100,000 | 110,803 | ||||||||
Gas Supply Revenue, Sereis 2022C, VRDN, 4.00%, 8/01/52 | 1,500,000 | 1,539,368 | ||||||||
Municipal Electric Authority of Georgia, Refunding, Series 2019A, 5.00%, 1/01/33 | 100,000 | 114,271 | ||||||||
|
| |||||||||
| 3,877,658 | ||||||||||
|
| |||||||||
| Guam 0.2% | ||||||||||
Guam Government Waterworks Authority, Refunding, 5.00%, 7/01/30 | 125,000 | 138,219 | ||||||||
|
| |||||||||
| Illinois 5.0% | ||||||||||
Chicago Park District, Refunding, Series 2020F-2, 5.00%, 1/01/31 | 100,000 | 115,526 | ||||||||
City of Berwyn, Refunding, Series 2022B, 4.00%, 12/01/41 | 1,000,000 | 1,079,616 | ||||||||
City of Chicago, zero cpn., 1/01/31 | 525,000 | 389,700 | ||||||||
| franklintempleton.com | Annual Report | 117 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Dynamic Municipal Bond ETF (continued)
| Principal Amount* | Value | |||||||||
| Municipal Bonds (continued) | ||||||||||
| Illinois (continued) | ||||||||||
Illinois Finance Authority, | ||||||||||
a 2018 Blue Island LLC, 4.25%, 12/01/28 | 100,000 | $ | 200 | |||||||
Lifespace Communities, Inc. Obligated Group, Refunding, Series 2015A, 5.00%, 5/15/24 | 245,000 | 256,908 | ||||||||
Refunding, 4.00%, 10/01/31 | 180,000 | 182,559 | ||||||||
Metropolitan Pier & Exposition Authority, | ||||||||||
McCormick Project, Refunding, zero cpn., 6/15/28 | 100,000 | 80,878 | ||||||||
McCormick Project, zero cpn., 12/15/32 | 85,000 | 56,820 | ||||||||
Railsplitter Tobacco Settlement Authority, 5.00%, 6/01/27 | 100,000 | 109,250 | ||||||||
Southwestern Illinois Development Authority, Madison County Community Unit School District No 7 Edwardsville, Refunding, zero cpn., 12/01/24 | 245,000 | 227,804 | ||||||||
State of Illinois, | ||||||||||
Series 2017C, 5.00%, 11/01/29 | 200,000 | 220,282 | ||||||||
Series 2020B, 5.00%, 10/01/31 | 150,000 | 169,101 | ||||||||
Refunding, Series 2016B, 5.00%, 10/01/31 | 100,000 | 110,229 | ||||||||
5.50%, 5/01/30 | 175,000 | 203,488 | ||||||||
Series 2021B, 3.00%, 12/01/41 | 500,000 | 424,495 | ||||||||
Upper Illinois River Valley Development Authority, Refunding, 3.50%, 12/01/32 | 125,000 | 115,747 | ||||||||
Village of Villa Park, Garden Station Redevelopment Area, zero cpn, 12/31/38 | 100,000 | 76,612 | ||||||||
|
| |||||||||
| 3,819,215 | ||||||||||
|
| |||||||||
| Indiana 0.6% | ||||||||||
City of Goshen, Green Oaks of Goshen LLC, 4.75%, 8/01/24 | 130,000 | 125,621 | ||||||||
City of Jeffersonville, Vivera Senior Living of Columbus LLC, Series 2020A, 4.75%, 11/01/30 | 100,000 | 94,857 | ||||||||
Indiana Finance Authority, Ohio Valley Electric Corp., Series 2012C, 3.00%, 11/01/30 | 150,000 | 140,545 | ||||||||
Indiana Housing & Community Development Authority, Vita of Marion LLC, Series 2021A, 5.00%, 4/01/31 | 100,000 | 95,703 | ||||||||
|
| |||||||||
| 456,726 | ||||||||||
|
| |||||||||
| Kansas 0.2% | ||||||||||
City of Manhattan, Meadowlark Hills Retirement Community Obligated Group, Refunding, Series 2021A, 4.00%, 6/01/28 | 170,000 | 175,141 | ||||||||
|
| |||||||||
| Kentucky 2.9% | ||||||||||
City of Berea, Berea College, Series 2003B, Daily, VRDN, 0.38%, 6/01/29 | 300,000 | 300,000 | ||||||||
County of Owen, Refunding, VRDN, 2.45%, 6/01/39 | 100,000 | 99,692 | ||||||||
Kentucky Public Energy Authority, Kentucky Public Energy Authority, Series 2022A2, Daily, VRDN, 1.381%, 8/01/52 | 625,000 | 617,232 | ||||||||
Louisville/Jefferson County Metropolitan Sewer District, Green Bond, Refunding, Series 2022A, 4.00%, 5/15/34 | 1,000,000 | 1,128,646 | ||||||||
Louisville/Jefferson County Metropolitan Government, Refunding, 4.00%, 5/01/29 | 100,000 | 101,504 | ||||||||
|
| |||||||||
| 2,247,074 | ||||||||||
|
| |||||||||
| Louisiana 0.7% | ||||||||||
Louisiana Local Government Environmental Facilities & Community Development Authority, | ||||||||||
3.90%, 11/01/44 | 190,000 | 171,686 | ||||||||
5.00%, 7/01/29 | 100,000 | 99,992 | ||||||||
Patriot Services Group Obligated Group, 5.25%, 10/01/32 | 145,000 | 136,551 | ||||||||
Port New Orleans Board of Commissioners, AMT, Series 2020E, 5.00%, 4/01/34 | 100,000 | 114,067 | ||||||||
|
| |||||||||
| 522,296 | ||||||||||
|
| |||||||||
| Maryland 0.8% | ||||||||||
City of Baltimore, Refunding, 3.25%, 6/01/31 | 100,000 | 96,604 | ||||||||
County of Frederick, Oakdale-Lake Linganore Development District, 3.25%, 7/01/29 | 140,000 | 138,772 | ||||||||
Maryland Economic Development Corp., Ports America Chesapeake LLC, Refunding, Series 2017A, 5.00%, 6/01/27 | 100,000 | 112,252 | ||||||||
| 118 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Dynamic Municipal Bond ETF (continued)
| Principal Amount* | Value | |||||||||
| Municipal Bonds (continued) | ||||||||||
| Maryland (continued) | ||||||||||
Maryland Health & Higher Educational Facilities Authority, | ||||||||||
Adventist Healthcare Obligated Group, Refunding, 4.00%, 1/01/30 | 145,000 | $ | 154,335 | |||||||
Refunding, 5.00%, 6/01/30 | 100,000 | 112,977 | ||||||||
|
| |||||||||
| 614,940 | ||||||||||
|
| |||||||||
| Massachusetts 0.4% | ||||||||||
Massachusetts Development Finance Agency, | ||||||||||
Foxborough Regional Charter School, Refunding, 5.00%, 7/01/27 | 100,000 | 105,552 | ||||||||
Wellforce Obligated Group, Refunding, Series 2020C, 5.00%, 10/01/30 | 200,000 | 237,592 | ||||||||
|
| |||||||||
| 343,144 | ||||||||||
|
| |||||||||
| Michigan 0.9% | ||||||||||
Grand Rapids Economic Development Corp., Refunding, 4.00%, 11/01/27 | 100,000 | 104,053 | ||||||||
Kalamazoo Economic Development Corp., Refunding, 5.00%, 8/15/31 | 115,000 | 120,693 | ||||||||
Michigan Finance Authority, | ||||||||||
Lawrence Technological University Obligated Group, Refunding, 4.00%, 2/01/27 | 190,000 | 197,133 | ||||||||
Lawrence Technological University Obligated Group, Refunding, 4.00%, 2/01/32 | 285,000 | 296,593 | ||||||||
|
| |||||||||
| 718,472 | ||||||||||
|
| |||||||||
| Minnesota 0.9% | ||||||||||
City of Eagan, Series 2018A, 4.00%, 2/01/26 | 100,000 | 107,416 | ||||||||
County of Mille Lacs, Series 2018A, 3.00%, 2/01/24 | 135,000 | 137,406 | ||||||||
Duluth Economic Development Authority, Refunding, 4.00%, 7/01/31 | 125,000 | 126,169 | ||||||||
Housing & Redevelopment Authority of The City of St Paul Minnesota, Episcopal Homes Obligated Group, Refunding, 4.00%, 11/01/33 | 135,000 | 129,547 | ||||||||
Northern Municipal Power Agency, Refunding, 5.00%, 1/01/36 | 100,000 | 110,779 | ||||||||
St Louis Park Independent School District No 283, Series 2018A, 5.00%, 2/01/25 | 100,000 | 108,436 | ||||||||
|
| |||||||||
| 719,753 | ||||||||||
|
| |||||||||
| Mississippi 0.5% | ||||||||||
Mississippi Development Bank, Magnolia Regional Health Center, Refunding, 5.00%, 10/01/31 | 150,000 | 171,671 | ||||||||
Mississippi Home Corp., | ||||||||||
Patriot Services Group Obligated Group, 3.50%, 6/01/33 | 100,000 | 88,065 | ||||||||
Patriot Services Group Pascagoula Portfolio II Obligated Group, 3.65%, 6/01/33 | 100,000 | 89,352 | ||||||||
|
| |||||||||
| 349,088 | ||||||||||
|
| |||||||||
| Missouri 1.8% | ||||||||||
Cape Girardeau County Industrial Development Authority, SoutheastHEALTH Obligated Group, 5.00%, 3/01/29 | 130,000 | 144,080 | ||||||||
City of Maryland Heights, Westport Plaza Redevelopment, 3.625%, 11/01/31 | 90,000 | 86,364 | ||||||||
Missouri Development Finance Board, City of Independence, Refunding, 5.00%, 3/01/30 | 930,000 | 1,040,023 | ||||||||
St Louis County Industrial Development Authority, Refunding, 5.00%, 9/01/27 | 100,000 | 108,509 | ||||||||
|
| |||||||||
| 1,378,976 | ||||||||||
|
| |||||||||
| Montana 0.1% | ||||||||||
Cascade County High School District A Great Falls, 5.00%, 7/01/25 | 100,000 | 108,952 | ||||||||
|
| |||||||||
| Nevada 1.2% | ||||||||||
City of Carson City, 5.00%, 9/01/28 | 115,000 | 128,494 | ||||||||
City of Las Vegas, | ||||||||||
Special Improvement District No 611, Special Assessment, 3.50%, 6/01/31 | 160,000 | 158,181 | ||||||||
Special Assessment, 4.00%, 12/01/22 | 95,000 | 95,836 | ||||||||
Special Assessment, 2.50%, 6/01/29 | 200,000 | 185,340 | ||||||||
Tahoe-Douglas Visitors Authority, 5.00%, 7/01/31 | 250,000 | 272,601 | ||||||||
Washoe County School District, Series 2017C, 5.00%, 10/01/26 | 100,000 | 112,243 | ||||||||
|
| |||||||||
| 952,695 | ||||||||||
|
| |||||||||
| franklintempleton.com | Annual Report | 119 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Dynamic Municipal Bond ETF (continued)
| Principal Amount* | Value | |||||||||
| Municipal Bonds (continued) | ||||||||||
| New Hampshire 0.1% | ||||||||||
New Hampshire Health and Education Facilities Authority Act, University System of New Hampshire Obligated Group, Refunding, Series 2017A, 5.00%, 7/01/27 | 100,000 | $ | 114,466 | |||||||
|
| |||||||||
| New Jersey 2.8% | ||||||||||
New Jersey Economic Development Authority, | ||||||||||
AMT, Refunding, VRDN, 2.20%, 10/01/39 | 100,000 | 96,792 | ||||||||
5.00%, 7/01/32 | 100,000 | 105,023 | ||||||||
5.00%, 6/15/31 | 200,000 | 228,924 | ||||||||
New Jersey Educational Facilities Authority, Seton Hall University, Series 2016C, 5.00%, 7/01/29 | 240,000 | 258,862 | ||||||||
New Jersey Transportation Trust Fund Authority, | ||||||||||
Refunding, 5.00%, 12/15/28 | 100,000 | 113,025 | ||||||||
Transportation Program Bonds, Sereis 2022BB, 5.00%, 6/15/34 | 1,000,000 | 1,145,716 | ||||||||
Pinelands Regional School District, 3.00%, 8/01/27 | 100,000 | 101,629 | ||||||||
State of New Jersey, Series 2020A, 4.00%, 6/01/31 | 100,000 | 109,177 | ||||||||
|
| |||||||||
| 2,159,148 | ||||||||||
|
| |||||||||
| New York 3.8% | ||||||||||
Metropolitan Transportation Authority, | ||||||||||
Green Bond, Series 2017C-1, 5.00%, 11/15/28 | 270,000 | 302,148 | ||||||||
Green Bond, Series 2017C-1, 5.00%, 11/15/30 | 730,000 | 810,099 | ||||||||
New York State Dormitory Authority, St Joseph’s College, 5.00%, 7/01/30 | 65,000 | 73,390 | ||||||||
New York Transportation Development Corp., | ||||||||||
Laguardia Gateway Partners LLC, Term B, AMT, 5.00%, 7/01/30 | 100,000 | 105,762 | ||||||||
AMT, 5.25%, 8/01/31 | 95,000 | 103,612 | ||||||||
Delta Air Lines, Inc., AMT, 4.00%, 10/01/30 | 125,000 | 129,775 | ||||||||
AMT, Refunding, 5.00%, 12/01/30 | 100,000 | 111,953 | ||||||||
Refunding, 5.00%, 12/01/30 | 100,000 | 113,640 | ||||||||
AMT, 2.25%, 8/01/26 | 150,000 | 144,816 | ||||||||
State of New York Mortgage Agency, AMT, Series 2018-212, 2.95%, 4/01/25 | 1,000,000 | 1,010,074 | ||||||||
|
| |||||||||
| 2,905,269 | ||||||||||
|
| |||||||||
| North Carolina 1.4% | ||||||||||
Charlotte-Mecklenburg Hospital Authority, | ||||||||||
Atrium Health Obligated Group, Series 2018G, Daily, VRDN, .34%, 1/15/48 | 500,000 | 500,000 | ||||||||
Atrium Health Obligated Group, Refunding, Series 2007B, Daily, VRDN, .34%, 1/15/38 | 500,000 | 500,000 | ||||||||
North Carolina Medical Care Commission, 5.00%, 10/01/27 | 100,000 | 107,515 | ||||||||
|
| |||||||||
| 1,107,515 | ||||||||||
|
| |||||||||
| North Dakota 0.1% | ||||||||||
County of Grand Forks, Red River Biorefinery LLC, AMT, 6.625%, 12/15/31 | 125,000 | 79,391 | ||||||||
|
| |||||||||
| Ohio 1.6% | ||||||||||
Akron Bath Copley Joint Township Hospital District, Summa Health System Obligated Group, Refunding, 4.00%, 11/15/33 | 150,000 | 160,134 | ||||||||
County of Franklin, | ||||||||||
Nationwide Children’s Hospital, Inc., 5.00%, 11/01/28 | 100,000 | 114,505 | ||||||||
Trinity Health Corp Obligated Group, Series 2019A, 5.00%, 12/01/31 | 100,000 | 116,378 | ||||||||
Wesley Communities Obligated Group, Refunding, 5.00%, 11/15/30 | 100,000 | 107,448 | ||||||||
b Ohio Living Obligated Group, Refunding, 4.00%, 7/01/33 | 200,000 | 204,420 | ||||||||
County of Hamilton, UC Health Obligated Group, 5.00%, 9/15/33 | 100,000 | 116,452 | ||||||||
Franklin County Convention Facilities Authority, 5.00%, 12/01/30 | 100,000 | 108,357 | ||||||||
Ohio Air Quality Development Authority, AMT, 3.75%, 1/15/28 | 100,000 | 104,655 | ||||||||
State of Ohio, Refunding, 5.00%, 11/15/33 | 200,000 | 229,670 | ||||||||
|
| |||||||||
| 1,262,019 | ||||||||||
|
| |||||||||
| Oregon 1.0% | ||||||||||
Medford Hospital Facilities Authority, Asante Health System Obligated Group, Series 2020A, 5.00%, 8/15/33 | 200,000 | 234,467 | ||||||||
| 120 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Dynamic Municipal Bond ETF (continued)
| Principal Amount* | Value | |||||||||
| Municipal Bonds (continued) | ||||||||||
| Oregon (continued) | ||||||||||
Oregon State Facilities Authority, PeaceHealth Obligated Group, Refunding, Series 2018B, Daily, VRDN, 0.35%, 8/01/34 | 500,000 | $ | 500,000 | |||||||
|
| |||||||||
| 734,467 | ||||||||||
|
| |||||||||
| Pennsylvania 2.1% | ||||||||||
Allegheny County Higher Education Building Authority, Robert Morris University, 5.00%, 10/15/26 | 100,000 | 106,821 | ||||||||
Allentown Neighborhood Improvement Zone Development Authority, 5.00%, 5/01/28 | 100,000 | 110,315 | ||||||||
Bucks County Industrial Development Authority, Grand View Hospital/Sellersville PA Obligated Group, 5.00%, 7/01/32 | 150,000 | 173,150 | ||||||||
Franklin County Industrial Development Authority, 5.00%, 12/01/28 | 100,000 | 107,891 | ||||||||
Luzerne County Industrial Development Authority, Pennsylvania-American Water Co., AMT, Refunding, VRDN, 2.45%, 12/01/39 | 100,000 | 100,728 | ||||||||
Pennsylvania Economic Development Financing Authority, UPMC Obligated Group, Series 2017A, 3.375%, 11/15/33 | 125,000 | 128,708 | ||||||||
Philadelphia Authority for Industrial Development, | ||||||||||
MaST Community Charter School II, 5.00%, 8/01/30 | 150,000 | 164,811 | ||||||||
Philadelphia Electrical & Technology Charter High School, 4.00%, 6/01/31 | 100,000 | 103,130 | ||||||||
Redevelopment Authority of the City of Philadelphia, Social Bond, Series 2021A, 2.799%, 9/01/33 | 500,000 | 471,518 | ||||||||
Westmoreland County Industrial Development Authority, Excela Health Obligated Group, Refunding, Series 2020A, 5.00%, 7/01/30 | 100,000 | 118,064 | ||||||||
|
| |||||||||
| 1,585,136 | ||||||||||
|
| |||||||||
| Puerto Rico 3.5% | ||||||||||
Commonwealth of Puerto Rico, | ||||||||||
Series 2021A1, 5.25%, 7/01/23 | 10,754 | 11,019 | ||||||||
Series 2021A1, 5.375%, 7/01/25 | 10,723 | 11,323 | ||||||||
Series 2021A1, 5.625%, 7/01/27 | 10,626 | 11,618 | ||||||||
Series 2021A1, 5.625%, 7/01/29 | 10,454 | 11,679 | ||||||||
Series 2021A1, 5.75%, 7/01/31 | 10,154 | 11,591 | ||||||||
Series 2021A1, 4.00%, 7/01/33 | 9,628 | 9,424 | ||||||||
Series 2021A1, 4.00%, 7/01/35 | 8,655 | 8,378 | ||||||||
Series 2021A1, 4.00%, 7/01/37 | 7,428 | 7,156 | ||||||||
Series 2021A1, 4.00%, 7/01/41 | 10,099 | 9,628 | ||||||||
Series 2021A1, 4.00%, 7/01/46 | 110,503 | 104,422 | ||||||||
Series 2021A, zero cpn., 7/01/24 | 4,953 | 4,523 | ||||||||
Series 2021A, zero cpn., 7/01/33 | 12,391 | 7,175 | ||||||||
VRDN, zero cpn, 11/01/43 | 48,075 | 25,900 | ||||||||
GDB Debt Recovery Authority of Puerto Rico, 7.50%, 8/20/40 | 375,890 | 353,337 | ||||||||
Puerto Rico Electric Power Authority, | ||||||||||
Refunding, Series 2007VV, 5.25%, 7/01/27 | 170,000 | 177,007 | ||||||||
Refunding, Series 2007VV, 5.25%, 7/01/32 | 175,000 | 180,898 | ||||||||
Puerto Rico Highway & Transportation Authority, | ||||||||||
Refunding, Series 2007CC, 5.25%, 7/01/32 | 200,000 | 209,576 | ||||||||
Series 2007CC, 5.50%, 7/01/28 | 155,000 | 165,212 | ||||||||
Refunding, Series 2007CC, 5.50%, 7/01/29 | 250,000 | 266,593 | ||||||||
Puerto Rico Infrastructure Financing Authority, | ||||||||||
F, zero cpn, 7/01/27 | 100,000 | 99,843 | ||||||||
F, zero cpn, 7/01/29 | 320,000 | 228,228 | ||||||||
Puerto Rico Sales Tax Financing Corp., Sales Tax Revenue, Series 2018A-1, zero cpn., 7/01/31 | 1,009,000 | 748,103 | ||||||||
|
| |||||||||
| 2,662,633 | ||||||||||
|
| |||||||||
| South Carolina 0.5% | ||||||||||
County of Richland, Village at Sandhill Improvement District, Special Assessment, Refunding, 3.00%, 11/01/26 | 100,000 | 95,170 | ||||||||
Patriots Energy Group, Refunding, 4.00%, 6/01/33 | 100,000 | 107,587 | ||||||||
| franklintempleton.com | Annual Report | 121 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Dynamic Municipal Bond ETF (continued)
| Principal Amount* | Value | |||||||||
| Municipal Bonds (continued) | ||||||||||
| South Carolina (continued) | ||||||||||
South Carolina Jobs-Economic Development Authority, | ||||||||||
AHPC Vista Towers 2021 LLC, 3.65%, 12/01/36 | 100,000 | $ | 87,223 | |||||||
Orchard Pk and Willowbrook Apartment, 3.65%, 12/01/36 | 100,000 | 87,318 | ||||||||
|
| |||||||||
| 377,298 | ||||||||||
|
| |||||||||
| Tennessee 1.9% | ||||||||||
City of Lawrenceburg, Refunding, 2.50%, 6/01/27 | 100,000 | 100,390 | ||||||||
Metropolitan Government of Nashville & Davidson County, Refunding, 4.00%, 7/01/29 | 100,000 | 108,856 | ||||||||
Metropolitan Nashville Airport Authority, Subordinate, AMT, Series 2019B, 5.00%, 7/01/30 | 100,000 | 115,491 | ||||||||
Tennessee Energy Acquisition Corp., Series 2021A, VRDN, 5.00%, 5/01/52 | 1,000,000 | 1,144,966 | ||||||||
|
| |||||||||
| 1,469,703 | ||||||||||
|
| |||||||||
| Texas 12.9% | ||||||||||
Arlington Higher Education Finance Corp., Riverwalk Education Foundation, Inc., 4.00%, 8/15/33 | 100,000 | 109,008 | ||||||||
City of Cedar Park, Refunding, 5.00%, 2/15/24 | 100,000 | 105,646 | ||||||||
City of Celina, | ||||||||||
Special Assessment, 3.625%, 9/01/30 | 125,000 | 119,776 | ||||||||
Special Assessment, Refunding, 4.00%, 9/01/30 | 190,000 | 194,389 | ||||||||
Wells North Public Improvement District, Special Assessment, 3.25%, 9/01/30 | 180,000 | 172,065 | ||||||||
Edgewood Creek Public Improvement District, Special Assessment, 3.75%, 9/01/31 | 180,000 | 169,996 | ||||||||
The Parks at Wilson Creek Public Improvement District, Special Assessment, 3.25%, 9/01/31 | 110,000 | 101,774 | ||||||||
Sutton Fields II Public Improvement District, Special Assessment, 2.875%, 9/01/27 | 100,000 | 95,288 | ||||||||
City of Crandall, Special Assessment, 4.75%, 9/15/31 | 100,000 | 94,617 | ||||||||
City of Fate, | ||||||||||
Williamsburg East Public Improvement District, Special Assessment, 3.375%, 8/15/30 | 145,000 | 138,956 | ||||||||
Monterra Public Improvement District, Special Assessment, 2.75%, 8/15/26 | 97,000 | 93,353 | ||||||||
City of Garland, Refunding, 5.00%, 2/15/27 | 100,000 | 113,357 | ||||||||
City of Horseshoe Bay, Escondido Public Improvement District, Special Assessment, Refunding, 3.00%, 10/01/30 | 140,000 | 134,049 | ||||||||
City of Kyle, | ||||||||||
b Plum Creek North Public Improvement District, Special Assessment, 4.375%, 9/01/32 | 215,000 | 216,040 | ||||||||
Creeks Public Improvement District, Special Assessment, 2.75%, 9/01/26 | 100,000 | 94,743 | ||||||||
City of Lago Vista, | ||||||||||
Tessera on Lake Travis Public Improvement District, Special Assessment, Refunding, 5.00%, 9/01/30 | 140,000 | 139,488 | ||||||||
Special Assessment, Refunding, 3.125%, 9/01/30 | 130,000 | 124,411 | ||||||||
City of Leander, Oak Creek Public Improvement District, Special Assessment, Refunding, 3.25%, 9/01/32 | 100,000 | 98,004 | ||||||||
City of Liberty Hill, Summerlyn West Public Improvement District, Special Assessment, 3.125%, 9/01/30 | 75,000 | 71,566 | ||||||||
City of Oak Point, Special Assessment, 3.25%, 9/01/30 | 155,000 | 148,478 | ||||||||
City of Princeton, | ||||||||||
Special Assessment, 3.25%, 9/01/30 | 100,000 | 96,030 | ||||||||
Winchester Public Improvement District, Special Assessment, 2.875%, 9/01/31 | 100,000 | 94,286 | ||||||||
City of Royse City, Creekshaw Public Improvement District, Special Assessment, 3.125%, 9/15/25 | 150,000 | 148,220 | ||||||||
City of Tomball, Raburn Reserve Public Improvement District, Special Assessment, 3.375%, 9/15/30 | 100,000 | 95,521 | ||||||||
County of Hays, La Cima Public Improvement District, Special Assessment, 3.25%, 9/15/30 | 150,000 | 142,622 | ||||||||
County of Medina, Woodlands Public Improvement District IA#1 Project, Special Assessment, 3.50%, 9/01/26 | 100,000 | 95,738 | ||||||||
Ector County Hospital District, Refunding, 5.00%, 9/15/31 | 100,000 | 111,271 | ||||||||
Hidalgo County Regional Mobility Authority, Senior Lien, Series 2022A, 5.00%, 12/01/33 | 350,000 | 393,306 | ||||||||
La Joya Independent School District, 5.00%, 2/15/26 | 1,415,000 | 1,561,606 | ||||||||
Lower Colorado River Authority, Refunding, 5.00%, 5/15/32 | 1,000,000 | 1,203,916 | ||||||||
| 122 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Dynamic Municipal Bond ETF (continued)
| Principal Amount* | Value | |||||||||
| Municipal Bonds (continued) | ||||||||||
| Texas (continued) | ||||||||||
New Hope Cultural Education Facilities Finance Corp., | ||||||||||
5.00%, 4/01/29 | 100,000 | $ | 113,155 | |||||||
4.00%, 1/01/29 | 100,000 | 95,100 | ||||||||
CHF-Collegiate Housing College Station I LLC, 5.00%, 4/01/29 | 100,000 | 102,861 | ||||||||
5.00%, 4/01/31 | 30,000 | 33,299 | ||||||||
4.00%, 4/01/22 | 80,000 | 80,000 | ||||||||
North Parkway Municipal Management District No 1, | ||||||||||
Special Assessment, 4.25%, 9/15/31 | 152,000 | 152,973 | ||||||||
Legacy Hills Public Improvement District, Special Assessment, 3.625%, 9/15/31 | 50,000 | 48,383 | ||||||||
Port Freeport, | ||||||||||
AMT, Series 2019A, 5.00%, 6/01/31 | 100,000 | 113,595 | ||||||||
AMT, 5.00%, 6/01/32 | 855,000 | 972,185 | ||||||||
Texas Municipal Gas Acquisition & Supply Corp. III, Refunding, 5.00%, 12/15/30 | 1,400,000 | 1,568,886 | ||||||||
Viridian Municipal Management District, | ||||||||||
Viridian Public Improvement District, Special Assessment, 2.375%, 12/01/25 | 53,000 | 50,965 | ||||||||
Special Assessment, 2.875%, 12/01/30 | 100,000 | 92,325 | ||||||||
|
| |||||||||
| 9,901,247 | ||||||||||
|
| |||||||||
| Utah 0.6% | ||||||||||
City of Provo, Refunding, 4.00%, 1/01/23 | 100,000 | 101,947 | ||||||||
Military Installation Development Authority, Series 2021A-2, 4.00%, 6/01/36 | 250,000 | 225,378 | ||||||||
Utah State Building Ownership Authority, Master Lease Program, 2.50%, 5/15/27 | 100,000 | 100,559 | ||||||||
|
| |||||||||
| 427,884 | ||||||||||
|
| |||||||||
| Vermont 0.1% | ||||||||||
Vermont Public Power Supply Authority, Refunding, Series 2017A, 5.00%, 7/01/28 | 100,000 | 111,809 | ||||||||
|
| |||||||||
| Virginia 1.3% | ||||||||||
Peninsula Town Center Community Development Authority, Special Assessment, Refunding, 4.50%, 9/01/28 | 100,000 | 100,952 | ||||||||
Virginia Small Business Financing Authority, | ||||||||||
National Senior Campuses, Inc.Obligated Group, Refunding, 5.00%, 1/01/33 | 100,000 | 111,200 | ||||||||
b Elizabeth River Crossings OpCo LLC, AMT, Refunding, 4.00%, 7/01/32 | 750,000 | 787,592 | ||||||||
|
| |||||||||
| 999,744 | ||||||||||
|
| |||||||||
| Washington 1.3% | ||||||||||
City of Seattle, 4.00%, 7/01/28 | 100,000 | 109,005 | ||||||||
Skagit County Public Hospital District No 1, Refunding, 5.00%, 12/01/29 | 100,000 | 110,858 | ||||||||
Spokane County School District No 356 Central Valley, 5.00%, 12/01/26 | 100,000 | 113,202 | ||||||||
University of Washington, Series 2016A, 5.00%, 12/01/26 | 100,000 | 113,012 | ||||||||
Washington Health Care Facilities Authority, 3.00%, 12/01/34 | 125,000 | 125,779 | ||||||||
Washington State Housing Finance Commission, | ||||||||||
Presbyterian Retirement Communities Northwest Obligated Group, Series 2019A, 5.00%, 1/01/34 | 100,000 | 103,805 | ||||||||
Spokane United Methodist Homes Obligated Group, 5.00%, 1/01/32 | 100,000 | 101,883 | ||||||||
eliseo Obligated Group, Series 2021A, 4.00%, 1/01/31 | 100,000 | 98,472 | ||||||||
Madison at Rivers Edge Apartments LLC, 3.65%, 1/01/37 | 100,000 | 87,268 | ||||||||
|
| |||||||||
| 963,284 | ||||||||||
|
| |||||||||
| Wisconsin 2.2% | ||||||||||
City of Brookfield, Refunding, 3.00%, 12/01/25 | 115,000 | 119,073 | ||||||||
Public Finance Authority, | ||||||||||
Refunding, 4.00%, 3/01/27 | 55,000 | 56,304 | ||||||||
Refunding, 5.00%, 10/01/29 | 100,000 | 109,396 | ||||||||
Friends Homes Obligated Group, Refunding, 4.00%, 9/01/29 | 100,000 | 105,305 | ||||||||
Refunding, 5.00%, 10/01/24 | 100,000 | 104,449 | ||||||||
Refunding, 5.00%, 1/01/30 | 250,000 | 292,790 | ||||||||
VRDN, 3.50%, 12/01/50 | 100,000 | 89,334 | ||||||||
Signature Preparatory, 5.00%, 6/15/31 | 120,000 | 123,721 | ||||||||
| franklintempleton.com | Annual Report | 123 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Dynamic Municipal Bond ETF (continued)
| Principal Amount* | Value | |||||||||
| Municipal Bonds (continued) | ||||||||||
| Wisconsin (continued) | ||||||||||
Refunding, 4.00%, 7/01/31 | 100,000 | $ | 93,723 | |||||||
Affordable Housing Preservation Corp., 5.25%, 12/01/22 | 100,000 | 99,338 | ||||||||
Ocean Academy Charter School, 4.00%, 10/15/31 | 100,000 | 97,216 | ||||||||
Wisconsin Center District, Series 2020C, zero cpn., 12/15/30 | 365,000 | 271,634 | ||||||||
Wisconsin Health & Educational Facilities Authority, St John’s Communities, Inc. Obligated Group, Series 2018A, 4.00%, 9/15/27 | 100,000 | 103,144 | ||||||||
|
| |||||||||
| 1,665,427 | ||||||||||
|
| |||||||||
Total Investments (Cost $77,838,921) 96.4% | 74,158,707 | |||||||||
Other Assets, less Liabilities 3.6% | 2,749,714 | |||||||||
|
| |||||||||
Net Assets 100.0% | $ | 76,908,421 | ||||||||
|
| |||||||||
See Abbreviations on page 240.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aSee Note 11 regarding defaulted securities.
bSecurity purchased on a when-issued basis.
| 124 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin Liberty Federal Tax-Free Bond ETF
| Year Ended March 31, | ||||||||||||||||||||
| 2022 | 2021 | 2020 | 2019 | 2018a | ||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 26.86 | $ | 26.07 | $ | 25.20 | $ | 24.34 | $ | 25.00 | ||||||||||
|
| |||||||||||||||||||
| Income from investment operationsb: | ||||||||||||||||||||
Net investment incomec | 0.36 | 0.40 | 0.46 | 0.67 | 0.30 | |||||||||||||||
Net realized and unrealized gains (losses) | (1.79 | ) | 0.94 | 1.02 | 0.85 | (0.66 | ) | |||||||||||||
|
| |||||||||||||||||||
Total from investment operations | (1.43 | ) | 1.34 | 1.48 | 1.52 | (0.36 | ) | |||||||||||||
|
| |||||||||||||||||||
Less distributions from net investment income | (0.44 | ) | (0.55 | ) | (0.61 | ) | (0.66 | ) | (0.30 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of year | $ | 24.99 | $ | 26.86 | $ | 26.07 | $ | 25.20 | $ | 24.34 | ||||||||||
|
| |||||||||||||||||||
Total returnd | (5.44)% | 5.16% | 5.92% | 6.38% | (1.45)% | |||||||||||||||
| Ratios to average net assetse | ||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.66% | 0.78% | 1.00% | 2.05% | 1.71% | |||||||||||||||
Expenses net of waiver and payments by affiliates | 0.30% | 0.30% | 0.30% | 0.30% | 0.30% | |||||||||||||||
Net investment income | 1.34% | 1.50% | 1.77% | 2.74% | 2.11% | |||||||||||||||
| Supplemental data | ||||||||||||||||||||
Net assets, end of year (000’s) | $104,939 | $126,221 | $28,674 | $8,820 | $7,302 | |||||||||||||||
Portfolio turnover ratef | 48.41% | g | 11.86% | g | 17.21% | g | 21.21% | 5.00% | ||||||||||||
aFor the period August 31, 2017 (commencement of operations) to March 31, 2018.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of Creation Unit Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year. Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period.
eRatios are annualized for periods less than one year.
fPortfolio turnover rate includes portfolio transactions that are executed as a result of the Fund offering and redeeming Creation Units solely for cash (“Cash creations”).
| gPortfolio turnover rate excluding cash creations was as follows: | 48.41% | 11.86% | 17.21% |
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 125 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Schedule of Investments, March 31, 2022
Franklin Liberty Federal Tax-Free Bond ETF
| Principal Amount* | Value | |||||||||
| Municipal Bonds 98.5% | ||||||||||
| Alabama 1.5% | ||||||||||
Black Belt Energy Gas District, | ||||||||||
Refunding, 4.00%, 12/01/23 | 435,000 | $ | 447,778 | |||||||
Refunding, 4.00%, 12/01/24 | 475,000 | 494,867 | ||||||||
City of Huntsville, Series 2019A, 5.00%, 5/01/37 | 250,000 | 292,917 | ||||||||
County of Mobile, Gomesa Projects, 4.00%, 11/01/45 | 400,000 | 364,597 | ||||||||
|
| |||||||||
| 1,600,159 | ||||||||||
|
| |||||||||
| Alaska 0.2% | ||||||||||
Borough of Matanuska-Susitna, State of Alaska Department of Administration, Refunding, 4.00%, 9/01/30 | 150,000 | 156,245 | ||||||||
|
| |||||||||
| Arizona 1.0% | ||||||||||
City of Phoenix Civic Improvement Corp., Wastewater Revenue, Series 2018A, 5.00%, 7/01/25 | 100,000 | 109,281 | ||||||||
Glendale Industrial Development Authority, 4.00%, 5/15/31 | 400,000 | 415,523 | ||||||||
Maricopa County Union High School District No 210-Phoenix, Series 2020C, 4.00%, 7/01/36 | 455,000 | 500,262 | ||||||||
|
| |||||||||
| 1,025,066 | ||||||||||
|
| |||||||||
| California 20.9% | ||||||||||
Alameda Corridor Transportation Authority, Subordinate Lien, Refunding, Series 2016A, 5.00%, 10/01/22 | 925,000 | 940,948 | ||||||||
California Community Choice Financing Authority, | ||||||||||
Green Bond, Series 2021B-1, VRDN, 4.00%, 2/01/52 | 3,850,000 | 4,168,315 | ||||||||
Green Bond, VRDN, 4.00%, 10/01/52 | 2,500,000 | 2,644,139 | ||||||||
California Infrastructure & Economic Development Bank, California Science Center Foundation, 4.00%, 5/01/46 | 1,000,000 | 1,056,827 | ||||||||
California Municipal Finance Authority, | ||||||||||
CHF-Davis II LLC, 4.00%, 5/15/40 | 1,000,000 | 1,042,129 | ||||||||
Northbay Healthcare Group Obligated Group, Refunding, 5.00%, 11/01/26 | 790,000 | 868,344 | ||||||||
City of Los Angeles, Department of Airports Customer Facility Charge Revenue, 4.058%, 5/15/37 | 1,000,000 | 998,582 | ||||||||
Clovis Unified School District, Refunding, zero cpn., 8/01/35 | 200,000 | 127,975 | ||||||||
Konocti Unified School District, Series 2004C, zero cpn., 8/01/28 | 150,000 | 122,179 | ||||||||
Los Angeles County Metropolitan Transportation Authority, 4.00%, 6/01/35 | 2,785,000 | 3,051,572 | ||||||||
Peninsula Corridor Joint Powers Board/CA, Series 2022A, 5.00%, 6/01/38 | 1,000,000 | 1,195,013 | ||||||||
Perris Joint Powers Authority, Refunding, Series 2017B, 5.00%, 9/01/37 | 100,000 | 110,115 | ||||||||
San Diego Association of Governments, Green Bond, 5.00%, 11/15/24 | 2,000,000 | 2,095,620 | ||||||||
San Diego County Regional Airport Authority, Subordinate Bond, AMT, Series 2021B, 4.00%, 7/01/46 | 2,000,000 | 2,053,989 | ||||||||
Sierra View Local Health Care District, Refunding, 4.00%, 7/01/26 | 500,000 | 533,003 | ||||||||
South Tahoe Joint Powers Financing Authority, Project Area 1, Refunding, Series 2017A, 5.00%, 10/01/30 | 100,000 | 111,846 | ||||||||
Three Rivers Levee Improvement Authority, | ||||||||||
Community Facilities District No 2006-1, Refunding, 4.00%, 9/01/27 | 250,000 | 260,790 | ||||||||
Refunding, 4.00%, 9/01/29 | 250,000 | 262,074 | ||||||||
Refunding, 4.00%, 9/01/31 | 200,000 | 209,435 | ||||||||
University of California, Limited Project, Series 2017M, 5.00%, 5/15/34 | 100,000 | 112,992 | ||||||||
|
| |||||||||
| 21,965,887 | ||||||||||
|
| |||||||||
| Colorado 2.9% | ||||||||||
Board of Governors of Colorado State University System, Refunding, Series 2017A, 4.00%, 3/01/35 | 115,000 | 123,361 | ||||||||
City of Westminster, Refunding, 5.00%, 12/01/30 | 200,000 | 241,741 | ||||||||
Denver Convention Center Hotel Authority, Senior, Refunding, 5.00%, 12/01/23 | 880,000 | 918,339 | ||||||||
Regional Transportation District, Refunding, 5.00%, 1/15/32 | 250,000 | 285,070 | ||||||||
Sterling Ranch Community Authority Board, Refunding, Series 2020A, 3.375%, 12/01/30 | 25,000 | 25,167 | ||||||||
University of Colorado, Refunding, VRDN, 2.00%, 6/01/51 | 1,500,000 | 1,486,001 | ||||||||
|
| |||||||||
| 3,079,679 | ||||||||||
|
| |||||||||
| 126 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty Federal Tax-Free Bond ETF (continued)
| Principal Amount* | Value | |||||||||
| Municipal Bonds (continued) | ||||||||||
| Connecticut 1.3% | ||||||||||
Connecticut State Health & Educational Facilities Authority, Refunding Series 2014B, VRDN, 1.80%, 7/01/49 | 225,000 | $ | 224,214 | |||||||
Hartford County Metropolitan District, Clean Water Project Revenue, Refunding, Series 2021A, 4.00%, 2/01/39 | 745,000 | 819,630 | ||||||||
State of Connecticut, Series 2015A, 5.00%, 8/01/31 | 320,000 | 346,007 | ||||||||
|
| |||||||||
| 1,389,851 | ||||||||||
|
| |||||||||
| Delaware 0.3% | ||||||||||
University of Delaware, 5.00%, 11/01/37 | 250,000 | 292,739 | ||||||||
|
| |||||||||
| District of Columbia 2.1% | ||||||||||
District of Columbia Water & Sewer Authority, | ||||||||||
Sub Series 2019A, 4.00%, 10/01/49 | 475,000 | 509,151 | ||||||||
Sub Series 2022B, 5.00%, 10/01/34 | 500,000 | 612,641 | ||||||||
Washington Metropolitan Area Transit Authority, Green Bond, Series 2021A, 4.00%, 7/15/34 | 1,000,000 | 1,109,394 | ||||||||
|
| |||||||||
| 2,231,186 | ||||||||||
|
| |||||||||
| Florida 0.8% | ||||||||||
City of Gainesville, Utilities System Revenue, Series 2017A, 5.00%, 10/01/36 | 250,000 | 283,633 | ||||||||
City of Pompano Beach, John Knox Village of Florida, Inc. Obligated Group, 3.50%, 9/01/30 | 250,000 | 247,300 | ||||||||
County of Sarasota, 5.00%, 10/01/34 | 250,000 | 298,316 | ||||||||
|
| |||||||||
| 829,249 | ||||||||||
|
| |||||||||
| Georgia 1.5% | ||||||||||
City of Atlanta, Department of Aviation, Series 2019A, 5.00%, 7/01/34 | 175,000 | 202,418 | ||||||||
Cobb County Kennestone Hospital Authority, WellStar Health System Obligated Group, 3.00%, 4/01/37 | 910,000 | 882,996 | ||||||||
Main Street Natural Gas, Inc., | ||||||||||
Series 2018A, VRDN, 4.00%, 4/01/48 | 100,000 | 102,751 | ||||||||
Series 2018B, Monthly, VRDN, .904%, 4/01/48 | 425,000 | 424,236 | ||||||||
|
| |||||||||
| 1,612,401 | ||||||||||
|
| |||||||||
| Hawaii 0.3% | ||||||||||
State of Hawaii, Refunding, Series 2016B, 5.00%, 1/01/29 | 255,000 | 284,578 | ||||||||
|
| |||||||||
| Illinois 6.2% | ||||||||||
Chicago Transit Authority Capital Grant Receipts, Section 5307, Refunding, 5.00%, 6/01/28 | 1,000,000 | 1,152,835 | ||||||||
Illinois Finance Authority, | ||||||||||
Refunding, Monthly, VRDN, .657%, 11/01/34 | 285,000 | 284,690 | ||||||||
State of Illinois Water Revolving Fund – Clean Water Program, 4.00%, 7/01/38 | 1,000,000 | 1,096,215 | ||||||||
Metropolitan Water Reclamation District of Greater Chicago, Green Bond, Series 2021B, 5.00%, 12/01/33 | 1,500,000 | 1,792,852 | ||||||||
Northern Illinois University, | ||||||||||
Refunding, 5.00%, 10/01/25 | 325,000 | 353,879 | ||||||||
Refunding, 5.00%, 10/01/26 | 295,000 | 327,109 | ||||||||
State of Illinois, | ||||||||||
Series 2019B, 4.00%, 11/01/38 | 200,000 | 203,332 | ||||||||
5.50%, 5/01/30 | 100,000 | 116,279 | ||||||||
5.50%, 5/01/39 | 250,000 | 282,770 | ||||||||
Refunding, 5.00%, 2/01/28 | 700,000 | 765,057 | ||||||||
Upper Illinois River Valley Development Authority, Refunding, 3.50%, 12/01/32 | 150,000 | 138,896 | ||||||||
|
| |||||||||
| 6,513,914 | ||||||||||
|
| |||||||||
| Indiana 2.6% | ||||||||||
East Allen Multi School Building Corp., East Allen County Schools, 5.00%, 1/15/38 | 250,000 | 280,126 | ||||||||
Indianapolis Local Public Improvement Bond Bank, | ||||||||||
5.00%, 1/15/27 | 610,000 | 689,389 | ||||||||
5.00%, 7/15/27 | 450,000 | 512,818 | ||||||||
Refunding, 5.00%, 1/01/52 | 1,000,000 | 1,193,208 | ||||||||
|
| |||||||||
| 2,675,541 | ||||||||||
|
| |||||||||
| franklintempleton.com | Annual Report | 127 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty Federal Tax-Free Bond ETF (continued)
| Principal Amount* | Value | |||||||||
| Municipal Bonds (continued) | ||||||||||
| Iowa 0.1% | ||||||||||
Iowa Tobacco Settlement Authority, Refunding, Class A, Series 2021B-1, 0.375%, 6/01/30 | 140,000 | $ | 139,704 | |||||||
|
| |||||||||
| Kentucky 2.5% | ||||||||||
Kentucky Municipal Power Agency, Prairie State Project, Refunding, 5.00%, 9/01/34 | 285,000 | 314,392 | ||||||||
Louisville/Jefferson County Metropolitan Sewer District, Green Bond, Refunding , Series 2022A, 4.00%, 5/15/34 | 2,000,000 | 2,257,293 | ||||||||
|
| |||||||||
| 2,571,685 | ||||||||||
|
| |||||||||
| Louisiana 4.3% | ||||||||||
City of New Orleans, Series 2020B, 5.00%, 6/01/30 | 800,000 | 938,951 | ||||||||
Louisiana Local Government Environmental Facilities & Community Development Authority, | ||||||||||
Parish of St Bernard LA, 4.00%, 11/01/45 | 1,000,000 | 891,673 | ||||||||
Parish of St Chareles LA, 4.50%, 11/01/47 | 1,000,000 | 937,844 | ||||||||
Parish of St John LA, 3.90%, 11/01/44 | 500,000 | 451,805 | ||||||||
State of Louisiana, Series 2017B, 4.00%, 10/01/34 | 240,000 | 257,058 | ||||||||
Terrebonne Levee & Conservation District, Series 2020B, 4.00%, 6/01/39 | 1,000,000 | 1,055,142 | ||||||||
|
| |||||||||
| 4,532,473 | ||||||||||
|
| |||||||||
| Maine 0.2% | ||||||||||
Maine Municipal Bond Bank, Series 2017C, 5.00%, 11/01/31 | 135,000 | 154,353 | ||||||||
|
| |||||||||
| Maryland 0.9% | ||||||||||
County of Prince George’s, Series 2017A, 3.00%, 9/15/32 | 100,000 | 102,663 | ||||||||
Maryland Community Development Administration, Series 2021C, 0.375%, 7/01/23 | 500,000 | 490,538 | ||||||||
Maryland Health & Higher Educational Facilities Authority, Adventist Healthcare Obligated Group, Refunding, 4.00%, 1/01/30 | 365,000 | 388,499 | ||||||||
|
| |||||||||
| 981,700 | ||||||||||
|
| |||||||||
| Massachusetts 4.5% | ||||||||||
Massachusetts Clean Energy Cooperative Corp., Green Bond, 2.135%, 7/01/29 | 1,295,000 | 1,215,391 | ||||||||
Massachusetts Development Finance Agency, | ||||||||||
Springfield College, Green Bond, 5.00%, 6/01/26 | 420,000 | 454,287 | ||||||||
Springfield College, Green Bond, 5.00%, 6/01/27 | 440,000 | 482,058 | ||||||||
Beth Israel Lahey Health Obligated Group, Refunding, Series 2016I, 5.00%, 7/01/34 | 490,000 | 539,302 | ||||||||
Massachusetts Housing Finance Agency, Sustainability Bond, Series 2021B-1, 2.60%, 12/01/41 | 2,000,000 | 1,749,314 | ||||||||
Town of Braintree, 4.00%, 6/01/32 | 250,000 | 275,528 | ||||||||
|
| |||||||||
| 4,715,880 | ||||||||||
|
| |||||||||
| Michigan 0.1% | ||||||||||
Michigan Finance Authority, Tobacco Settlement Revenue, Refunding, Class 2, Series 2020B-1, 1.25%, 6/01/30 | 115,000 | 110,093 | ||||||||
|
| |||||||||
| Minnesota 0.8% | ||||||||||
City of Center City, Refunding, 4.00%, 11/01/34 | 125,000 | 133,674 | ||||||||
Minnesota Higher Education Facilities Authority, Macalester College, 3.00%, 3/01/35 | 500,000 | 504,964 | ||||||||
Northern Municipal Power Agency, Refunding, 5.00%, 1/01/36 | 100,000 | 110,779 | ||||||||
Southern Minnesota Municipal Power Agency, Series 2017A, 5.00%, 1/01/31 | 100,000 | 113,299 | ||||||||
|
| |||||||||
| 862,716 | ||||||||||
|
| |||||||||
| Mississippi 0.6% | ||||||||||
Mississippi Development Bank, County of Jackson Project, 3.625%, 11/01/36 | 400,000 | 364,878 | ||||||||
Mississippi Home Corp., Patriot Services Group Obligated Group, 5.20%, 6/01/36 | 280,000 | 258,149 | ||||||||
|
| |||||||||
| 623,027 | ||||||||||
|
| |||||||||
| Missouri 0.9% | ||||||||||
Health & Educational Facilities Authority of the State of Missouri, St Luke’s Episcopal-Presbyterian Hospitals Obligated Group, 4.00%, 12/01/35 | 755,000 | 808,232 | ||||||||
Park Hill School District of Platte County, 3.00%, 3/01/33 | 100,000 | 101,863 | ||||||||
|
| |||||||||
| 910,095 | ||||||||||
|
| |||||||||
| 128 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty Federal Tax-Free Bond ETF (continued)
| Principal Amount* | Value | |||||||||
| Municipal Bonds (continued) | ||||||||||
| New Hampshire 0.1% | ||||||||||
New Hampshire Health and Education Facilities Authority Act, University System of New Hampshire Obligated Group, Refunding, Series 2017A, 5.00%, 7/01/27 | 100,000 | $ | 114,466 | |||||||
|
| |||||||||
| New Jersey 4.1% | ||||||||||
New Jersey Economic Development Authority, | ||||||||||
Refunding, Series 2019A, VRDN, 5.25%, 4/01/28 | 1,000,000 | 1,135,292 | ||||||||
State of New Jersey Department of the Treasury, Refunding, Weekly, VRDN, 2.11%, 3/01/28 | 1,000,000 | 1,008,892 | ||||||||
New Jersey Transportation Trust Fund Authority, | ||||||||||
Series 2006C, zero cpn.,12/15/29 | 870,000 | 687,260 | ||||||||
5.00%, 6/15/34 | 1,000,000 | 1,113,575 | ||||||||
Newark Board of Education, Sustainability Bonds, 5.00%, 7/15/25 | 250,000 | 272,462 | ||||||||
Pinelands Regional School District, 3.00%, 8/01/27 | 100,000 | 101,629 | ||||||||
|
| |||||||||
| 4,319,110 | ||||||||||
|
| |||||||||
| New Mexico 0.1% | ||||||||||
City of Santa, Wastewater Utility System Revenue, 4.00%, 6/01/35 | 100,000 | 108,657 | ||||||||
|
| |||||||||
| New York 10.0% | ||||||||||
City of New York, | ||||||||||
Series 2017B-1, 4.00%, 10/01/36 | 100,000 | 106,896 | ||||||||
Subseries 2018F-1, 5.00%, 4/01/37 | 500,000 | 563,177 | ||||||||
Long Island Power Authority, Series 2019A, 5.00%, 9/01/28 | 300,000 | 350,427 | ||||||||
Metropolitan Transportation Authority, | ||||||||||
Climate Bond Certified, 5.00%, 11/15/32 | 500,000 | 562,214 | ||||||||
Green Bond, Series 2021A-1, 4.00%, 11/15/45 | 1,000,000 | 1,024,060 | ||||||||
Refunding, Series 2017B, 5.00%, 11/15/28 | 100,000 | 113,371 | ||||||||
Refunding, Subseries 2012G-4, Monthly, VRDN, 0.704%, 11/01/30 | 995,000 | 992,747 | ||||||||
New York Liberty Development Corp., 7 World Trade Center II LLC, Refunding, 3.00%, 9/15/43 | 1,000,000 | 935,089 | ||||||||
New York Liberty Development corp., Green Bonds- 4 World Trade, Refunding, 2.50%, 11/15/36 | 1,900,000 | 1,644,689 | ||||||||
New York State Dormitory Authority, | ||||||||||
Refunding, 3.00%, 10/01/33 | 100,000 | 100,617 | ||||||||
Rochester Institute of Technology, 5.00%, 7/01/39 | 300,000 | 344,984 | ||||||||
New York State Housing Finance Agency, Sustainability Bonds, Series 2022A, VRDN, 2.50%, 11/01/60 | 1,500,000 | 1,487,301 | ||||||||
New York State Urban Development Corp., State of New York Personal Income Tax Revenue, Series 2013C, 5.00%, 3/15/31 | 630,000 | 648,671 | ||||||||
New York Transportation Development Corp., | ||||||||||
AMT, Refunding, 5.00%, 12/01/30 | 100,000 | 111,953 | ||||||||
Refunding, 5.00%, 12/01/34 | 500,000 | 560,432 | ||||||||
Western Nassau County Water Authority, Green Bonds, Series 2021A, 4.00%, 4/01/40 | 900,000 | 989,322 | ||||||||
|
| |||||||||
| 10,535,950 | ||||||||||
|
| |||||||||
| North Carolina 0.2% | ||||||||||
City of Winston-Salem, 4.00%, 6/01/33 | 100,000 | 108,012 | ||||||||
University of North Carolina at Charlotte, 4.00%, 10/01/34 | 100,000 | 108,266 | ||||||||
|
| |||||||||
| 216,278 | ||||||||||
|
| |||||||||
| Ohio 3.7% | ||||||||||
County of Franklin, Sales Tax Revenue, 5.00%, 6/01/43 | 450,000 | 518,166 | ||||||||
Northeast Ohio Regional Sewer District, Refunding, 4.00%, 11/15/34 | 100,000 | 109,242 | ||||||||
Ohio State University, 5.00%, 12/01/23 | 3,000,000 | 3,160,366 | ||||||||
Ohio Water Development Authority, Refunding, 4.00%, 12/01/30 | 100,000 | 113,489 | ||||||||
|
| |||||||||
| 3,901,263 | ||||||||||
|
| |||||||||
| Oregon 2.6% | ||||||||||
Clackamas County, School District No 7J Lake Oswego, 5.00%, 6/01/29 | 310,000 | 352,976 | ||||||||
| franklintempleton.com | Annual Report | 129 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty Federal Tax-Free Bond ETF (continued)
| Principal Amount* | Value | |||||||||
| Municipal Bonds (continued) | ||||||||||
| Oregon (continued) | ||||||||||
County of Washington, 5.00%, 3/01/25 | 175,000 | $ | 190,056 | |||||||
Port of Portland OR Airport Revenue, AMT, Series 2021-27A, 4.00%, 7/01/50 | 2,000,000 | 2,060,496 | ||||||||
Portland Community College District, 5.00%, 6/15/25 | 100,000 | 109,358 | ||||||||
|
| |||||||||
| 2,712,886 | ||||||||||
|
| |||||||||
| Pennsylvania 2.7% | ||||||||||
Delaware Valley Regional Finance Authority, Series 1998A, 5.50%, 8/01/28 | 810,000 | 950,239 | ||||||||
Pennsylvania Economic Development Financing Authority, UPMC Obligated Group, Series 2017A, 3.375%, 11/15/33 | 125,000 | 128,708 | ||||||||
School District of Philadelphia, Green Bond, Series 2019B, 5.00%, 9/01/29 | 1,500,000 | 1,746,562 | ||||||||
|
| |||||||||
| 2,825,509 | ||||||||||
|
| |||||||||
| Puerto Rico 0.8% | ||||||||||
Puerto Rico Highway & Transportation Authority, | ||||||||||
Refunding, Series 2007N, 5.25%, 7/01/36 | 200,000 | 210,258 | ||||||||
Series 2007CC, 5.50%, 7/01/28 | 550,000 | 586,234 | ||||||||
|
| |||||||||
| 796,492 | ||||||||||
|
| |||||||||
| South Carolina 0.6% | ||||||||||
City of Columbia, Stormwater System Revenue, Special Assessment, 5.00%, 2/01/39 | 520,000 | 592,908 | ||||||||
|
| |||||||||
| South Dakota 0.9% | ||||||||||
County of Lincoln, Augustana College Association, 4.00%, 8/01/41 | 900,000 | 903,721 | ||||||||
|
| |||||||||
| Tennessee 1.8% | ||||||||||
Chattanooga Health Educational & Housing Facility Board, Series 2019A-1, 5.00%, 8/01/25 | 250,000 | 271,235 | ||||||||
City of Kingsport, Series 2017B, 3.00%, 3/01/35 | 130,000 | 130,459 | ||||||||
Metropolitan Government Nashville & Davidson County Industrial Development Board, Waste Management, Inc. of Tennessee Project, VRDN, 0.58%, 8/01/31 | 1,200,000 | 1,146,433 | ||||||||
Tennessee Housing Development Agency, Refunding, 1.95%, 1/01/26 | 250,000 | 246,225 | ||||||||
Tennessee State School Bond Authority, Higher Educational Facility 2nd Program, 5.00%, 11/01/37 | 100,000 | 114,322 | ||||||||
|
| |||||||||
| 1,908,674 | ||||||||||
|
| |||||||||
| Texas 1.2% | ||||||||||
Central Texas Regional Mobility Authority, Refunding, Series 2020B, 5.00%, 1/01/33 | 400,000 | 461,996 | ||||||||
City of Fort Worth, 5.00%, 2/15/32 | 295,000 | 339,685 | ||||||||
City of Round Rock, Utility System Revenue, Refunding, 2.75%, 8/01/29 | 100,000 | 100,584 | ||||||||
Pflugerville Independent School District, Series 2019A, 5.00%, 2/15/29 | 100,000 | 115,915 | ||||||||
Texas A&M University, Refunding, Series 2017C, 5.00%, 5/15/33 | 100,000 | 113,104 | ||||||||
Texas Water Development Board, State Water Implementation Revenue Fund, Series 2017A, 4.00%, 10/15/33 | 115,000 | 124,812 | ||||||||
|
| |||||||||
| 1,256,096 | ||||||||||
|
| |||||||||
| Utah 1.4% | ||||||||||
City of Provo, Refunding, 4.00%, 1/01/23 | 100,000 | 101,947 | ||||||||
Utah Infrastructure Agency, 4.00%, 10/15/30 | 500,000 | 533,170 | ||||||||
Utah State Building Ownership Authority, Master Lease Program, 2.50%, 5/15/27 | 100,000 | 100,559 | ||||||||
Utah Transit Authority, Refunding, Series 2015A, 5.00%, 6/15/29 | 500,000 | 545,674 | ||||||||
Utah Water Finance Agency, Central Valley Water Reclamation Facility, Series 2019B, 5.00%, 3/01/38 | 200,000 | 231,901 | ||||||||
|
| |||||||||
| 1,513,251 | ||||||||||
|
| |||||||||
| Vermont 0.6% | ||||||||||
| a | City of Burlington, Electric System Revenue, Series 2022A, 5.00%, 7/01/31 | 500,000 | 595,907 | |||||||
|
| |||||||||
| Virginia 2.8% | ||||||||||
Charles City County Economic Development Authority, Waste Management, Inc., AMT, 1.45%, 4/01/27 | 1,100,000 | 1,028,326 | ||||||||
Fairfax County Economic Development Authority, County of Fairfax, 4.00%, 10/01/37 | 1,630,000 | 1,820,608 | ||||||||
| 130 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty Federal Tax-Free Bond ETF (continued)
| Principal Amount* | Value | |||||||||
| Municipal Bonds (continued) | ||||||||||
| Virginia (continued) | ||||||||||
Virginia College Building Authority, 5.00%, 9/01/32 | 100,000 | $ | 117,150 | |||||||
|
| |||||||||
| 2,966,084 | ||||||||||
|
| |||||||||
| Washington 3.0% | ||||||||||
Central Puget Sound Regional Transit Authority, Green Bond, Refunding, Series 2021S-1, 5.00%, 11/01/22 | 1,080,000 | 1,103,442 | ||||||||
City of Seattle, Drainage & Wastewater Revenue, 4.00%, 4/01/31 | 125,000 | 133,393 | ||||||||
Spokane County School District No 356 Central Valley, | ||||||||||
5.00%, 12/01/26 | 100,000 | 113,202 | ||||||||
5.00%, 12/01/28 | 310,000 | 358,328 | ||||||||
Washington Health Care Facilities Authority, | ||||||||||
Refunding, Series 2017B, 5.00%, 8/15/29 | 125,000 | 143,573 | ||||||||
5.00%, 12/01/32 | 250,000 | 293,073 | ||||||||
Washington State Housing Finance Commission, Series 2021A-1, 3.50%, 12/20/35 | 988,203 | 977,118 | ||||||||
|
| |||||||||
| 3,122,129 | ||||||||||
|
| |||||||||
| Wisconsin 4.5% | ||||||||||
Public Finance Authority, | ||||||||||
RED River Valley Alliance LLC, AMT, 4.00%, 3/31/56 | 2,500,000 | 2,450,936 | ||||||||
VRDN, 3.50%, 12/01/50 | 200,000 | 178,667 | ||||||||
University of Wisconsin Hospitals & Clinics, Obligated Group, Green Bond, 4.00%, 4/01/46 | 2,000,000 | 2,131,323 | ||||||||
|
| |||||||||
| 4,760,926 | ||||||||||
|
| |||||||||
| Wyoming 0.9% | ||||||||||
County of Laramie, Cheyenne Regional Medical Center, Refunding, 3.00%, 5/01/42 | 1,000,000 | 911,234 | ||||||||
|
| |||||||||
Total Investments (Cost $109,291,453) 98.5% | 103,319,762 | |||||||||
Other Assets, less Liabilities 1.5% | 1,618,780 | |||||||||
|
| |||||||||
Net Assets 100.0% | $ | 104,938,542 | ||||||||
|
| |||||||||
See Abbreviations on page 240.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aSecurity purchased on a when-issued basis. See Note 1(d).
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 131 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin Liberty High Yield Corporate ETF
| Year Ended March 31, | ||||||||||||||||
| 2022 | 2021 | 2020 | 2019a | |||||||||||||
| Per share operating performance (for a share outstanding throughout the year) | ||||||||||||||||
Net asset value, beginning of year | $ | 26.16 | $ | 22.67 | $ | 25.45 | $ | 25.00 | ||||||||
|
| |||||||||||||||
| Income from investment operationsb: | ||||||||||||||||
Net investment incomec | 1.20 | 1.23 | 1.33 | 1.21 | ||||||||||||
Net realized and unrealized gains (losses) | (1.34 | ) | 3.73 | (2.51 | ) | 0.49 | ||||||||||
|
| |||||||||||||||
Total from investment operations | (0.14 | ) | 4.96 | (1.18 | ) | 1.70 | ||||||||||
|
| |||||||||||||||
Less distributions from: | ||||||||||||||||
Net investment income | (1.18 | ) | (1.47 | ) | (1.56 | ) | (1.23 | ) | ||||||||
Net realized gains | (0.08 | ) | — | (0.04 | ) | (0.02 | ) | |||||||||
|
| |||||||||||||||
Total Distributions | (1.26 | ) | (1.47 | ) | (1.60 | ) | (1.25 | ) | ||||||||
|
| |||||||||||||||
Net asset value, end of year | $ | 24.76 | $ | 26.16 | $ | 22.67 | $ | 25.45 | ||||||||
|
| |||||||||||||||
Total returnd | (0.69)% | 22.28% | (5.12)% | 7.07% | ||||||||||||
| Ratios to average net assetse | ||||||||||||||||
Expenses before waiver and payments by affiliates | 0.47% | 0.64% | 0.86% | 1.54% | ||||||||||||
Expenses net of waiver and payments by affiliates | 0.40% | 0.40% | 0.40% | 0.40% | ||||||||||||
Net investment income | 4.62% | 4.84% | 5.29% | 5.80% | ||||||||||||
| Supplemental data | ||||||||||||||||
Net assets, end of year (000’s) | $334,286 | $346,586 | $130,362 | $10,181 | ||||||||||||
Portfolio turnover ratef | 43.83% | g | 53.18% | g | 129.98% | g | 23.57% | |||||||||
aFor the period May 30, 2018 (commencement of operations) to March 31, 2019.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of Creation Unit Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year. Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period.
eRatios are annualized for periods less than one year.
fPortfolio turnover rate includes portfolio transactions that are executed as a result of the Fund offering and redeeming Creation Units solely for cash (“Cash creations”).
| gPortfolio turnover rate excluding cash creations was as follows: | 43.83% | 53.18% | 129.98% |
| 132 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Schedule of Investments, March 31, 2022
Franklin Liberty High Yield Corporate ETF
| Country | Principal Amount* | Value | ||||||||||||
| Corporate Bonds & Notes 94.4% | ||||||||||||||
| Airlines 2.2% | ||||||||||||||
American Airlines Inc./AAdvantage Loyalty IP Ltd., | ||||||||||||||
a senior secured note, 144A, 5.75%, 4/20/29 | United States | 700,000 | $ | 698,338 | ||||||||||
a senior secured note, 144A, 5.50%, 4/20/26 | United States | 4,600,000 | 4,640,963 | |||||||||||
United Airlines Inc., | ||||||||||||||
a senior secured note, 144A, 4.375%, 4/15/26 | United States | 1,300,000 | 1,280,500 | |||||||||||
a senior secured note, 144A, 4.625%, 4/15/29 | United States | 800,000 | 761,780 | |||||||||||
|
| |||||||||||||
| 7,381,581 | ||||||||||||||
|
| |||||||||||||
| Automobiles & Components 3.4% | ||||||||||||||
| a | Allison Transmission Inc., senior bond, 144A, 3.75%, 1/30/31 | United States | 500,000 | 454,325 | ||||||||||
Dana Inc., senior note, 5.625%, 6/15/28 | United States | 1,700,000 | 1,719,950 | |||||||||||
| a | Dornoch Debt Merger Sub Inc., senior note, 144A, 6.625%, 10/15/29 | United States | 2,300,000 | 2,002,656 | ||||||||||
| a | Jaguar Land Rover Automotive PLC, 144A, 5.50%, 7/15/29 | United Kingdom | 3,000,000 | 2,645,625 | ||||||||||
| a | Real Hero Merger Sub 2 Inc., senior note, 144A, 6.25%, 2/01/29 | United States | 2,000,000 | 1,826,220 | ||||||||||
The Goodyear Tire & Rubber Co., | ||||||||||||||
a 144A, 5.00%, 7/15/29 | United States | 2,100,000 | 1,958,764 | |||||||||||
senior bond, 4.875%, 3/15/27 | United States | 700,000 | 680,890 | |||||||||||
|
| |||||||||||||
| 11,288,430 | ||||||||||||||
|
| |||||||||||||
| Capital Goods 4.1% | ||||||||||||||
| a | ATS Automation Tooling Systems Inc., senior note, 144A, 4.125%, 12/15/28 | Canada | 3,000,000 | 2,823,600 | ||||||||||
| a | Cornerstone Building Brands Inc., senior note, 144A, 6.125%, 1/15/29 | United States | 1,100,000 | 1,022,769 | ||||||||||
Standard Industries Inc., | ||||||||||||||
a senior unsecured note, 144A, 4.75%, 1/15/28 | United States | 200,000 | 191,604 | |||||||||||
a senior unsecured note, 144A, 4.375%, 7/15/30 | United States | 300,000 | 275,160 | |||||||||||
| a | Stericycle Inc., Senior note, 144A, 3.875%, 1/15/29 | United States | 1,700,000 | 1,582,964 | ||||||||||
| a | The Manitowoc Co. Inc., secured note, second lien, 144A, 9.00%, 4/01/26 | United States | 2,700,000 | 2,818,381 | ||||||||||
| a | TransDigm Inc., senior secured note, 144A, 6.25%, 3/15/26 | United States | 3,400,000 | 3,494,758 | ||||||||||
| a | Vertiv Group Corp., senior secured note, 144A, 4.125%, 11/15/28 | United States | 1,600,000 | 1,462,080 | ||||||||||
|
| |||||||||||||
| 13,671,316 | ||||||||||||||
|
| |||||||||||||
| Commercial & Professional Services 6.8% | ||||||||||||||
| a | Ahern Rentals Inc., secured note, senior lien, 144A, 7.375%, 5/15/23 | United States | 2,400,000 | 2,238,000 | ||||||||||
| a | APX Group Inc., 144A, 5.75%, 7/15/29 | United States | 1,200,000 | 1,097,250 | ||||||||||
| a | Gartner Inc., 144A, 3.625%, 6/15/29 | United States | 1,000,000 | 938,890 | ||||||||||
Grand Canyon University, unsecured note, 5.125%, 10/01/28 | United States | 2,800,000 | 2,743,160 | |||||||||||
| a | H&E Equipment Services Inc., senior note, 144A, 3.875%, 12/15/28 | United States | 1,900,000 | 1,783,616 | ||||||||||
| a | Herc Holdings Inc., senior note, 144A, 5.50%, 7/15/27 | United States | 2,200,000 | 2,233,506 | ||||||||||
| a | MPH Acquisition Holdings LLC, senior note, 144A, 5.75%, 11/01/28 | United States | 2,100,000 | 1,900,059 | ||||||||||
| a | NESCO Holdings II Inc., second lien, 144A, 5.50%, 4/15/29 | United States | 1,600,000 | 1,573,984 | ||||||||||
| a | Nielsen Finance LLC/Nielsen Finance Co., 144A, 4.50%, 7/15/29 | United States | 1,800,000 | 1,799,460 | ||||||||||
| a | Prime Security Services Borrower LLC/Prime Finance Inc., senior secured note, first lien, 144A, 3.375%, 8/31/27 | United States | 2,200,000 | 2,015,629 | ||||||||||
| a | PROG Holdings Inc., 144A, 6.00%, 11/15/29 | United States | 2,900,000 | 2,695,593 | ||||||||||
| a | Ritchie Bros Holdings Inc., 144A, 4.75%, 12/15/31 | United States | 700,000 | 683,634 | ||||||||||
| a | ZipRecruiter Inc., Sr. Unsecured, 144A, 5.00%, 1/15/30 | United States | 900,000 | 879,894 | ||||||||||
|
| |||||||||||||
| 22,582,675 | ||||||||||||||
|
| |||||||||||||
| Consumer Durables & Apparel 1.2% | ||||||||||||||
| a | Ashton Woods USA LLC/Ashton Woods Finance Co., senior note, 144A, 4.625%, 4/01/30 | United States | 2,300,000 | 2,007,877 | ||||||||||
| a | Kontoor Brands Inc., 144A, 4.125%, 11/15/29 | United States | 1,000,000 | 916,135 | ||||||||||
| a | Williams Scotsman International Inc., senior secured note, 144A, 4.625%, 8/15/28 | United States | 1,200,000 | 1,171,368 | ||||||||||
|
| |||||||||||||
| 4,095,380 | ||||||||||||||
|
| |||||||||||||
| franklintempleton.com | Annual Report | 133 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty High Yield Corporate ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| Corporate Bonds & Notes (continued) | ||||||||||||||
| Consumer Services 5.7% | ||||||||||||||
| a,b | 24 Hour Holdings III LLC, senior note, 144A, 8.00%, 6/01/22 | United States | 800,000 | $ | 240 | |||||||||
Carnival Corp., | ||||||||||||||
a senior note, 144A, 7.625%, 3/01/26 | United States | 3,000,000 | 3,023,100 | |||||||||||
a senior note, 144A, 5.75%, 3/01/27 | United States | 3,200,000 | 3,056,000 | |||||||||||
| a | NCL Corp. Ltd., senior note, 144A, 5.875%, 3/15/26 | United States | 3,000,000 | 2,853,990 | ||||||||||
Premier Entertainment Sub LLC/Premier Entertainment Finance Corp., | ||||||||||||||
a 144A, 5.625%, 9/01/29 | United States | 2,200,000 | 1,895,256 | |||||||||||
a 144A, 5.875%, 9/01/31 | United States | 1,200,000 | 1,026,690 | |||||||||||
| a | Royal Caribbean Cruises Ltd., senior note, 144A, 5.50%, 8/31/26 | United States | 2,300,000 | 2,238,394 | ||||||||||
| a | Station Casinos LLC, 144A, 4.50%, 2/15/28 | United States | 1,200,000 | 1,140,252 | ||||||||||
| a | Studio City Finance Ltd., senior note, 144A, 5.00%, 1/15/29 | United States | 2,200,000 | 1,678,094 | ||||||||||
| a | Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., senior bond, 144A, 5.50%, 3/01/25 | United States | 2,100,000 | 2,102,940 | ||||||||||
|
| |||||||||||||
| 19,014,956 | ||||||||||||||
|
| |||||||||||||
| Diversified Financials 5.3% | ||||||||||||||
| a | American Finance Trust Inc./American Finance Operating Partner LP, 144A, 4.50%, 9/30/28 | United States | 2,100,000 | 1,894,315 | ||||||||||
| a | Apollo Commercial Real Estate Finance Inc., senior secured note, 144A, 4.625%, 6/15/29 | United States | 2,900,000 | 2,637,390 | ||||||||||
| a | Global Net Lease Inc./Global Net Lease Operating Partnership LP, senior note, 144A, 3.75%, 12/15/27 | United States | 3,000,000 | 2,765,209 | ||||||||||
| a | Jane Street Group/JSG Finance Inc., senior secured note, 144A, 4.50%, 11/15/29 | United States | 600,000 | 569,283 | ||||||||||
| a | Jefferson Capital Holdings LLC, 144A, 6.00%, 8/15/26 | United States | 2,600,000 | 2,484,898 | ||||||||||
| a | Ladder Capital Finance Holdings LLLP/Ladder Capital Finance Corp., 144A, 4.75%, 6/15/29 | United States | 1,800,000 | 1,699,938 | ||||||||||
| a | MGM Growth Properties Operating Partnership LP/MGP Finance Co-Issuer Inc., senior note, 144A, 3.875%, 2/15/29 | United States | 1,500,000 | 1,476,608 | ||||||||||
| a | Oxford Finance LLC / Oxford Finance Co-Issuer II Inc., 144A, 6.375%, 2/01/27 | United States | 900,000 | 918,459 | ||||||||||
| a | PRA Group Inc., 144A, 5.00%, 10/01/29 | United States | 1,700,000 | 1,614,346 | ||||||||||
| a | XHR LP, senior secured note, 144A, 4.875%, 6/01/29 | United States | 1,800,000 | 1,750,752 | ||||||||||
|
| |||||||||||||
| 17,811,198 | ||||||||||||||
|
| |||||||||||||
| Energy 20.8% | ||||||||||||||
Antero Resources Corp., | ||||||||||||||
a Senior note, 144A, 8.375%, 7/15/26 | United States | 2,010,000 | 2,218,487 | |||||||||||
a senior note, 144A, 7.625%, 2/01/29 | United States | 1,101,000 | 1,192,234 | |||||||||||
| a | Atlantica Sustainable Infrastructure PLC, 144A, 4.125%, 6/15/28 | United Kingdom | 500,000 | 482,840 | ||||||||||
| a | Calumet Specialty Products Partners LP / Calumet Finance Corp., senior note,144A, 8.125%, 1/15/27 | United States | 2,300,000 | 2,141,691 | ||||||||||
Cheniere Energy Inc., senior secured, 4.625%, 10/15/28 | United States | 3,200,000 | 3,214,800 | |||||||||||
Cheniere Energy Partners LP, | ||||||||||||||
senior note, 4.00%, 3/01/31 | United States | 1,300,000 | 1,262,228 | |||||||||||
senior note, 4.50%, 10/01/29 | United States | 2,000,000 | 2,012,370 | |||||||||||
| a | Chesapeake Energy Corp., 144A, 6.75%, 4/15/29 | United States | 1,800,000 | 1,909,098 | ||||||||||
Crestwood Midstream Partners LP/Crestwood Midstream Finance Corp., | ||||||||||||||
senior note, 5.75%, 4/01/25 | United States | 700,000 | 704,207 | |||||||||||
a senior note, 144A, 5.625%, 5/01/27 | United States | 2,800,000 | 2,780,176 | |||||||||||
| a | CrownRock LP/CrownRock Finance Inc., senior unsecured note, 144A, 5.00%, 5/01/29 | United States | 900,000 | 901,913 | ||||||||||
| a | CSI Compressco LP/CSI Compressco Finance Inc., senior secured note, first lien, 144A, 7.50%, 4/01/25 | United States | 1,600,000 | 1,581,776 | ||||||||||
| a | DT Midstream Inc., 144A, 4.125%, 6/15/29 | United States | 3,000,000 | 2,880,870 | ||||||||||
EnLink Midstream LLC, senior bond, 5.375%, 6/01/29 | United States | 1,300,000 | 1,298,986 | |||||||||||
EnLink Midstream Partners LP, senior note, 4.15%, 6/01/25 | United States | 3,600,000 | 3,593,520 | |||||||||||
| a | Harbour Energy PLC, 144A, 5.50%, 10/15/26 | United Kingdom | 3,000,000 | 2,966,325 | ||||||||||
| 134 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty High Yield Corporate ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| Corporate Bonds & Notes (continued) | ||||||||||||||
| Energy (continued) | ||||||||||||||
Hilcorp Energy I LP/Hilcorp Finance Co., | ||||||||||||||
a senior bond, 144A, 6.00%, 2/01/31 | United States | 2,600,000 | $ | 2,616,250 | ||||||||||
a senior note, 144A, 5.75%, 2/01/29 | United States | 2,200,000 | 2,205,720 | |||||||||||
| a | Martin Midstream Partners LP, senior note, second lien, 144A, 11.50%, 2/28/25 | United States | 3,786,248 | 3,879,693 | ||||||||||
| a | Nabors Industries Inc., 144A, 7.375%, 5/15/27 | United States | 2,400,000 | 2,497,056 | ||||||||||
| a | Nabors Industries Ltd., senior note, 144A, 7.25%, 1/15/26 | United States | 2,300,000 | 2,303,841 | ||||||||||
| a | Oasis Midstream Partners LP/OMP Finance Corp., senior note, 144A, 8.00%, 4/01/29 | United States | 2,700,000 | 2,885,625 | ||||||||||
Occidental Petroleum Corp., | ||||||||||||||
senior bond, 8.875%, 7/15/30 | United States | 1,900,000 | 2,439,020 | |||||||||||
senior bond, 6.625%, 9/01/30 | United States | 700,000 | 804,125 | |||||||||||
senior bond, 6.45%, 9/15/36 | United States | 1,800,000 | 2,117,880 | |||||||||||
senior note, 6.125%, 1/01/31 | United States | 900,000 | 1,013,900 | |||||||||||
senior note, 5.55%, 3/15/26 | United States | 2,400,000 | 2,546,832 | |||||||||||
| a | PBF Holding Co. LLC / PBF Finance Corp., Sr. Secured, 144A, 9.25%, 5/15/25 | United States | 400,000 | 412,544 | ||||||||||
| a | Renewable Energy Group Inc., senior secured note, 144A, 5.875%, 6/01/28 | United States | 1,000,000 | 1,075,815 | ||||||||||
| a | SunCoke Energy Inc., senior secured note, 144A, 4.875%, 6/30/29 | United States | 2,100,000 | 1,982,400 | ||||||||||
Sunoco LP / Sunoco Finance Corp., 4.50%, 5/15/29 | United States | 1,900,000 | 1,794,930 | |||||||||||
Sunoco LP/Sunoco Finance Corp., senior note, 6.00%, 4/15/27 | United States | 1,200,000 | 1,224,642 | |||||||||||
Venture Global Calcasieu Pass LLC, | ||||||||||||||
a senior note, 144A, 3.875%, 8/15/29 | United States | 700,000 | 681,496 | |||||||||||
a senior note, 144A, 4.125%, 8/15/31 | United States | 1,600,000 | 1,572,496 | |||||||||||
Weatherford International Ltd., | ||||||||||||||
a 144A, 8.625%, 4/30/30 | United States | 1,900,000 | 1,931,378 | |||||||||||
a senior secured, 144A, 6.50%, 9/15/28 | United States | 2,500,000 | 2,587,500 | |||||||||||
|
| |||||||||||||
| 69,714,664 | ||||||||||||||
|
| |||||||||||||
| Food, Beverage & Tobacco 0.6% | ||||||||||||||
| a | Primo Water Holdings Inc., 144A, 4.375%, 4/30/29 | United States | 2,300,000 | 2,084,709 | ||||||||||
|
| |||||||||||||
| Health Care Equipment & Services 3.6% | ||||||||||||||
Centene Corp., | ||||||||||||||
senior bond, 2.50%, 3/01/31 | United States | 800,000 | 707,336 | |||||||||||
senior note, 4.25%, 12/15/27 | United States | 2,200,000 | 2,210,516 | |||||||||||
CHS/Community Health Systems Inc., | ||||||||||||||
a secured note, second lien, 144A, 6.875%, 4/15/29 | United States | 2,400,000 | 2,361,312 | |||||||||||
a senior secured note, 144A, 6.00%, 1/15/29 | United States | 1,300,000 | 1,315,860 | |||||||||||
| a | DaVita Inc., senior note, 144A, 4.625%, 6/01/30 | United States | 2,500,000 | 2,338,000 | ||||||||||
Mozart Debt Merger Sub Inc., | ||||||||||||||
a senior bond, 144A, 5.25%, 10/01/29 | United States | 2,300,000 | 2,141,185 | |||||||||||
a senior note, 144A, 3.875%, 4/01/29 | United States | 900,000 | 833,647 | |||||||||||
|
| |||||||||||||
| 11,907,856 | ||||||||||||||
|
| |||||||||||||
| Household & Personal Products 1.4% | ||||||||||||||
| a | Great Lakes Dredge & Dock Corp., 144A, 5.25%, 6/01/29 | United States | 1,700,000 | 1,625,608 | ||||||||||
| a | Spectrum Brands Inc., senior bond, 144A, 5.50%, 7/15/30 | United States | 1,600,000 | 1,538,832 | ||||||||||
| a | VM Consolidated Inc., senior note, 144A, 5.50%, 4/15/29 | United States | 1,800,000 | 1,693,053 | ||||||||||
|
| |||||||||||||
| 4,857,493 | ||||||||||||||
|
| |||||||||||||
| Materials 11.5% | ||||||||||||||
| a | Arcosa Inc., 144A, 4.375%, 4/15/29 | United States | 1,600,000 | 1,520,040 | ||||||||||
| a | Ardagh Metal Packaging Finance USA LLC/Ardagh Metal Packaging Finance PLC, senior note, 144A, 4.00%, 9/01/29 | United States | 1,000,000 | 902,300 | ||||||||||
Ardagh Packaging Finance PLC/Ardagh Holdings USA Inc., | ||||||||||||||
a senior note, 144A, 5.25%, 8/15/27 | United States | 1,000,000 | 925,505 | |||||||||||
a senior secured note, first lien, 144A, 5.25%, 4/30/25 | United States | 800,000 | 800,304 | |||||||||||
| franklintempleton.com | Annual Report | 135 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty High Yield Corporate ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| Corporate Bonds & Notes (continued) | ||||||||||||||
| Materials (continued) | ||||||||||||||
| a | Braskem Idesa SAPI, senior secured note, 144A, 6.99%, 2/20/32 | Mexico | 1,000,000 | $ | 981,280 | |||||||||
| a | Consolidated Energy Finance SA, 144A, 5.625%, 10/15/28 | Luxembourg | 1,200,000 | 1,112,370 | ||||||||||
| a | Constellium SE, 144A, 3.75%, 4/15/29 | France | 2,200,000 | 1,978,603 | ||||||||||
| a | CVR Partners LP/CVR Nitrogen Finance Corp., senior secured note, 144A, 6.125%, 6/15/28 | United States | 2,400,000 | 2,403,240 | ||||||||||
| a | Diamond BC B.V., senior bond, 144A, 4.625%, 10/01/29 | Netherlands | 400,000 | 359,764 | ||||||||||
| a | Eco Material Technologies Inc., Sr. Secured, 144A, 7.875%, 1/31/27 | United States | 1,300,000 | 1,294,813 | ||||||||||
| a | Element Solutions Inc., senior note, 144A, 3.875%, 9/01/28 | United States | 2,200,000 | 2,058,254 | ||||||||||
| a | Gates Global LLC/Gates Corp., senior note, 144A, 6.25%, 1/15/26 | United States | 1,900,000 | 1,905,187 | ||||||||||
| a | Glatfelter Corp., 144A, 4.75%, 11/15/29 | United States | 800,000 | 679,512 | ||||||||||
| a | Ingevity Corp., senior note, 144A, 3.875%, 11/01/28 | United States | 2,100,000 | 1,901,896 | ||||||||||
| a | Kobe US Midco 2 Inc., senior unsecured note, PIK, 144A, 9.25%, 11/01/26 | United States | 500,000 | 487,628 | ||||||||||
| a | LSF11 A5 HoldCo. LLC, Senior Unsecured, 144A, 6.625%, 10/15/29 | United States | 2,000,000 | 1,863,150 | ||||||||||
Mauser Packaging Solutions Holding Co., | ||||||||||||||
a senior note, 144A, 7.25%, 4/15/25 | United States | 2,000,000 | 1,984,600 | |||||||||||
a senior note, 144A, 8.50%, 4/15/24 | United States | 1,400,000 | 1,428,399 | |||||||||||
| a | Neon Holdings Inc., senior note, 144A, 10.125%, 4/01/26 | United States | 1,650,000 | 1,717,873 | ||||||||||
| a | Novelis Corp., senior bond, 144A, 4.75%, 1/30/30 | United States | 1,500,000 | 1,459,095 | ||||||||||
| a | OI European Group B.V., 144A, 4.75%, 2/15/30 | Netherlands | 1,700,000 | 1,582,725 | ||||||||||
| a | Owens-Brockway Glass Container Inc., senior note, 144A, 5.875%, 8/15/23 | United States | 629,000 | 643,687 | ||||||||||
| a | PMHC II Inc., Sr. Unsecured, 144A, 9.00%, 2/15/30 | United States | 1,400,000 | 1,233,806 | ||||||||||
| a | Reynolds Group Issuer Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Luxembourg SA, senior secured note, 4.00% 144A, 4.00%, 10/15/27 | United States | 2,500,000 | 2,325,500 | ||||||||||
| a | Roller Bearing Co. of America Inc., Sr. Secured, 144A, 4.375%, 10/15/29 | United States | 2,200,000 | 2,054,250 | ||||||||||
| a | Trivium Packaging Finance BV, senior secured note, 144A, 5.50%, 8/15/26 | Netherlands | 1,500,000 | 1,495,800 | ||||||||||
Unifrax Escrow Issuer Corp., | ||||||||||||||
a senior bond, 144A, 5.25%, 5.25%, 9/30/28 | United States | 700,000 | 651,161 | |||||||||||
a senior note, 144A, 7.50%, 9/30/29 | United States | 700,000 | 623,862 | |||||||||||
|
| |||||||||||||
| 38,374,604 | ||||||||||||||
|
| |||||||||||||
| Media & Entertainment 10.8% | ||||||||||||||
| a | Banijay Entertainment SASU, senior note, 144A, 5.375%, 3/01/25 | France | 1,900,000 | 1,862,019 | ||||||||||
CCO Holdings LLC/CCO Holdings Capital Corp., | ||||||||||||||
a senior bond, 144A, 4.25%, 2/01/31 | United States | 1,100,000 | 999,675 | |||||||||||
a senior bond, 144A, 5.375%, 6/01/29 | United States | 800,000 | 801,404 | |||||||||||
a senior bond, 144A, 4.50%, 8/15/30 | United States | 3,400,000 | 3,195,991 | |||||||||||
| a | Clear Channel International BV, senior secured note, first lien, 144A, 6.625%, 8/01/25 | United States | 1,700,000 | 1,731,875 | ||||||||||
| a | Clear Channel Outdoor Holdings Inc., 144A, 7.50%, 6/01/29 | United States | 1,100,000 | 1,098,933 | ||||||||||
| a | Clear Channel Worldwide Holdings Inc., senior secured note, first lien, 144A, 5.125%, 8/15/27 | United States | 1,100,000 | 1,090,100 | ||||||||||
| a | Cogent Communications Group Inc., senior secured note, 144A, 3.50%, 5/01/26 | United States | 1,000,000 | 951,365 | ||||||||||
| a | CSC Holdings LLC, senior note, 144A, 7.50%, 4/01/28 | United States | 4,000,000 | 3,937,440 | ||||||||||
Diamond Sports Group LLC/Diamond Sports Finance Co., | ||||||||||||||
a first lien, 144A, 5.375%, 8/15/26 | United States | 1,000,000 | 388,740 | |||||||||||
a senior note, 144A, 6.625%, 8/15/27 | United States | 1,200,000 | 250,140 | |||||||||||
| a | DIRECTV Holdings LLC / DIRECTV Financing Co. Inc., Sr. Secured, 144A, 5.875%, 8/15/27 | United States | 2,100,000 | 2,068,657 | ||||||||||
| a | DISH DBS Corp., senior secured note, 144A, 5.75%, 12/01/28 | United States | 2,000,000 | 1,896,250 | ||||||||||
| a | Everi Holding Inc. Co., 144A, 5.00%, 7/15/29 | United States | 2,100,000 | 1,992,008 | ||||||||||
| a | Match Group Holdings II LLC, senior bond, 144A, 3.625%, 10/01/31 | United States | 500,000 | 448,000 | ||||||||||
| a | Motion Bondco DAC, 144A, 6.625%, 11/15/27 | United Kingdom | 600,000 | 566,634 | ||||||||||
| 136 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty High Yield Corporate ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| Corporate Bonds & Notes (continued) | ||||||||||||||
| Media & Entertainment (continued) | ||||||||||||||
Netflix Inc., | ||||||||||||||
senior bond, 5.75%, 3/01/24 | United States | 600,000 | $ | 630,690 | ||||||||||
senior unsecured, 6.375%, 5/15/29 | United States | 1,800,000 | 2,038,482 | |||||||||||
senior unsecured note, 5.875%, 11/15/28 | United States | 1,400,000 | 1,546,720 | |||||||||||
| a | Northwest Fiber LLC/Northwest Fiber Finance Sub Inc., senior note, 144A, 6.00%, 2/15/28 | United States | 2,000,000 | 1,759,713 | ||||||||||
Sinclair Television Group Inc., | ||||||||||||||
a senior bond, 144A, 5.50%, 3/01/30 | United States | 800,000 | 693,904 | |||||||||||
a senior bond, 144A, 5.125%, 2/15/27 | United States | 700,000 | 636,724 | |||||||||||
| a | Sirius XM Radio Inc., 144A, 4.00%, 7/15/28 | United States | 1,600,000 | 1,522,168 | ||||||||||
Univision Communications Inc., | ||||||||||||||
a senior note, 144A, 6.625%, 6/01/27 | United States | 1,600,000 | 1,677,864 | |||||||||||
a senior secured note, 144A, 4.50%, 5/01/29 | United States | 1,400,000 | 1,334,480 | |||||||||||
| a | Virgin Media Secured Finance PLC, senior secured bond, 144A, 4.50%, 8/15/30 | United Kingdom | 1,000,000 | 933,790 | ||||||||||
|
| |||||||||||||
| 36,053,766 | ||||||||||||||
|
| |||||||||||||
| Pharmaceuticals, Biotechnology & Life Sciences 4.4% | ||||||||||||||
| a | Bausch Health Americas Inc., senior note, 144A, 9.25%, 4/01/26 | United States | 3,900,000 | 3,998,397 | ||||||||||
| a | Bausch Health Cos. Inc., senior secured note, 144A, 4.875%, 6/01/28 | Canada | 2,100,000 | 2,013,595 | ||||||||||
| a | Jazz Securities DAC, senior secured note, 144A, 4.375%, 1/15/29 | United Kingdom | 2,600,000 | 2,522,247 | ||||||||||
Organon & Co./Organon Foreign Debt Co-Issuer BV, | ||||||||||||||
a senior secured note, 144A, 4.125%, 4/30/28 | United States | 1,600,000 | 1,526,400 | |||||||||||
a senior unsecured note, 144A, 5.125%, 4/30/31 | United States | 600,000 | 579,810 | |||||||||||
| a | Par Pharmaceutical Inc., senior secured note, 144A, 7.50%, 4/01/27 | United States | 2,200,000 | 2,056,604 | ||||||||||
Teva Pharmaceutical Finance Netherlands III B.V. 4.75%, 5/09/27 | Israel | 1,300,000 | 1,249,560 | |||||||||||
Teva Pharmaceutical Finance Netherlands III BV, senior bond, 3.15%, 10/01/26 | Israel | 1,000,000 | 907,200 | |||||||||||
|
| |||||||||||||
| 14,853,813 | ||||||||||||||
|
| |||||||||||||
| Retailing 2.8% | ||||||||||||||
| a | Fertitta Entertainment LLC / Fertitta Entertainment Finance Co. Inc., 144A, 6.75%, 1/15/30 | United States | 1,200,000 | 1,105,482 | ||||||||||
Lithia Motors Inc., | ||||||||||||||
a senior note, 144A, 4.625%, 12/15/27 | United States | 1,800,000 | 1,788,831 | |||||||||||
a senior unsecured note, 144A, 3.875%, 6/01/29 | United States | 500,000 | 473,365 | |||||||||||
Macy’s Retail Holdings LLC, | ||||||||||||||
a 144A, 5.875%, 3/15/30 | United States | 1,200,000 | 1,185,204 | |||||||||||
a 144A, 6.125%, 3/15/32 | United States | 1,200,000 | 1,186,596 | |||||||||||
Magic Mergeco Inc., | ||||||||||||||
a senior secured note, 144A, 5.25%, 5/01/28 | United States | 1,200,000 | 1,103,256 | |||||||||||
a senior unsecured note, 144A, 7.875%, 5/01/29 | United States | 1,000,000 | 857,495 | |||||||||||
| a | Papa John’s International Inc., 144A, 3.875%, 9/15/29 | United States | 700,000 | 643,272 | ||||||||||
| a | The Gap Inc., 144A, 3.625%, 10/01/29 | United States | 1,100,000 | 982,272 | ||||||||||
|
| |||||||||||||
| 9,325,773 | ||||||||||||||
|
| |||||||||||||
| Software & Services 1.3% | ||||||||||||||
Gartner Inc., | ||||||||||||||
a senior bond, 144A, 3.75%, 10/01/30 | United States | 1,200,000 | 1,128,390 | |||||||||||
a senior note, 144A, 4.50%, 7/01/28 | United States | 1,000,000 | 997,400 | |||||||||||
| a | Rocket Software Inc., senior note, 144A, 6.50%, 2/15/29 | United States | 2,600,000 | 2,364,583 | ||||||||||
|
| |||||||||||||
| 4,490,373 | ||||||||||||||
|
| |||||||||||||
| Technology Hardware & Equipment 0.8% | ||||||||||||||
| a | CommScope Inc., senior secured note, 144A, 7.125%, 7/01/28 | United States | 2,000,000 | 1,809,000 | ||||||||||
| a | Condor Merger Sub Inc., 144A, 7.375%, 2/15/30 | United States | 800,000 | 768,500 | ||||||||||
|
| |||||||||||||
| 2,577,500 | ||||||||||||||
|
| |||||||||||||
| franklintempleton.com | Annual Report | 137 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty High Yield Corporate ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| Corporate Bonds & Notes (continued) | ||||||||||||||
| Telecommunication Services 2.6% | ||||||||||||||
| a | Altice France Holding SA, senior note, 144A, 10.50%, 5/15/27 | Luxembourg | 1,600,000 | $ | 1,676,320 | |||||||||
| a | Altice France SA, senior note, first lien, 144A, 8.125%, 2/01/27 | France | 1,600,000 | 1,651,504 | ||||||||||
| a | CommScope Technologies LLC, 144A, 5.00%, 3/15/27 | United States | 1,400,000 | 1,218,924 | ||||||||||
Iliad Holding SASU, | ||||||||||||||
a senior secured note, 144A, 6.50%, 10/15/26 | France | 1,300,000 | 1,305,213 | |||||||||||
a senior secured note, 144A, 7.00%, 10/15/28 | France | 1,100,000 | 1,103,438 | |||||||||||
T-Mobile USA Inc., senior bond, 2.875%, 2/15/31 | United States | 1,900,000 | 1,714,750 | |||||||||||
|
| |||||||||||||
| 8,670,149 | ||||||||||||||
|
| |||||||||||||
| Transportation 0.6% | ||||||||||||||
| a | First Student Bidco Inc. / First Transit Parent Inc., Sr. Secured, 144A, 4.00%, 7/31/29 | United States | 2,000,000 | 1,867,970 | ||||||||||
|
| |||||||||||||
| Utilities 4.5% | ||||||||||||||
Calpine Corp., | ||||||||||||||
a first lien, 144A, Senior Secured, 4.50%, 2/15/28 | United States | 1,300,000 | 1,270,360 | |||||||||||
a senior note, 144A, 5.125%, 3/15/28 | United States | 2,000,000 | 1,908,830 | |||||||||||
| a | Clearway Energy Operating LLC, senior bond, 144A, 3.75%, 1/15/32 | United States | 800,000 | 737,560 | ||||||||||
| a | InterGen NV, senior secured note, 144A, 7.00%, 6/30/23 | Netherlands | 1,500,000 | 1,474,103 | ||||||||||
| a | Leeward Renewable Energy Operations LLC, 144A, 4.25%, 7/01/29 | United States | 2,300,000 | 2,160,148 | ||||||||||
| a | Sensata Technologies B.V., senior note, 144A, 4.00%, 4/15/29 | Netherlands | 1,900,000 | 1,812,049 | ||||||||||
Talen Energy Supply LLC, | ||||||||||||||
senior note, 6.50%, 6/01/25 | United States | 1,000,000 | 253,245 | |||||||||||
a senior note, 144A, 7.625%, 6/01/28 | United States | 2,200,000 | 2,041,930 | |||||||||||
| a | TTM Technologies Inc., senior note, 144A, 4.00%, 3/01/29 | United States | 1,400,000 | 1,297,891 | ||||||||||
| a | Vistra Operations Co. LLC, senior note, 144A, 5.50%, 9/01/26 | United States | 2,100,000 | 2,113,755 | ||||||||||
|
| |||||||||||||
| 15,069,871 | ||||||||||||||
|
| |||||||||||||
Total Corporate Bonds & Notes (Cost $331,950,442) | 315,694,077 | |||||||||||||
|
| |||||||||||||
Senior Floating Rate Interests 2.3% |
| |||||||||||||
| Materials 1.2% | ||||||||||||||
Hexion Holdings Corporation, | ||||||||||||||
c 2022 USD 2nd Lien Term Loan, TBD, zero cpn, 3/02/30 | United States | 1,186,047 | 1,141,570 | |||||||||||
c 2022 USD Term Loan, 5.00%, zero cpn, 3/15/29 | United States | 1,100,000 | 1,078,000 | |||||||||||
| c | PMHC II Inc., 2022 Term Loan B, TBD, zero cpn, 2/01/29 | United States | 1,700,000 | 1,626,330 | ||||||||||
|
| |||||||||||||
| 3,845,900 | ||||||||||||||
|
| |||||||||||||
| Media & Entertainment 0.6% | ||||||||||||||
Diamond Sports Group LLC, 2022 First Priority Term Loan, 9.00%, 5/26/26 | United States | 275,914 | 280,648 | |||||||||||
Fertitta Entertainment LLC, 2022 Term Loan B, 4.50%, 1/27/29 | United States | 1,700,000 | 1,693,736 | |||||||||||
|
| |||||||||||||
| 1,974,384 | ||||||||||||||
|
| |||||||||||||
| Software & Services 0.5% | ||||||||||||||
Athenahealth Inc., | ||||||||||||||
c 2022 Delayed Draw Term loan, TBD, zero cpn, 2/15/29 | United States | 246,377 | 244,221 | |||||||||||
2022 Term Loan B, 4.00%, 2/15/29 | United States | 1,453,623 | 1,440,904 | |||||||||||
|
| |||||||||||||
| 1,685,125 | ||||||||||||||
|
| |||||||||||||
Total Floating Rate Loans (Cost $7,562,934) | 7,505,409 | |||||||||||||
|
| |||||||||||||
Total Investments before Short Term Investments (Cost $339,513,376) | 323,199,486 | |||||||||||||
|
| |||||||||||||
| 138 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty High Yield Corporate ETF (continued)
| Principal Amount* | Value | |||||||||||||
| Short Term Investments 3.0% | ||||||||||||||
| U.S. Government & Agency Securities (Cost $10,000,000) 3.0% | ||||||||||||||
| d | Federal Home Loan Bank Discount Notes, 4/01/22 | 10,000,000 | $ | 10,000,000 | ||||||||||
|
| |||||||||||||
Total Investments (Cost $349,513,376) 99.7% | 333,199,486 | |||||||||||||
Other Assets, less Liabilities 0.3% | 1,086,345 | |||||||||||||
|
| |||||||||||||
Net Assets 100.0% | $ | 334,285,831 | ||||||||||||
|
| |||||||||||||
See Abbreviations on page 240.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. At March 31, 2022, the aggregate value of these securities was $275,264,138 representing 82.3% of net assets.
bSee Note 11 regarding defaulted securities.
cA portion or all of the security represents an unsettled loan commitment. The coupon rate is to-be determined (TBD) at the time of settlement and will be based upon a reference index/floor plus a spread.
dThe security was issued on a discount basis with no stated coupon rate.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 139 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin Liberty International Aggregate Bond ETF
| Year Ended March 31, | ||||||||||||||||
| 2022 | 2021 | 2020 | 2019a | |||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
| |||||||||||||||
Net asset value, beginning of year | $ | 25.02 | $ | 24.95 | $ | 24.56 | $ | 25.00 | ||||||||
|
| |||||||||||||||
| Income from investment operationsb: |
| |||||||||||||||
Net investment income (loss)c | 0.05 | (0.01 | ) | 0.22 | 0.39 | |||||||||||
Net realized and unrealized gains (losses) | (0.87 | ) | 0.19 | 0.78 | (0.40 | ) | ||||||||||
|
| |||||||||||||||
Total from investment operations | (0.82 | ) | 0.18 | 1.00 | (0.01 | ) | ||||||||||
|
| |||||||||||||||
| Less distributions from: |
| |||||||||||||||
Net investment income | (0.42 | ) | (0.11 | ) | (0.09 | ) | (0.43 | ) | ||||||||
Net realized gains | (0.13 | ) | — | (0.52 | ) | — | ||||||||||
|
| |||||||||||||||
Total Distributions | (0.55 | ) | (0.11 | ) | (0.61 | ) | (0.43 | ) | ||||||||
|
| |||||||||||||||
Net asset value, end of year | $ | 23.65 | $ | 25.02 | $ | 24.95 | $ | 24.56 | ||||||||
|
| |||||||||||||||
Total returnd | (3.35)% | 0.72% | 4.05% | 0.00% | ||||||||||||
| Ratios to average net assetse |
| |||||||||||||||
Expenses before waiver and payments by affiliates | 0.39% | 0.58% | 3.23% | 2.32% | ||||||||||||
Expenses net of waiver and payments by affiliates | 0.25% | 0.25% | 0.28% | 0.35% | ||||||||||||
Net investment income (loss) | 0.21% | (0.03)% | 0.87% | 1.91% | ||||||||||||
| Supplemental data |
| |||||||||||||||
Net assets, end of year (000’s) | $193,968 | $181,405 | $4,989 | $4,912 | ||||||||||||
Portfolio turnover ratef | 24.12% | g | 72.21% | g | 66.78% | g | 50.32% | |||||||||
aFor the period May 30, 2018 (commencement of operations) to March 31, 2019.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of Creation Unit Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year. Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period.
eRatios are annualized for periods less than one year.
fPortfolio turnover rate includes portfolio transactions that are executed as a result of the Fund offering and redeeming Creation Units solely for cash (“Cash creations”).
| gPortfolio turnover rate excluding cash creations was as follows: | 24.12% | 72.21% | 66.78% |
| 140 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Schedule of Investments, March 31, 2022
Franklin Liberty International Aggregate Bond ETF
| Principal Amount* | Value | |||||||||||||
| Foreign Government and Agency Securities 81.6% | ||||||||||||||
| Australia 2.1% | ||||||||||||||
| a | Government of Australia, senior bond, 149, Reg S, 2.25%, 5/21/28 | 1,900,000 | AUD | $ | 1,386,142 | |||||||||
| a | New South Wales Treasury Corp., senior bond, Reg S, 3.00%, 5/20/27 | 1,200,000 | AUD | 904,004 | ||||||||||
| a,b | Queensland Treasury Corp., senior bond, 144A, Reg S, 3.25%, 8/21/29 | 1,200,000 | AUD | 910,924 | ||||||||||
| a | Western Australian Treasury Corp., senior note, 26, Reg S, 3.00%, 10/21/26 | 1,200,000 | AUD | 905,811 | ||||||||||
|
| |||||||||||||
| 4,106,881 | ||||||||||||||
|
| |||||||||||||
| Austria 1.5% | ||||||||||||||
Government of Austria, | ||||||||||||||
a,b senior bond, 144A, Reg S, 1.50%, 2/20/47 | 1,200,000 | EUR | 1,442,955 | |||||||||||
a,b Sr. Unsecured, 144A, Reg S,, 1.20%, 10/20/25 | 1,200,000 | EUR | 1,370,192 | |||||||||||
|
| |||||||||||||
| 2,813,147 | ||||||||||||||
|
| |||||||||||||
| Belgium 3.2% | ||||||||||||||
| a,b | Government of Belgium, unsecured bond, 144A, Reg S, 1.00%, 6/22/31 | 5,500,000 | EUR | 6,156,291 | ||||||||||
|
| |||||||||||||
| Canada 4.5% | ||||||||||||||
Government of Canada, | ||||||||||||||
1.25%, 3/01/25 | 3,800,000 | CAD | 2,948,477 | |||||||||||
1.25%, 6/01/30 | 750,000 | CAD | 549,972 | |||||||||||
5.00%, 6/01/37 | 2,300,000 | CAD | 2,426,834 | |||||||||||
senior bond, 2.00%, 9/01/23 | 2,400,000 | CAD | 1,917,005 | |||||||||||
senior bond, 2.00%, 12/01/51 | 1,100,000 | CAD | 810,163 | |||||||||||
|
| |||||||||||||
| 8,652,451 | ||||||||||||||
|
| |||||||||||||
| China 11.0% | ||||||||||||||
Agricultural Development Bank of China, Series 2008, Unsecured, 3.45%, 9/23/25 | 13,000,000 | CNY | 2,086,457 | |||||||||||
China Development Bank, | ||||||||||||||
senior note, 2003, 3.23%, 1/10/25 | 24,000,000 | CNY | 3,835,737 | |||||||||||
senior note, 2004, 3.43%, 1/14/27 | 25,000,000 | CNY | 4,028,059 | |||||||||||
China Government Bond, | ||||||||||||||
2.64%, 8/13/22 | 24,000,000 | CNY | 3,783,965 | |||||||||||
2.85%, 6/04/27 | 25,000,000 | CNY | 3,967,946 | |||||||||||
Unsecured, 3.03%, 3/11/26 | 12,000,000 | CNY | 1,920,479 | |||||||||||
The Export-Import Bank of China, Series 2003, Unsecured, 2.17%, 4/07/23 | 11,000,000 | CNY | 1,728,838 | |||||||||||
|
| |||||||||||||
| 21,351,481 | ||||||||||||||
|
| |||||||||||||
| Cyprus 1.1% | ||||||||||||||
| a | Government of Cyprus, Reg S, 1.50%, 4/16/27 | 1,900,000 | EUR | 2,105,593 | ||||||||||
|
| |||||||||||||
| France 4.3% | ||||||||||||||
French Republic Government Bond OAT, | ||||||||||||||
a,c Reg S, .01%, 11/25/29 | 2,800,000 | EUR | 2,923,051 | |||||||||||
a Reg S, .75%, 5/25/52 | 2,000,000 | EUR | 1,862,960 | |||||||||||
a Reg S, 1.00%, 11/25/25 | 3,200,000 | EUR | 3,618,269 | |||||||||||
|
| |||||||||||||
| 8,404,280 | ||||||||||||||
|
| |||||||||||||
| Germany 16.9% | ||||||||||||||
Government of Germany, | ||||||||||||||
a Reg S, 4.25%, 7/04/39 | 2,100,000 | EUR | 3,711,414 | |||||||||||
a Reg S, 5.50%, 1/04/31 | 1,100,000 | EUR | 1,745,333 | |||||||||||
a,c senior bond, 180, Reg S, zero cpn, 10/18/24 | 8,500,000 | EUR | 9,394,510 | |||||||||||
a,c senior bond, Reg S, .01%, 8/15/26 | 14,000,000 | EUR | 15,295,870 | |||||||||||
KFW, senior note, 2.05%, 2/16/26 | 300,000,000 | JPY | 2,658,648 | |||||||||||
|
| |||||||||||||
| 32,805,775 | ||||||||||||||
|
| |||||||||||||
| Indonesia 0.1% | ||||||||||||||
Indonesia Treasury Bond, senior bond, 8.25%, 5/15/36 | 3,000,000,000 | IDR | 227,256 | |||||||||||
|
| |||||||||||||
| franklintempleton.com | Annual Report | 141 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty International Aggregate Bond ETF (continued)
| Principal Amount* | Value | |||||||||||||
| Foreign Government and Agency Securities (continued) | ||||||||||||||
| Italy 3.1% | ||||||||||||||
Italy Treasury Bond, | ||||||||||||||
a senior bond, Reg S, 1.25%, 12/01/26 | 3,700,000 | EUR | $ | 4,104,912 | ||||||||||
a,b senior unsecured bond, Reg S, .05%, 1/15/23 | 1,800,000 | EUR | 1,997,323 | |||||||||||
|
| |||||||||||||
| 6,102,235 | ||||||||||||||
|
| |||||||||||||
| Japan 19.4% | ||||||||||||||
Development Bank of Japan, senior bond, 2.30%, 3/19/26 | 1,000,000,000 | JPY | 8,906,894 | |||||||||||
Government of Japan, | ||||||||||||||
senior bond, 1.00%, 12/20/35 | 1,300,000,000 | JPY | 11,534,108 | |||||||||||
senior bond, 1.50%, 3/20/33 | 270,000,000 | JPY | 2,514,363 | |||||||||||
Japan Government Five Year Bond, senior bond, 142, 0.10%, 12/20/24 | 1,300,000,000 | JPY | 10,716,898 | |||||||||||
Japan Government Thirty Year Bond, senior bond, 0.40%, 12/20/49 | 550,000,000 | JPY | 3,970,276 | |||||||||||
|
| |||||||||||||
| 37,642,539 | ||||||||||||||
|
| |||||||||||||
| Mexico 0.1% | ||||||||||||||
| d | Mexican Bonos, senior bond, 8.00%, 11/07/47 | 3,900,000 | MXN | 187,106 | ||||||||||
|
| |||||||||||||
| Netherlands 1.5% | ||||||||||||||
| a,b | Government of the Netherlands, 144A, Reg S, 0.50%, 7/15/26 | 2,700,000 | EUR | 3,004,796 | ||||||||||
|
| |||||||||||||
| Romania 1.0% | ||||||||||||||
| a | Government of Romania, senior bond, Reg S, 2.00%, 1/28/32 | 2,100,000 | EUR | 1,937,730 | ||||||||||
|
| |||||||||||||
| Slovenia 1.7% | ||||||||||||||
| a | Slovenia Government Bond, senior bond, Reg S, 0.875%, 7/15/30 | 3,000,000 | EUR | 3,217,849 | ||||||||||
|
| |||||||||||||
| Spain 4.1% | ||||||||||||||
Government of Spain, | ||||||||||||||
c senior note, .01%, 1/31/25 | 3,600,000 | EUR | 3,942,781 | |||||||||||
a,b senior unsecured bond, 144A, Reg S, 1.25%, 10/31/30 | 3,600,000 | EUR | 3,998,083 | |||||||||||
|
| |||||||||||||
| 7,940,864 | ||||||||||||||
|
| |||||||||||||
| e | Supranational 2.2% | |||||||||||||
Asian Development Bank, senior bond, 339-00-1, 2.35%, 6/21/27 | 140,000,000 | JPY | 1,293,960 | |||||||||||
| a | European Investment Bank, senior bond, Reg S, 1.90%, 1/26/26 | 330,000,000 | JPY | 2,910,567 | ||||||||||
|
| |||||||||||||
| 4,204,527 | ||||||||||||||
|
| |||||||||||||
| Sweden 1.2% | ||||||||||||||
Government of Sweden, | ||||||||||||||
a,b 144A, Reg S, 1.50%, 11/13/23 | 11,000,000 | SEK | 1,185,270 | |||||||||||
senior bond, .75%, 5/12/28 | 11,000,000 | SEK | 1,139,982 | |||||||||||
|
| |||||||||||||
| 2,325,252 | ||||||||||||||
|
| |||||||||||||
| United Kingdom 2.6% | ||||||||||||||
| a | United Kingdom Gilt, Reg S, 1.75%, 9/07/37 | 1,250,000 | GBP | 1,627,119 | ||||||||||
| a | United Kingdom Treasury Bond, Reg S, 4.75%, 12/07/30 | 2,100,000 | GBP | 3,485,731 | ||||||||||
|
| |||||||||||||
| 5,112,850 | ||||||||||||||
|
| |||||||||||||
Total Foreign Government and Agency Securities | 158,298,903 | |||||||||||||
|
| |||||||||||||
| Corporate Bonds & Notes 5.8% | ||||||||||||||
| Denmark 0.1% | ||||||||||||||
| a | Nykredit Realkredit AS, secured bond, Reg S, 1.00%, 10/01/50 | 1,067,167 | DKK | 138,380 | ||||||||||
|
| |||||||||||||
| France 0.8% | ||||||||||||||
| a | Air Liquide Finance SA, senior note, Reg S, 1.375%, 4/02/30 | 500,000 | EUR | 558,875 | ||||||||||
| a | Orange SA, senior note, Reg S, 1.375%, 3/20/28 | 1,000,000 | EUR | 1,110,428 | ||||||||||
|
| |||||||||||||
| 1,669,303 | ||||||||||||||
|
| |||||||||||||
| 142 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty International Aggregate Bond ETF (continued)
| Principal Amount* | Value | |||||||||||||
| Corporate Bonds & Notes (continued) | ||||||||||||||
| Germany 1.1% | ||||||||||||||
| a | Aroundtown SA, senior note, Reg S, 1.625%, 1/31/28 | 1,000,000 | EUR | $ | 1,059,715 | |||||||||
| a | Deutsche Telekom AG, senior note, Reg S, 0.875%, 3/25/26 | 500,000 | EUR | 551,905 | ||||||||||
| a,c | Siemens Financieringsmaatschappij NV, senior note, Reg S, 0.01%, 2/20/26 | 500,000 | EUR | 534,303 | ||||||||||
|
| |||||||||||||
| 2,145,923 | ||||||||||||||
|
| |||||||||||||
| Romania 0.2% | ||||||||||||||
| a | Globalworth Real Estate Investments Ltd., senior note, Reg S, 3.00%, 3/29/25 | 300,000 | EUR | 337,074 | ||||||||||
|
| |||||||||||||
| United Kingdom 0.5% | ||||||||||||||
| a | RELX Finance BV, senior note, Reg S, 0.50%, 3/10/28 | 1,000,000 | EUR | 1,041,848 | ||||||||||
|
| |||||||||||||
| United States 3.1% | ||||||||||||||
AbbVie Inc., senior note, 1.375%, 5/17/24 | 500,000 | EUR | 559,311 | |||||||||||
Air Products and Chemicals Inc., senior note, 0.50%, 5/05/28 | 1,000,000 | EUR | 1,039,792 | |||||||||||
Apple Inc., senior bond, 1.625%, 11/10/26 | 500,000 | EUR | 574,470 | |||||||||||
AT&T Inc., senior note, 0.25%, 3/04/26 | 1,000,000 | EUR | 1,069,829 | |||||||||||
| a | Schlumberger Finance France SAS, senior note, Reg S, 1.00%, 2/18/26 | 500,000 | EUR | 550,442 | ||||||||||
Stryker Corp., senior note, 0.25%, 12/03/24 | 1,000,000 | EUR | 1,086,385 | |||||||||||
The Procter & Gamble Co., senior note, 0.50%, 10/25/24 | 500,000 | EUR | 553,636 | |||||||||||
Verizon Communications Inc., senior note, 0.875%, 4/02/25 | 500,000 | EUR | 552,862 | |||||||||||
|
| |||||||||||||
| 5,986,727 | ||||||||||||||
|
| |||||||||||||
Total Corporate Bonds & Notes (Cost $11,858,900) | 11,319,255 | |||||||||||||
|
| |||||||||||||
Total Investments before Short Term Investments | 169,618,158 | |||||||||||||
|
| |||||||||||||
| Short Term Investments 2.9% | ||||||||||||||
| U.S. Government & Agency Securities (Cost $5,520,000) 2.9% | ||||||||||||||
| c | Federal Home Loan Bank Discount Notes, 4/01/22 | 5,520,000 | 5,520,000 | |||||||||||
|
| |||||||||||||
Total Investments (Cost $190,792,264) 90.3% | 175,138,158 | |||||||||||||
Other Assets, less Liabilities 9.7% | 18,829,647 | |||||||||||||
|
| |||||||||||||
Net Assets 100.0% | $ | 193,967,805 | ||||||||||||
|
| |||||||||||||
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. At March 31, 2022, the aggregate value of these securities was $87,085,669, representing 44.9% of net assets.
bSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. At March 31, 2022, the aggregate value of these securities was $18,068,511, representing 9.3% of net assets.
cThe security was issued on a discount basis with no stated coupon rate.
dPrincipal amount is stated in 100 Mexican Peso Units.
eA supranational organization is an entity formed by two or more central governments through international treaties.
| franklintempleton.com | Annual Report | 143 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty International Aggregate Bond ETF (continued)
At March 31, 2022 the Fund had the following forward exchange contracts outstanding. See Note 1(c).
| Forward Exchange Contracts | ||||||||||||||||||||||||||||
| Currency | Counterpartya | Type | Quantity | Contract Amount | Settlement Date | Unrealized Appreciation | Unrealized Depreciation | |||||||||||||||||||||
| OTC Forward Exchange Contracts | ||||||||||||||||||||||||||||
Australian Dollar | CITI | Sell | 1,000,000 | $ | 721,816 | 5/09/22 | $ | — | $ | (28,372 | ) | |||||||||||||||||
Australian Dollar | CITI | Sell | 5,265,000 | 3,767,555 | 5/09/22 | — | (182,183 | ) | ||||||||||||||||||||
Canadian Dollar | CITI | Sell | 2,000,000 | 1,602,299 | 5/09/22 | 499 | — | |||||||||||||||||||||
Canadian Dollar | CITI | Sell | 7,620,000 | 6,020,822 | 5/09/22 | — | (82,035 | ) | ||||||||||||||||||||
Danish Krone | CITI | Sell | 1,141,000 | 173,917 | 5/09/22 | 3,572 | — | |||||||||||||||||||||
Euro | CITI | Buy | 51,050 | 18,300,000 | 5/09/22 | 1,803 | — | |||||||||||||||||||||
Euro | CITI | Sell | 15,500,000 | 17,637,777 | 5/09/22 | 422,491 | — | |||||||||||||||||||||
Euro | CITI | Sell | 64,670,000 | 73,313,469 | 5/09/22 | 1,486,855 | — | |||||||||||||||||||||
Great British Pound | CITI | Sell | 300,000 | 408,480 | 5/09/22 | 14,045 | — | |||||||||||||||||||||
Great British Pound | CITI | Sell | 9,245,968 | 12,525,976 | 5/09/22 | 369,525 | — | |||||||||||||||||||||
Hungarian Forint | CITI | Buy | 22,203,286 | 70,217 | 5/09/22 | — | (3,612 | ) | ||||||||||||||||||||
Indonesian Rupiah | CITI | Sell | 2,825,000,000 | 195,311 | 5/09/22 | — | (1,105 | ) | ||||||||||||||||||||
Japanese Yen | CITI | Sell | 1,000,000,000 | 8,744,468 | 5/09/22 | 504,058 | — | |||||||||||||||||||||
Japanese Yen | CITI | Sell | 4,499,000,000 | 39,337,755 | 5/09/22 | 2,264,153 | — | |||||||||||||||||||||
Mexican Peso | CITI | Sell | 7,600,000 | 363,894 | 5/09/22 | — | (15,341 | ) | ||||||||||||||||||||
Polish Zloty | CITI | Sell | 2,300,000 | 572,432 | 5/09/22 | 24,783 | — | |||||||||||||||||||||
Polish Zloty | CITI | Sell | 5,750,000 | 1,423,091 | 5/09/22 | 53,966 | — | |||||||||||||||||||||
South African Rand | CITI | Sell | 470,000 | 30,261 | 5/09/22 | — | (1,741 | ) | ||||||||||||||||||||
Swedish Krona | CITI | Sell | 4,000,000 | 439,036 | 5/09/22 | 10,718 | — | |||||||||||||||||||||
Swedish Krona | CITI | Sell | 19,500,000 | 2,121,848 | 5/09/22 | 33,797 | — | |||||||||||||||||||||
Chinese Yuan | CITI | Sell | 21,000,000 | 3,283,893 | 5/10/22 | — | (15,216 | ) | ||||||||||||||||||||
Chinese Yuan | CITI | Sell | 112,700,000 | 17,598,678 | 5/10/22 | — | (106,537 | ) | ||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Forward Exchange Contracts |
| $ | 5,190,265 | $ | (436,142 | ) | ||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) |
| $ | 4,754,123 | |||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.
See Note 12 regarding other derivative information.
See Abbreviations on page 240.
| 144 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin Liberty Investment Grade Corporate ETF
| Year Ended March 31, | ||||||||||||||||||||
| 2022 | 2021 | 2020 | 2019 | 2018 | ||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
| |||||||||||||||||||
Net asset value, beginning of year | $ | 25.47 | $ | 24.22 | $ | 24.09 | $ | 23.97 | $ | 24.21 | ||||||||||
|
| |||||||||||||||||||
| Income from investment operationsa: |
| |||||||||||||||||||
Net investment incomeb | 0.58 | 0.60 | 0.73 | 0.82 | 0.80 | |||||||||||||||
Net realized and unrealized gains (losses) | (1.63 | ) | 1.71 | 0.27 | 0.21 | (0.22 | ) | |||||||||||||
|
| |||||||||||||||||||
Total from investment operations | (1.05 | ) | 2.31 | 1.00 | 1.03 | 0.58 | ||||||||||||||
|
| |||||||||||||||||||
| Less distributions from: |
| |||||||||||||||||||
Net investment income | (0.66 | ) | (0.83 | ) | (0.81 | ) | (0.91 | ) | (0.82 | ) | ||||||||||
Net realized gains | (0.05 | ) | (0.23 | ) | (0.06 | ) | — | — | ||||||||||||
|
| |||||||||||||||||||
Total Distributions | (0.71 | ) | (1.06 | ) | (0.87 | ) | (0.91 | ) | (0.82 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of year | $ | 23.71 | $ | 25.47 | $ | 24.22 | $ | 24.09 | $ | 23.97 | ||||||||||
|
| |||||||||||||||||||
Total returnc | (4.30)% | 9.43% | 4.02% | 4.46% | 2.38% | |||||||||||||||
| Ratios to average net assetsd |
| |||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.42% | 0.50% | 0.58% | 1.07% | 1.04% | |||||||||||||||
Expenses net of waiver and payments by affiliates | 0.35% | 0.35% | 0.35% | 0.35% | 0.37% | |||||||||||||||
Net investment income | 2.27% | 2.27% | 2.86% | 3.49% | 3.27% | |||||||||||||||
| Supplemental data |
| |||||||||||||||||||
Net assets, end of year (000’s) | $981,602 | $1,018,639 | $553,338 | $18,065 | $39,554 | |||||||||||||||
Portfolio turnover ratee | 36.76% | f | 53.32% | f | 52.17% | f | 22.02% | 63.14% | ||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of Creation Unit Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return is not annualized for periods less than one year. Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period.
dRatios are annualized for periods less than one year.
ePortfolio turnover rate includes portfolio transactions that are executed as a result of the Fund offering and redeeming Creation Units solely for cash (“Cash creations”).
| fPortfolio turnover rate excluding cash creations was as follows: | 36.76% | 53.32% | 52.17% |
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 145 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Schedule of Investments, March 31, 2022
Franklin Liberty Investment Grade Corporate ETF
| Country | Principal Amount* | Value | ||||||||||||
| Corporate Bonds & Notes 95.5% | ||||||||||||||
| Aerospace & Defense 1.8% | ||||||||||||||
| a | Huntington Ingalls Industries Inc., 144A, 0.67%, 8/16/23 | United States | 5,000,000 | $ | 4,854,194 | |||||||||
Lockheed Martin Corp., senior note, 4.07%, 12/15/42 | United States | 4,100,000 | 4,395,222 | |||||||||||
The Boeing Co., | ||||||||||||||
senior unsecured note, 3.65%, 3/01/47 | United States | 7,010,000 | 5,977,253 | |||||||||||
Sr. Unsecured, 5.15%, 5/01/30 | United States | 2,600,000 | 2,776,793 | |||||||||||
|
| |||||||||||||
| 18,003,462 | ||||||||||||||
|
| |||||||||||||
| Air Freight & Logistics 1.0% | ||||||||||||||
FedEx Corp., senior bond, 4.75%, 11/15/45 | United States | 8,950,000 | 9,574,911 | |||||||||||
|
| |||||||||||||
| Airlines 2.2% | ||||||||||||||
| a | Delta Air Lines Inc./SkyMiles IP Ltd., first lien, 144A, 4.50%, 4.50%, 10/20/25 | United States | 13,900,000 | 13,991,693 | ||||||||||
United Airlines, senior bond, 2016-1 Class A, 3.45%, 1/07/30 | United States | 3,812,779 | 3,561,347 | |||||||||||
United Airlines 2020-1 Class B Pass Through Trust, 2020-1 Class B, 4.875%, 7/15/27 | United States | 4,320,000 | 4,269,710 | |||||||||||
|
| |||||||||||||
| 21,822,750 | ||||||||||||||
|
| |||||||||||||
| Banks 24.6% | ||||||||||||||
| a | Banco de Chile, senior unsecured, 144A, 2.99%, 12/09/31 | Chile | 2,400,000 | 2,218,212 | ||||||||||
Banco Santander SA, sub. note, 2.749%, 12/03/30 | Spain | 9,300,000 | 8,198,608 | |||||||||||
Bancolombia SA, senior note, 3.00%, 1/29/25 | Colombia | 8,200,000 | 7,985,160 | |||||||||||
Bank of America Corp., | ||||||||||||||
Senior unsecured, 2.676%, 6/19/41 | United States | 5,000,000 | 4,237,429 | |||||||||||
senior unsecured note, 2.592%, 4/29/31 | United States | 5,900,000 | 5,453,251 | |||||||||||
sub. bond, 4.183%, 11/25/27 | United States | 12,300,000 | 12,555,636 | |||||||||||
| a | BNP Paribas SA, senior note, 144A, FRN thereafter, 4.705%, 1/10/25 | France | 11,700,000 | 11,951,528 | ||||||||||
| a | BPCE SA, senior note, 144A, 5.70%, 10/22/23 | France | 11,300,000 | 11,693,803 | ||||||||||
Citigroup Inc., | ||||||||||||||
3.057%, 1/25/33 | United States | 10,000,000 | 9,353,971 | |||||||||||
senior bond, FRN thereafter, 3.668%, 7/24/28 | United States | 7,100,000 | 7,110,068 | |||||||||||
| a | Credit Agricole SA, subordinated, 144A, 4.375%, 3/17/25 | France | 12,000,000 | 12,152,696 | ||||||||||
Deutsche Bank AG, Senior unsecured, 0.898%, 5/28/24 | Germany | 5,500,000 | 5,240,822 | |||||||||||
Deutsche Bank AG/New York NY, senior note, FRN thereafter, 2.129%, 11/24/26 | Germany | 8,000,000 | 7,425,232 | |||||||||||
Goldman Sachs Group Inc. 3.436%, 2/24/43 | United States | 7,000,000 | 6,499,866 | |||||||||||
HSBC Holdings PLC, senior note, FRN thereafter, 1.645%, 4/18/26 | United Kingdom | 11,500,000 | 10,832,462 | |||||||||||
JPMorgan Chase & Co., | ||||||||||||||
2.963%, 1/25/33 | United States | 5,000,000 | 4,718,948 | |||||||||||
senior bond, FRN thereafter, 2.522%, 4/22/31 | United States | 8,000,000 | 7,425,521 | |||||||||||
sub. bond, 4.25%, 10/01/27 | United States | 7,100,000 | 7,340,987 | |||||||||||
Morgan Stanley, | ||||||||||||||
senior unsecured note, FRN thereafter, .731%, 4/05/24 | United States | 5,150,000 | 5,046,614 | |||||||||||
senior unsecured note, Series GMTN, to 1/22/24 FRN thereafter, .791%, 1/22/25 | United States | 5,000,000 | 4,802,970 | |||||||||||
| a | National Australia Bank Ltd., sub. note, 144A, 2.332%, 8/21/30 | Australia | 13,800,000 | 12,023,838 | ||||||||||
NatWest Group PLC, subordinated, 5.125%, 5/28/24 | United Kingdom | 5,300,000 | 5,463,621 | |||||||||||
Standard Chartered PLC, | ||||||||||||||
a senior note, 144A, FRN thereafter, 1.456%, 1/14/27 | United Kingdom | 10,000,000 | 9,105,770 | |||||||||||
a Sr. Unsecured, 144A, 2.608%, 1/12/28 | United Kingdom | 5,000,000 | 4,680,167 | |||||||||||
SVB Financial Group, | ||||||||||||||
a senior note, 3.125%, 6/05/30 | United States | 7,500,000 | 7,219,209 | |||||||||||
a Series D, 4.25%, 11/15/26 | United States | 5,000,000 | 4,634,375 | |||||||||||
The PNC Financial Services Group Inc., Junior Subordinated Note, Series T, to 9/15/26 FRN thereafter, 3.40%, 9/15/26 | United States | 11,000,000 | 9,933,000 | |||||||||||
Truist Bank, sub. note, 3.30%, 5/15/26 | United States | 6,400,000 | 6,454,882 | |||||||||||
Truist Financial Corp., sub. bond, 3.875%, 3/19/29 | United States | 7,000,000 | 7,141,767 | |||||||||||
| a | UniCredit SpA, Senior unsecured, 144A, 1.982%, 6/03/27 | Italy | 9,800,000 | 8,846,651 | ||||||||||
| 146 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty Investment Grade Corporate ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| Corporate Bonds & Notes (continued) | ||||||||||||||
| Banks (continued) | ||||||||||||||
Wachovia Corp., Subordinated, 5.50%, 8/01/35 | United States | 3,700,000 | $ | 4,181,429 | ||||||||||
Wells Fargo & Co., sub. bond, 4.75%, 12/07/46 | United States | 8,669,000 | 9,460,376 | |||||||||||
|
| |||||||||||||
| 241,388,869 | ||||||||||||||
|
| |||||||||||||
| Beverages 1.6% | ||||||||||||||
Anheuser-Busch Companies LLC/Anheuser-Busch InBev Worldwide Inc. 4.90%, 2/01/46 | United States | 5,300,000 | 5,902,840 | |||||||||||
Anheuser-Busch InBev Worldwide Inc., senior bond, 5.80%, 1/23/59 | Belgium | 6,000,000 | 7,605,909 | |||||||||||
Constellation Brands Inc., senior unsecured note, 2.25%, 8/01/31 | United States | 3,000,000 | 2,646,604 | |||||||||||
|
| |||||||||||||
| 16,155,353 | ||||||||||||||
|
| |||||||||||||
| Biotechnology 0.4% | ||||||||||||||
AbbVie Inc., Senior unsecured, 4.25%, 11/21/49 | United States | 3,000,000 | 3,124,553 | |||||||||||
Bio-Rad Laboratories Inc. 3.30%, 3/15/27 | United States | 1,100,000 | 1,084,198 | |||||||||||
|
| |||||||||||||
| 4,208,751 | ||||||||||||||
|
| |||||||||||||
| Building Products 1.0% | ||||||||||||||
MDC Holdings Inc. 2.50%, 1/15/31 | United States | 10,725,000 | 9,379,960 | |||||||||||
|
| |||||||||||||
| Capital Markets 3.6% | ||||||||||||||
Brixmor Operating Partnership LP, senior bond, 4.125%, 5/15/29 | United States | 3,200,000 | 3,286,318 | |||||||||||
Credit Suisse Group AG, | ||||||||||||||
a senior bond,144A, FRN thereafter, 3.869%, 1/12/29 | Switzerland | 3,900,000 | 3,811,177 | |||||||||||
a senior note, 144A, FRN thereafter, 2.997%, 12/14/23 | Switzerland | 8,400,000 | 8,402,214 | |||||||||||
Morgan Stanley, senior note, 1.794%, 2/13/32 | United States | 9,900,000 | 8,525,978 | |||||||||||
The Goldman Sachs Group Inc., | ||||||||||||||
senior note, FRN thereafter, 2.908%, 6/05/23 | United States | 3,250,000 | 3,253,500 | |||||||||||
Series V, 4.125%, 11/10/26 | United States | 4,000,000 | 3,756,000 | |||||||||||
sub. note, 4.25%, 10/21/25 | United States | 4,175,000 | 4,281,215 | |||||||||||
|
| |||||||||||||
| 35,316,402 | ||||||||||||||
|
| |||||||||||||
| Chemicals 0.9% | ||||||||||||||
| a | Alpek SAB de CV, 144A, 3.25%, 2/25/31 | Mexico | 3,200,000 | 2,922,848 | ||||||||||
CF Industries Inc. 5.15%, 3/15/34 | United States | 5,300,000 | 5,898,794 | |||||||||||
|
| |||||||||||||
| 8,821,642 | ||||||||||||||
|
| |||||||||||||
| Computers & Peripherals 0.4% | ||||||||||||||
Apple Inc., Sr. Unsecured, 2.80%, 2/08/61 | United States | 4,100,000 | 3,538,426 | |||||||||||
|
| |||||||||||||
| Diversified Financial Services 2.5% | ||||||||||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust 3.00%, 10/29/28 | Ireland | 7,500,000 | 6,930,959 | |||||||||||
Air Lease Corp., senior unsecured note, 0.80%, 8/18/24 | United States | 7,000,000 | 6,599,297 | |||||||||||
American Express Co. 2.25%, 3/04/25 | United States | 6,000,000 | 5,897,931 | |||||||||||
Aon PLC 4.60%, 6/14/44 | Ireland | 5,000,000 | 5,264,552 | |||||||||||
|
| |||||||||||||
| 24,692,739 | ||||||||||||||
|
| |||||||||||||
| Diversified Telecommunication Services 3.7% | ||||||||||||||
AT&T Inc., Senior unsecured, 3.50%, 6/01/41 | United States | 12,400,000 | 11,449,105 | |||||||||||
T-Mobile USA Inc., senior bond, 2.875%, 2/15/31 | United States | 11,000,000 | 9,927,500 | |||||||||||
Verizon Communications Inc., senior bond, 3.40%, 3/22/41 | United States | 16,200,000 | 15,229,546 | |||||||||||
|
| |||||||||||||
| 36,606,151 | ||||||||||||||
|
| |||||||||||||
| Electric Utilities 8.5% | ||||||||||||||
| a | Comision Federal de Electricidad, 144A, 3.348%, 2/09/31 | Mexico | 5,000,000 | 4,397,800 | ||||||||||
Commonwealth Edison Co., first mortgage, Secured, 4.00%, 3/01/48 | United States | 3,500,000 | 3,734,059 | |||||||||||
Dominion Energy Inc., senior unsecured note, Series B, 3.30%, 4/15/41 | United States | 4,000,000 | 3,640,850 | |||||||||||
DTE Electric Co., Series B, 3.65%, 3/01/52 | United States | 4,000,000 | 4,055,420 | |||||||||||
Duke Energy Corp., senior bond, 4.80%, 12/15/45 | United States | 4,115,000 | 4,419,716 | |||||||||||
| franklintempleton.com | Annual Report | 147 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty Investment Grade Corporate ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| Corporate Bonds & Notes (continued) | ||||||||||||||
| Electric Utilities (continued) | ||||||||||||||
Duke Energy Progress LLC, senior bond, 2.50%, 8/15/50 | United States | 6,150,000 | $ | 5,019,112 | ||||||||||
| a | EDP Finance BV, senior note, 144A, 1.71%, 1/24/28 | Netherlands | 8,000,000 | 7,069,277 | ||||||||||
| a | Enel Finance International NV, senior note, 144A, 3.625%, 5/25/27 | Italy | 8,000,000 | 7,966,294 | ||||||||||
Exelon Corp., senior bond, 4.05%, 4/15/30 | United States | 10,000,000 | 10,336,368 | |||||||||||
Georgia Power Co., | ||||||||||||||
senior bond, 4.30%, 3/15/42 | United States | 3,745,000 | 3,796,881 | |||||||||||
senior bond, 4.75%, 9/01/40 | United States | 5,898,000 | 6,239,191 | |||||||||||
Public Service Electric and Gas Co., First Mortgage, 3.15%, 1/01/50 | United States | 3,150,000 | 2,936,405 | |||||||||||
Virginia Electric and Power Co., senior note, 3.50%, 3/15/27 | United States | 7,100,000 | 7,226,298 | |||||||||||
| a | Vistra Operations Co. LLC, senior secured note, first lien, 144A, 3.55%, 7/15/24 | United States | 12,400,000 | 12,291,603 | ||||||||||
|
| |||||||||||||
| 83,129,274 | ||||||||||||||
|
| |||||||||||||
| Electronic Equipment, Instruments & Components 1.6% | ||||||||||||||
Flex Ltd., senior note, 3.75%, 2/01/26 | Singapore | 4,500,000 | 4,505,545 | |||||||||||
Jabil Inc., senior note, 3.60%, 1/15/30 | United States | 5,400,000 | 5,240,647 | |||||||||||
Teledyne FLIR LLC, senior unsecured note, 2.50%, 8/01/30 | United States | 6,500,000 | 5,929,882 | |||||||||||
|
| |||||||||||||
| 15,676,074 | ||||||||||||||
|
| |||||||||||||
| Energy Equipment & Services 1.6% | ||||||||||||||
Baker Hughes a GE Co. LLC/Baker Hughes Co-Obligor Inc., senior bond, 4.08%, 12/15/47 | United States | 2,590,000 | 2,627,208 | |||||||||||
Energy Transfer LP, Sr. Unsecured, 4.90%, 3/15/35 | United States | 2,700,000 | 2,738,939 | |||||||||||
| a | Schlumberger Holdings Corp., senior bond, 144A, 4.30%, 5/01/29 | United States | 6,750,000 | 6,968,748 | ||||||||||
The Williams Companies Inc., Sr. Unsecured, 3.50%, 10/15/51 | United States | 3,750,000 | 3,295,623 | |||||||||||
|
| |||||||||||||
| 15,630,518 | ||||||||||||||
|
| |||||||||||||
| Entertainment 0.4% | ||||||||||||||
| a | Magallanes Inc., 144A, 5.05%, 3/15/42 | United States | 4,100,000 | 4,190,625 | ||||||||||
|
| |||||||||||||
| Equity Real Estate Investment Trusts (REITs) 2.2% | ||||||||||||||
Essex Portfolio LP, senior bond, 2.65%, 3/15/32 | United States | 10,000,000 | 9,162,980 | |||||||||||
| a | Global Net Lease Inc./Global Net Lease Operating Partnership LP, senior note, 144A, 3.75%, 12/15/27 | United States | 3,400,000 | 3,133,903 | ||||||||||
Simon Property Group LP, senior note, 3.375%, 12/01/27 | United States | 9,000,000 | 8,956,882 | |||||||||||
|
| |||||||||||||
| 21,253,765 | ||||||||||||||
|
| |||||||||||||
| Food & Staples Retailing 1.7% | ||||||||||||||
| a | Bimbo Bakeries USA Inc., 144A, 4.00%, 5/17/51 | United States | 2,700,000 | 2,525,021 | ||||||||||
JBS Finance Luxembourg Sarl, | ||||||||||||||
a 144A, 2.50%, 1/15/27 | United States | 4,400,000 | 4,095,410 | |||||||||||
a 144A, 3.625%, 1/15/32 | Luxembourg | 5,200,000 | 4,769,648 | |||||||||||
The Kroger Co., senior bond, 4.45%, 2/01/47 | United States | 5,000,000 | 5,329,666 | |||||||||||
|
| |||||||||||||
| 16,719,745 | ||||||||||||||
|
| |||||||||||||
| Health Care Providers & Services 4.4% | ||||||||||||||
Cigna Corp., senior bond, 4.90%, 12/15/48 | United States | 7,500,000 | 8,440,463 | |||||||||||
Cigna Holding Co. 3.05%, 10/15/27 | United States | 1,100,000 | 1,092,065 | |||||||||||
CVS Health Corp., senior bond, 5.30%, 12/05/43 | United States | 9,000,000 | 10,505,923 | |||||||||||
HCA Inc., senior secured bond, first lien, 4.50%, 2/15/27 | United States | 9,490,000 | 9,815,599 | |||||||||||
STERIS Irish FinCo UnLtd Co. 3.75%, 3/15/51 | Ireland | 6,600,000 | 6,163,562 | |||||||||||
UnitedHealth Group Inc., Senior unsecured, 3.05%, 5/15/41 | United States | 8,200,000 | 7,656,148 | |||||||||||
|
| |||||||||||||
| 43,673,760 | ||||||||||||||
|
| |||||||||||||
| Hotels, Restaurants & Leisure 2.7% | ||||||||||||||
Las Vegas Sands Corp., | ||||||||||||||
Senior unsecured, 3.20%, 8/08/24 | United States | 12,000,000 | 11,465,158 | |||||||||||
Senior unsecured, 3.90%, 8/08/29 | United States | 6,000,000 | 5,509,628 | |||||||||||
| 148 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty Investment Grade Corporate ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| Corporate Bonds & Notes (continued) | ||||||||||||||
| Hotels, Restaurants & Leisure (continued) | ||||||||||||||
Marriott International Inc., senior bond, 3.125%, 6/15/26 | United States | 10,000,000 | $ | 9,895,489 | ||||||||||
|
| |||||||||||||
| 26,870,275 | ||||||||||||||
|
| |||||||||||||
| Household Durables 0.8% | ||||||||||||||
Mohawk Industries Inc., senior bond, 3.625%, 5/15/30 | United States | 7,500,000 | 7,377,724 | |||||||||||
|
| |||||||||||||
| Household Products 2.0% | ||||||||||||||
| a | Kimberly-Clark de Mexico SAB de CV, senior bond, 144A, 2.431%, 7/01/31 | Mexico | 10,375,000 | 9,415,105 | ||||||||||
The Procter & Gamble Co., senior bond, 3.00%, 3/25/30 | United States | 10,000,000 | 10,068,313 | |||||||||||
|
| |||||||||||||
| 19,483,418 | ||||||||||||||
|
| |||||||||||||
| Insurance 2.4% | ||||||||||||||
Aflac Inc., senior bond, 4.75%, 1/15/49 | United States | 7,000,000 | 8,028,454 | |||||||||||
Arch Capital Group Ltd., senior bond, 3.635%, 6/30/50 | Bermuda | 5,800,000 | 5,331,632 | |||||||||||
Berkshire Hathaway Finance Corp. 3.85%, 3/15/52 | United States | 1,650,000 | 1,689,354 | |||||||||||
MetLife Inc., junior sub. bond, 6.40%, 12/15/66 | United States | 4,910,000 | 5,311,638 | |||||||||||
The Allstate Corp., senior bond, 4.20%, 12/15/46 | United States | 3,100,000 | 3,311,588 | |||||||||||
|
| |||||||||||||
| 23,672,666 | ||||||||||||||
|
| |||||||||||||
| Interactive Media & Services 1.2% | ||||||||||||||
| a | Tencent Holdings Ltd., senior note, 144A, 3.595%, 1/19/28 | China | 12,000,000 | 11,713,227 | ||||||||||
|
| |||||||||||||
| Internet & Direct Marketing Retail 1.7% | ||||||||||||||
Alibaba Group Holding Ltd., | ||||||||||||||
senior note, 2.125%, 2/09/31 | China | 3,600,000 | 3,135,032 | |||||||||||
senior note, 3.40%, 12/06/27 | China | 8,000,000 | 7,859,170 | |||||||||||
Amazon.com Inc., senior bond, 2.70%, 6/03/60 | United States | 6,400,000 | 5,304,903 | |||||||||||
|
| |||||||||||||
| 16,299,105 | ||||||||||||||
|
| |||||||||||||
| IT Services 1.0% | ||||||||||||||
Fiserv Inc., senior bond, 4.40%, 7/01/49 | United States | 9,200,000 | 9,528,511 | |||||||||||
|
| |||||||||||||
| Media 2.6% | ||||||||||||||
AT&T Inc., Sr. Unsecured, 3.55%, 9/15/55 | United States | 5,100,000 | 4,515,481 | |||||||||||
Charter Communications Operating LLC/Charter Communications Operating Capital, | ||||||||||||||
senior bond, 2.80%, 4/01/31 | United States | 8,450,000 | 7,628,635 | |||||||||||
senior secured note, 3.50%, 3/01/42 | United States | 3,500,000 | 2,903,522 | |||||||||||
Comcast Corp., senior bond, 4.95%, 10/15/58 | United States | 6,000,000 | 7,131,037 | |||||||||||
Fox Corp., senior bond, 5.476%, 1/25/39 | United States | 3,000,000 | 3,404,558 | |||||||||||
|
| |||||||||||||
| 25,583,233 | ||||||||||||||
|
| |||||||||||||
| Metals & Mining 0.5% | ||||||||||||||
| a | Antofagasta PLC, senior note, 144A, 2.375%, 10/14/30 | United Kingdom | 5,000,000 | 4,434,975 | ||||||||||
|
| |||||||||||||
| Multi-Utilities 1.1% | ||||||||||||||
Berkshire Hathaway Energy Co., | ||||||||||||||
senior bond, 3.80%, 7/15/48 | United States | 8,600,000 | 8,532,684 | |||||||||||
Sr. Unsecured, 5.15%, 11/15/43 | United States | 2,000,000 | 2,284,763 | |||||||||||
|
| |||||||||||||
| 10,817,447 | ||||||||||||||
|
| |||||||||||||
| Oil, Gas & Consumable Fuels 5.8% | ||||||||||||||
Aker BP ASA, | ||||||||||||||
a senior bond, 144A, 4.00%, 1/15/31 | Norway | 3,350,000 | 3,342,744 | |||||||||||
a senior note, 144A, 3.75%, 1/15/30 | Norway | 5,000,000 | 4,899,581 | |||||||||||
Canadian Natural Resources Ltd., senior bond, 3.85%, 6/01/27 | Canada | 7,700,000 | 7,798,916 | |||||||||||
Chevron Corp., senior bond, 3.078%, 5/11/50 | United States | 1,200,000 | 1,136,341 | |||||||||||
Devon Energy Corp., Sr. Unsecured, 4.75%, 5/15/42 | United States | 2,700,000 | 2,863,052 | |||||||||||
| a | EASTERN GAS TRAN, Senior unsecured, 144A, 3.90%, 11/15/49 | United States | 8,000,000 | 7,842,838 | ||||||||||
| franklintempleton.com | Annual Report | 149 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty Investment Grade Corporate ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| Corporate Bonds & Notes (continued) | ||||||||||||||
| Oil, Gas & Consumable Fuels (continued) | ||||||||||||||
Energy Transfer LP, Sr. Unsecured, 5.15%, 3/15/45 | United States | 3,800,000 | $ | 3,848,184 | ||||||||||
Exxon Mobil Corp., | ||||||||||||||
senior bond, 3.567%, 3/06/45 | United States | 5,000,000 | 4,865,088 | |||||||||||
Sr. Unsecured, 3.452%, 4/15/51 | United States | 5,000,000 | 4,872,038 | |||||||||||
Phillips 66 3.30%, 3/15/52 | United States | 3,600,000 | 3,176,970 | |||||||||||
TransCanada PipeLines Ltd., | ||||||||||||||
senior bond, 4.25%, 5/15/28 | Canada | 8,200,000 | 8,531,700 | |||||||||||
senior note, 6.10%, 6/01/40 | Canada | 3,400,000 | 4,188,144 | |||||||||||
|
| |||||||||||||
| 57,365,596 | ||||||||||||||
|
| |||||||||||||
| Paper & Forest Products 0.5% | ||||||||||||||
Suzano Austria GmbH, senior bond, 3.75%, 1/15/31 | Austria | 5,000,000 | 4,716,100 | |||||||||||
|
| |||||||||||||
| Pharmaceuticals 2.4% | ||||||||||||||
AbbVie Inc., Senior unsecured, 4.05%, 11/21/39 | United States | 5,400,000 | 5,564,373 | |||||||||||
Bristol-Myers Squibb Co., | ||||||||||||||
senior bond, 4.125%, 6/15/39 | United States | 4,459,000 | 4,804,345 | |||||||||||
senior bond, 5.00%, 8/15/45 | United States | 3,100,000 | 3,665,696 | |||||||||||
Takeda Pharmaceutical Co. Ltd., Senior unsecured, 3.175%, 7/09/50 | Japan | 10,800,000 | 9,482,161 | |||||||||||
|
| |||||||||||||
| 23,516,575 | ||||||||||||||
|
| |||||||||||||
| Real Estate Management & Development 0.3% | ||||||||||||||
ERP Operating LP, senior bond, 4.50%, 7/01/44 | United States | 3,000,000 | 3,272,443 | |||||||||||
|
| |||||||||||||
| Road & Rail 0.8% | ||||||||||||||
Burlington Northern Santa Fe LLC, Sr. Unsecured, 5.75%, 5/01/40 | United States | 4,800,000 | 6,002,882 | |||||||||||
| a | SMBC Aviation Capital Finance DAC, 144A, 1.90%, 10/15/26 | Ireland | 2,000,000 | 1,790,040 | ||||||||||
|
| |||||||||||||
| 7,792,922 | ||||||||||||||
|
| |||||||||||||
| Software 0.7% | ||||||||||||||
Microsoft Corp., senior bond, 2.675%, 6/01/60 | United States | 3,600,000 | 3,116,340 | |||||||||||
ServiceNow Inc., senior bond, 1.40%, 9/01/30 | United States | 5,000,000 | 4,255,199 | |||||||||||
|
| |||||||||||||
| 7,371,539 | ||||||||||||||
|
| |||||||||||||
| Specialty Retail 2.8% | ||||||||||||||
AutoZone Inc., senior bond, 1.65%, 1/15/31 | United States | 4,000,000 | 3,415,568 | |||||||||||
| a | GSK Consumer Healthcare Capital US LLC, 144A, 3.375%, 3/24/27 | United States | 5,300,000 | 5,305,893 | ||||||||||
Home Depot Inc. 3.625%, 4/15/52 | United States | 3,900,000 | 3,877,624 | |||||||||||
Lowe’s Cos Inc. 4.25%, 4/01/52 | United States | 8,000,000 | 8,287,446 | |||||||||||
Nordstrom Inc., | ||||||||||||||
senior unsecured note, 4.25%, 8/01/31 | United States | 1,600,000 | 1,461,128 | |||||||||||
senior unsecured note, 4.375%, 4/01/30 | United States | 4,000,000 | 3,743,800 | |||||||||||
Target Corp. 2.95%, 1/15/52 | United States | 1,000,000 | 921,515 | |||||||||||
|
| |||||||||||||
| 27,012,974 | ||||||||||||||
|
| |||||||||||||
| Tobacco 1.5% | ||||||||||||||
Imperial Brands Finance PLC, | ||||||||||||||
a senior bond, 144A, 3.875%, 7/26/29 | United Kingdom | 3,400,000 | 3,339,574 | |||||||||||
a senior note, 144A, 4.25%, 7/21/25 | United Kingdom | 11,765,000 | 11,878,946 | |||||||||||
|
| |||||||||||||
| 15,218,520 | ||||||||||||||
|
| |||||||||||||
| Wireless Telecommunication Services 0.6% | ||||||||||||||
| a | Sprint Spectrum Co. LLC, senior secured bond, first lien, 144A, 5.152%, 9/20/29 | United States | 5,500,000 | 5,796,722 | ||||||||||
|
| |||||||||||||
Total Corporate Bonds & Notes (Cost $1,009,528,337) | 937,627,149 | |||||||||||||
|
| |||||||||||||
| 150 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty Investment Grade Corporate ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| Discount Notes 0.2% | ||||||||||||||
U.S. Treasury Note 0.125%, 10/15/23 | United States | 2,000,000 | $ | 1,938,789 | ||||||||||
|
| |||||||||||||
Total Discount Notes (Cost $1,993,555) | 1,938,789 | |||||||||||||
|
| |||||||||||||
Total Investments before Short Term Investments | 939,565,938 | |||||||||||||
|
| |||||||||||||
| Short-Term Investments 2.0% | ||||||||||||||
| U.S. Government & Agency Securities (Cost $19,440,000) 2.0% | ||||||||||||||
| b | Federal Home Loan Bank Discount Notes, 4/01/22 | United States | 19,440,000 | 19,440,000 | ||||||||||
|
| |||||||||||||
Total Short-Term Investments (Cost $19,440,000) 2.0% | 19,440,000 | |||||||||||||
|
| |||||||||||||
Total Investments (Cost $1,030,961,892) 97.7% | 959,005,938 | |||||||||||||
Other Assets, less Liabilities 2.3% | 22,595,889 | |||||||||||||
|
| |||||||||||||
Net Assets 100.0% | $ | 981,601,827 | ||||||||||||
|
| |||||||||||||
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. At March 31, 2022, the aggregate value of these securities was $245,676,349, representing 25.0% of net assets.
bThe security was issued on a discount basis with no stated coupon rate.
At March 31, 2022, the Fund had the following futures contracts outstanding. See Note 1(c).
| Futures Contracts | ||||||||||||||||||||
| Description | Type | Number of Contracts | Notional Amount* | Expiration Date | Value/Unrealized Appreciation (Depreciation) | |||||||||||||||
| Index Contracts | ||||||||||||||||||||
Ultra 10 Yr. U.S. Treasury Note | Short | 64 | $ | 8,670,000 | 6/21/22 | $ | 248,998 | |||||||||||||
U.S. Treasury 5 Yr. Note | Short | 83 | 9,519,063 | 6/30/22 | 231,583 | |||||||||||||||
U.S. Treasury 10 Yr. Note | Short | 119 | 14,622,125 | 6/21/22 | 390,305 | |||||||||||||||
|
| |||||||||||||||||||
Total Futures Contracts |
| $ | 870,886 | |||||||||||||||||
|
| |||||||||||||||||||
*As of year end.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 151 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin Liberty Senior Loan ETF
| Year Ended March 31, | ||||||||||||||||
| 2022 | 2021 | 2020 | 2019a | |||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
| |||||||||||||||
Net asset value, beginning of year | $ | 24.83 | $ | 22.85 | $ | 24.85 | $ | 25.00 | ||||||||
|
| |||||||||||||||
| Income from investment operationsb: |
| |||||||||||||||
Net investment incomec | 0.91 | 0.70 | 0.99 | 0.81 | ||||||||||||
Net realized and unrealized gains (losses) | (0.23 | ) | 1.99 | (1.90 | ) | (0.21 | ) | |||||||||
|
| |||||||||||||||
Total from investment operations | 0.68 | 2.69 | (0.91 | ) | 0.60 | |||||||||||
|
| |||||||||||||||
Less distributions from net investment income | (0.81 | ) | (0.71 | ) | (1.09 | ) | (0.75 | ) | ||||||||
|
| |||||||||||||||
Net asset value, end of year | $ | 24.70 | $ | 24.83 | $ | 22.85 | $ | 24.85 | ||||||||
|
| |||||||||||||||
Total returnd | 2.76% | 11.91% | (3.92)% | 2.44% | ||||||||||||
| Ratios to average net assetse |
| |||||||||||||||
Expenses before waiver and payments by affiliates | 0.58% | 0.92% | 0.97% | 1.00% | ||||||||||||
Expenses net of waiver and payments by affiliates | 0.45% | 0.45% | 0.45% | 0.45% | ||||||||||||
Net investment income | 3.72% | 2.88% | 4.02% | 3.90% | ||||||||||||
| Supplemental data |
| |||||||||||||||
Net assets, end of year (000’s) | $292,722 | $201,101 | $54,833 | $57,165 | ||||||||||||
Portfolio turnover ratef | 35.67% | g | 45.87% | g | 51.48% | g | 10.62% | |||||||||
aFor the period May 30, 2018 (commencement of operations) to March 31, 2019.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of Creation Unit Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year. Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period.
eRatios are annualized for periods less than one year.
fPortfolio turnover rate includes portfolio transactions that are executed as a result of the Fund offering and redeeming Creation Units solely for cash (“Cash creations”).
| gPortfolio turnover rate excluding cash creations was as follows: | 35.67% | 45.87% | 51.48% |
| 152 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Schedule of Investments, March 31, 2022
Franklin Liberty Senior Loan ETF
| Country | Principal Amount* | Value | ||||||||||||
| * | Corporate Bonds & Notes 2.1% | |||||||||||||
| Airlines 0.6% | ||||||||||||||
| a | American Airlines Inc./AAdvantage Loyalty IP Ltd., senior secured note, 144A, 5.50%, 4/20/26 | United States | 1,500,000 | $ | 1,513,358 | |||||||||
| a | Delta Air Lines Inc./SkyMiles IP Ltd., first lien, 144A, 4.50%, 10/20/25 | United States | 250,000 | 251,649 | ||||||||||
|
| |||||||||||||
| 1,765,007 | ||||||||||||||
|
| |||||||||||||
| Chemicals 0.3% | ||||||||||||||
| a | SCIH Salt Holdings Inc., senior secured note, 144A, 4.875%, 5/01/28 | United States | 500,000 | 471,943 | ||||||||||
| a | Unifrax Escrow Issuer Corp., senior bond, 144A, 5.25%, 9/30/28 | United States | 419,400 | 390,138 | ||||||||||
|
| |||||||||||||
| 862,081 | ||||||||||||||
|
| |||||||||||||
| Commercial Services & Supplies 0.1% | ||||||||||||||
| a | MPH Acquisition Holdings LLC, senior secured, 144A, 5.50%, 9/01/28 | United States | 213,000 | 204,627 | ||||||||||
|
| |||||||||||||
| Communications Equipment 0.1% | ||||||||||||||
| a | CommScope Inc., senior secured, 144A, 4.75%, 9/01/29 | United States | 288,500 | 266,107 | ||||||||||
|
| |||||||||||||
| Construction Materials 0.1% | ||||||||||||||
| a | Cemex SAB de CV, senior secured note, 144A, 5.20%, 9/17/30 | Mexico | 375,000 | 373,699 | ||||||||||
|
| |||||||||||||
| Containers & Packaging 0.1% | ||||||||||||||
| a | Reynolds Group Issuer Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Luxembourg SA, senior secured note, 4.00% 144A, 10/15/27 | United States | 400,000 | 372,080 | ||||||||||
|
| |||||||||||||
| Diversified Financial Services 0.2% | ||||||||||||||
| a | Altice France SA, senior secured note, 144A, 5.125%, 7/15/29 | France | 500,000 | 448,800 | ||||||||||
| a | Vmed O2 UK Financing I PLC, senior secured bond, 144A, 4.25%, 1/31/31 | United Kingdom | 210,000 | 192,341 | ||||||||||
|
| |||||||||||||
| 641,141 | ||||||||||||||
|
| |||||||||||||
| Media 0.1% | ||||||||||||||
| a | Diamond Sports Group LLC/Diamond Sports Finance Co., first lien, 144A, 5.375%, 8/15/26 | United States | 1,210,000 | 470,375 | ||||||||||
| a | Univision Communications Inc., senior secured note, first lien, 144A, 5.125%, 2/15/25 | United States | 44,444 | 44,540 | ||||||||||
|
| |||||||||||||
| 514,915 | ||||||||||||||
|
| |||||||||||||
| �� | Oil, Gas & Consumable Fuels 0.1% | |||||||||||||
Cheniere Energy Inc., senior secured, 4.625%, 10/15/28 | United States | 150,000 | 150,694 | |||||||||||
| a | Weatherford International Ltd., senior secured, 144A, 6.50%, 9/15/28 | United States | 44,600 | 46,161 | ||||||||||
|
| |||||||||||||
| 196,855 | ||||||||||||||
|
| |||||||||||||
| Pharmaceuticals 0.3% | ||||||||||||||
| a | Endo Luxembourg Finance Co. I Sarl/Endo US Inc., 144A, 6.125%, 4/01/29 | United States | 925,000 | 845,177 | ||||||||||
|
| |||||||||||||
| Specialty Retail 0.1% | ||||||||||||||
| a | Staples Inc., 144A, 7.50%, 4/15/26 | United States | 161,000 | 156,524 | ||||||||||
|
| |||||||||||||
Total Corporate Bonds & Notes (Cost $6,879,336) | 6,198,213 | |||||||||||||
|
| |||||||||||||
| b | Senior Floating Rate Interests 92.3% | |||||||||||||
| Aerospace & Defense 3.4% | ||||||||||||||
Dynasty Acquisition Co. Inc., | ||||||||||||||
Initial Term B-1 Loan, 4.51%, 4/06/26 | United States | 2,337,092 | 2,303,006 | |||||||||||
Initial Term B-2 Loan (CAD), 4.51%, 4/06/26 | United States | 1,256,501 | 1,238,175 | |||||||||||
Madison IAQ LLC, Term Loan, 4.52%, 6/21/28 | United States | 2,335,701 | 2,305,535 | |||||||||||
Peraton Corp., Term Loan B1, 4.50%, 2/01/28 | United States | 4,155,467 | 4,134,689 | |||||||||||
|
| |||||||||||||
| 9,981,405 | ||||||||||||||
|
| |||||||||||||
| Air Freight & Logistics 0.9% | ||||||||||||||
Kenan Advantage Group Inc., 2021 Term Loan B1, 4.50%, 3/24/26 | United States | 2,567,590 | 2,537,908 | |||||||||||
|
| |||||||||||||
| franklintempleton.com | Annual Report | 153 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty Senior Loan ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| b | Senior Floating Rate Interests (continued) | |||||||||||||
| Airlines 4.0% | ||||||||||||||
AAdvantage Loyalty IP Ltd., 2021 Term Loan, 5.50%, 4/20/28 | United States | 1,024,129 | $ | 1,039,491 | ||||||||||
Air Canada, 2021 Term Loan B, 4.25%, 8/11/28 | Canada | 2,165,116 | 2,147,070 | |||||||||||
American Airlines Inc., | ||||||||||||||
c 2018 Replacement Term Loans, 2.20%, 6/27/25 | United States | 2,533,130 | 2,391,439 | |||||||||||
c 2017 Incremental Term Loan, TBD, zero cpn, 12/15/23 | United States | 500,000 | 494,793 | |||||||||||
Kestrel Bidco Inc., Term Loan B, 4.00%, 12/11/26 | Canada | 3,161,063 | 3,055,041 | |||||||||||
SkyMiles IP Ltd., Term Loan B, 4.75%, 10/20/27 | United States | 136,597 | 141,420 | |||||||||||
United Airlines Inc., 2021 Term Loan B, 4.50%, 4/21/28 | United States | 2,489,388 | 2,464,320 | |||||||||||
|
| |||||||||||||
| 11,733,574 | ||||||||||||||
|
| |||||||||||||
| Auto Components 0.7% | ||||||||||||||
Clarios Global LP, 2021 USD Term Loan B, 3.359%, 4/30/26 | United States | 1,955,327 | 1,933,819 | |||||||||||
|
| |||||||||||||
| Auto Parts & Equipment 1.5% | ||||||||||||||
First Brands Group LLC, 2021 Term Loan, 6.00%, 3/30/27 | United States | 1,960,054 | 1,950,254 | |||||||||||
Truck Hero Inc., 2021 Term Loan B, 4.00%, 1/31/28 | United States | 2,387,461 | 2,319,574 | |||||||||||
|
| |||||||||||||
| 4,269,828 | ||||||||||||||
|
| |||||||||||||
| Automobile Manufacturers 0.7% | ||||||||||||||
American Trailer World Corp., Term Loan B, 4.50%, 3/03/28 | United States | 2,194,472 | 2,111,839 | |||||||||||
|
| |||||||||||||
| Building Products 2.1% | ||||||||||||||
Allied Universal Holdco LLC, 2021 USD Incremental Term Loan B, 4.25%, 5/12/28 | United States | 2,767,016 | 2,728,222 | |||||||||||
Solis IV BV, USD Term Loan B1, 4.00%, 2/26/29 | Netherlands | 1,800,000 | 1,766,817 | |||||||||||
White Cap Buyer LLC, Term Loan, 4.25%, 10/19/27 | United States | 1,583,217 | 1,569,032 | |||||||||||
|
| |||||||||||||
| 6,064,071 | ||||||||||||||
|
| |||||||||||||
| Casinos & Gaming 1.7% | ||||||||||||||
| c | Scientific Games Holdings LP, 2022 USD Term Loan B, TBD, 4/04/29 | United States | 2,283,425 | 2,265,889 | ||||||||||
Twin River Worldwide Holdings Inc., 2021 Term Loan B, 3.75%, 10/02/28 | United States | 2,593,500 | 2,582,763 | |||||||||||
|
| |||||||||||||
| 4,848,652 | ||||||||||||||
|
| |||||||||||||
| Chemicals 3.2% | ||||||||||||||
Hexion Holdings Corporation, 2022 USD Term Loan, 5.00%, 3/15/29 | United States | 1,800,000 | 1,764,000 | |||||||||||
INEOS Styrolution US Holding LLC, 2021 USD Term Loan B, 3.25%, 1/29/26 | United States | 2,416,258 | 2,377,900 | |||||||||||
LSF11 A5 Holdco LLC, Term Loan, 4.00%, 10/15/28 | United States | 1,300,000 | 1,283,913 | |||||||||||
| c | PMHC II Inc., 2022 Term Loan B, TBD, 2/01/29 | United States | 2,200,000 | 2,104,663 | ||||||||||
SCIH Salt Holdings Inc., 2021 Incremental Term Loan B, 4.75%, 3/16/27 | United States | 1,802,927 | 1,776,848 | |||||||||||
|
| |||||||||||||
| 9,307,324 | ||||||||||||||
|
| |||||||||||||
| Commercial Services & Supplies 4.8% | ||||||||||||||
Amentum Government Services Holdings LLC, 2022 Term Loan, 4.50%, 2/15/29 | United States | 2,335,398 | 2,320,802 | |||||||||||
APX Group Inc., 2021 Term Loan B, 4.00%, 7/10/28 | United States | 1,894,486 | 1,871,487 | |||||||||||
Intrado Corp., Term B Loans, 5.00%, 10/10/24 | United States | 336,335 | 308,359 | |||||||||||
KUEHG Corp., 2018 Incremental Term Loan, 4.76%, 2/21/25 | United States | 1,985,584 | 1,959,216 | |||||||||||
PECF USS Intermediate Holding III Corporation, Term Loan B, 4.76%, 12/15/28 | United States | 2,238,339 | 2,221,361 | |||||||||||
Prime Security Services Borrower LLC, 2021 Term Loan, 3.50%, 9/23/26 | United States | 2,650,271 | 2,634,819 | |||||||||||
Spin Holdco Inc., 2021 Term Loan, 4.75%, 3/04/28 | United States | 2,682,244 | 2,666,406 | |||||||||||
|
| |||||||||||||
| 13,982,450 | ||||||||||||||
|
| |||||||||||||
| Communications Equipment 0.5% | ||||||||||||||
CommScope Inc., Initial Term Loans, 3.71%, 4/06/26 | United States | 1,374,996 | 1,341,192 | |||||||||||
|
| |||||||||||||
| Computer & Electronics Retail 0.7% | ||||||||||||||
Vision Solutions Inc., 2021 Incremental Term Loan, 4.75%, 4/24/28 | United States | 2,099,453 | 2,081,082 | |||||||||||
|
| |||||||||||||
| 154 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty Senior Loan ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| b | Senior Floating Rate Interests (continued) | |||||||||||||
| Construction & Engineering 0.4% | ||||||||||||||
Brand Energy & Infrastructure Services Inc., 2017 Term Loan, 5.25%, 6/21/24 | United States | 1,092,714 | $ | 1,046,503 | ||||||||||
|
| |||||||||||||
| Construction Materials 0.5% | ||||||||||||||
Cornerstone Building Brands Inc., 2021 Term Loan B, 3.75%, 4/12/28 | United States | 1,385,183 | 1,344,202 | |||||||||||
|
| |||||||||||||
| Containers & Packaging 2.8% | ||||||||||||||
BWAY Holding Company, 2017 Term Loan B, 3.48%, 4/03/24 | United States | 2,811,539 | 2,777,857 | |||||||||||
Charter NEX US Inc., 2021 Term Loan, 4.50%, 12/01/27 | United States | 2,074,797 | 2,066,042 | |||||||||||
Klockner-Pentaplast of America Inc., 2021 Term Loan B, 5.55%, 2/12/26 | Luxembourg | 2,391,716 | 2,186,937 | |||||||||||
| c | Reynolds Group Holdings Inc., 2021 Term Loan B, TBD, 9/20/28 | United States | 1,196,992 | 1,168,564 | ||||||||||
|
| |||||||||||||
| 8,199,400 | ||||||||||||||
|
| |||||||||||||
| Diversified Banks 0.5% | ||||||||||||||
Aqgen Island Holdings Inc., Term Loan, 4.51%, 8/02/28 | United States | 1,502,563 | 1,493,172 | |||||||||||
|
| |||||||||||||
| Diversified Financial Services 3.6% | ||||||||||||||
Amentum Government Services Holdings LLC, Term Loan B, 3.96%, 1/29/27 | United States | 1,518,658 | 1,504,733 | |||||||||||
Astra Acquisition Corp., 2021 1st Lien Term Loan, 5.75%, 10/25/28 | United States | 498,750 | 485,346 | |||||||||||
Asurion LLC, | ||||||||||||||
Term Loan B-8, 3.71%, 12/23/26 | United States | 1,089,555 | 1,067,535 | |||||||||||
2021 2nd Lien Term Loan B3, 5.71%, 1/31/28 | United States | 819,599 | 804,846 | |||||||||||
Replacement B-6 Term Loans, 3.58%, 11/03/23 | United States | 749,919 | 746,450 | |||||||||||
2021 2nd Lien Term Loan B4, 5.71%, 1/20/29 | United States | 1,397,666 | 1,368,406 | |||||||||||
Citadel Securities LP, 2021 Term Loan B, 2.93%, 2/02/28 | United States | 1,435,500 | 1,429,729 | |||||||||||
Edelman Financial Center LLC, 2021 Term Loan B, 4.25%, 4/07/28 | United States | 2,388,326 | 2,364,944 | |||||||||||
Jane Street Group LLC, 2021 Term Loan, 3.21%, 1/26/28 | United States | 927,773 | 917,145 | |||||||||||
|
| |||||||||||||
| 10,689,134 | ||||||||||||||
|
| |||||||||||||
| Diversified Telecommunication Services 1.2% | ||||||||||||||
Altice France SA, USD TLB-13 Incremental Term Loans, FRN, 4.51%, 8/14/26 | France | 2,385,792 | 2,345,043 | |||||||||||
Zayo Group Holdings Inc., Initial Dollar Term Loan, 3.46%, 3/09/27 | United States | 1,308,194 | 1,274,946 | |||||||||||
|
| |||||||||||||
| 3,619,989 | ||||||||||||||
|
| |||||||||||||
| Electronic Equipment & Instruments 1.0% | ||||||||||||||
Magenta Buyer LLC, 2021 USD 1st Lien Term Loan, 5.75%, 7/27/28 | United States | 1,405,697 | 1,397,263 | |||||||||||
Verifone Systems Inc., 2018 1st Lien Term Loan, 4.50%, 8/20/25 | United States | 1,660,537 | 1,639,780 | |||||||||||
|
| |||||||||||||
| 3,037,043 | ||||||||||||||
|
| |||||||||||||
| Food Products 0.7% | ||||||||||||||
Shearer’s Foods Inc., 2021 Term Loan, 4.25%, 9/23/27 | United States | — | ||||||||||||
Triton Water Holdings Inc, Term Loan, 4.51%, 3/31/28 | United States | 2,023,116 | 1,977,232 | |||||||||||
|
| |||||||||||||
| 1,977,232 | ||||||||||||||
|
| |||||||||||||
| Health Care Providers & Services 8.3% | ||||||||||||||
ADMI Corp., | ||||||||||||||
2021 Term Loan B2, 3.88%, 12/23/27 | United States | 2,664,018 | 2,622,605 | |||||||||||
2021 Incremental Term Loan B3, 4.00%, 12/23/27 | United States | 312,428 | 309,468 | |||||||||||
CHG Healthcare Services Inc., 2021 Term Loan, 4.51%, 9/29/28 | United States | 1,810,083 | 1,796,507 | |||||||||||
Gainwell Acquisition Corp., Term Loan B, FRN thereafter, 5.00%, 10/01/27 | United States | 2,907,439 | 2,907,439 | |||||||||||
Global Medical Response Inc., 2018 New Term Loans, 5.25%, 3/14/25 | United States | 1,138,962 | 1,133,876 | |||||||||||
Heartland Dental LLC, 2021 Incremental Term Loan, 4.45%, 4/30/25 | United States | 315,795 | 313,596 | |||||||||||
Icon Luxembourg SARL, | ||||||||||||||
LUX Term Loan, 3.31%, 7/03/28 | Luxembourg | 712,087 | 709,641 | |||||||||||
US Term Loan, 3.31%, 7/03/28 | United States | 177,417 | 176,807 | |||||||||||
Medical Solutions Holdings Inc., | ||||||||||||||
2021 First Lien Term Loan, 4.51%, 11/01/28 | United States | 1,501,231 | 1,490,910 | |||||||||||
2021 Delayed Draw Term Loan, 3.50%, 11/01/28 | United States | 285,949 | 283,983 | |||||||||||
| franklintempleton.com | Annual Report | 155 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty Senior Loan ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| b | Senior Floating Rate Interests (continued) | |||||||||||||
| Health Care Providers & Services (continued) | ||||||||||||||
Medline Borrower LP, USD Term Loan B, 3.75%, 10/23/28 | United States | 2,554,717 | $ | 2,532,197 | ||||||||||
National Mentor Holdings Inc., | ||||||||||||||
2021 Term Loan, 4.50%, 3/02/28 | United States | 1,977,031 | 1,917,987 | |||||||||||
2021 Term Loan C, 4.76%, 3/02/28 | United States | 62,563 | 60,695 | |||||||||||
Phoenix Guarantor Inc., | ||||||||||||||
Tranche B-1 Term Loan, 3.71%, 3/05/26 | United States | 1,025,607 | 1,015,833 | |||||||||||
2021 Term Loan B, 3.95%, 3/05/26 | United States | 790,882 | 783,677 | |||||||||||
Radiology Partners Inc., 2018 1st Lien Term Loan B, 4.72%, 7/09/25 | United States | 1,124,138 | 1,111,694 | |||||||||||
Team Health Holdings Inc., 1st Lien Term Loan, 3.75%, 2/06/24 | United States | 1,314,852 | 1,254,507 | |||||||||||
U.S. Anesthesia Partners Inc., 2021 Term Loan, 4.75%, 10/01/28 | United States | 1,744,470 | 1,735,424 | |||||||||||
U.S. Radiology Specialists Inc., 2020 Term Loan, 6.31%, 12/15/27 | United States | 1,288,101 | 1,285,821 | |||||||||||
U.S. Renal Care Inc., 2019 Term Loan B, 5.46%, 6/26/26 | United States | 1,088,832 | 1,004,448 | |||||||||||
|
| |||||||||||||
| 24,447,115 | ||||||||||||||
|
| |||||||||||||
| Health Care Services 0.7% | ||||||||||||||
MedAssets Software Intermediate Holdings Inc., 2021 Term Loan, 4.50%, 12/18/28 | United States | 2,118,473 | 2,100,593 | |||||||||||
|
| |||||||||||||
| Home Furnishings 0.7% | ||||||||||||||
AI Aqua Merger Sub Inc., | ||||||||||||||
c 2022 Term Loan B, TBD, zero cpn, 7/31/28 | United States | 426,667 | 422,801 | |||||||||||
c 2022 Delayed Draw Term loan, TBD, zero cpn, 7/31/28 | United States | 96,970 | 96,091 | |||||||||||
c 2021 1st Lien Term Loan B, 4.25%, 7/31/28 | United States | 1,498,333 | 1,486,399 | |||||||||||
c 2021 1st Lien Delayed Draw Term Loan, TBD, zero cpn, 7/31/28 | United States | 26,667 | 26,455 | |||||||||||
|
| |||||||||||||
| 2,031,746 | ||||||||||||||
|
| |||||||||||||
| Hotels Restaurants & Leisure 2.3% | ||||||||||||||
Caesars Resort Collection LLC, | ||||||||||||||
Term B-1 Loans, 3.96%, 7/21/25 | United States | 1,118,066 | 1,115,829 | |||||||||||
Term B Loans, 3.21%, 12/23/24 | United States | 1,617,792 | 1,611,499 | |||||||||||
Fertitta Entertainment LLC, 2022 Term Loan B, 4.50%, 1/27/29 | United States | 2,463,357 | 2,454,280 | |||||||||||
Hilton Grand Vacations BWR LLC, 2021 Term Loan B, 3.50%, 8/02/28 | United States | 1,667,950 | 1,660,236 | |||||||||||
|
| |||||||||||||
| 6,841,844 | ||||||||||||||
|
| |||||||||||||
| Insurance 2.1% | ||||||||||||||
Acrisure LLC, | ||||||||||||||
2021 First Lien Term Loan B, 4.75%, 2/15/27 | United States | 244,143 | 243,534 | |||||||||||
Term Loan B, 3.96%, 2/15/27 | United States | 1,726,223 | 1,705,370 | |||||||||||
Alliant Holdings Intermediate LLC, | ||||||||||||||
2021 Term Loan B4, 4.00%, 11/06/27 | United States | 757,843 | 754,107 | |||||||||||
Initial Term Loan, 3.71%, 5/09/25 | United States | 927,713 | 918,686 | |||||||||||
AssuredPartners Inc., | ||||||||||||||
2020 February Refinancing Term Loans, 3.96%, 2/12/27 | United States | 1,667,289 | 1,649,366 | |||||||||||
2021 Term Loan B, 4.00%, 2/12/27 | United States | 420,233 | 416,033 | |||||||||||
2022 Term Loan, 4.00%, 2/12/27 | United States | 568,750 | 563,242 | |||||||||||
|
| |||||||||||||
| 6,250,338 | ||||||||||||||
|
| |||||||||||||
| Interactive Media & Services 2.0% | ||||||||||||||
Arches Buyer Inc., 2021 Term Loan B, 3.75%, 12/06/27 | United States | 1,394,957 | 1,374,402 | |||||||||||
Hunter Holdco 3 Limited, USD Term Loan B, 5.26%, 8/19/28 | United Kingdom | 1,895,153 | 1,890,415 | |||||||||||
MH Sub I LLC, | ||||||||||||||
Initial Term Loans, 3.96%, 9/13/24 | United States | 1,292,718 | 1,279,073 | |||||||||||
2020 June New Term Loans, 4.75%, 9/13/24 | United States | 1,334,158 | 1,321,771 | |||||||||||
|
| |||||||||||||
| 5,865,661 | ||||||||||||||
|
| |||||||||||||
| IT Services 3.3% | ||||||||||||||
Deerfield Dakota Holding LLC, Term Loan B, 4.75%, 4/09/27 | United States | 2,677,850 | 2,668,089 | |||||||||||
Dun and Bradstreet Corp., Term Loan B, 3.70%, 2/06/26 | United States | 987,046 | 979,555 | |||||||||||
| 156 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty Senior Loan ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| b | Senior Floating Rate Interests (continued) | |||||||||||||
| IT Services (continued) | ||||||||||||||
Sedgwick Claims Management Services Inc., Initial Term Loans, 3.71%, 12/31/25 | United States | 2,270,201 | $ | 2,250,745 | ||||||||||
Verscend Holding Corp., 2021 Term Loan B, 4.46%, 8/27/25 | United States | 3,702,019 | 3,697,392 | |||||||||||
|
| |||||||||||||
| 9,595,781 | ||||||||||||||
|
| |||||||||||||
| Leisure Equipment & Products 0.2% | ||||||||||||||
Varsity Brands Inc., 2017 Term Loan B, 4.50%, 12/15/24 | United States | 497,398 | 478,176 | |||||||||||
|
| |||||||||||||
| Machinery 1.3% | ||||||||||||||
Vertical US Newco Inc., (thyssenkrupp Elevator), Term Loan B, 4.02%, 7/30/27 | United States | 3,720,485 | 3,692,600 | |||||||||||
|
| |||||||||||||
| Media 8.2% | ||||||||||||||
AMC Entertainment Holdings Inc., 2019 Term Loan B, 3.35%, 4/22/26 | United States | 247,449 | 221,477 | |||||||||||
Cengage Learning Inc., 2021 Term Loan B, 5.75%, 7/14/26 | United States | 3,027,327 | 3,006,907 | |||||||||||
Clear Channel Outdoor Holdings Inc., Term B Loan, 3.80%, 8/21/26 | United States | 2,939,279 | 2,894,279 | |||||||||||
Crown Finance US Inc., 2018 USD Term Loan, 3.51%, 2/28/25 | United States | 1,309,522 | 1,014,113 | |||||||||||
CSC Holdings LLC, March 2017 Incremental Term Loans, 2.65%, 7/17/25 | United States | 2,090,894 | 2,062,155 | |||||||||||
Diamond Sports Group LLC, | ||||||||||||||
2022 First Priority Term Loan, 9.00%, 5/26/26 | United States | 461,521 | 469,439 | |||||||||||
2022 2nd Lien Term Loan, 3.545%, 8/24/26 | United States | 931,770 | 322,919 | |||||||||||
Gray Television Inc., 2021 Term Loan D, 3.23%, 12/01/28 | United States | 798,000 | 794,936 | |||||||||||
McGraw-Hill Global Education Holdings LLC, 2021 Term Loan, 5.26%, 7/28/28 | United States | 1,498,175 | 1,484,834 | |||||||||||
| d | Nexstar Broadcasting Inc., Term B-4 Loan, 2.73%, 9/18/26 | United States | 1,210,393 | 1,207,258 | ||||||||||
Radiate Holdco LLC, 2021 Term Loan B, 4.00%, 9/25/26 | United States | 3,374,434 | 3,350,610 | |||||||||||
Univision Communications Inc., | ||||||||||||||
2022 Term Loan B, 4.00%, 1/31/29 | United States | 642,391 | 637,037 | |||||||||||
2021 First Lien Term Loan B, 4.00%, 3/15/26 | United States | 2,565,693 | 2,555,006 | |||||||||||
Virgin Media Bristol LLC, 2020 USD Term Loan Q, 3.65%, 1/31/29 | United States | 1,770,000 | 1,761,982 | |||||||||||
William Morris Endeavor Entertainment LLC and IMG LLC, Term Loan B, 3.21%, 5/18/25 | United States | 2,307,944 | 2,272,852 | |||||||||||
|
| |||||||||||||
| 24,055,804 | ||||||||||||||
|
| |||||||||||||
| Personal Products 1.8% | ||||||||||||||
Conair Holdings LLC, Term Loan B, 4.76%, 5/17/28 | United States | 2,163,873 | 2,133,038 | |||||||||||
Sunshine Luxembourg VII SARL, 2021 Term Loan B3, 4.76%, 10/01/26 | Luxembourg | 3,136,584 | 3,120,415 | |||||||||||
|
| |||||||||||||
| 5,253,453 | ||||||||||||||
|
| |||||||||||||
| Pharmaceuticals 4.3% | ||||||||||||||
Bausch Health Companies Inc., | ||||||||||||||
c 2022 Term Loan B, TBD, zero cpn, 1/27/27 | Canada | 1,031,104 | 1,022,809 | |||||||||||
Initial Term Loans, 3.46%, 6/02/25 | United States | 1,438,327 | 1,429,337 | |||||||||||
eResearchTechnology Inc., 2020 1st Lien Term Loan, 5.50%, 2/04/27 | United States | 3,483,191 | 3,475,580 | |||||||||||
Jazz Financing Lux S.a.r.l., USD Term Loan, 4.00%, 5/05/28 | United States | 2,203,410 | 2,198,044 | |||||||||||
Organon & Co., USD Term Loan, 3.56%, 6/02/28 | United States | 1,458,702 | 1,453,232 | |||||||||||
Parexel International Corporation, 2021 1st Lien Term Loan, 4.00%, 11/15/28 | United States | 1,593,548 | 1,583,876 | |||||||||||
Pathway Vet Alliance LLC, 2021 Term Loan, 4.21%, 3/31/27 | United States | 797,980 | 791,500 | |||||||||||
PetVet Care Centers LLC, 2021 Term Loan B3, 4.25%, 2/14/25 | United States | 730,401 | 727,892 | |||||||||||
|
| |||||||||||||
| 12,682,270 | ||||||||||||||
|
| |||||||||||||
| Precious Metals & Minerals 0.2% | ||||||||||||||
Lucid Energy Group II Borrower LLC, 2021 Term Loan, 5.00%, 11/24/28 | United States | 600,000 | 595,815 | |||||||||||
|
| |||||||||||||
| Real Estate Management & Development 0.7% | ||||||||||||||
Brookfield Property REIT Inc., 1st Lien Term Loan B, 2.96%, 8/27/25 | United States | 475,468 | 464,697 | |||||||||||
Cushman & Wakefield U.S. Borrower LLC, Replacement Term Loan, 3.21%, 8/21/25 | United States | 1,601,179 | 1,582,829 | |||||||||||
|
| |||||||||||||
| 2,047,526 | ||||||||||||||
|
| |||||||||||||
| franklintempleton.com | Annual Report | 157 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty Senior Loan ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| b | Senior Floating Rate Interests (continued) | |||||||||||||
| Retail REITs 1.3% | ||||||||||||||
Great Outdoors Group LLC, 2021 Term Loan B1, 4.50%, 3/06/28 | United States | 3,479,987 | $ | 3,471,826 | ||||||||||
Restoration Hardware Inc., Term Loan B, 3.00%, 10/20/28 | United States | 411,635 | 404,946 | |||||||||||
|
| |||||||||||||
| 3,876,772 | ||||||||||||||
|
| |||||||||||||
| Soft Drinks 0.3% | ||||||||||||||
Naked Juice LLC, | ||||||||||||||
Term Loan, 3.75%, 1/24/29 | United States | 909,154 | 896,167 | |||||||||||
Delayed Draw Term Loan, 3.75%, 1/24/29 | United States | 52,451 | 51,702 | |||||||||||
|
| |||||||||||||
| 947,869 | ||||||||||||||
|
| |||||||||||||
| Software 14.5% | ||||||||||||||
Aptean Inc., 2019 Term Loan, 4.71%, 4/23/26 | United States | 698,149 | 693,039 | |||||||||||
Athenahealth Inc., | ||||||||||||||
2022 Term Loan B, 4.00%, 2/15/29 | United States | 3,334,783 | 3,305,603 | |||||||||||
c 2022 Delayed Draw Term loan, TBD, zero cpn, 2/15/29 | United States | 565,217 | 560,272 | |||||||||||
Cloudera Inc., | ||||||||||||||
2021 Term Loan, 4.25%, 10/08/28 | United States | 1,533,333 | 1,517,042 | |||||||||||
2021 Second Lien Term Loan, 6.50%, 10/08/29 | United States | 303,306 | 299,514 | |||||||||||
Cornerstone OnDemand Inc., 2021 Term Loan, 4.25%, 10/16/28 | United States | 1,706,024 | 1,692,163 | |||||||||||
DCert Buyer Inc., | ||||||||||||||
2021 2nd Lien Term Loan, 7.457%, 2/19/29 | United States | 600,000 | 594,624 | |||||||||||
Term Loan B, 4.457%, 10/16/26 | United States | 2,886,626 | 2,869,984 | |||||||||||
Epicor Software Corporation, Term B Loans, 4.00%, 7/30/27 | United States | 2,812,137 | 2,793,422 | |||||||||||
Finastra USA Inc., Dollar Term Loan, 4.50%, 6/13/24 | United States | 2,501,921 | 2,474,063 | |||||||||||
GoTo Group Inc., Initial Term Loans, 5.22%, 8/31/27 | United States | 2,382,178 | 2,344,587 | |||||||||||
Hyland Software Inc., | ||||||||||||||
Term Loan, 4.25%, 7/01/24 | United States | 3,206,078 | 3,194,055 | |||||||||||
2021 2nd Lien Term Loan, 7.00%, 7/07/25 | United States | 30,303 | 30,038 | |||||||||||
Idera Inc., 2021 Term Loan, 4.50%, 3/02/28 | United States | 1,844,330 | 1,814,821 | |||||||||||
Ivanti Software Inc., | ||||||||||||||
2021 Term Loan B, 5.00%, 12/01/27 | United States | 1,594,500 | 1,575,565 | |||||||||||
2021 Add On Term Loan B, 4.75%, 12/01/27 | United States | 140,004 | 137,904 | |||||||||||
MA Finance Co., Tranche B-4 Term Loans, 5.25%, 6/05/25 | United States | 401,821 | 399,143 | |||||||||||
McAfee LLC, 2022 USD Term Loan B, 4.50%, 3/01/29 | United States | 1,354,839 | 1,347,218 | |||||||||||
Mitchell International Inc., 2021 Term Loan B, 4.25%, 10/15/28 | United States | 1,893,000 | 1,865,362 | |||||||||||
Navicure Inc., 2019 Term Loan B, 4.46%, 10/22/26 | United States | 2,699,330 | 2,695,956 | |||||||||||
Polaris Newco LLC, USD Term Loan B, 4.50%, 6/02/28 | United States | 3,402,890 | 3,382,898 | |||||||||||
Quest Software US Holdings Inc., 2022 Term Loan, 4.75%, 2/01/29 | United States | 1,700,000 | 1,677,024 | |||||||||||
RealPage Inc., 1st Lien Term Loan, 3.75%, 4/24/28 | United States | — | ||||||||||||
Sovos Compliance LLC, | ||||||||||||||
2021 Term Loan, 5.00%, 8/11/28 | United States | 1,659,219 | 1,659,228 | |||||||||||
2021 Delayed Draw Term Loan, 4.50%, 8/11/28 | United States | 287,250 | 287,251 | |||||||||||
The Ultimate Software Group Inc., 2021 Incremental Term Loans, 3.75%, 5/04/26 | United States | 2,469,289 | 2,452,732 | |||||||||||
Ultimate Software Group Inc. (The), | ||||||||||||||
Term Loan B, 4.76%, 5/04/26 | United States | 299,233 | 298,485 | |||||||||||
2021 2nd Lien Term Loan, 5.75%, 5/03/27 | United States | 570,096 | 567,514 | |||||||||||
|
| |||||||||||||
| 42,529,507 | ||||||||||||||
|
| |||||||||||||
| Specialty Retail 3.4% | ||||||||||||||
IRB Holding Corp, 2022 Term Loan B, 3.75%, 12/15/27 | United States | 1,141,274 | 1,136,281 | |||||||||||
Michaels Companies Inc., 2021 Term Loan B, 5.26%, 4/15/28 | United States | 1,998,910 | 1,880,085 | |||||||||||
PetSmart Inc., 2021 Term Loan B, 4.50%, 2/11/28 | United States | 1,734,584 | 1,731,331 | |||||||||||
SRS Distribution Inc., | ||||||||||||||
2022 Incremental Term Loan, 4.00%, 6/02/28 | United States | 79,545 | 78,700 | |||||||||||
2021 Term Loan B, 4.00%, 6/02/28 | United States | 1,679,497 | 1,661,308 | |||||||||||
Staples Inc., 2019 Refinancing Term B-1 Loans, 5.32%, 4/16/26 | United States | 2,849,336 | 2,699,148 | |||||||||||
| 158 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty Senior Loan ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| b | Senior Floating Rate Interests (continued) | |||||||||||||
| Specialty Retail (continued) | ||||||||||||||
Whatabrands LLC, 2021 Term Loan B, 3.75%, 8/03/28 | United States | 835,861 | $ | 826,897 | ||||||||||
|
| |||||||||||||
| 10,013,750 | ||||||||||||||
|
| |||||||||||||
| Technology Hardware, Storage & Peripherals 1.2% | ||||||||||||||
Greeneden U.S. Holdings II LLC, Initial Dollar Term Loan, 4.75%, 12/01/27 | United States | 3,472,452 | 3,471,376 | |||||||||||
|
| |||||||||||||
| Wireless Telecommunication Services 0.6% | ||||||||||||||
CCI Buyer Inc., Term Loan, 4.75%, 12/17/27 | United States | 1,895,970 | 1,873,853 | |||||||||||
|
| |||||||||||||
Total Floating Rate Loans (Cost $272,836,083) | 270,251,668 | |||||||||||||
|
| |||||||||||||
| Asset-Backed Securities 0.7% | ||||||||||||||
| a,e | BlueMountain CLO 2018-3 Ltd., 2018-3A, C, 144A, 2.458%, 2,10/25/2030 | United States | 1,000,000 | 984,380 | ||||||||||
| a,e | LCM XVIII LP, 2018A, CR, 144A, 2.104%, 2,04/20/2031 | United States | 1,000,000 | 982,112 | ||||||||||
|
| |||||||||||||
Total Asset-Backed Securities (Cost $1,996,875) | 1,966,492 | |||||||||||||
|
| |||||||||||||
Total Investments before Short Term Investments | 278,416,373 | |||||||||||||
|
| |||||||||||||
| Short Term Investments 5.1% | ||||||||||||||
| U.S. Government & Agency Securities (Cost $15,000,000) 5.1% | ||||||||||||||
| f | Federal Home Loan Bank Discount Notes,4/01/22 | United States | 15,000,000 | 15,000,000 | ||||||||||
|
| |||||||||||||
Total Investments (Cost $296,659,319) 100.2% | 293,416,373 | |||||||||||||
Other Assets, less Liabilities (0.2)% | (694,130 | ) | ||||||||||||
|
| |||||||||||||
Net Assets 100.0% | $ | 292,722,243 | ||||||||||||
|
| |||||||||||||
See Abbreviations on page 240.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. At March 31, 2022, the aggregate value of these securities was $8,014,011, representing 2.7% of net assets.
bThe coupon rate shown represents the rate at period end.
cA portion or all of the security represents an unsettled loan commitment. The coupon rate is to-be determined (TBD) at the time of settlement and will be based upon a reference index/floor plus a spread.
dA portion or all of the security purchased on a delayed delivery basis.
eThe coupon rate shown represents the rate inclusive of any caps or floors, if applicable, in effect at period end.
fThe security was issued on a discount basis with no stated coupon rate.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 159 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Consolidated Financial Highlights
Franklin Liberty Systematic Style Premia ETF
| Year Ended March 31, | ||||||||||||
| 2022 | 2021 | 2020a | ||||||||||
| Per share operating performance (for a share outstanding throughout the year) | ||||||||||||
Net asset value, beginning of year | $ | 19.55 | $ | 23.16 | $ | 25.00 | ||||||
|
| |||||||||||
| Income from investment operationsb: | ||||||||||||
Net investment incomec | 0.14 | 0.23 | 0.11 | |||||||||
Net realized and unrealized gains (losses) | 1.82 | (2.25 | ) | (1.94 | ) | |||||||
|
| |||||||||||
Total from investment operations | 1.96 | (2.02 | ) | (1.83 | ) | |||||||
|
| |||||||||||
| Less distributions from: | ||||||||||||
Net investment income | (0.26 | ) | (0.05 | ) | (0.01 | ) | ||||||
Net realized gains | — | (1.54 | ) | — | ||||||||
|
| |||||||||||
Total Distributions | (0.26 | ) | (1.59 | ) | (0.01 | ) | ||||||
|
| |||||||||||
Net asset value, end of year | $ | 21.25 | $ | 19.55 | $ | 23.16 | ||||||
|
| |||||||||||
Total returnd | 10.09% | (8.70)% | (7.34)% | |||||||||
| Ratios to average net assetse | ||||||||||||
Expenses before waiver and payments by affiliates | 0.73% | 1.14% | 1.15% | |||||||||
Expenses net of waiver and payments by affiliates | 0.63% | 0.65% | 0.65% | |||||||||
Net investment income | 0.69% | 1.08% | 1.67% | |||||||||
| Supplemental data | ||||||||||||
Net assets, end of year (000’s) | $55,258 | $46,927 | $50,948 | |||||||||
Portfolio turnover ratef | 189.89% | g | 171.16% | g | 60.95% | g | ||||||
aFor the period December 18, 2019 (commencement of operations) to March 31, 2020.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of Creation Unit Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year. Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period.
eRatios are annualized for periods less than one year.
fPortfolio turnover rate includes portfolio transactions that are executed as a result of the Fund offering and redeeming Creation Units solely for cash (“Cash creations”).
| gPortfolio turnover rate excluding cash creations was as follows: | 189.89% | 171.16% | 60.95% |
| 160 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Consolidated Schedule of Investments, March 31, 2022
Franklin Liberty Systematic Style Premia ETF
| Country | Shares | Value | ||||||||||||
| Common Stocks 63.16% | ||||||||||||||
| Aerospace & Defense 0.4% | ||||||||||||||
General Dynamics Corp. | United States | 955 | $ | 230,327 | ||||||||||
|
| |||||||||||||
| Air Freight & Logistics 0.9% | ||||||||||||||
Deutsche Post AG | Germany | 3,908 | 189,366 | |||||||||||
Expeditors International of Washington Inc. | United States | 695 | 71,696 | |||||||||||
FedEx Corp. | United States | 1,031 | 238,563 | |||||||||||
|
| |||||||||||||
| 499,625 | ||||||||||||||
|
| |||||||||||||
| Automobiles 0.3% | ||||||||||||||
Stellantis NV | United States | 7,863 | 129,482 | |||||||||||
Yamaha Motor Co. Ltd. | Japan | 1,100 | 24,977 | |||||||||||
|
| |||||||||||||
| 154,459 | ||||||||||||||
|
| |||||||||||||
| Banks 2.4% | ||||||||||||||
Banco Bilbao Vizcaya Argentaria SA | Spain | 21,371 | 123,886 | |||||||||||
Bank of Montreal | Canada | 2,500 | 294,444 | |||||||||||
Barclays PLC | United Kingdom | 65,151 | 127,213 | |||||||||||
BOC Hong Kong (Holdings) Ltd. | Hong Kong | 15,000 | 56,887 | |||||||||||
Canadian Imperial Bank of Commerce | Canada | 500 | 60,746 | |||||||||||
Hang Seng Bank Ltd. | Hong Kong | 1,500 | 28,960 | |||||||||||
Mediobanca Banca di Credito Finanziario SpA | Italy | 2,398 | 24,600 | |||||||||||
Mitsubishi UFJ Financial Group Inc. | Japan | 46,800 | 293,158 | |||||||||||
Mizuho Financial Group Inc. | Japan | 8,400 | 108,447 | |||||||||||
The Bank of Nova Scotia | Canada | 2,900 | 208,030 | |||||||||||
|
| |||||||||||||
| 1,326,371 | ||||||||||||||
|
| |||||||||||||
| Beverages 0.1% | ||||||||||||||
Heineken Holding NV | Netherlands | 466 | 36,865 | |||||||||||
|
| |||||||||||||
| Biotechnology 2.6% | ||||||||||||||
AbbVie Inc. | United States | 3,614 | 585,865 | |||||||||||
Gilead Sciences Inc. | United States | 5,062 | 300,936 | |||||||||||
| a | Regeneron Pharmaceuticals Inc. | United States | 419 | 292,638 | ||||||||||
| a | Vertex Pharmaceuticals Inc. | United States | 1,006 | 262,536 | ||||||||||
|
| |||||||||||||
| 1,441,975 | ||||||||||||||
|
| |||||||||||||
| Building Products 0.3% | ||||||||||||||
AGC Inc. | Japan | 800 | 32,329 | |||||||||||
Compagnie de Saint-Gobain | France | 2,030 | 122,579 | |||||||||||
Owens Corning | United States | 402 | 36,783 | |||||||||||
|
| |||||||||||||
| 191,691 | ||||||||||||||
|
| |||||||||||||
| Capital Markets 1.8% | ||||||||||||||
3i Group PLC | United Kingdom | 3,860 | 70,567 | |||||||||||
Ameriprise Financial Inc. | United States | 450 | 135,162 | |||||||||||
Goldman Sachs Group Inc. | United States | 1,373 | 453,227 | |||||||||||
SBI Holdings Inc. | Japan | 1,000 | 25,541 | |||||||||||
SEI Investments Co. | United States | 470 | 28,299 | |||||||||||
The Carlyle Group Inc. | United States | 660 | 32,281 | |||||||||||
UBS Group AG | Switzerland | 14,143 | 278,864 | |||||||||||
|
| |||||||||||||
| 1,023,941 | ||||||||||||||
|
| |||||||||||||
| Chemicals 1.9% | ||||||||||||||
Arkema SA | France | 189 | 22,869 | |||||||||||
Asahi Kasei Corp. | Japan | 5,000 | 43,769 | |||||||||||
Celanese Corp. | United States | 435 | 62,148 | |||||||||||
CF Industries Holdings Inc. | United States | 878 | 90,487 | |||||||||||
| b | Covestro AG, 144A | Germany | 776 | 39,579 | ||||||||||
Dow Inc. | United States | 3,023 | 192,626 | |||||||||||
| franklintempleton.com | Annual Report | 161 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
CONSOLIDATED SCHEDULE OF INVESTMENTS
Franklin Liberty Systematic Style Premia ETF (continued)
| Country | Shares | Value | ||||||||||||
| Common Stocks (continued) | ||||||||||||||
| Chemicals (continued) | ||||||||||||||
ICL Group Ltd. | Israel | 2,954 | $ | 35,388 | ||||||||||
LyondellBasell Industries NV, A | United States | 1,072 | 110,223 | |||||||||||
Mitsubishi Chemical Holdings Corp. | Japan | 5,000 | 33,660 | |||||||||||
Mosaic Co. | United States | 1,597 | 106,201 | |||||||||||
Nitto Denko Corp. | Japan | 600 | 43,600 | |||||||||||
Nutrien Ltd. | Canada | 2,200 | 227,600 | |||||||||||
Sumitomo Chemical Co. Ltd. | Japan | 5,900 | 27,319 | |||||||||||
Toray Industries Inc. | Japan | 5,400 | 28,420 | |||||||||||
|
| |||||||||||||
| 1,063,889 | ||||||||||||||
|
| |||||||||||||
| Commercial Services & Supplies 0.0%† | ||||||||||||||
Dai Nippon Printing Co. Ltd. | Japan | 900 | 21,340 | |||||||||||
|
| |||||||||||||
| Communications Equipment 0.3% | ||||||||||||||
Juniper Networks Inc. | United States | 666 | 24,749 | |||||||||||
| a | Nokia OYJ | Finland | 21,104 | 117,066 | ||||||||||
|
| |||||||||||||
| 141,815 | ||||||||||||||
|
| |||||||||||||
| Construction Materials 0.4% | ||||||||||||||
CRH PLC | Ireland | 617 | 24,955 | |||||||||||
HeidelbergCement AG | Germany | 584 | 33,568 | |||||||||||
| a | Holcim Ltd. | Switzerland | 2,098 | 103,253 | ||||||||||
James Hardie Industries PLC, CDI | United States | 1,630 | 49,696 | |||||||||||
|
| |||||||||||||
| 211,472 | ||||||||||||||
|
| |||||||||||||
| Consumer Finance 0.5% | ||||||||||||||
Ally Financial Inc. | United States | 1,465 | 63,698 | |||||||||||
Capital One Financial Corp. | United States | 1,676 | 220,042 | |||||||||||
|
| |||||||||||||
| 283,740 | ||||||||||||||
|
| |||||||||||||
| Distributors 0.3% | ||||||||||||||
Genuine Parts Co. | United States | 574 | 72,336 | |||||||||||
LKQ Corp. | United States | 1,093 | 49,633 | |||||||||||
Pool Corp. | United States | 54 | 22,834 | |||||||||||
|
| |||||||||||||
| 144,803 | ||||||||||||||
|
| |||||||||||||
| Diversified Financial Services 0.1% | ||||||||||||||
Investor AB, A | Sweden | 1,973 | 46,661 | |||||||||||
Sofina SA | Belgium | 61 | 22,411 | |||||||||||
|
| |||||||||||||
| 69,072 | ||||||||||||||
|
| |||||||||||||
| Diversified Telecommunication Services 1.6% | ||||||||||||||
| a | Liberty Global PLC, C | United Kingdom | 1,344 | 34,823 | ||||||||||
Nippon Telegraph & Telephone Corp. | Japan | 4,700 | 137,273 | |||||||||||
Orange SA | France | 7,946 | 94,635 | |||||||||||
Telefonica SA | Spain | 21,067 | 102,867 | |||||||||||
Verizon Communications Inc. | United States | 9,777 | 498,041 | |||||||||||
|
| |||||||||||||
| 867,639 | ||||||||||||||
|
| |||||||||||||
| Electric Utilities 0.7% | ||||||||||||||
CLP Holdings Ltd. | Hong Kong | 6,500 | 63,370 | |||||||||||
Endesa SA | Spain | 1,267 | 27,877 | |||||||||||
Exelon Corp. | United States | 3,312 | 157,750 | |||||||||||
| c | Fortum OYJ, Reg S | Finland | 1,719 | 31,616 | ||||||||||
NRG Energy Inc. | United States | 985 | 37,785 | |||||||||||
Power Assets Holdings Ltd. | Hong Kong | 6,000 | 39,112 | |||||||||||
Red Electrica Corp. SA | Spain | 1,791 | 37,085 | |||||||||||
|
| |||||||||||||
| 394,595 | ||||||||||||||
|
| |||||||||||||
| 162 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
CONSOLIDATED SCHEDULE OF INVESTMENTS
Franklin Liberty Systematic Style Premia ETF (continued)
| Country | Shares | Value | ||||||||||||
| Common Stocks (continued) | ||||||||||||||
| Electrical Equipment 1.0% | ||||||||||||||
ABB Ltd. | Switzerland | 5,119 | $ | 167,824 | ||||||||||
Emerson Electric Co. | United States | 2,424 | 237,673 | |||||||||||
Fuji Electric Co. Ltd. | Japan | 500 | 25,376 | |||||||||||
Mitsubishi Electric Corp. | Japan | 7,300 | 84,803 | |||||||||||
| a | Sensata Technologies Holding PLC | United States | 648 | 32,951 | ||||||||||
|
| |||||||||||||
| 548,627 | ||||||||||||||
|
| |||||||||||||
| Electronic Equipment, Instruments & Components 0.6% | ||||||||||||||
| a | Arrow Electronics Inc. | United States | 281 | 33,335 | ||||||||||
Kyocera Corp. | Japan | 1,300 | 73,711 | |||||||||||
Murata Manufacturing Co. Ltd. | Japan | 1,000 | 66,875 | |||||||||||
TE Connectivity Ltd. | Switzerland | 1,331 | 174,334 | |||||||||||
|
| |||||||||||||
| 348,255 | ||||||||||||||
|
| |||||||||||||
| Equity Real Estate Investment Trusts (REITs) 1.8% | ||||||||||||||
Ascendas REIT | Singapore | 11,600 | 25,114 | |||||||||||
Dexus | Australia | 4,362 | 35,868 | |||||||||||
Goodman Group | Australia | 6,803 | 116,938 | |||||||||||
GPT Group | Australia | 7,832 | 30,466 | |||||||||||
Link REIT | Hong Kong | 8,700 | 74,431 | |||||||||||
Public Storage | United States | 649 | 253,292 | |||||||||||
Scentre Group | Australia | 17,202 | 39,399 | |||||||||||
Segro PLC | United Kingdom | 4,846 | 85,850 | |||||||||||
Simon Property Group Inc. | United States | 1,349 | 177,475 | |||||||||||
Stockland | Australia | 9,631 | 30,882 | |||||||||||
Weyerhaeuser Co. | United States | 3,097 | 117,376 | |||||||||||
|
| |||||||||||||
| 987,091 | ||||||||||||||
|
| |||||||||||||
| Food & Staples Retailing 2.0% | ||||||||||||||
Carrefour SA | France | 2,459 | 53,749 | |||||||||||
Jeronimo Martins SGPS SA | Portugal | 1,115 | 26,958 | |||||||||||
Koninklijke Ahold Delhaize NV | Netherlands | 4,051 | 131,232 | |||||||||||
Loblaw Cos. Ltd. | Canada | 700 | 62,869 | |||||||||||
The Kroger Co. | United States | 2,882 | 165,340 | |||||||||||
Walgreens Boots Alliance Inc. | United States | 2,947 | 131,937 | |||||||||||
Walmart Inc. | United States | 3,688 | 549,217 | |||||||||||
|
| |||||||||||||
| 1,121,302 | ||||||||||||||
|
| |||||||||||||
| Food Products 1.0% | ||||||||||||||
Archer-Daniels-Midland Co. | United States | 2,292 | 206,876 | |||||||||||
Bunge Ltd. | United States | 578 | 64,048 | |||||||||||
Meiji Holdings Co. Ltd. | Japan | 500 | 27,230 | |||||||||||
The Hershey Co. | United States | 582 | 126,078 | |||||||||||
Tyson Foods Inc. | United States | 1,222 | 109,528 | |||||||||||
|
| |||||||||||||
| 533,760 | ||||||||||||||
|
| |||||||||||||
| Gas Utilities 0.2% | ||||||||||||||
Osaka Gas Co. Ltd. | Japan | 1,600 | 27,577 | |||||||||||
Tokyo Gas Co. Ltd. | Japan | 1,600 | 29,423 | |||||||||||
UGI Corp. | United States | 797 | 28,868 | |||||||||||
|
| |||||||||||||
| 85,868 | ||||||||||||||
|
| |||||||||||||
| Health Care Equipment & Supplies 0.4% | ||||||||||||||
| a | Edwards Lifesciences Corp. | United States | 1,115 | 131,258 | ||||||||||
| a | Hologic Inc. | United States | 1,015 | 77,972 | ||||||||||
|
| |||||||||||||
| 209,230 | ||||||||||||||
|
| |||||||||||||
| franklintempleton.com | Annual Report | 163 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
CONSOLIDATED SCHEDULE OF INVESTMENTS
Franklin Liberty Systematic Style Premia ETF (continued)
| Country | Shares | Value | ||||||||||||
| Common Stocks (continued) | ||||||||||||||
| Health Care Providers & Services 1.5% | ||||||||||||||
Cigna Corp. | United States | 1,345 | $ | 322,276 | ||||||||||
HCA Healthcare Inc. | United States | 1,028 | 257,637 | |||||||||||
| a | Laboratory Corp. of America Holdings | United States | 307 | 80,944 | ||||||||||
McKesson Corp. | United States | 610 | 186,739 | |||||||||||
|
| |||||||||||||
| 847,596 | ||||||||||||||
|
| |||||||||||||
| Hotels, Restaurants & Leisure 1.5% | ||||||||||||||
Aristocrat Leisure Ltd. | Australia | 2,416 | 66,585 | |||||||||||
Dominos Pizza Inc. | United States | 147 | 59,830 | |||||||||||
McDonald’s Corp. | United States | 2,263 | 559,595 | |||||||||||
Yum! Brands Inc. | United States | 1,216 | 144,132 | |||||||||||
|
| |||||||||||||
| 830,142 | ||||||||||||||
|
| |||||||||||||
| Industrial Conglomerates 0.3% | ||||||||||||||
CK Hutchison Holdings Ltd. | Hong Kong | 11,500 | 84,509 | |||||||||||
Jardine Matheson Holdings Ltd. | Hong Kong | 900 | 49,500 | |||||||||||
Toshiba Corp. | Japan | 1,600 | 61,298 | |||||||||||
|
| |||||||||||||
| 195,307 | ||||||||||||||
|
| |||||||||||||
| Insurance 1.6% | ||||||||||||||
Aflac Inc. | United States | 2,506 | 161,361 | |||||||||||
American Financial Group Inc. | United States | 290 | 42,230 | |||||||||||
Assicurazioni Generali SpA | Italy | 4,298 | 99,326 | |||||||||||
Dai-ichi Life Holdings Inc. | Japan | 3,900 | 80,297 | |||||||||||
Fairfax Financial Holdings Ltd. | Canada | 100 | 54,604 | |||||||||||
Fidelity National Financial Inc. | United States | 1,071 | 52,308 | |||||||||||
MetLife Inc. | United States | 2,871 | 201,774 | |||||||||||
NN Group NV | Netherlands | 1,065 | 54,343 | |||||||||||
Principal Financial Group Inc. | United States | 1,054 | 77,374 | |||||||||||
Sompo Holdings Inc. | Japan | 1,200 | 53,200 | |||||||||||
|
| |||||||||||||
| 876,817 | ||||||||||||||
|
| |||||||||||||
| Interactive Media & Services 3.2% | ||||||||||||||
| a | Alphabet Inc., A | United States | 125 | 347,669 | ||||||||||
| a | Alphabet Inc., C | United States | 294 | 821,139 | ||||||||||
| a | Meta Platforms Inc., A | United States | 2,613 | 581,027 | ||||||||||
|
| |||||||||||||
| 1,749,835 | ||||||||||||||
|
| |||||||||||||
| Internet & Direct Marketing Retail 0.2% | ||||||||||||||
eBay Inc. | United States | 2,434 | 139,371 | |||||||||||
|
| |||||||||||||
| IT Services 2.6% | ||||||||||||||
Accenture PLC, A | Ireland | 1,678 | 565,872 | |||||||||||
| a | CGI Inc. | Canada | 900 | 71,759 | ||||||||||
Cognizant Technology Solutions Corp., A | United States | 2,140 | 191,894 | |||||||||||
Fujitsu Ltd. | Japan | 800 | 121,376 | |||||||||||
| a | Gartner Inc. | United States | 340 | 101,137 | ||||||||||
International Business Machines Corp. | United States | 1,213 | 157,714 | |||||||||||
NTT Data Corp. | Japan | 2,500 | 49,804 | |||||||||||
Paychex Inc. | United States | 1,321 | 180,277 | |||||||||||
|
| |||||||||||||
| 1,439,833 | ||||||||||||||
|
| |||||||||||||
| Leisure Products 0.1% | ||||||||||||||
Hasbro Inc. | United States | 528 | 43,254 | |||||||||||
|
| |||||||||||||
| Life Sciences Tools & Services 1.1% | ||||||||||||||
Agilent Technologies Inc. | United States | 1,248 | 165,148 | |||||||||||
| a | IQVIA Holdings Inc. | United States | 782 | 180,806 | ||||||||||
| a | Mettler-Toledo International Inc. | United States | 95 | 130,453 | ||||||||||
| 164 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
CONSOLIDATED SCHEDULE OF INVESTMENTS
Franklin Liberty Systematic Style Premia ETF (continued)
| Country | Shares | Value | ||||||||||||
| Common Stocks (continued) | ||||||||||||||
| Life Sciences Tools & Services (continued) | ||||||||||||||
PerkinElmer Inc. | United States | 469 | $ | 81,822 | ||||||||||
| a | Waters Corp. | United States | 248 | 76,977 | ||||||||||
|
| |||||||||||||
| 635,206 | ||||||||||||||
|
| |||||||||||||
| Machinery 0.5% | ||||||||||||||
CNH Industrial NV | United Kingdom | 4,047 | 64,819 | |||||||||||
Dover Corp. | United States | 417 | 65,427 | |||||||||||
Minebea Mitsumi Inc. | Japan | 1,400 | 31,074 | |||||||||||
Snap-on Inc. | United States | 218 | 44,795 | |||||||||||
Techtronic Industries Co. Ltd. | Hong Kong | 6,000 | 97,224 | |||||||||||
|
| |||||||||||||
| 303,339 | ||||||||||||||
|
| |||||||||||||
| Marine 0.2% | ||||||||||||||
AP Moller-Maersk A/S, A | Denmark | 12 | 35,810 | |||||||||||
AP Moller-Maersk A/S, B | Denmark | 22 | 67,033 | |||||||||||
|
| |||||||||||||
| 102,843 | ||||||||||||||
|
| |||||||||||||
| Media 0.4% | ||||||||||||||
Dentsu Group Inc. | Japan | 800 | 33,088 | |||||||||||
Omnicom Group Inc. | United States | 824 | 69,941 | |||||||||||
The Interpublic Group of Cos. Inc. | United States | 1,538 | 54,522 | |||||||||||
WPP PLC | United Kingdom | 4,729 | 62,451 | |||||||||||
|
| |||||||||||||
| 220,002 | ||||||||||||||
|
| |||||||||||||
| Metals & Mining 1.5% | ||||||||||||||
Anglo American PLC | South Africa | 2,465 | 128,929 | |||||||||||
ArcelorMittal SA | Luxembourg | 2,618 | 85,349 | |||||||||||
BlueScope Steel Ltd. | Australia | 2,009 | 31,471 | |||||||||||
Nippon Steel Corp. | Japan | 3,500 | 62,603 | |||||||||||
Nucor Corp. | United States | 1,184 | 176,002 | |||||||||||
Rio Tinto PLC | Australia | 3,804 | 304,569 | |||||||||||
Steel Dynamics Inc. | United States | 810 | 67,578 | |||||||||||
|
| |||||||||||||
| 856,501 | ||||||||||||||
|
| |||||||||||||
| Multi-Utilities 0.9% | ||||||||||||||
DTE Energy Co. | United States | 787 | 104,049 | |||||||||||
E.ON SE | Germany | 8,758 | 102,728 | |||||||||||
Engie SA | France | 7,101 | 94,290 | |||||||||||
Sempra Energy | United States | 1,034 | 173,836 | |||||||||||
|
| |||||||||||||
| 474,903 | ||||||||||||||
|
| |||||||||||||
| Multiline Retail 0.8% | ||||||||||||||
Canadian Tire Corp. Ltd., A | Canada | 200 | 30,224 | |||||||||||
Target Corp. | United States | 1,922 | 407,887 | |||||||||||
|
| |||||||||||||
| 438,111 | ||||||||||||||
|
| |||||||||||||
| Oil, Gas & Consumable Fuels 3.0% | ||||||||||||||
BP PLC | United Kingdom | 32,098 | 158,630 | |||||||||||
ConocoPhillips | United States | 269 | 26,900 | |||||||||||
ENEOS Holdings Inc. | Japan | 12,200 | 46,036 | |||||||||||
Eni SpA | Italy | 10,312 | 152,531 | |||||||||||
Imperial Oil Ltd. | Canada | 1,000 | 48,437 | |||||||||||
INPEX Corp. | Japan | 4,300 | 51,015 | |||||||||||
OMV AG | Austria | 590 | 28,484 | |||||||||||
Repsol SA | Spain | 5,963 | 79,112 | |||||||||||
Shell PLC | Netherlands | 20,673 | 573,915 | |||||||||||
Suncor Energy Inc. | Canada | 6,100 | 198,767 | |||||||||||
| franklintempleton.com | Annual Report | 165 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
CONSOLIDATED SCHEDULE OF INVESTMENTS
Franklin Liberty Systematic Style Premia ETF (continued)
| Country | Shares | Value | ||||||||||||
| Common Stocks (continued) | ||||||||||||||
| Oil, Gas & Consumable Fuels (continued) | ||||||||||||||
TotalEnergies SE | France | 5,454 | $ | 279,328 | ||||||||||
|
| |||||||||||||
| 1,643,155 | ||||||||||||||
|
| |||||||||||||
| Paper & Forest Products 0.1% | ||||||||||||||
West Fraser Timber Co. Ltd. | Canada | 400 | 32,940 | |||||||||||
|
| |||||||||||||
| Personal Products 0.4% | ||||||||||||||
L’Oreal SA | France | 319 | 129,143 | |||||||||||
The Estee Lauder Cos Inc., A | United States | 283 | 77,067 | |||||||||||
|
| |||||||||||||
| 206,210 | ||||||||||||||
|
| |||||||||||||
| Pharmaceuticals 2.3% | ||||||||||||||
Bristol-Myers Squibb Co. | United States | 6,228 | 454,831 | |||||||||||
Otsuka Holdings Co. Ltd. | Japan | 1,600 | 55,788 | |||||||||||
Pfizer Inc. | United States | 10,666 | 552,179 | |||||||||||
Roche Holding AG, Bearer | Switzerland | 127 | 55,892 | |||||||||||
Roche Holding AG, Non-Voting | Switzerland | 319 | 127,028 | |||||||||||
|
| |||||||||||||
| 1,245,718 | ||||||||||||||
|
| |||||||||||||
| Professional Services 0.2% | ||||||||||||||
Adecco Group AG | Switzerland | 642 | 29,308 | |||||||||||
Randstad NV | Netherlands | 473 | 28,756 | |||||||||||
Robert Half International Inc. | United States | 443 | 50,582 | |||||||||||
|
| |||||||||||||
| 108,646 | ||||||||||||||
|
| |||||||||||||
| Real Estate Management & Development 0.8% | ||||||||||||||
Aroundtown SA | Germany | 3,975 | 22,972 | |||||||||||
| a | CBRE Group Inc., A | United States | 1,357 | 124,193 | ||||||||||
CK Asset Holdings Ltd. | Hong Kong | 8,500 | 58,285 | |||||||||||
Daiwa House Industry Co. Ltd. | Japan | 900 | 23,735 | |||||||||||
Henderson Land Development Co. Ltd. | Hong Kong | 6,000 | 24,976 | |||||||||||
Hongkong Land Holdings Ltd. | Hong Kong | 4,900 | 24,010 | |||||||||||
LEG Immobilien AG | Germany | 295 | 33,890 | |||||||||||
New World Development Co. Ltd. | Hong Kong | 6,000 | 24,402 | |||||||||||
Sun Hung Kai Properties Ltd. | Hong Kong | 5,500 | 65,735 | |||||||||||
Wharf Real Estate Investment Co. Ltd. | Hong Kong | 5,000 | 24,804 | |||||||||||
|
| |||||||||||||
| 427,002 | ||||||||||||||
|
| |||||||||||||
| Road & Rail 1.5% | ||||||||||||||
AMERCO | United States | 39 | 23,281 | |||||||||||
JB Hunt Transport Services Inc. | United States | 345 | 69,272 | |||||||||||
Knight-Swift Transportation Holdings Inc. | United States | 634 | 31,992 | |||||||||||
MTR Corp. Ltd. | Hong Kong | 6,500 | 35,150 | |||||||||||
Old Dominion Freight Line Inc. | United States | 406 | 121,264 | |||||||||||
Union Pacific Corp. | United States | 1,984 | 542,049 | |||||||||||
|
| |||||||||||||
| 823,008 | ||||||||||||||
|
| |||||||||||||
| Semiconductors & Semiconductor Equipment 4.0% | ||||||||||||||
Intel Corp. | United States | 11,478 | 568,850 | |||||||||||
Micron Technology Inc. | United States | 4,749 | 369,900 | |||||||||||
| a | ON Semiconductor Corp. | United States | 1,177 | 73,692 | ||||||||||
| a | Qorvo Inc. | United States | 465 | 57,706 | ||||||||||
QUALCOMM Inc. | United States | 3,488 | 533,036 | |||||||||||
| a | Renesas Electronics Corp. | Japan | 5,100 | 60,171 | ||||||||||
Texas Instruments Inc. | United States | 3,040 | 557,779 | |||||||||||
|
| |||||||||||||
| 2,221,134 | ||||||||||||||
|
| |||||||||||||
| 166 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
CONSOLIDATED SCHEDULE OF INVESTMENTS
Franklin Liberty Systematic Style Premia ETF (continued)
| Country | Shares | Value | ||||||||||||
| Common Stocks (continued) | ||||||||||||||
| Software 6.1% | ||||||||||||||
| a | Cadence Design Systems Inc. | United States | 1,168 | $ | 192,089 | |||||||||
Constellation Software Inc. | Canada | 100 | 171,090 | |||||||||||
| a | Dropbox Inc., A | United States | 1,245 | 28,946 | ||||||||||
| a | Fair Isaac Corp. | United States | 110 | 51,311 | ||||||||||
Intuit Inc. | United States | 1,061 | 510,171 | |||||||||||
Microsoft Corp. | United States | 4,527 | 1,395,719 | |||||||||||
Open Text Corp. | Canada | 1,100 | 46,684 | |||||||||||
Oracle Corp. | United States | 1,520 | 125,750 | |||||||||||
SAP SE | Germany | 4,197 | 472,210 | |||||||||||
SS&C Technologies Holdings Inc. | United States | 911 | 68,343 | |||||||||||
| a | Synopsys Inc. | United States | 650 | 216,626 | ||||||||||
The Sage Group PLC | United Kingdom | 4,096 | 37,816 | |||||||||||
Trend Micro Inc. | Japan | 500 | 29,495 | |||||||||||
|
| |||||||||||||
| 3,346,250 | ||||||||||||||
|
| |||||||||||||
| Specialty Retail 3.1% | ||||||||||||||
Advance Auto Parts Inc. | United States | 258 | 53,396 | |||||||||||
| a | AutoZone Inc. | United States | 85 | 173,789 | ||||||||||
Bath & Body Works Inc. | United States | 1,079 | 51,576 | |||||||||||
Best Buy Co. Inc. | United States | 895 | 81,356 | |||||||||||
Industria de Diseno Textil SA | Spain | 1,501 | 33,034 | |||||||||||
Kingfisher PLC | United Kingdom | 8,346 | 28,065 | |||||||||||
Lowe’s Cos Inc. | United States | 2,224 | 449,671 | |||||||||||
| a | O’Reilly Automotive Inc. | United States | 273 | 186,994 | ||||||||||
The Home Depot Inc. | United States | 1,812 | 542,386 | |||||||||||
Tractor Supply Co. | United States | 166 | 38,740 | |||||||||||
| a | Ulta Beauty Inc. | United States | 215 | 85,617 | ||||||||||
|
| |||||||||||||
| 1,724,624 | ||||||||||||||
|
| |||||||||||||
| Technology Hardware, Storage & Peripherals 0.5% | ||||||||||||||
Hewlett Packard Enterprise Co. | United States | 5,366 | 89,666 | |||||||||||
HP Inc. | United States | 4,962 | 180,120 | |||||||||||
|
| |||||||||||||
| 269,786 | ||||||||||||||
|
| |||||||||||||
| Textiles, Apparel & Luxury Goods 0.7% | ||||||||||||||
Burberry Group PLC | United Kingdom | 1,622 | 35,750 | |||||||||||
Gildan Activewear Inc. | Canada | 800 | 30,032 | |||||||||||
LVMH Moet Hennessy Louis Vuitton SE | France | 388 | 280,351 | |||||||||||
Pandora AS | Denmark | 391 | 37,876 | |||||||||||
|
| |||||||||||||
| 384,009 | ||||||||||||||
|
| |||||||||||||
| Tobacco 0.2% | ||||||||||||||
Imperial Brands PLC | United Kingdom | 3,559 | 75,467 | |||||||||||
Japan Tobacco Inc. | Japan | 1,900 | 32,678 | |||||||||||
|
| |||||||||||||
| 108,145 | ||||||||||||||
|
| |||||||||||||
| Trading Companies & Distributors 1.6% | ||||||||||||||
| a | AerCap Holdings NV | Ireland | 545 | 27,403 | ||||||||||
Ferguson PLC | United States | 903 | 123,411 | |||||||||||
ITOCHU Corp. | Japan | 4,900 | 167,296 | |||||||||||
Marubeni Corp. | Japan | 6,400 | 75,192 | |||||||||||
Mitsubishi Corp. | Japan | 5,200 | 197,118 | |||||||||||
Mitsui & Co. Ltd. | Japan | 6,500 | 178,225 | |||||||||||
Sumitomo Corp. | Japan | 4,600 | 80,308 | |||||||||||
Toyota Tsusho Corp. | Japan | 800 | 33,351 | |||||||||||
|
| |||||||||||||
| 882,304 | ||||||||||||||
|
| |||||||||||||
| franklintempleton.com | Annual Report | 167 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
CONSOLIDATED SCHEDULE OF INVESTMENTS
Franklin Liberty Systematic Style Premia ETF (continued)
| Country | Shares | Value | ||||||||||||
| Common Stocks (continued) | ||||||||||||||
| Wireless Telecommunication Services 0.7% | ||||||||||||||
KDDI Corp. | Japan | 6,400 | $ | 211,180 | ||||||||||
Vodafone Group PLC | United Kingdom | 108,399 | 178,176 | |||||||||||
|
| |||||||||||||
| 389,356 | ||||||||||||||
|
| |||||||||||||
Total Common Stocks (Cost $31,430,864) | 34,903,099 | |||||||||||||
|
| |||||||||||||
Total Investments (Cost $31,430,864) 63.16% | 34,903,099 | |||||||||||||
Other Assets, less Liabilities 36.84% | 20,355,215 | |||||||||||||
|
| |||||||||||||
Net Assets 100.0% | $ | 55,258,314 | ||||||||||||
|
| |||||||||||||
*The principal amount is stated in U.S. dollars unless otherwise indicated.
†Rounds to less than 0.1% of net assets.
aNon-income producing.
bSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. At March 31, 2022, the value of this security was $39,579, representing 0.1% of net assets.
cSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. At March 31, 2022, the value of this security was $31,616, representing 0.1% of net assets.
At March 31, 2022, the Fund had the following total return equity swap contracts outstanding. See Note 1(c).
| Swaps | ||||||||||||||||||||||
Description OTC Swap Contracts Short | Financing Rate | Payment Frequency | Counterparty | Maturity Date | Notional Amount | Unrealized Appreciation (Depreciation) | ||||||||||||||||
MSFTLSSP | 1-month USD LIBOR | At Maturity | MSCS | 4/21/22 | 24,824 | 878 | ||||||||||||||||
At March 31, 2022 the Fund had the following forward exchange contracts outstanding. See Note 1(c).
| Forward Exchange Contracts | ||||||||||||||||||||||||||||
| Currency | Counterpartya | Type | Quantity | Contract Amount | Settlement Date | Unrealized Appreciation | Unrealized Depreciation | |||||||||||||||||||||
| OTC Forward Exchange Contracts | ||||||||||||||||||||||||||||
Australian Dollar | MSCO | Buy | 2,024,413 | $ | 1,485,368 | 6/15/22 | $ | 36,706 | $ | — | ||||||||||||||||||
Australian Dollar | MSCO | Buy | 2,130,395 | 1,563,130 | 6/15/22 | 38,627 | — | |||||||||||||||||||||
Australian Dollar | MSCO | Sell | 2,130,395 | 1,565,879 | 6/15/22 | — | (35,879 | ) | ||||||||||||||||||||
Brazilian Real | MSCO | Buy | 3,706,831 | 713,717 | 6/15/22 | 50,314 | — | |||||||||||||||||||||
Brazilian Real | MSCO | Buy | 200,318 | 38,489 | 6/15/22 | 2,800 | — | |||||||||||||||||||||
Canadian Dollar | MSCO | Buy | 1,784,528 | 1,392,503 | 6/15/22 | 35,942 | — | |||||||||||||||||||||
Canadian Dollar | MSCO | Buy | 697,060 | 550,674 | 6/15/22 | 7,296 | — | |||||||||||||||||||||
Czech Koruna | MSCO | Buy | 38,806,504 | 1,682,884 | 6/15/22 | 70,063 | — | |||||||||||||||||||||
Czech Koruna | MSCO | Sell | 351,211 | 15,558 | 6/15/22 | — | (307 | ) | ||||||||||||||||||||
Euro | MSCO | Sell | 1,016,753 | 1,127,929 | 6/15/22 | — | (6,412 | ) | ||||||||||||||||||||
Euro | MSCO | Sell | 298,372 | 330,559 | 6/15/22 | — | (2,321 | ) | ||||||||||||||||||||
Great British Pound | MSCO | Buy | 1,035,491 | 1,363,150 | 6/15/22 | — | (158 | ) | ||||||||||||||||||||
Great British Pound | MSCO | Buy | 452,157 | 595,447 | 6/15/22 | — | (284 | ) | ||||||||||||||||||||
Hungarian Forint | MSCO | Buy | 714,098,062 | 2,050,653 | 6/15/22 | 91,480 | — | |||||||||||||||||||||
Hungarian Forint | MSCO | Sell | 471,892,664 | 1,386,207 | 6/15/22 | — | (29,364 | ) | ||||||||||||||||||||
Hungarian Forint | MSCO | Sell | 714,098,062 | 2,097,697 | 6/15/22 | — | (44,436 | ) | ||||||||||||||||||||
Israeli Shekel | �� | MSCO | Buy | 1,322,400 | 409,658 | 6/15/22 | 5,606 | — | ||||||||||||||||||||
Israeli Shekel | MSCO | Sell | 11,636,234 | 3,581,702 | 6/15/22 | — | (72,346 | ) | ||||||||||||||||||||
Japanese Yen | MSCO | Sell | 57,183,755 | 494,259 | 6/15/22 | 22,257 | — | |||||||||||||||||||||
Japanese Yen | MSCO | Sell | 213,281,806 | 1,800,513 | 6/15/22 | 40,058 | — | |||||||||||||||||||||
Mexican Peso | MSCO | Buy | 61,939,237 | 2,909,894 | 6/15/22 | 156,759 | — | |||||||||||||||||||||
Mexican Peso | MSCO | Sell | 31,585,166 | 1,507,098 | 6/15/22 | — | (56,704 | ) | ||||||||||||||||||||
New Zealand Dollar | MSCO | Buy | 4,018,526 | 2,746,944 | 6/15/22 | 44,792 | — | |||||||||||||||||||||
| 168 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
CONSOLIDATED SCHEDULE OF INVESTMENTS
Franklin Liberty Systematic Style Premia ETF (continued)
| Forward Exchange Contracts (continued) | ||||||||||||||||||||||||||||
| Currency | Counterpartya | Type | Quantity | Contract Amount | Settlement Date | Unrealized Appreciation | Unrealized Depreciation | |||||||||||||||||||||
| OTC Forward Exchange Contracts (continued) | ||||||||||||||||||||||||||||
New Zealand Dollar | MSCO | Sell | 5,672,608 | $ | 3,881,601 | 6/15/22 | $ | — | $ | (59,253 | ) | |||||||||||||||||
Norwegian Krone | MSCO | Buy | 10,898,000 | 1,224,748 | 6/15/22 | 20,995 | — | |||||||||||||||||||||
Norwegian Krone | MSCO | Sell | 10,898,000 | 1,216,254 | 6/15/22 | — | (29,489 | ) | ||||||||||||||||||||
South African Rand | MSCO | Buy | 11,974,500 | 793,576 | 6/15/22 | 18,511 | — | |||||||||||||||||||||
Swedish Krona | MSCO | Buy | 3,429,302 | 364,006 | 6/15/22 | 4,612 | — | |||||||||||||||||||||
Swedish Krona | MSCO | Buy | 15,907,993 | 1,688,567 | 6/15/22 | 21,393 | — | |||||||||||||||||||||
Swedish Krona | MSCO | Sell | 15,907,993 | 1,641,722 | 6/15/22 | — | (68,238 | ) | ||||||||||||||||||||
Swiss Franc | MSCO | Buy | 696,831 | 754,511 | 6/15/22 | 4,990 | — | |||||||||||||||||||||
Swiss Franc | MSCO | Buy | 242,473 | 258,808 | 6/15/22 | 5,472 | — | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Forward Exchange Contracts |
| $ | 678,673 | $ | (405,191 | ) | ||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) |
| $ | 273,482 | |||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.
At March 31, 2022, the Fund had the following futures contracts outstanding. See Note 1(c).
| Futures Contracts | ||||||||||||||||||||
| Description | Type | Number of Contracts | Notional Amount* | Expiration Date | Value/Unrealized Appreciation (Depreciation) | |||||||||||||||
| Index Contracts | ||||||||||||||||||||
Australian 10 Yr. Bond | Long | 92 | $ | 8,756,344 | 6/15/22 | $ | (311,054 | ) | ||||||||||||
Euro-OAT | Long | 39 | 6,574,528 | 6/08/22 | (320,720 | ) | ||||||||||||||
Euro-BTP | Long | 28 | 4,308,938 | 6/08/22 | (146,467 | ) | ||||||||||||||
EURO STOXX 50 Index | Long | 77 | 3,275,320 | 6/17/22 | 2,408 | |||||||||||||||
S&P/TSX 60 Index | Long | 6 | 1,265,378 | 6/16/22 | 38,771 | |||||||||||||||
Mex Bolsa Index | Long | 39 | 1,109,433 | 6/17/22 | 53,287 | |||||||||||||||
FTSE/MIB Index | Long | 8 | 1,086,214 | 6/17/22 | 27,539 | |||||||||||||||
FTSE 100 Index | Long | 11 | 1,084,209 | 6/17/22 | 30,242 | |||||||||||||||
OMXS30 Index | Long | 18 | 402,708 | 4/13/22 | (12,576 | ) | ||||||||||||||
CAC 40 10 Euro | Long | 3 | 222,224 | 4/14/22 | 1,503 | |||||||||||||||
IBEX 35 Index | Short | 3 | 280,919 | 4/14/22 | (1,316 | ) | ||||||||||||||
Nikkei 225 Mini | Short | 3 | 687,868 | 6/09/22 | (35,360 | ) | ||||||||||||||
DAX Index | Short | 2 | 802,944 | 6/17/22 | 3,528 | |||||||||||||||
Euro-Bund | Short | 8 | 1,412,265 | 6/08/22 | 21,145 | |||||||||||||||
S&P 500 E-Mini | Short | 8 | 1,812,300 | 6/17/22 | (71,980 | ) | ||||||||||||||
Canada 10 Yr. Bond | Short | 21 | 2,195,076 | 6/21/22 | 95,454 | |||||||||||||||
SPI 200 Index | Short | 17 | 2,386,950 | 6/16/22 | (88,294 | ) | ||||||||||||||
SGX Nifty 50 | Short | 82 | 2,875,986 | 4/28/22 | (13,478 | ) | ||||||||||||||
U.S. Treasury 10 Yr. Note | Short | 66 | 8,109,750 | 6/21/22 | 222,643 | |||||||||||||||
Long Gilt, June | Short | 61 | 9,736,670 | 6/28/22 | 127,823 | |||||||||||||||
| Commodity Contracts | ||||||||||||||||||||
NY Harbor ULSD, May | Long | 6 | 846,947 | 4/29/22 | 24,077 | |||||||||||||||
Soybean Oil, May | Long | 20 | 839,280 | 5/13/22 | 29,850 | |||||||||||||||
Brent Crude, June | Long | 8 | 837,680 | 4/29/22 | 18,356 | |||||||||||||||
Soybean, May | Long | 10 | 809,125 | 5/13/22 | 6,137 | |||||||||||||||
Low Sulphur Gasoil, May | Long | 8 | 806,400 | 5/12/22 | 28,786 | |||||||||||||||
WTI Crude, May | Long | 8 | 802,240 | 4/20/22 | (1,719 | ) | ||||||||||||||
Gasoline Rbob, May | Long | 6 | 794,027 | 4/29/22 | 4,379 | |||||||||||||||
Cotton No. 2, May | Long | 9 | 610,605 | 5/06/22 | 72,640 | |||||||||||||||
Gold 100 Ounce, June | Long | 2 | 390,800 | 6/28/22 | 1,535 | |||||||||||||||
Silver, May | Long | 2 | 251,330 | 5/26/22 | (3,758 | ) | ||||||||||||||
Live Cattle, October | Long | 4 | 231,080 | 10/31/22 | 1,508 | |||||||||||||||
Sugar No. 11, October | Long | 6 | 129,965 | 9/30/22 | 11,205 | |||||||||||||||
Copper, September | Long | 1 | 118,825 | 9/28/22 | 5,673 | |||||||||||||||
| franklintempleton.com | Annual Report | 169 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
CONSOLIDATED SCHEDULE OF INVESTMENTS
Franklin Liberty Systematic Style Premia ETF (continued)
| Futures Contracts (continued) | ||||||||||||||||||||
| Description | Type | Number of Contracts | Notional Amount* | Expiration Date | Value/Unrealized Appreciation (Depreciation) | |||||||||||||||
| Commodity Contracts (continued) | ||||||||||||||||||||
Cotton No. 2, December | Long | 2 | $ | 111,280 | 12/07/22 | $ | 9,004 | |||||||||||||
Cocoa, September | Long | 4 | 107,760 | 9/15/22 | (1,225 | ) | ||||||||||||||
Corn, September | Long | 3 | 104,437 | 9/14/22 | 7,479 | |||||||||||||||
Lean Hog, August | Long | 2 | 94,760 | 8/12/22 | 874 | |||||||||||||||
Coffee ‘C’, September | Long | 1 | 84,637 | 9/20/22 | (8,928 | ) | ||||||||||||||
Soybean Meal, December | Long | 2 | 82,300 | 12/14/22 | (852 | ) | ||||||||||||||
Soybean Oil, December | Long | 2 | 76,248 | 12/14/22 | 570 | |||||||||||||||
Soybean, November | Long | 1 | 71,025 | 11/14/22 | (2,322 | ) | ||||||||||||||
Wheat, May | Long | 1 | 50,300 | 5/13/22 | (3,303 | ) | ||||||||||||||
Wheat, September | Long | 1 | 49,450 | 9/14/22 | 10,310 | |||||||||||||||
Corn, May | Long | 1 | 37,438 | 5/13/22 | 5,135 | |||||||||||||||
Cocoa, May | Short | 1 | 26,500 | 5/13/22 | (1,858 | ) | ||||||||||||||
Soybean Meal, May | Short | 4 | 187,000 | 5/13/22 | (8,092 | ) | ||||||||||||||
Platinum, July | Short | 4 | 199,160 | 7/27/22 | 5,710 | |||||||||||||||
Copper, May | Short | 2 | 237,550 | 5/26/22 | (10,213 | ) | ||||||||||||||
Lean Hog, June | Short | 5 | 241,250 | 6/14/22 | (1,254 | ) | ||||||||||||||
Coffee ‘C’, May | Short | 4 | 339,600 | 5/18/22 | (16,774 | ) | ||||||||||||||
Natural Gas, May | Short | 8 | 451,360 | 4/27/22 | (58,099 | ) | ||||||||||||||
Sugar No. 11, May | Short | 35 | 764,008 | 4/29/22 | (75,195 | ) | ||||||||||||||
Live Cattle, June | Short | 28 | 1,535,800 | 6/30/22 | (22,522 | ) | ||||||||||||||
|
| |||||||||||||||||||
Total Futures Contracts |
| $ | (349,788 | ) | ||||||||||||||||
|
| |||||||||||||||||||
*As of year end.
The following table represents the individual short positions and related values of the equity securities underlying the total return swap with Morgan Stanley Capital Services LLC as of March 31, 2022 , expiration date 4/22/22:
| Country | Shares | Value | ||||||||||||
| Reference Entity – Short 100.00% | ||||||||||||||
| Automobiles & Components 4.28% | ||||||||||||||
Aptiv PLC | United States | (1,226 | ) | $ | (146,765 | ) | ||||||||
BorgWarner Inc. | United States | (1,069 | ) | (41,584 | ) | |||||||||
Denso Corp. | Japan | (1,900 | ) | (123,040 | ) | |||||||||
Ferrari NV | Italy | (555 | ) | (122,701 | ) | |||||||||
Lear Corp. | United States | (264 | ) | (37,644 | ) | |||||||||
Lucid Group Inc., A | United States | (1,952 | ) | (49,581 | ) | |||||||||
Nissan Motor Co. Ltd. | Japan | (10,000 | ) | (45,133 | ) | |||||||||
Porsche Automobil Holding SE | Germany | (470 | ) | (45,967 | ) | |||||||||
Tesla Inc. | United States | (414 | ) | (446,126 | ) | |||||||||
|
| |||||||||||||
| (1,058,541 | ) | |||||||||||||
|
| |||||||||||||
| Banks 1.66% | ||||||||||||||
Danske Bank A/S | Denmark | (3,051 | ) | (51,388 | ) | |||||||||
First Republic Bank | United States | (802 | ) | (130,004 | ) | |||||||||
Huntington Bancshares Inc. | United States | (6,314 | ) | (92,311 | ) | |||||||||
Skandinaviska Enskilda Banken AB, A | Sweden | (7,022 | ) | (77,194 | ) | |||||||||
Swedbank AB | Sweden | (3,971 | ) | (60,080 | ) | |||||||||
|
| |||||||||||||
| (410,977 | ) | |||||||||||||
|
| |||||||||||||
| Capital Goods 10.54% | ||||||||||||||
Airbus SE | France | (2,645 | ) | (324,785 | ) | |||||||||
Alfa Laval AB | Sweden | (1,393 | ) | (48,624 | ) | |||||||||
Alstom SA | France | (1,396 | ) | (33,038 | ) | |||||||||
| 170 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
CONSOLIDATED SCHEDULE OF INVESTMENTS
Franklin Liberty Systematic Style Premia ETF (continued)
| Country | Shares | Value | ||||||||||||
| Reference Entity – Short (continued) | ||||||||||||||
| Capital Goods (continued) | ||||||||||||||
Assa Abloy AB, B | Sweden | (4,384 | ) | $ | (119,909 | ) | ||||||||
Atlas Copco AB, A | Sweden | (1,661 | ) | (87,636 | ) | |||||||||
Boeing Co. | United States | (1,810 | ) | (346,615 | ) | |||||||||
CAE Inc. | Canada | (1,500 | ) | (39,078 | ) | |||||||||
Epiroc AB, A | Sweden | (2,901 | ) | (62,942 | ) | |||||||||
Epiroc AB, B | Sweden | (1,694 | ) | (31,001 | ) | |||||||||
Ferrovial SA | Spain | (2,130 | ) | (57,187 | ) | |||||||||
Generac Holdings Inc. | United States | (287 | ) | (85,314 | ) | |||||||||
General Electric Co. | United States | (757 | ) | (69,265 | ) | |||||||||
HEICO Corp. | United States | (197 | ) | (30,247 | ) | |||||||||
HEICO Corp., A | United States | (331 | ) | (41,981 | ) | |||||||||
Howmet Aerospace Inc. | United States | (1,227 | ) | (44,098 | ) | |||||||||
Kone Oyj | Finland | (1,540 | ) | (81,545 | ) | |||||||||
Melrose Industries PLC | United Kingdom | (18,968 | ) | (31,180 | ) | |||||||||
MTU Aero Engines AG | Germany | (230 | ) | (53,920 | ) | |||||||||
Nibe Industrier AB | Sweden | (6,255 | ) | (70,508 | ) | |||||||||
Plug Power Inc. | United States | (2,514 | ) | (71,926 | ) | |||||||||
Rolls-Royce Holdings PLC | United Kingdom | (37,945 | ) | (50,510 | ) | |||||||||
Safran SA | France | (1,540 | ) | (183,788 | ) | |||||||||
Siemens Energy AG | Germany | (1,778 | ) | (40,990 | ) | |||||||||
Skanska AB, B | Sweden | (1,492 | ) | (33,844 | ) | |||||||||
SKF AB, B | Sweden | (1,672 | ) | (27,620 | ) | |||||||||
Smiths Group PLC | United Kingdom | (1,753 | ) | (33,525 | ) | |||||||||
Thales SA | France | (454 | ) | (57,561 | ) | |||||||||
TransDigm Group Inc. | United States | (236 | ) | (153,763 | ) | |||||||||
United Rentals Inc. | United States | (325 | ) | (115,443 | ) | |||||||||
Vestas Wind Systems A/S | Denmark | (4,890 | ) | (146,107 | ) | |||||||||
Vinci SA | France | (353 | ) | (36,523 | ) | |||||||||
|
| |||||||||||||
| (2,610,473 | ) | |||||||||||||
|
| |||||||||||||
| Commercial & Professional Services 0.82% | ||||||||||||||
CoStar Group Inc. | United States | (1,745 | ) | (116,234 | ) | |||||||||
Rentokil Initial PLC | United Kingdom | (8,148 | ) | (56,430 | ) | |||||||||
Ritchie Bros Auctioneers Inc. | Canada | (500 | ) | (29,558 | ) | |||||||||
|
| |||||||||||||
| (202,222 | ) | |||||||||||||
|
| |||||||||||||
| Consumer Durables & Apparel 1.29% | ||||||||||||||
adidas AG | Germany | (842 | ) | (198,519 | ) | |||||||||
Newell Brands Inc. | United States | (1,723 | ) | (36,889 | ) | |||||||||
Peloton Interactive Inc., A | United States | (1,321 | ) | (34,901 | ) | |||||||||
PulteGroup Inc. | United States | (1,183 | ) | (49,568 | ) | |||||||||
|
| |||||||||||||
| (319,877 | ) | |||||||||||||
|
| |||||||||||||
| Consumer Services 3.65% | ||||||||||||||
Aramark | United States | (1,037 | ) | (38,991 | ) | |||||||||
Caesars Entertainment Inc. | United States | (991 | ) | (76,664 | ) | |||||||||
Carnival Corp. | United States | (3,738 | ) | (75,582 | ) | |||||||||
Darden Restaurants Inc. | United States | (601 | ) | (79,903 | ) | |||||||||
Evolution AB | Sweden | (790 | ) | (82,065 | ) | |||||||||
Flutter Entertainment PLC | Ireland | (759 | ) | (88,673 | ) | |||||||||
InterContinental Hotels Group PLC | United Kingdom | (816 | ) | (55,761 | ) | |||||||||
Las Vegas Sands Corp. | United States | (1,741 | ) | (67,673 | ) | |||||||||
MGM Resorts International | United States | (1,728 | ) | (72,472 | ) | |||||||||
Restaurant Brands International Inc. | Canada | (1,200 | ) | (70,172 | ) | |||||||||
Royal Caribbean Cruises Ltd. | United States | (1,027 | ) | (86,042 | ) | |||||||||
Sands China Ltd. | Macau | (14,400 | ) | (34,900 | ) | |||||||||
Whitbread PLC | United Kingdom | (900 | ) | (33,855 | ) | |||||||||
Wynn Resorts Ltd. | United States | (502 | ) | (40,029 | ) | |||||||||
|
| |||||||||||||
| (902,782 | ) | |||||||||||||
|
| |||||||||||||
| franklintempleton.com | Annual Report | 171 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
CONSOLIDATED SCHEDULE OF INVESTMENTS
Franklin Liberty Systematic Style Premia ETF (continued)
| Country | Shares | Value | ||||||||||||
| Reference Entity – Short (continued) | ||||||||||||||
| Diversified Financials 2.32% | ||||||||||||||
AGNC Investment Corp. REIT | United States | (2,379 | ) | $ | (31,165 | ) | ||||||||
Annaly Capital Management Inc. REIT | United States | (6,532 | ) | (45,985 | ) | |||||||||
Credit Suisse Group AG | Switzerland | (11,827 | ) | (94,333 | ) | |||||||||
EQT AB | Sweden | (1,342 | ) | (53,583 | ) | |||||||||
Euronext NV | Netherlands | (372 | ) | (34,230 | ) | |||||||||
Japan Exchange Group Inc. | Japan | (2,400 | ) | (45,202 | ) | |||||||||
Kinnevik AB, B | Sweden | (1,124 | ) | (29,850 | ) | |||||||||
London Stock Exchange Group PLC | United Kingdom | (1,429 | ) | (149,880 | ) | |||||||||
M&G PLC | United Kingdom | (11,458 | ) | (33,371 | ) | |||||||||
MarketAxess Holdings Inc. | United States | (169 | ) | (57,494 | ) | |||||||||
|
| |||||||||||||
| (575,093 | ) | |||||||||||||
|
| |||||||||||||
| Energy 2.22% | ||||||||||||||
Cameco Corp. | Canada | (1,900 | ) | (55,385 | ) | |||||||||
Occidental Petroleum Corp. | United States | (4,343 | ) | (246,422 | ) | |||||||||
TC Energy Corp. | Canada | (4,400 | ) | (248,384 | ) | |||||||||
|
| |||||||||||||
| (550,191 | ) | |||||||||||||
|
| |||||||||||||
| Food & Staples Retailing 0.53% | ||||||||||||||
Aeon Co. Ltd. | Japan | (2,900 | ) | (62,348 | ) | |||||||||
HelloFresh SE | Germany | (751 | ) | (34,226 | ) | |||||||||
Ocado Group PLC | United Kingdom | (2,208 | ) | (34,043 | ) | |||||||||
|
| |||||||||||||
| (130,617 | ) | |||||||||||||
|
| |||||||||||||
| Food, Beverage & Tobacco 0.93% | ||||||||||||||
Brown-Forman Corp. | United States | (1,386 | ) | (92,890 | ) | |||||||||
Mowi ASA | Norway | (1,954 | ) | (53,185 | ) | |||||||||
Orkla ASA | Norway | (3,306 | ) | (29,627 | ) | |||||||||
Swedish Match AB | Sweden | (7,211 | ) | (54,844 | ) | |||||||||
|
| |||||||||||||
| (230,546 | ) | |||||||||||||
|
| |||||||||||||
| Health Care Equipment & Services 4.31% | ||||||||||||||
DaVita Inc. | United States | (299 | ) | (33,820 | ) | |||||||||
Dexcom Inc. | United States | (414 | ) | (211,802 | ) | |||||||||
Fisher & Paykel Healthcare Corp. Ltd. | New Zealand | (2,614 | ) | (44,272 | ) | |||||||||
Fresenius Medical Care AG & Co. KGaA | Germany | (899 | ) | (60,777 | ) | |||||||||
Humana Inc. | United States | (565 | ) | (245,871 | ) | |||||||||
Insulet Corp. | United States | (324 | ) | (86,310 | ) | |||||||||
M3 Inc. | Japan | (2,100 | ) | (77,322 | ) | |||||||||
Masimo Corp. | United States | (235 | ) | (34,202 | ) | |||||||||
Novocure Ltd. | United States | (444 | ) | (36,785 | ) | |||||||||
Olympus Corp. | Japan | (4,900 | ) | (94,427 | ) | |||||||||
Ramsay Health Care Ltd. | Australia | (813 | ) | (39,776 | ) | |||||||||
SARTORIUS AG | Germany | (116 | ) | (51,846 | ) | |||||||||
Teladoc Health Inc. | United States | (691 | ) | (49,842 | ) | |||||||||
|
| |||||||||||||
| (1,067,052 | ) | |||||||||||||
|
| |||||||||||||
| Household & Personal Products 2.67% | ||||||||||||||
Clorox Co. | United States | (559 | ) | (77,718 | ) | |||||||||
Essity AB, B | Sweden | (2,693 | ) | (64,208 | ) | |||||||||
Kimberly-Clark Corp. | United States | (1,482 | ) | (182,523 | ) | |||||||||
Reckitt Benckiser Group PLC | United Kingdom | (3,129 | ) | (240,267 | ) | |||||||||
Shiseido Co. Ltd. | Japan | (1,900 | ) | (97,336 | ) | |||||||||
|
| |||||||||||||
| (662,052 | ) | |||||||||||||
|
| |||||||||||||
| Insurance 4.17% | ||||||||||||||
Admiral Group PLC | United Kingdom | (869 | ) | (29,325 | ) | |||||||||
Ageas SA/NV | Belgium | (748 | ) | (38,151 | ) | |||||||||
Alleghany Corp. | United States | (60 | ) | (50,820 | ) | |||||||||
| 172 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
CONSOLIDATED SCHEDULE OF INVESTMENTS
Franklin Liberty Systematic Style Premia ETF (continued)
| Country | Shares | Value | ||||||||||||
| Reference Entity – Short (continued) | ||||||||||||||
| Insurance (continued) | ||||||||||||||
Aviva PLC | United Kingdom | (16,771 | ) | $ | (99,830 | ) | ||||||||
Insurance Australia Group Ltd. | Australia | (10,616 | ) | (34,918 | ) | |||||||||
Lincoln National Corp. | United States | (749 | ) | (48,955 | ) | |||||||||
Phoenix Group Holdings PLC | United Kingdom | (3,159 | ) | (25,538 | ) | |||||||||
Progressive Corp. | United States | (2,605 | ) | (296,944 | ) | |||||||||
Prudential PLC | United Kingdom | (13,124 | ) | (195,952 | ) | |||||||||
QBE Insurance Group Ltd. | Australia | (6,447 | ) | (55,676 | ) | |||||||||
Tryg A/S | Denmark | (1,574 | ) | (38,671 | ) | |||||||||
Willis Towers Watson PLC | United States | (500 | ) | (118,110 | ) | |||||||||
|
| |||||||||||||
| (1,032,890 | ) | |||||||||||||
|
| |||||||||||||
| Materials 7.70% | ||||||||||||||
Agnico Eagle Mines Ltd. | Canada | (2,100 | ) | (128,618 | ) | |||||||||
Air Products and Chemicals Inc. | United States | (993 | ) | (248,161 | ) | |||||||||
Antofagasta PLC | United Kingdom | (1,816 | ) | (40,002 | ) | |||||||||
Boliden AB | Sweden | (1,252 | ) | (64,230 | ) | |||||||||
Chr. Hansen Holding A/S | Denmark | (466 | ) | (34,622 | ) | |||||||||
Croda International PLC | United Kingdom | (605 | ) | (62,770 | ) | |||||||||
Ecolab Inc. | United States | (1,107 | ) | (195,452 | ) | |||||||||
First Quantum Minerals Ltd. | Canada | (2,800 | ) | (97,021 | ) | |||||||||
Freeport-McMoRan Inc. | United States | (6,904 | ) | (343,405 | ) | |||||||||
Givaudan SA | Switzerland | (40 | ) | (166,346 | ) | |||||||||
International Flavors & Fragrances Inc. | United States | (1,152 | ) | (151,292 | ) | |||||||||
Nippon Paint Holdings Co. Ltd. | Japan | (3,800 | ) | (33,875 | ) | |||||||||
Northern Star Resources Ltd. | Australia | (5,177 | ) | (41,753 | ) | |||||||||
Pan American Silver Corp. | Canada | (1,000 | ) | (27,317 | ) | |||||||||
RPM International Inc. | United States | (573 | ) | (46,665 | ) | |||||||||
Svenska Cellulosa AB SCA, B | Sweden | (2,617 | ) | (51,515 | ) | |||||||||
Umicore SA | Belgium | (867 | ) | (37,969 | ) | |||||||||
Wheaton Precious Metals Corp. | Canada | (2,100 | ) | (99,952 | ) | |||||||||
Yara International ASA | Norway | (717 | ) | (36,244 | ) | |||||||||
|
| |||||||||||||
| (1,907,209 | ) | |||||||||||||
|
| |||||||||||||
| Media & Entertainment 8.00% | ||||||||||||||
Activision Blizzard Inc. | United States | (749 | ) | (60,002 | ) | |||||||||
AMC Entertainment Holdings Inc., A | United States | (2,417 | ) | (59,555 | ) | |||||||||
Cable One Inc. | United States | (24 | ) | (35,142 | ) | |||||||||
Informa PLC | United Kingdom | (6,488 | ) | (51,408 | ) | |||||||||
Liberty Broadband Corp. | United States | (633 | ) | (85,658 | ) | |||||||||
Match Group Inc. | United States | (743 | ) | (80,794 | ) | |||||||||
Netflix Inc, | United States | (959 | ) | (359,232 | ) | |||||||||
News Corp., A | United States | (1,665 | ) | (36,880 | ) | |||||||||
Nexon Co Ltd. | Japan | (2,000 | ) | (48,313 | ) | |||||||||
Nintendo Co. Ltd. | Japan | (500 | ) | (254,047 | ) | |||||||||
Paramount Global, B | United States | (2,468 | ) | (93,315 | ) | |||||||||
Pearson PLC | United Kingdom | (3,140 | ) | (31,032 | ) | |||||||||
Pinterest Inc., A | United States | (2,589 | ) | (63,715 | ) | |||||||||
Roku Inc. | United States | (542 | ) | (67,896 | ) | |||||||||
Sea Ltd. ADR | Taiwan | (1,400 | ) | (167,706 | ) | |||||||||
Snap Inc. | United States | (5,190 | ) | (186,788 | ) | |||||||||
Take-Two Interactive Software Inc. | United States | (556 | ) | (85,480 | ) | |||||||||
Twitter Inc. | United States | (3,563 | ) | (137,853 | ) | |||||||||
Zoominfo Technologies Inc. | United States | (1,291 | ) | (77,124 | ) | |||||||||
|
| |||||||||||||
| (1,981,940 | ) | |||||||||||||
|
| |||||||||||||
| Pharmaceuticals, Biotechnology & Life Sciences 6.11% | ||||||||||||||
Alnylam Pharmaceuticals Inc. | United States | (545 | ) | (88,993 | ) | |||||||||
Argenx SE | Netherlands | (205 | ) | (64,436 | ) | |||||||||
AstraZeneca PLC | United Kingdom | (2,594 | ) | (346,047 | ) | |||||||||
BioMarin Pharmaceutical Inc. | United States | (818 | ) | (63,068 | ) | |||||||||
| franklintempleton.com | Annual Report | 173 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
CONSOLIDATED SCHEDULE OF INVESTMENTS
Franklin Liberty Systematic Style Premia ETF (continued)
| Country | Shares | Value | ||||||||||||
| Reference Entity – Short (continued) | ||||||||||||||
| Pharmaceuticals, Biotechnology & Life Sciences (continued) | ||||||||||||||
Chugai Pharmaceutical Co. Ltd. | Japan | (3,000 | ) | $ | (101,265 | ) | ||||||||
Daiichi Sankyo Co. Ltd. | Japan | (7,700 | ) | (170,019 | ) | |||||||||
Eisai Co. Ltd. | Japan | (1,100 | ) | (51,386 | ) | |||||||||
Elanco Animal Health Inc. | United States | (1,997 | ) | (52,102 | ) | |||||||||
Exact Sciences Corp. | United States | (822 | ) | (57,474 | ) | |||||||||
Incyte Corp. | United States | (857 | ) | (68,063 | ) | |||||||||
Jazz Pharmaceuticals PLC | United States | (300 | ) | (46,701 | ) | |||||||||
Sartorius Stedim Biotech | France | (121 | ) | (50,150 | ) | |||||||||
Seagen Inc. | United States | (617 | ) | (88,879 | ) | |||||||||
Takeda Pharmaceutical Co. Ltd. | Japan | (7,100 | ) | (204,620 | ) | |||||||||
Viatris Inc. | United States | (5,510 | ) | (59,949 | ) | |||||||||
|
| |||||||||||||
| (1,513,152 | ) | |||||||||||||
|
| |||||||||||||
| Real Estate 5.19% | ||||||||||||||
Boston Properties Inc. REIT | United States | (665 | ) | (85,652 | ) | |||||||||
Digital Realty Trust Inc. | United States | (1,295 | ) | (183,631 | ) | |||||||||
Equinix Inc. | United States | (407 | ) | (301,839 | ) | |||||||||
Host Hotels & Resorts Inc. | United States | (3,206 | ) | (62,293 | ) | |||||||||
Mitsui Fudosan Co. Ltd. | Japan | (3,900 | ) | (84,185 | ) | |||||||||
Realty Income Corp. REIT | United States | (2,542 | ) | (176,161 | ) | |||||||||
SBA Communications Corp. REIT | United States | (485 | ) | (166,888 | ) | |||||||||
Unibail-Rodamco-Westfield REIT | France | (543 | ) | (41,192 | ) | |||||||||
Ventas Inc. REIT | United States | (1,801 | ) | (111,230 | ) | |||||||||
Vornado Realty Trust REIT | United States | (734 | ) | (33,265 | ) | |||||||||
Zillow Group Inc., C | United States | (783 | ) | (38,594 | ) | |||||||||
|
| |||||||||||||
| (1,284,930 | ) | |||||||||||||
|
| |||||||||||||
| Retailing 3.01% | ||||||||||||||
Carvana Co. | United States | (370 | ) | (44,137 | ) | |||||||||
Delivery Hero SE | South Korea | (752 | ) | (33,351 | ) | |||||||||
Doordash Inc. | United States | (556 | ) | (65,158 | ) | |||||||||
Etsy Inc. | United States | (579 | ) | (71,958 | ) | |||||||||
Fast Retailing Co. Ltd. | Japan | (300 | ) | (155,691 | ) | |||||||||
Just Eat Takeaway.com NV | United Kingdom | (859 | ) | (29,395 | ) | |||||||||
MercadoLibre Inc. | Brazil | (205 | ) | (243,844 | ) | |||||||||
Pan Pacific International Holdings Corp. | Japan | (1,900 | ) | (30,744 | ) | |||||||||
Rakuten Group Inc. | Japan | (4,000 | ) | �� | (31,868 | ) | ||||||||
Wayfair Inc. | United States | (361 | ) | (39,992 | ) | |||||||||
|
| |||||||||||||
| (746,138 | ) | |||||||||||||
|
| |||||||||||||
| Semiconductors & Semiconductor Equipment 4.57% | ||||||||||||||
Advanced Micro Devices Inc. | United States | (1,618 | ) | (176,912 | ) | |||||||||
ASM International NV | Netherlands | (200 | ) | (73,902 | ) | |||||||||
Enphase Energy Inc. | United States | (620 | ) | (125,104 | ) | |||||||||
Lam Research Corp. | United States | (648 | ) | (348,371 | ) | |||||||||
Lasertec Corp. | Japan | (300 | ) | (51,374 | ) | |||||||||
Marvell Technology Inc. | United States | (3,846 | ) | (275,797 | ) | |||||||||
SolarEdge Technologies Inc. | United States | (250 | ) | (80,592 | ) | |||||||||
|
| |||||||||||||
| (1,132,052 | ) | |||||||||||||
|
| |||||||||||||
| Software & Services 18.43% | ||||||||||||||
Adyen NV | Netherlands | (83 | ) | (167,061 | ) | |||||||||
Amadeus IT Group SA | Spain | (2,009 | ) | (132,286 | ) | |||||||||
Avalara Inc. | United States | (413 | ) | (41,098 | ) | |||||||||
Bill.com Holdings Inc. | United States | (373 | ) | (84,593 | ) | |||||||||
Cloudflare Inc., A | United States | (1,224 | ) | (146,513 | ) | |||||||||
Coupa Software Inc. | United States | (365 | ) | (37,095 | ) | |||||||||
Crowdstrike Holdings Inc., A | United States | (908 | ) | (206,189 | ) | |||||||||
Datadog Inc., A | United States | (1,043 | ) | (157,983 | ) | |||||||||
DocuSign Inc. | United States | (899 | ) | (96,301 | ) | |||||||||
| 174 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
CONSOLIDATED SCHEDULE OF INVESTMENTS
Franklin Liberty Systematic Style Premia ETF (continued)
| Country | Shares | Value | ||||||||||||
| Reference Entity – Short (continued) | ||||||||||||||
| Software & Services (continued) | ||||||||||||||
Fidelity National Information Services Inc. | United States | (2,725 | ) | $ | (273,644 | ) | ||||||||
Fiserv Inc. | United States | (2,655 | ) | (269,217 | ) | |||||||||
FleetCor Technologies Inc. | United States | (348 | ) | (86,673 | ) | |||||||||
GoDaddy Inc., A | United States | (740 | ) | (61,938 | ) | |||||||||
MongoDB Inc. | United States | (290 | ) | (128,641 | ) | |||||||||
Okta Inc., A | United States | (694 | ) | (104,766 | ) | |||||||||
Palantir Technologies Inc. | United States | (7,841 | ) | (107,657 | ) | |||||||||
PayPal Holdings Inc. | United States | (3,278 | ) | (379,101 | ) | |||||||||
RingCentral Inc., A | United States | (361 | ) | (42,313 | ) | |||||||||
Shopify Inc., A | Canada | (500 | ) | (338,445 | ) | |||||||||
Snowflake Inc. | United States | (1,017 | ) | (233,025 | ) | |||||||||
Splunk Inc. | United States | (799 | ) | (118,739 | ) | |||||||||
Square Inc., A | United States | (2,435 | ) | (330,186 | ) | |||||||||
Twilio Inc., A | United States | (795 | ) | (131,024 | ) | |||||||||
Visa Inc., A | United States | (1,585 | ) | (351,505 | ) | |||||||||
Workday Inc., A | United States | (876 | ) | (209,767 | ) | |||||||||
Worldline SA | France | (1,074 | ) | (47,184 | ) | |||||||||
Zendesk Inc. | United States | (554 | ) | (66,641 | ) | |||||||||
Zoom Video Communications Inc., A | United States | (1,009 | ) | (118,285 | ) | |||||||||
Zscaler Inc. | United States | (398 | ) | (96,029 | ) | |||||||||
|
| |||||||||||||
| (4,563,899 | ) | |||||||||||||
|
| |||||||||||||
| Technology Hardware & Equipment 0.59% | ||||||||||||||
Logitech International SA | Switzerland | (785 | ) | (59,030 | ) | |||||||||
NetApp Inc. | United States | (1,044 | ) | (86,652 | ) | |||||||||
|
| |||||||||||||
| (145,682 | ) | |||||||||||||
|
| |||||||||||||
| Telecommunication Services 2.27% | ||||||||||||||
Cellnex Telecom SA | Spain | (2,287 | ) | (111,226 | ) | |||||||||
Lumen Technologies Inc. | United States | (3,871 | ) | (43,626 | ) | |||||||||
Rogers Communications Inc. | Canada | (1,500 | ) | (84,977 | ) | |||||||||
SoftBank Corp. | Japan | (12,700 | ) | (149,418 | ) | |||||||||
T-Mobile US Inc. | United States | (384 | ) | (49,286 | ) | |||||||||
Tele2 AB, B | Sweden | (2,131 | ) | (32,539 | ) | |||||||||
Telenor ASA | Norway | (3,119 | ) | (45,212 | ) | |||||||||
Telia Co. AB | Sweden | (11,377 | ) | (46,072 | ) | |||||||||
|
| |||||||||||||
| (562,356 | ) | |||||||||||||
|
| |||||||||||||
| Transportation 2.30% | ||||||||||||||
Central Japan Railway Co. | Japan | (700 | ) | (92,074 | ) | |||||||||
East Japan Railway Co. | Japan | (1,400 | ) | (82,010 | ) | |||||||||
Kuehne + Nagel International AG | Switzerland | (232 | ) | (66,329 | ) | |||||||||
Lyft Inc., A | United States | (1,247 | ) | (47,885 | ) | |||||||||
Uber Technologies Inc. | United States | (6,820 | ) | (243,338 | ) | |||||||||
West Japan Railway Co. | Japan | (900 | ) | (37,750 | ) | |||||||||
|
| |||||||||||||
| (569,386 | ) | |||||||||||||
|
| |||||||||||||
| Utilities 2.43% | ||||||||||||||
APA Group | Australia | (5,363 | ) | (42,972 | ) | |||||||||
EDP Renovaveis SA | Spain | (1,316 | ) | (34,175 | ) | |||||||||
Iberdrola SA | Spain | (25,946 | ) | (286,379 | ) | |||||||||
Northland Power Inc. | Canada | (1,000 | ) | (33,273 | ) | |||||||||
Orsted AS | Denmark | (897 | ) | (113,941 | ) | |||||||||
PPL Corp. | United States | (3,223 | ) | (92,049 | ) | |||||||||
|
| |||||||||||||
| (602,789 | ) | |||||||||||||
|
| |||||||||||||
Total Value of Reference Entity – Morgan Stanley Capital Services LLC | $ | (24,762,846 | ) | |||||||||||
|
| |||||||||||||
See Abbreviations on page 240.
See Note 12 regarding other derivative information.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 175 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin Liberty U.S. Core Bond ETF
| Year Ended March 31, | ||||||||||||
| 2022 | 2021 | 2020a | ||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
| |||||||||||
Net asset value, beginning of year | $ | 25.14 | $ | 25.44 | $ | 25.00 | ||||||
|
| |||||||||||
| Income from investment operationsb: |
| |||||||||||
Net investment incomec | 0.45 | 0.51 | 0.29 | |||||||||
Net realized and unrealized gains (losses) | (1.61 | ) | 0.03 | 0.49 | ||||||||
|
| |||||||||||
Total from investment operations | (1.16 | ) | 0.54 | 0.78 | ||||||||
|
| |||||||||||
| Less distributions from: |
| |||||||||||
Net investment income | (0.50 | ) | (0.65 | ) | (0.31 | ) | ||||||
Net realized gains | (0.05 | ) | (0.19 | ) | (0.03 | ) | ||||||
|
| |||||||||||
Total Distributions | (0.55 | ) | (0.84 | ) | (0.34 | ) | ||||||
|
| |||||||||||
Net asset value, end of year | $ | 23.43 | $ | 25.14 | $ | 25.44 | ||||||
|
| |||||||||||
Total returnd | (4.72)% | 2.07% | 3.12% | |||||||||
| Ratios to average net assetse |
| |||||||||||
Expenses before waiver and payments by affiliates | 0.16% | 0.17% | 0.19% | |||||||||
Expenses net of waiver and payments by affiliates | 0.15% | 0.15% | 0.15% | |||||||||
Net investment income | 1.80% | 1.95% | 2.14% | |||||||||
| Supplemental data |
| |||||||||||
Net assets, end of year (000’s) | $1,509,961 | $1,460,597 | $853,532 | |||||||||
Portfolio turnover ratef | 69.88% | g | 90.99% | g | 126.68% | g | ||||||
aFor the period September 17, 2019 (commencement of operations) to March 31, 2020.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of Creation Unit Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year. Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period.
eRatios are annualized for periods less than one year.
fPortfolio turnover rate includes portfolio transactions that are executed as a result of the Fund offering and redeeming Creation Units solely for cash (“Cash creations”).
| gPortfolio turnover rate excluding cash creations was as follows: | 69.88% | 90.99% | 126.68% |
| 176 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Schedule of Investments, March 31, 2022
Franklin Liberty U.S. Core Bond ETF
| Country | Principal Amount* | Value | ||||||||||||
| Corporate Bonds & Notes 26.0% | ||||||||||||||
| Aerospace & Defense 0.3% | ||||||||||||||
The Boeing Co., Sr. Unsecured note, 3.50%, 3/01/39 | United States | 5,000,000 | $ | 4,319,493 | ||||||||||
|
| |||||||||||||
| Air Freight & Logistics 0.1% | ||||||||||||||
FedEx Corp., senior bond, 4.05%, 2/15/48 | United States | 2,000,000 | 1,981,794 | |||||||||||
|
| |||||||||||||
| Airlines 1.1% | ||||||||||||||
American Airlines 2016-3 Class A Pass Through Trust 3.25%, 4/15/30 | United States | 4,552,817 | 4,088,166 | |||||||||||
| a | Delta Air Lines Inc./SkyMiles IP Ltd., first lien, 144A, 4.50%, 4.50%, 10/20/25 | United States | 7,700,000 | 7,750,794 | ||||||||||
United Airlines 2019-2 Class A Pass Through Trust, Series A, 2.90%, 11/01/29 | United States | 2,325,209 | 2,115,340 | |||||||||||
United Airlines 2020-1 Class A Pass Through Trust, Series 20-1, 5.875%, 4/15/29 | United States | 87,507 | 90,724 | |||||||||||
United Airlines 2020-1 Class B Pass Through Trust, 2020-1 Class B, 4.875%, 7/15/27 | United States | 2,073,600 | 2,049,461 | |||||||||||
|
| |||||||||||||
| 16,094,485 | ||||||||||||||
|
| |||||||||||||
| Banks 3.1% | �� | |||||||||||||
| a | Banco de Chile, Sr. Unsecured , 144A, 2.99%, 12/09/31 | Chile | 1,200,000 | 1,109,106 | ||||||||||
Bancolombia SA, senior note, 3.00%, 1/29/25 | Colombia | 1,100,000 | 1,071,180 | |||||||||||
Bank of America Corp., | ||||||||||||||
Sr. Unsecured , 1.922%, 10/24/31 | United States | 1,500,000 | 1,304,695 | |||||||||||
Sr. Unsecured note, 2.592%, 4/29/31 | United States | 3,000,000 | 2,772,839 | |||||||||||
Citigroup Inc., | ||||||||||||||
3.057%, 1/25/33 | United States | 1,800,000 | 1,683,715 | |||||||||||
senior bond, 5.875%, 1/30/42 | United States | 1,100,000 | 1,374,406 | |||||||||||
sub. bond, 4.45%, 9/29/27 | United States | 1,500,000 | 1,549,736 | |||||||||||
subordinate, 4.125%, 7/25/28 | United States | 2,300,000 | 2,339,400 | |||||||||||
HSBC Holdings PLC, | ||||||||||||||
senior note, 2.013% to 9/22/27, FRN thereafter, 9/22/28 | United Kingdom | 4,100,000 | 3,722,274 | |||||||||||
senior note, 2.357% to 8/18/30, FRN thereafter, 8/18/31 | United Kingdom | 1,300,000 | 1,155,404 | |||||||||||
Industrial & Commercial Bank of China Ltd., senior note, 3.538%, 11/08/27 | China | 1,200,000 | 1,219,686 | |||||||||||
JPMorgan Chase & Co., | ||||||||||||||
senior bond, 2.522% to 4/22/30, FRN thereafter, 4/22/31 | United States | 2,000,000 | 1,856,380 | |||||||||||
Sr. Unsecured , 1.953%, 2/04/32 | United States | 2,000,000 | 1,754,153 | |||||||||||
subordinated, 2.956%, to 5/13/30 FRN thereafter, 5/13/31 | United States | 5,000,000 | 4,687,158 | |||||||||||
Merrill Lynch & Co. Inc., sub. bond, 7.75%, 5/14/38 | United States | 2,800,000 | 3,919,001 | |||||||||||
| a | Societe Generale SA, Sr. Unsecured , 144A, 1.792%, 6/09/27 | France | 2,300,000 | 2,075,698 | ||||||||||
Truist Bank, sub. Bond, 2.25%, 3/11/30 | United States | 4,300,000 | 3,946,265 | |||||||||||
| a | UniCredit SpA, Sr. Unsecured , 144A, 1.982%, 6/03/27 | Italy | 2,100,000 | 1,895,711 | ||||||||||
Wells Fargo & Co., senior bond, 2.879% to 10/30/29, FRN thereafter, 10/30/30 | United States | 7,700,000 | 7,326,809 | |||||||||||
|
| |||||||||||||
| 46,763,616 | ||||||||||||||
|
| |||||||||||||
| Beverages 0.3% | ||||||||||||||
Anheuser-Busch InBev Worldwide Inc., | ||||||||||||||
senior bond, 3.50%, 6/01/30 | United States | 2,400,000 | 2,437,055 | |||||||||||
senior bond, 5.55%, 1/23/49 | United States | 1,200,000 | 1,468,878 | |||||||||||
|
| |||||||||||||
| 3,905,933 | ||||||||||||||
|
| |||||||||||||
| Biotechnology 0.4% | ||||||||||||||
AbbVie Inc., senior bond, 4.75%, 3/15/45 | United States | 5,000,000 | 5,464,619 | |||||||||||
Bio-Rad Laboratories Inc. 3.30%, 3/15/27 | United States | 500,000 | 492,817 | |||||||||||
|
| |||||||||||||
| 5,957,436 | ||||||||||||||
|
| |||||||||||||
| Building Products 0.6% | ||||||||||||||
Carrier Global Corp., senior note, 3.577%, 4/05/50 | United States | 2,300,000 | 2,112,356 | |||||||||||
MDC Holdings Inc. 2.50%, 1/15/31 | United States | 4,000,000 | 3,498,353 | |||||||||||
| franklintempleton.com | Annual Report | 177 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty U.S. Core Bond ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| Corporate Bonds & Notes (continued) | ||||||||||||||
| Building Products (continued) | ||||||||||||||
NVR Inc., Sr. Unsecured , 3.00%, 5/15/30 | United States | 4,500,000 | $ | 4,206,385 | ||||||||||
|
| |||||||||||||
| 9,817,094 | ||||||||||||||
|
| |||||||||||||
| Capital Markets 0.7% | ||||||||||||||
Morgan Stanley, | ||||||||||||||
senior note, 3.622% to 4/01/30, FRN thereafter, 4/01/31 | United States | 4,300,000 | 4,283,167 | |||||||||||
sub. bond, 3.95%, 4/23/27 | United States | 3,600,000 | 3,664,508 | |||||||||||
The Goldman Sachs Group Inc., senior bond, 3.691% to 6/05/27, FRN thereafter, 6/05/28 | United States | 2,500,000 | 2,505,803 | |||||||||||
|
| |||||||||||||
| 10,453,478 | ||||||||||||||
|
| |||||||||||||
| Chemicals 0.7% | ||||||||||||||
CF Industries Inc. 5.15%, 3/15/34 | United States | 4,800,000 | 5,342,304 | |||||||||||
| a | International Flavors & Fragrances Inc., Sr. Unsecured, 144A, 2.30%, 11/01/30 | United States | 6,500,000 | 5,812,614 | ||||||||||
|
| |||||||||||||
| 11,154,918 | ||||||||||||||
|
| |||||||||||||
| Commercial Services & Supplies 0.3% | ||||||||||||||
Boardwalk Pipelines LP, senior note, 4.80%, 5/03/29 | United States | 3,950,000 | 4,089,912 | |||||||||||
|
| |||||||||||||
| Containers & Packaging 0.2% | ||||||||||||||
Bemis Co. Inc., senior note, 2.63%, 6/19/30 | United States | 3,500,000 | 3,231,207 | |||||||||||
|
| |||||||||||||
| Diversified Consumer Services 0.3% | ||||||||||||||
Kohl’s Corp., Sr. Unsecured note, 3.375%, 5/01/31 | United States | 5,000,000 | 4,834,707 | |||||||||||
|
| |||||||||||||
| Diversified Financial Services 0.2% | ||||||||||||||
AerCap Ireland Capital DAC/AerCap Global Aviation Trust 3.40%, 10/29/33 | Ireland | 3,500,000 | 3,144,078 | |||||||||||
|
| |||||||||||||
| Diversified Telecommunication Services 1.4% | ||||||||||||||
America Movil SAB de CV, Sr. Unsecured note, 2.875%, 5/07/30 | Mexico | 3,800,000 | 3,633,699 | |||||||||||
AT&T Inc., Sr. Unsecured , 3.50%, 6/01/41 | United States | 4,000,000 | 3,693,260 | |||||||||||
France Telecom SA, senior bond, 9.00%, 3/01/31 | France | 4,300,000 | 5,982,739 | |||||||||||
Verizon Communications Inc., | ||||||||||||||
Sr. Unsecured note, 1.75%, 1/20/31 | United States | 5,000,000 | 4,366,295 | |||||||||||
Sr. Unsecured note, 2.85%, 9/03/41 | United States | 3,900,000 | 3,444,350 | |||||||||||
|
| |||||||||||||
| 21,120,343 | ||||||||||||||
|
| |||||||||||||
| Education Services 0.5% | ||||||||||||||
Rockefeller University, Series 2020, Unsecured, 3.75%, 7/01/51 | United States | 7,000,000 | 7,007,026 | |||||||||||
|
| |||||||||||||
| Electric Utilities 2.6% | ||||||||||||||
Baltimore Gas and Electric Co., senior bond, 3.50%, 8/15/46 | United States | 1,400,000 | 1,359,416 | |||||||||||
| a | Comision Federal de Electricidad, 144A, 3.348%, 2/09/31 | Mexico | 3,800,000 | 3,342,328 | ||||||||||
Duke Energy Corp., senior bond, 3.75%, 9/01/46 | United States | 6,400,000 | 6,059,847 | |||||||||||
| a | EDP Finance BV, senior note, 144A, 1.71%, 1/24/28 | Netherlands | 4,500,000 | 3,976,469 | ||||||||||
Enel Finance International NV, | ||||||||||||||
a 144A, 2.25%, 7/12/31 | Italy | 3,500,000 | 3,105,421 | |||||||||||
a senior bond, 144A, 3.50%, 4/06/28 | Netherlands | 2,700,000 | 2,671,168 | |||||||||||
Exelon Corp., senior bond, 4.05%, 4/15/30 | United States | 3,000,000 | 3,100,910 | |||||||||||
Georgia Power Co., senior bond, 4.75%, 9/01/40 | United States | 1,400,000 | 1,480,988 | |||||||||||
MidAmerican Energy Co., secured bond, 3.65%, 8/01/48 | United States | 1,100,000 | 1,094,668 | |||||||||||
| a | Perusahaan Perseroan Persero PT Perusahaan Listrik Negara, senior bond, 144A, 4.875%, 7/17/49 | Indonesia | 750,000 | 725,014 | ||||||||||
| a | State Grid Overseas Investment 2016 Ltd., senior note, 144A, 3.50%, 5/04/27 | China | 3,300,000 | 3,328,091 | ||||||||||
The Southern Co., senior bond, 3.70%, 4/30/30 | United States | 4,000,000 | 4,016,984 | |||||||||||
Virginia Electric and Power Co., senior bond, 3.80%, 9/15/47 | United States | 5,100,000 | 5,114,602 | |||||||||||
|
| |||||||||||||
| 39,375,906 | ||||||||||||||
|
| |||||||||||||
| 178 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty U.S. Core Bond ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| Corporate Bonds & Notes (continued) | ||||||||||||||
| Electronic Equipment, Instruments & Components 0.8% | ||||||||||||||
Flex Ltd., senior note, 4.875%, 5/12/30 | Singapore | 6,300,000 | $ | 6,593,033 | ||||||||||
Teledyne FLIR LLC, Sr. Unsecured note, 2.50%, 8/01/30 | United States | 6,000,000 | 5,473,738 | |||||||||||
|
| |||||||||||||
| 12,066,771 | ||||||||||||||
|
| |||||||||||||
| Energy Equipment & Services 0.9% | ||||||||||||||
Kinder Morgan Inc. 2.00%, 2/15/31 | United States | 8,200,000 | 7,180,338 | |||||||||||
MPLX LP, Sr. Unsecured, 2.65%, 8/15/30 | United States | 5,000,000 | 4,588,803 | |||||||||||
| a | Schlumberger Holdings Corp., senior note, 144A, 3.90%, 5/17/28 | United States | 1,950,000 | 1,972,690 | ||||||||||
|
| |||||||||||||
| 13,741,831 | ||||||||||||||
|
| |||||||||||||
| Entertainment 0.1% | ||||||||||||||
| a | Magallanes Inc., 144A, 4.054%, 3/15/29 | United States | 900,000 | 905,504 | ||||||||||
|
| |||||||||||||
| Equity Real Estate Investment Trusts (REITs) 0.1% | ||||||||||||||
Kimco Realty Corp., Sr. Unsecured , 4.25%, 4/01/45 | United States | 1,000,000 | 1,001,458 | |||||||||||
|
| |||||||||||||
| Food Products 0.8% | ||||||||||||||
| a | Bimbo Bakeries USA Inc., 144A, 4.00%, 5/17/51 | United States | 800,000 | 748,154 | ||||||||||
| a | Cencosud SA, 144A, 5.15%, 2/12/25 | Chile | 6,300,000 | 6,546,739 | ||||||||||
Kraft Heinz Foods Co., senior bond, 3.00%, 6/01/26 | United States | 4,100,000 | 4,049,632 | |||||||||||
|
| |||||||||||||
| 11,344,525 | ||||||||||||||
|
| |||||||||||||
| Health Care Providers & Services 1.2% | ||||||||||||||
Anthem Inc., senior bond, 5.10%, 1/15/44 | United States | 2,000,000 | 2,313,681 | |||||||||||
Centene Corp., Sr. Unsecured , 3.00%, 10/15/30 | United States | 3,000,000 | 2,760,030 | |||||||||||
CVS Health Corp., | ||||||||||||||
senior bond, 4.30%, 3/25/28 | United States | 1,117,000 | 1,170,401 | |||||||||||
senior bond, 4.875%, 7/20/35 | United States | 1,400,000 | 1,540,009 | |||||||||||
HCA Inc., senior secured bond, first lien, 5.50%, 6/15/47 | United States | 900,000 | 1,019,485 | |||||||||||
Quest Diagnostics Inc., senior bond, 2.80%, 6/30/31 | United States | 6,800,000 | 6,369,365 | |||||||||||
STERIS Irish FinCo UnLtd Co. 2.70%, 3/15/31 | Ireland | 3,000,000 | 2,750,745 | |||||||||||
|
| |||||||||||||
| 17,923,716 | ||||||||||||||
|
| |||||||||||||
| Hotels, Restaurants & Leisure 0.3% | ||||||||||||||
Las Vegas Sands Corp., Sr. Unsecured , 3.90%, 8/08/29 | United States | 4,700,000 | 4,315,875 | |||||||||||
|
| |||||||||||||
| Household Durables 0.4% | ||||||||||||||
Mohawk Industries Inc., senior bond, 3.625%, 5/15/30 | United States | 6,200,000 | 6,098,918 | |||||||||||
|
| |||||||||||||
| Independent Power Producers & Energy Traders 0.4% | ||||||||||||||
| a | Colbun SA, senior note, 144A, 3.95%, 10/11/27 | Chile | 5,550,000 | 5,617,599 | ||||||||||
|
| |||||||||||||
| Insurance 1.2% | ||||||||||||||
Arch Capital Group Ltd., senior bond, 3.635%, 6/30/50 | United States | 1,700,000 | 1,562,720 | |||||||||||
AXA SA, Subordinated, 8.60%, 12/15/30 | France | 3,600,000 | 4,768,632 | |||||||||||
Berkshire Hathaway Finance Corp. 3.85%, 3/15/52 | United States | 1,200,000 | 1,228,621 | |||||||||||
| a | Five Corners Funding Trust II, senior note, 144A, 2.85%, 5/15/30 | United States | 4,000,000 | 3,798,143 | ||||||||||
MetLife Inc., senior bond, 5.875%, 2/06/41 | United States | 1,100,000 | 1,365,795 | |||||||||||
Radian Group Inc., Sr. Unsecured , 4.875%, 3/15/27 | United States | 3,700,000 | 3,723,217 | |||||||||||
Reinsurance Group of America Inc., Sr. Unsecured , 3.90%, 5/15/29 | United States | 2,250,000 | 2,274,680 | |||||||||||
|
| |||||||||||||
| 18,721,808 | ||||||||||||||
|
| |||||||||||||
| Internet Software & Services 0.2% | ||||||||||||||
| a | Tencent Holdings Ltd., Sr. Unsecured , 144A, 3.925%, 1/19/38 | Cayman Islands | 4,000,000 | 3,721,085 | ||||||||||
|
| |||||||||||||
| IT Services 0.7% | ||||||||||||||
Fidelity National Information Services Inc., Sr. Unsecured note, 2.25%, 3/01/31 | United States | 4,500,000 | 3,986,259 | |||||||||||
Fiserv Inc., | ||||||||||||||
senior bond, 2.65%, 6/01/30 | United States | 4,700,000 | 4,344,688 | |||||||||||
senior bond, 4.40%, 7/01/49 | United States | 2,400,000 | 2,485,698 | |||||||||||
|
| |||||||||||||
| 10,816,645 | ||||||||||||||
|
| |||||||||||||
| franklintempleton.com | Annual Report | 179 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty U.S. Core Bond ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| Corporate Bonds & Notes (continued) | ||||||||||||||
| Media 0.8% | ||||||||||||||
Charter Communications Operating LLC/Charter Communications Operating Capital, | ||||||||||||||
senior bond, 2.80%, 4/01/31 | United States | 5,000,000 | $ | 4,513,985 | ||||||||||
senior secured note, 3.50%, 3/01/42 | United States | 1,500,000 | 1,244,367 | |||||||||||
Comcast Corp., senior bond, 4.25%, 1/15/33 | United States | 2,000,000 | 2,164,034 | |||||||||||
Fox Corp., senior bond, 5.576%, 1/25/49 | United States | 3,200,000 | 3,731,170 | |||||||||||
NBCUniversal Media LLC, senior bond, 4.45%, 1/15/43 | United States | 1,100,000 | 1,187,128 | |||||||||||
|
| |||||||||||||
| 12,840,684 | ||||||||||||||
|
| |||||||||||||
| Metals & Mining 0.1% | ||||||||||||||
| a | Corp. Nacional del Cobre de Chile, Sr. Unsecured , 144A, 4.50%, 8/01/47 | Chile | 1,160,000 | 1,183,479 | ||||||||||
|
| |||||||||||||
| Oil, Gas & Consumable Fuels 2.0% | ||||||||||||||
Canadian Natural Resources Ltd., senior bond, 3.85%, 6/01/27 | Canada | 3,000,000 | 3,038,538 | |||||||||||
Cheniere Corpus Christi Holdings LLC, senior secured note, first lien, 5.875%, 3/31/25 | United States | 2,200,000 | 2,323,426 | |||||||||||
| a | Continental Resources Inc., senior bond, 144A, 5.75%, 1/15/31 | United States | 3,400,000 | 3,724,088 | ||||||||||
Enable Midstream Partners LP, senior note, 3.90%, 5/15/24 | United States | 2,650,000 | 2,667,840 | |||||||||||
Enterprise Products Operating LLC, senior bond, 4.25%, 2/15/48 | United States | 1,150,000 | 1,158,155 | |||||||||||
Equinor ASA, senior note, 2.375%, 5/22/30 | Norway | 3,000,000 | 2,835,248 | |||||||||||
| a | Lundin Energy Finance B.V., 144A, 3.10%, 7/15/31 | Netherlands | 4,700,000 | 4,359,986 | ||||||||||
MPLX LP, senior bond, 4.70%, 4/15/48 | United States | 1,250,000 | 1,263,098 | |||||||||||
| a | Pertamina Persero PT, senior bond, 144A, 4.70%, 7/30/49 | Indonesia | 1,000,000 | 987,866 | ||||||||||
Phillips 66 3.30%, 3/15/52 | United States | 950,000 | 838,367 | |||||||||||
Sabine Pass Liquefaction LLC, senior secured bond, first lien, 4.20%, 3/15/28 | United States | 4,000,000 | 4,115,135 | |||||||||||
| a | Sinopec Group Overseas Development 2018 Ltd., 144A, 3.35%, 5/13/50 | British Virgin Islands | 1,700,000 | 1,430,431 | ||||||||||
The Williams Cos. Inc., | ||||||||||||||
senior bond, 3.50%, 11/15/30 | United States | 1,000,000 | 990,328 | |||||||||||
senior bond, 5.10%, 9/15/45 | United States | 300,000 | 325,942 | |||||||||||
|
| |||||||||||||
| 30,058,448 | ||||||||||||||
|
| |||||||||||||
| Paper & Forest Products 0.2% | ||||||||||||||
Suzano Austria GmbH 3.125%, 1/15/32 | Austria | 2,700,000 | 2,396,493 | |||||||||||
|
| |||||||||||||
| Pharmaceuticals 0.9% | ||||||||||||||
Bristol-Myers Squibb Co., senior bond, 4.125%, 6/15/39 | United States | 3,200,000 | 3,447,837 | |||||||||||
Royalty Pharma PLC 2.20%, 9/02/30 | United Kingdom | 5,000,000 | 4,379,029 | |||||||||||
Takeda Pharmaceutical Co. Ltd., | ||||||||||||||
senior note, 2.05%, 3/31/30 | Japan | 2,600,000 | 2,350,154 | |||||||||||
senior note, 5.00%, 11/26/28 | Japan | 2,500,000 | 2,713,918 | |||||||||||
|
| |||||||||||||
| 12,890,938 | ||||||||||||||
|
| |||||||||||||
| Real Estate Investment Trusts (REITs) 0.0%† | ||||||||||||||
MPT Operating Partnership LP/MPT Finance Corp., senior bond, 3.50%, 3/15/31 | United States | 400,000 | 372,167 | |||||||||||
|
| |||||||||||||
| Road & Rail 0.3% | ||||||||||||||
Burlington Northern Santa Fe LLC, | ||||||||||||||
senior bond, 4.15%, 4/01/45 | United States | 2,300,000 | 2,444,099 | |||||||||||
senior bond, 4.90%, 4/01/44 | United States | 1,100,000 | 1,268,363 | |||||||||||
CSX Corp., senior bond, 4.25%, 11/01/66 | United States | 1,000,000 | 1,045,599 | |||||||||||
|
| |||||||||||||
| 4,758,061 | ||||||||||||||
|
| |||||||||||||
| Software 0.3% | ||||||||||||||
ServiceNow Inc., senior bond, 1.40%, 9/01/30 | United States | 6,000,000 | 5,106,238 | |||||||||||
|
| |||||||||||||
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FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty U.S. Core Bond ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| Corporate Bonds & Notes (continued) | ||||||||||||||
| Tobacco 0.8% | ||||||||||||||
Altria Group Inc., senior note, 3.40%, 5/06/30 | United States | 6,600,000 | $ | 6,359,822 | ||||||||||
| a | Imperial Brands Finance PLC, senior note, 144A, 3.50%, 7/26/26 | United Kingdom | 6,000,000 | 5,877,098 | ||||||||||
|
| |||||||||||||
| 12,236,920 | ||||||||||||||
| �� | |||||||||||||
| Wireless Telecommunication Services 0.7% | ||||||||||||||
T-Mobile USA Inc., | ||||||||||||||
senior bond, 3.30%, 2/15/51 | United States | 2,000,000 | 1,688,933 | |||||||||||
senior note, 3.75%, 4/15/27 | United States | 5,000,000 | 5,037,600 | |||||||||||
senior secured bond, 3.875%, 4/15/30 | United States | 1,000,000 | 1,005,262 | |||||||||||
Vodafone Group PLC, senior bond, 6.15%, 2/27/37 | United Kingdom | 2,300,000 | 2,761,180 | |||||||||||
|
| |||||||||||||
| 10,492,975 | ||||||||||||||
|
| |||||||||||||
Total Corporate Bonds & Notes (Cost $424,288,017) | 391,863,564 | |||||||||||||
|
| |||||||||||||
| U.S. Government & Agency Securities 41.2% | ||||||||||||||
Federal Home Loan Mortgage Corp., | United States | 5,399,000 | 5,017,612 | |||||||||||
2.50%, 9/01/51 | United States | 5,291,713 | 5,057,328 | |||||||||||
2.50%, 12/01/51 | United States | 4,068,225 | 3,896,023 | |||||||||||
2.50%, 12/01/51 | United States | 1,440,602 | 1,376,948 | |||||||||||
2.50%, 4/01/52 | United States | 14,252,000 | 13,620,738 | |||||||||||
3.50%, 4/01/52 | United States | 3,388,000 | 3,398,415 | |||||||||||
Federal National Mortgage Association, | United States | 5,446,450 | 5,206,779 | |||||||||||
2.50%, 11/01/51 | United States | 5,444,898 | 5,204,738 | |||||||||||
2.50%, 2/01/52 | United States | 5,324,238 | 5,098,959 | |||||||||||
2.50%, 2/01/52 | United States | 5,443,691 | 5,215,061 | |||||||||||
3.00%, 3/01/52 | United States | 830,259 | 813,930 | |||||||||||
3.00%, 3/01/52 | United States | 5,321,885 | 5,218,573 | |||||||||||
Government National Mortgage Association, | United States | 2,924,074 | 2,990,313 | |||||||||||
4.00%, 1/20/52 | United States | 5,024,330 | 5,138,145 | |||||||||||
U.S. Treasury Bond, | United States | 6,900,000 | 5,414,613 | |||||||||||
1.25%, 5/15/50 | United States | 18,743,000 | 14,003,071 | |||||||||||
1.375%, 8/15/50 | United States | 20,400,000 | 15,723,937 | |||||||||||
2.00%, 11/15/41 | United States | 5,100,000 | 4,616,297 | |||||||||||
2.00%, 2/15/50 | United States | 11,100,000 | 10,012,113 | |||||||||||
2.25%, 8/15/46 | United States | 25,354,000 | 23,739,663 | |||||||||||
2.25%, 8/15/49 | United States | 2,050,000 | 1,951,824 | |||||||||||
2.75%, 8/15/42 | United States | 4,387,000 | 4,465,143 | |||||||||||
2.75%, 11/15/42 | United States | 5,924,000 | 6,022,232 | |||||||||||
3.00%, 11/15/44 | United States | 12,595,000 | 13,362,016 | |||||||||||
3.00%, 2/15/49 | United States | 7,293,000 | 8,024,294 | |||||||||||
3.50%, 2/15/39 | United States | 3,175,000 | 3,640,708 | |||||||||||
U.S. Treasury Note, | United States | 24,509,000 | 22,773,744 | |||||||||||
0.375%, 11/30/25 | United States | 91,791,000 | 84,879,783 | |||||||||||
0.375%, 1/31/26 | United States | 62,772,000 | 57,847,095 | |||||||||||
0.50%, 3/31/25 | United States | 51,900,000 | 48,903,586 | |||||||||||
0.875%, 6/30/26 | United States | 24,500,000 | 22,886,924 | |||||||||||
1.25%, 12/31/26 | United States | 34,100,000 | 32,223,168 | |||||||||||
1.375%, 8/31/23 | United States | 20,000,000 | 19,806,641 | |||||||||||
1.50%, 3/31/23 | United States | 30,273,000 | 30,203,535 | |||||||||||
1.50%, 9/30/24 | United States | 9,050,000 | 8,838,598 | |||||||||||
1.50%, 10/31/24 | United States | 5,750,000 | 5,610,967 | |||||||||||
1.875%, 9/30/22 | United States | 6,500,000 | 6,526,314 | |||||||||||
2.125%, 2/29/24 | United States | 100,665,000 | 100,324,862 | |||||||||||
2.125%, 3/31/24 | United States | 3,500,000 | 3,486,055 | |||||||||||
|
| |||||||||||||
Total U.S. Government & Agency Securities (Cost $654,974,415) | 622,540,745 | |||||||||||||
|
| |||||||||||||
| franklintempleton.com | Annual Report | 181 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty U.S. Core Bond ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| Municipal Bonds 4.3% | ||||||||||||||
| Alabama 0.3% | ||||||||||||||
Southeast Alabama Gas Supply District, Series 2018B, Monthly, VRDN, 1.004%, 6/01/49 | 5,000,000 | $ | 4,999,536 | |||||||||||
|
| |||||||||||||
| California 2.5% | ||||||||||||||
California Health Facilities Financing Authority, | ||||||||||||||
State of California Personal Income Tax Revenue, 2.934%, 6/01/32 | 530,000 | 495,633 | ||||||||||||
State of California Personal Income Tax Revenue, 2.984%, 6/01/33 | 460,000 | 426,698 | ||||||||||||
State of California Personal Income Tax Revenue, 3.034%, 6/01/34 | 345,000 | 318,076 | ||||||||||||
California State University, Series 2021B-1, 2.719%, 11/01/52 | 2,195,000 | 1,853,916 | ||||||||||||
Clovis Unified School District, Refunding, Series 2021B, 3.067%, 8/01/39 | 12,580,000 | 11,594,246 | ||||||||||||
Contra Costa Community College District, Refunding, 2.926%, 8/01/38 | 4,000,000 | 3,618,866 | ||||||||||||
Foothill-Eastern Transportation Corridor Agency, Refunding, Series 2019A, 4.094%, 1/15/49 | 275,000 | 275,050 | ||||||||||||
Gilroy Unified School District, Refunding, 3.364%, 8/01/47 | 1,145,000 | 1,146,435 | ||||||||||||
San Bernardino Community College District, | ||||||||||||||
Refunding, 2.686%, 8/01/41 | 6,140,000 | 5,349,805 | ||||||||||||
Refunding, 2.856%, 8/01/49 | 3,575,000 | 3,019,951 | ||||||||||||
State of California, 4.00%, 3/01/46 | 2,500,000 | 2,685,247 | ||||||||||||
Whittier City School District, Refunding, 3.306%, 8/01/43 | 7,500,000 | 7,316,046 | ||||||||||||
|
| |||||||||||||
| 38,099,969 | ||||||||||||||
|
| |||||||||||||
| Florida 0.0%† | ||||||||||||||
County of Broward, Airport System Revenue, Refunding, Series 2019C, 3.477%, 10/01/43 | 560,000 | 528,364 | ||||||||||||
|
| |||||||||||||
| New York 0.3% | ||||||||||||||
Metropolitan Transportation Authority, | 1,095,000 | 1,120,115 | ||||||||||||
Green Bond, Series 2019B, 5.00%, 11/15/52 | 2,655,000 | 2,879,660 | ||||||||||||
|
| |||||||||||||
| 3,999,775 | ||||||||||||||
|
| |||||||||||||
| Ohio 0.1% | ||||||||||||||
Greenville City School District, Refunding, 3.541%, 1/01/51 | 1,295,000 | 1,308,669 | ||||||||||||
|
| |||||||||||||
| Pennsylvania 0.7% | ||||||||||||||
Commonwealth Financing Authority, Series 2021A, 2.991%, 6/01/42 | 7,800,000 | 7,074,417 | ||||||||||||
Pennsylvania State University, Series 2020B, 2.888%, 9/01/50 | 3,500,000 | 3,154,713 | ||||||||||||
|
| |||||||||||||
| 10,229,130 | ||||||||||||||
|
| |||||||||||||
| Texas 0.4% | ||||||||||||||
City of Austin, Electric Utility Revenue, Refunding, 6.262%, 11/15/32 | 940,000 | 1,116,207 | ||||||||||||
Texas Water Development Board, Series 2019A, 4.00%, 10/15/44 | 3,750,000 | 4,022,310 | ||||||||||||
|
| |||||||||||||
| 5,138,517 | ||||||||||||||
|
| |||||||||||||
Total Municipals (Cost $69,609,852) | 64,303,960 | |||||||||||||
|
| |||||||||||||
| Mortgage-Backed Securities 18.4% | ||||||||||||||
| Fannie Mae 5.0% | ||||||||||||||
Federal Home Loan Mortgage Corp., | United States | 5,359,058 | 5,214,771 | |||||||||||
2.00%, 7/01/36 | United States | 4,950,048 | 4,814,757 | |||||||||||
2.00%, 3/01/51 | United States | 5,594,030 | 5,209,351 | |||||||||||
2.50%, 2/01/51 | United States | 5,444,352 | 5,205,264 | |||||||||||
3.00%, 3/01/27 | United States | 4,392,516 | 4,439,419 | |||||||||||
3.00%, 3/01/50 | United States | 16,959,652 | 16,666,100 | |||||||||||
3.00%, 3/01/50 | United States | 6,627,291 | 6,514,628 | |||||||||||
3.50%, 2/01/47 | United States | 1,694,368 | 1,726,266 | |||||||||||
3.50%, 2/01/47 | United States | 3,142,518 | 3,200,852 | |||||||||||
3.50%, 3/01/48 | United States | 4,216,275 | 4,275,711 | |||||||||||
3.50%, 3/01/48 | United States | 2,004,827 | 2,031,440 | |||||||||||
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FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty U.S. Core Bond ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| Mortgage-Backed Securities (continued) | ||||||||||||||
| Fannie Mae (continued) | ||||||||||||||
4.00%, 11/01/45 | United States | 3,000,227 | $ | 3,124,529 | ||||||||||
4.00%, 6/01/48 | United States | 6,208,827 | 6,433,723 | |||||||||||
4.00%, 5/01/50 | United States | 6,965,966 | 7,190,567 | |||||||||||
|
| |||||||||||||
| 76,047,378 | ||||||||||||||
|
| |||||||||||||
| Freddie Mac 11.5% | ||||||||||||||
Federal National Mortgage Association, | United States | 7,732,051 | 7,344,127 | |||||||||||
2.00%, 5/01/36 | United States | 12,280,881 | 11,946,358 | |||||||||||
2.00%, 7/01/36 | United States | 10,603,588 | 10,314,738 | |||||||||||
2.00%, 8/01/36 | United States | 4,006,349 | 3,897,169 | |||||||||||
2.00%, 11/01/36 | United States | 1,153,611 | 1,122,081 | |||||||||||
2.00%, 12/01/36 | United States | 3,994,883 | 3,885,930 | |||||||||||
2.00%, 1/01/37 | United States | 1,584,985 | 1,542,950 | |||||||||||
2.00%, 6/01/51 | United States | 4,102,199 | 3,817,381 | |||||||||||
2.00%, 7/01/51 | United States | 23,568,690 | 21,927,923 | |||||||||||
2.00%, 8/01/51 | United States | 7,996,904 | 7,448,766 | |||||||||||
2.50%, 12/01/35 | United States | 816,387 | 808,325 | |||||||||||
2.50%, 7/01/36 | United States | 7,560,931 | 7,486,265 | |||||||||||
2.50%, 7/01/51 | United States | 7,955,481 | 7,603,110 | |||||||||||
2.50%, 12/01/51 | United States | 17,354,501 | 16,585,820 | |||||||||||
3.00%, 12/01/32 | United States | 1,587,663 | 1,601,369 | |||||||||||
3.00%, 4/01/33 | United States | 2,236,298 | 2,255,655 | |||||||||||
3.00%, 2/01/35 | United States | 1,824,269 | 1,841,149 | |||||||||||
3.00%, 4/01/50 | United States | 7,089,536 | 6,973,310 | |||||||||||
3.00%, 9/01/50 | United States | 5,671,484 | 5,566,387 | |||||||||||
3.00%, 11/01/51 | United States | 13,478,369 | 13,203,402 | |||||||||||
3.50%, 8/01/49 | United States | 11,836,317 | 11,967,980 | |||||||||||
4.00%, 9/01/48 | United States | 6,827,377 | 7,031,288 | |||||||||||
4.50%, 7/01/47 | United States | 6,492,439 | 6,829,867 | |||||||||||
4.50%, 5/01/48 | United States | 3,306,315 | 3,487,936 | |||||||||||
4.50%, 12/01/48 | United States | 4,788,385 | 5,021,769 | |||||||||||
4.50%, 2/01/50 | United States | 1,938,907 | 2,026,835 | |||||||||||
|
| |||||||||||||
| 173,537,890 | ||||||||||||||
|
| |||||||||||||
| Ginnie Mae 1.9% | ||||||||||||||
Government National Mortgage Association, | ||||||||||||||
2.00%, 5/20/51 | United States | 5,486,901 | 5,242,117 | |||||||||||
2.00%, 7/20/51 | United States | 5,487,662 | 5,242,765 | |||||||||||
2.00%, 12/20/51 | United States | 2,207,424 | 2,108,222 | |||||||||||
2.50%, 6/20/51 | United States | 11,897,247 | 11,558,402 | |||||||||||
2.50%, 11/20/51 | United States | 4,612,047 | 4,480,692 | |||||||||||
|
| |||||||||||||
| 28,632,198 | ||||||||||||||
|
| |||||||||||||
Total Mortgage-Backed Securities (Cost $293,506,279) | 278,217,466 | |||||||||||||
|
| |||||||||||||
| Foreign Government and Agency Securities 3.3% | ||||||||||||||
| Chile 0.1% | ||||||||||||||
Chile Government International Bond, Sr. Unsecured, 3.5%, 1/25/2050 | 1,100,000 | 1,009,734 | ||||||||||||
|
| |||||||||||||
| Colombia 0.3% | ||||||||||||||
Colombia Government International Bond, | ||||||||||||||
senior bond, 5.00%, 6/15/45 | 3,250,000 | 2,747,420 | ||||||||||||
senior bond, 5.625%, 2/26/44 | 2,000,000 | 1,817,940 | ||||||||||||
|
| |||||||||||||
| 4,565,360 | ||||||||||||||
|
| |||||||||||||
| India 0.1% | ||||||||||||||
| a | Export-Import Bank of India, senior note, 144A, 3.25%, 1/15/2030 | 1,000,000 | 948,971 | |||||||||||
|
| |||||||||||||
| franklintempleton.com | Annual Report | 183 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty U.S. Core Bond ETF (continued)
| Principal Amount* | Value | |||||||||||||
| Foreign Government and Agency Securities (continued) | ||||||||||||||
| Indonesia 0.4% | ||||||||||||||
Indonesia Government International Bond, | ||||||||||||||
a senior bond, 144A, 4.35%, 1/08/27 | 3,150,000 | $ | 3,353,808 | |||||||||||
a senior note, 144A, 4.125%, 1/15/25 | 3,500,000 | 3,617,247 | ||||||||||||
|
| |||||||||||||
| 6,971,055 | ||||||||||||||
|
| |||||||||||||
| Mexico 0.2% | ||||||||||||||
Mexico Government International Bond, senior bond, 3.6%, 1/30/2025 | 2,700,000 | 2,775,870 | ||||||||||||
|
| |||||||||||||
| Panama 0.4% | ||||||||||||||
Panama Notas del Tesoro, senior note, 3.75%, 4/17/2026 | 5,950,000 | 5,985,700 | ||||||||||||
|
| |||||||||||||
| Peru 0.4% | ||||||||||||||
Peruvian Government International Bond, senior bond, 2.783%, 1/23/2031 | 5,850,000 | 5,522,400 | ||||||||||||
|
| |||||||||||||
| Philippines 0.3% | ||||||||||||||
Philippine Government International Bond, senior bond, 3.95%, 1/20/2040 | 4,620,000 | 4,586,146 | ||||||||||||
|
| |||||||||||||
| Romania 0.1% | ||||||||||||||
| a | Romanian Government International Bond, senior bond, 144A, 5.125%, 6/15/2048 | 2,270,000 | 2,363,338 | |||||||||||
|
| |||||||||||||
| Supranational 0.6% | ||||||||||||||
| a | African Export-Import Bank, senior bond, 144A, 3.994%, 9/21/2029 | 6,100,000 | 5,793,731 | |||||||||||
| a | Banque Ouest Africaine de Developpement, Sr. Unsecured note, 144A, 5.00%, 7/27/2027 | 3,800,000 | 3,841,458 | |||||||||||
|
| |||||||||||||
| 9,635,189 | ||||||||||||||
|
| |||||||||||||
| Uruguay 0.4% | ||||||||||||||
Uruguay Government International Bond, | ||||||||||||||
senior bond, 4.375%, 1/23/31 | 3,875,000 | 4,232,236 | ||||||||||||
senior bond, 4.50%, 8/14/24 | 1,400,000 | 1,443,764 | ||||||||||||
|
| |||||||||||||
| 5,676,000 | ||||||||||||||
|
| |||||||||||||
Total Foreign Government and Agency Securities (Cost $54,700,024) | 50,039,763 | |||||||||||||
|
| |||||||||||||
| Asset-Backed Securities 2.7% | ||||||||||||||
BANK 2021-BNK33, Series 2021-BN33, Class A5, 2.556%, 5/15/64 | 2,780,000 | 2,612,152 | ||||||||||||
Benchmark Mortgage Trust, | ||||||||||||||
Series 2021-B31, Class A5, 2.669%, 12/15/54 | 2,780,000 | 2,631,119 | ||||||||||||
Series 2022-B32, Class A5, 3.002%, 1/15/55 | 5,560,000 | 5,409,032 | ||||||||||||
| a | BX 2021-LBA3 Mortgage Trust, Series 2021-PAC, Class A, 144A, 1.086%, 10/15/36 | 3,090,000 | 3,033,192 | |||||||||||
BX Commercial Mortgage Trust, | ||||||||||||||
a Series 2019-XL, Class A, 144A, 1.317%, 10/15/36 | 4,187,872 | 4,172,426 | ||||||||||||
a 144A, 1.318%, 2/15/39 | 3,200,000 | 3,141,217 | ||||||||||||
a Series 2021-VOLT, Class B, 144A, 1.347%, 9/15/36 | 3,190,000 | 3,126,774 | ||||||||||||
Capital One Multi-Asset Execution Trust, Series 2019-A2, Class A2, 1.72%, 8/15/24 | 5,510,000 | 5,520,213 | ||||||||||||
Citibank Credit Card Issuance Trust, Series 2017-A7 , Class A7, 0.68%, FRN thereafter, 0.68%, 8/08/24 | 2,000,000 | 2,001,910 | ||||||||||||
Discover Card Execution Note Trust, Series 2019-A3, Class A, 1.89%, 10/15/24 | 3,220,000 | 3,227,630 | ||||||||||||
| a | New Economy Assets Phase 1 Sponsor LLC, Series 2021-1, Class A1, 144A, 1.91%, 10/20/61 | 6,660,000 | 6,217,128 | |||||||||||
|
| |||||||||||||
Total Asset-Backed Securities (Cost $41,911,050) | 41,092,793 | |||||||||||||
|
| |||||||||||||
Total Investments before Short Term Investments | 1,448,058,291 | |||||||||||||
|
| |||||||||||||
| 184 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty U.S. Core Bond ETF (continued)
| Principal Amount* | Value | |||||||||||||
| Short Term Investments 3.2% | ||||||||||||||
| Money Market Funds 3.2% | ||||||||||||||
| b,c | Institutional Fiduciary Trust Portfolio, 0.01% | 48,548,641 | $ | 48,548,641 | ||||||||||
|
| |||||||||||||
Total Short Term Investments | 48,548,641 | |||||||||||||
|
| |||||||||||||
Total Investments (Cost $1,587,538,278) 99.1% | 1,496,606,932 | |||||||||||||
Other Assets, less Liabilities 0.9% | 13,354,376 | |||||||||||||
|
| |||||||||||||
Net Assets 100.0% | $ | 1,509,961,308 | ||||||||||||
|
| |||||||||||||
*The principal amount is stated in U.S. dollars unless otherwise indicated.
†Rounds to less than 0.1% of net assets.
aSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. At March 31, 2022, the aggregate value of these securities was $116,274,566 representing 7.7% of net assets.
bSee Note 3(d) regarding investments in affiliated management investment companies.
cThe rate shown is the annualized seven-day effective yield at period end.
At March 31, 2022, the Fund had the following credit default swap contracts outstanding. See Note 1(c).
| Credit Default Swap Contracts | ||||||||||||||||||||||||||||
| Description | Periodic Payment Rate Received (Paid) | Payment Frequency | Maturity Date | Notional Amount | Value | Unamortized Upfront Payments (Receipts) | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
Over the counter Swap Contracts Contracts to Sell Protectiond,e | ||||||||||||||||||||||||||||
Long: s25995201 CDS USD R F 1.00000 Mexico Government International Bond | 1% | Quarterly | 6/20/26 | 5,200,000 | $ | 46,281 | $ | 14,678 | $ | 31,603 | ||||||||||||||||||
Long: s26257921 CDS USD R F 1.00000 Nordstrom Inc. | 1% | Quarterly | 12/20/26 | 3,810,000 | (357,130 | ) | (307,499 | ) | (49,631 | ) | ||||||||||||||||||
|
| |||||||||||||||||||||||||||
| $ | (18,028 | ) | ||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
dThe Fund enters contracts to sell protection to create a long credit position.
ePerformance triggers for settlement of contract include default, bankruptcy or restructuring for single name swaps, and failure to pay or bankruptcy of the underlying securities for traded swaps.
At March 31, 2022, the Fund had the following futures contracts outstanding. See Note 1(c).
| Futures Contracts | ||||||||||||||||||||
| Description | Type | Number of Contracts | Notional Amount* | Expiration Date | Value/Unrealized Appreciation (Depreciation) | |||||||||||||||
| Index Contracts | ||||||||||||||||||||
U.S. Treasury 10 Yr. Note | Long | 46 | $ | 5,652,250 | 6/21/22 | $ | (169,688 | ) | ||||||||||||
U.S. Treasury Bond Ultra | Long | 21 | 3,719,625 | 6/21/22 | (114,056 | ) | ||||||||||||||
U.S. Treasury Bond Long | Short | 40 | 6,002,500 | 6/21/22 | 152,407 | |||||||||||||||
Ultra 10 Yr. U.S. Treasury Note | Short | 100 | 13,546,875 | 6/21/22 | 247,319 | |||||||||||||||
|
| |||||||||||||||||||
Total Futures Contracts |
| $ | 115,982 | |||||||||||||||||
|
| |||||||||||||||||||
*As of year end.
See Note 12 regarding other derivative information.
See Abbreviations on page 240.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 185 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin Liberty U.S. Low Volatility ETF
| Year Ended March 31, | ||||||||||||||||||||
| 2022 | 2021 | 2020 | 2019 | 2018 | ||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) | ||||||||||||||||||||
Net asset value, beginning of year | $ | 43.69 | $ | 30.93 | $ | 33.61 | $ | 30.03 | $ | 26.97 | ||||||||||
|
| |||||||||||||||||||
| Income from investment operationsa: | ||||||||||||||||||||
Net investment incomeb | 0.70 | 0.67 | 0.64 | 0.52 | 0.45 | |||||||||||||||
Net realized and unrealized gains (losses) | 5.39 | 12.73 | (2.84 | ) | 3.88 | 3.06 | ||||||||||||||
|
| |||||||||||||||||||
Total from investment operations | 6.09 | 13.40 | (2.20 | ) | 4.40 | 3.51 | ||||||||||||||
|
| |||||||||||||||||||
| Less distributions from: | ||||||||||||||||||||
Net investment income | (0.71 | ) | (0.64 | ) | (0.48 | ) | (0.47 | ) | (0.45 | ) | ||||||||||
Net realized gains | — | — | — | (0.35 | ) | — | ||||||||||||||
|
| |||||||||||||||||||
Total Distributions | (0.71 | ) | (0.64 | ) | (0.48 | ) | (0.82 | ) | (0.45 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of year | $ | 49.07 | $ | 43.69 | $ | 30.93 | $ | 33.61 | $ | 30.03 | ||||||||||
|
| |||||||||||||||||||
Total returnc | 13.98% | 43.52% | (6.74)% | 14.98% | 13.08% | |||||||||||||||
| Ratios to average net assetsd | ||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.33% | 0.37% | 0.57% | 1.12% | 2.11% | |||||||||||||||
Expenses net of waiver and payments by affiliates | 0.29% | 0.29% | 0.33% | 0.50% | 0.50% | |||||||||||||||
Net investment income | 1.47% | 1.71% | 1.75% | 1.64% | 1.56% | |||||||||||||||
| Supplemental data | ||||||||||||||||||||
Net assets, end of year (000’s) | $134,935 | $139,822 | $74,223 | $13,443 | $6,005 | |||||||||||||||
Portfolio turnover ratee | 21.90% | f | 40.54% | f | 32.61% | f | 46.90% | 65.68% | ||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of Creation Unit Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return is not annualized for periods less than one year. Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period.
dRatios are annualized for periods less than one year.
ePortfolio turnover rate includes portfolio transactions that are executed as a result of the Fund offering and redeeming Creation Units solely for cash (“Cash creations”).
| fPortfolio turnover rate excluding cash creations was as follows: | 21.90% | 40.54% | 32.61% |
| 186 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Schedule of Investments, March 31, 2022
Franklin Liberty U.S. Low Volatility ETF
| Shares | Value | |||||||||||||
| Common Stocks 99.1% | ||||||||||||||
| Communication Services 8.6% | ||||||||||||||
| a | Alphabet Inc., A | 539 | $ | 1,499,148 | ||||||||||
AT&T Inc. | 63,288 | 1,495,495 | ||||||||||||
| a | Charter Communications Inc., A | 2,545 | 1,388,348 | |||||||||||
Comcast Corp., A | 31,326 | 1,466,683 | ||||||||||||
| a | Liberty Broadband Corp., C | 10,405 | 1,408,005 | |||||||||||
TELUS Corp. | 57,314 | 1,498,188 | ||||||||||||
| a | The Walt Disney Co. | 10,474 | 1,436,614 | |||||||||||
Verizon Communications Inc. | 28,928 | 1,473,592 | ||||||||||||
|
| |||||||||||||
| 11,666,073 | ||||||||||||||
|
| |||||||||||||
| Consumer Discretionary 11.4% | ||||||||||||||
| a | Amazon.com Inc. | 443 | 1,444,158 | |||||||||||
Dollar General Corp. | 6,225 | 1,385,872 | ||||||||||||
McDonald’s Corp. | 5,983 | 1,479,476 | ||||||||||||
NIKE Inc., B | 10,892 | 1,465,628 | ||||||||||||
| a | NVR Inc. | 286 | 1,277,639 | |||||||||||
| a | O’Reilly Automotive Inc. | 2,071 | 1,418,552 | |||||||||||
Starbucks Corp. | 15,953 | 1,451,244 | ||||||||||||
Target Corp. | 6,323 | 1,341,867 | ||||||||||||
The Home Depot Inc. | 4,195 | 1,255,689 | ||||||||||||
The TJX Cos. Inc. | 22,893 | 1,386,858 | ||||||||||||
Tractor Supply Co. | 6,121 | 1,428,458 | ||||||||||||
|
| |||||||||||||
| 15,335,441 | ||||||||||||||
|
| |||||||||||||
| Consumer Staples 5.8% | ||||||||||||||
Mondelez International Inc., A | 24,977 | 1,568,056 | ||||||||||||
PepsiCo Inc. | 9,437 | 1,579,565 | ||||||||||||
The Coca-Cola Co. | 25,563 | 1,584,906 | ||||||||||||
The Procter & Gamble Co. | 10,232 | 1,563,450 | ||||||||||||
Walmart Inc. | 10,563 | 1,573,042 | ||||||||||||
|
| |||||||||||||
| 7,869,019 | ||||||||||||||
|
| |||||||||||||
| Energy 3.9% | ||||||||||||||
Chevron Corp. | 10,325 | 1,681,220 | ||||||||||||
Exxon Mobil Corp. | 21,227 | 1,753,138 | ||||||||||||
Kinder Morgan Inc. | 96,194 | 1,819,028 | ||||||||||||
|
| |||||||||||||
| 5,253,386 | ||||||||||||||
|
| |||||||||||||
| Financials 11.7% | ||||||||||||||
Aflac Inc. | 25,042 | 1,612,454 | ||||||||||||
Arthur J Gallagher & Co. | 9,418 | 1,644,383 | ||||||||||||
BlackRock Inc. | 2,134 | 1,630,739 | ||||||||||||
Intercontinental Exchange Inc. | 11,515 | 1,521,362 | ||||||||||||
JPMorgan Chase & Co. | 11,252 | 1,533,872 | ||||||||||||
Nasdaq Inc. | 8,795 | 1,567,269 | ||||||||||||
S&P Global Inc. | 3,845 | 1,577,142 | ||||||||||||
The Progressive Corp. | 14,173 | 1,615,580 | ||||||||||||
The Travelers Cos. Inc. | 8,742 | 1,597,426 | ||||||||||||
US Bancorp | 27,886 | 1,482,141 | ||||||||||||
|
| |||||||||||||
| 15,782,368 | ||||||||||||||
|
| |||||||||||||
| Health Care 13.5% | ||||||||||||||
Abbott Laboratories | 13,419 | 1,588,273 | ||||||||||||
AbbVie Inc. | 10,321 | 1,673,137 | ||||||||||||
Amgen Inc. | 6,955 | 1,681,858 | ||||||||||||
Becton Dickinson and Co. | 6,270 | 1,667,820 | ||||||||||||
Bristol-Myers Squibb Co. | 23,137 | 1,689,695 | ||||||||||||
Danaher Corp. | 5,623 | 1,649,395 | ||||||||||||
| franklintempleton.com | Annual Report | 187 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty U.S. Low Volatility ETF (continued)
| Shares | Value | |||||||||||||
| Common Stocks (continued) | ||||||||||||||
| Health Care (continued) | ||||||||||||||
Johnson & Johnson | 9,398 | $ | 1,665,607 | |||||||||||
Medtronic PLC | 14,913 | 1,654,597 | ||||||||||||
Merck & Co. Inc. | 20,771 | 1,704,261 | ||||||||||||
Quest Diagnostics Inc. | 11,327 | 1,550,213 | ||||||||||||
UnitedHealth Group Inc. | 3,246 | 1,655,363 | ||||||||||||
|
| |||||||||||||
| 18,180,219 | ||||||||||||||
|
| |||||||||||||
| Industrials 8.7% | ||||||||||||||
3M Co. | 7,115 | 1,059,281 | ||||||||||||
AMETEK Inc. | 7,831 | 1,042,933 | ||||||||||||
General Dynamics Corp. | 4,584 | 1,105,569 | ||||||||||||
Honeywell International Inc. | 5,420 | 1,054,624 | ||||||||||||
IDEX Corp. | 5,303 | 1,016,744 | ||||||||||||
Illinois Tool Works Inc. | 4,970 | 1,040,718 | ||||||||||||
Lockheed Martin Corp. | 2,476 | 1,092,906 | ||||||||||||
Republic Services Inc. | 8,026 | 1,063,445 | ||||||||||||
Roper Technologies Inc. | 2,252 | 1,063,462 | ||||||||||||
Union Pacific Corp. | 4,038 | 1,103,222 | ||||||||||||
Verisk Analytics Inc. | 5,068 | 1,087,745 | ||||||||||||
|
| |||||||||||||
| 11,730,649 | ||||||||||||||
|
| |||||||||||||
| Information Technology 26.9% | ||||||||||||||
Accenture PLC, A | 6,185 | 2,085,768 | ||||||||||||
Amphenol Corp., A | 26,113 | 1,967,615 | ||||||||||||
Analog Devices Inc. | 12,260 | 2,025,107 | ||||||||||||
| a | ANSYS Inc. | 6,289 | 1,997,701 | |||||||||||
Apple Inc. | 12,220 | 2,133,734 | ||||||||||||
Automatic Data Processing Inc. | 9,334 | 2,123,858 | ||||||||||||
| a | Black Knight Inc. | 33,079 | 1,918,251 | |||||||||||
Cisco Systems Inc. | 35,803 | 1,996,375 | ||||||||||||
Fidelity National Information Services Inc. | 20,913 | 2,100,083 | ||||||||||||
International Business Machines Corp. | 15,563 | 2,023,501 | ||||||||||||
Intuit Inc. | 3,329 | 1,600,716 | ||||||||||||
| a | Keysight Technologies Inc. | 12,415 | 1,961,198 | |||||||||||
Mastercard Inc., A | 5,724 | 2,045,643 | ||||||||||||
Microsoft Corp. | 6,670 | 2,056,428 | ||||||||||||
Oracle Corp. | 24,533 | 2,029,615 | ||||||||||||
| a | Synopsys Inc. | 6,297 | 2,098,601 | |||||||||||
Texas Instruments Inc. | 11,126 | 2,041,399 | ||||||||||||
Visa Inc., A | 9,145 | 2,028,087 | ||||||||||||
|
| |||||||||||||
| 36,233,680 | ||||||||||||||
|
| |||||||||||||
| Materials 2.5% | ||||||||||||||
Air Products and Chemicals Inc. | 4,728 | 1,181,574 | ||||||||||||
Ecolab Inc. | 6,401 | 1,130,161 | ||||||||||||
Linde PLC | 3,514 | 1,122,477 | ||||||||||||
|
| |||||||||||||
| 3,434,212 | ||||||||||||||
|
| |||||||||||||
| Real Estate 3.4% | ||||||||||||||
Crown Castle International Corp. | 8,403 | 1,551,194 | ||||||||||||
Equinix Inc. | 2,006 | 1,487,690 | ||||||||||||
Public Storage | 4,018 | 1,568,145 | ||||||||||||
|
| |||||||||||||
| 4,607,029 | ||||||||||||||
|
| |||||||||||||
| Utilities 2.7% | ||||||||||||||
American Electric Power Co. Inc. | 7,384 | 736,702 | ||||||||||||
Consolidated Edison Inc. | 7,831 | 741,439 | ||||||||||||
Dominion Energy Inc. | 8,547 | 726,239 | ||||||||||||
| 188 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty U.S. Low Volatility ETF (continued)
| Shares | Value | |||||||||||||
| Common Stocks (continued) | ||||||||||||||
| Utilities (continued) | ||||||||||||||
Duke Energy Corp. | 6,612 | $ | 738,296 | |||||||||||
NextEra Energy Inc. | 8,433 | 714,359 | ||||||||||||
|
| |||||||||||||
| 3,657,035 | ||||||||||||||
|
| |||||||||||||
Total Investments before Short Term Investments | 133,749,111 | |||||||||||||
|
| |||||||||||||
| Country | Principal Amount* | |||||||||||||
| Short Term Investments 0.5% | ||||||||||||||
| U.S. Government & Agency Securities 0.5% | ||||||||||||||
| b | Federal Home Loan Bank Discount Notes, 04/01/2022 | United States | 660,000 | 660,000 | ||||||||||
|
| |||||||||||||
Total Short-Term Investments (Cost $660,000) | 660,000 | |||||||||||||
|
| |||||||||||||
Total Investments (Cost $116,214,358) 99.6% | 134,409,111 | |||||||||||||
Other Assets, less Liabilities 0.4% | 526,304 | |||||||||||||
|
| |||||||||||||
Net Assets 100.0% | $ | 134,935,415 | ||||||||||||
|
| |||||||||||||
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aNon-income producing.
bThe security was issued on a discount basis with no stated coupon rate.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 189 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin Liberty U.S. Treasury Bond ETF
| Year Ended March 31, | ||||||||
| 2022 | 2021a | |||||||
| Per share operating performance (for a share outstanding throughout the year) |
| |||||||
Net asset value, beginning of year | $ | 23.83 | $ | 25.00 | ||||
|
| |||||||
| Income from investment operationsb: |
| |||||||
Net investment incomec | 0.18 | 0.11 | ||||||
Net realized and unrealized gains (losses) | (0.96 | ) | (0.94 | ) | ||||
|
| |||||||
Total from investment operations | (0.78 | ) | (0.83 | ) | ||||
|
| |||||||
Less distributions from net investment income | (0.38 | ) | (0.34 | ) | ||||
|
| |||||||
Net asset value, end of year | $ | 22.67 | $ | 23.83 | ||||
|
| |||||||
Total returnd | (3.35)% | (3.36)% | ||||||
| Ratios to average net assetse |
| |||||||
Expenses before waiver and payments by affiliates | 0.28% | 0.50% | ||||||
Expenses net of waiver and payments by affiliates | 0.09% | 0.09% | ||||||
Net investment income | 0.77% | 0.54% | ||||||
| Supplemental data |
| |||||||
Net assets, end of year (000’s) | $403,543 | $418,199 | ||||||
Portfolio turnover ratef | 13.86% | g | 102.09% | g | ||||
aFor the period June 9, 2020 (commencement of operations) to March 31, 2021.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of Creation Unit Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year. Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period.
eRatios are annualized for periods less than one year.
fPortfolio turnover rate includes portfolio transactions that are executed as a result of the Fund offering and redeeming Creation Units solely for cash (“Cash creations”).
| gPortfolio turnover rate excluding cash creations was as follows: | 13.86% | 102.09% |
| 190 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Schedule of Investments, March 31, 2022
Franklin Liberty U.S. Treasury Bond ETF
| Country | Principal Amount* | Value | ||||||||||||
| U.S. Government & Agency Securities 96.5% | ||||||||||||||
U.S. Treasury Bond, | ||||||||||||||
1.125%, 8/15/40 | United States | 13,770,000 | $ | 10,805,685 | ||||||||||
2.00%, 8/15/51 | United States | 4,648,000 | 4,194,820 | |||||||||||
2.25%, 8/15/46 | United States | 9,339,000 | 8,744,368 | |||||||||||
2.25%, 8/15/49 | United States | 7,922,000 | 7,542,611 | |||||||||||
2.375%, 2/15/42 | United States | 1,616,000 | 1,559,188 | |||||||||||
2.375%, 5/15/51 | United States | 551,000 | 540,593 | |||||||||||
2.50%, 2/15/45 | United States | 8,932,000 | 8,708,002 | |||||||||||
2.75%, 11/15/47 | United States | 8,790,000 | 9,128,037 | |||||||||||
2.875%, 5/15/49 | United States | 4,980,000 | 5,360,795 | |||||||||||
3.00%, 5/15/47 | United States | 1,800,000 | 1,945,371 | |||||||||||
3.375%, 11/15/48 | United States | 8,760,000 | 10,266,652 | |||||||||||
4.375%, 2/15/38 | United States | 3,650,000 | 4,620,529 | |||||||||||
4.50%, 5/15/38 | United States | 6,080,000 | 7,807,337 | |||||||||||
U.S. Treasury Note, | ||||||||||||||
0.125%, 5/31/22 | United States | 35,400,000 | 35,384,829 | |||||||||||
0.50%, 6/30/27 | United States | 30,620,000 | 27,679,403 | |||||||||||
0.625%, 8/15/30 | United States | 2,450,000 | 2,128,772 | |||||||||||
0.75%, 8/31/26 | United States | 1,795,000 | 1,663,916 | |||||||||||
1.125%, 2/29/28 | United States | 7,358,000 | 6,824,258 | |||||||||||
1.25%, 8/31/24 | United States | 12,670,000 | 12,313,656 | |||||||||||
1.25%, 4/30/28 | United States | 18,200,000 | 16,957,992 | |||||||||||
1.375%, 11/15/31 | United States | 500,000 | 458,906 | |||||||||||
1.50%, 9/30/24 | United States | 12,610,000 | 12,315,438 | |||||||||||
1.50%, 11/30/24 | United States | 20,518,000 | 19,991,425 | |||||||||||
1.625%, 8/15/29 | United States | 8,785,000 | 8,333,225 | |||||||||||
1.75%, 7/31/24 | United States | 7,080,000 | 6,970,758 | |||||||||||
1.875%, 7/31/26 | United States | 31,973,000 | 31,159,312 | |||||||||||
1.875%, 2/15/32 | United States | 820,000 | 787,584 | |||||||||||
2.00%, 4/30/24 | United States | 11,369,000 | 11,284,177 | |||||||||||
2.00%, 5/31/24 | United States | 12,230,000 | 12,129,198 | |||||||||||
2.125%, 3/31/24 | United States | 13,131,000 | 13,078,681 | |||||||||||
2.125%, 9/30/24 | United States | 9,390,000 | 9,313,339 | |||||||||||
2.125%, 11/30/24 | United States | 12,920,000 | 12,796,352 | |||||||||||
2.25%, 10/31/24 | United States | 10,600,000 | 10,538,305 | |||||||||||
2.25%, 11/15/24 | United States | 13,470,000 | 13,388,970 | |||||||||||
2.375%, 2/29/24 | United States | 7,789,000 | 7,799,193 | |||||||||||
2.375%, 5/15/27 | United States | 7,000,000 | 6,971,562 | |||||||||||
2.50%, 5/15/24 | United States | 14,085,000 | 14,117,737 | |||||||||||
2.875%, 8/15/28 | United States | 1,764,000 | 1,807,824 | |||||||||||
3.125%, 11/15/28 | United States | 11,527,000 | 12,004,290 | |||||||||||
|
| |||||||||||||
Total U.S. Government & Agency Securities (Cost $419,648,558) | 389,423,090 | |||||||||||||
|
| |||||||||||||
| Mortgage-Backed Securities 1.5% | ||||||||||||||
| Fannie Mae 0.5% | ||||||||||||||
Federal National Mortgage Association | United States | 2,220,733 | 2,122,371 | |||||||||||
|
| |||||||||||||
| Ginnie Mae 1.0% | ||||||||||||||
Government National Mortgage Association | United States | 4,081,715 | 4,044,560 | |||||||||||
|
| |||||||||||||
Total Mortgage-Backed Securities (Cost $6,449,862) | 6,166,931 | |||||||||||||
|
| |||||||||||||
| franklintempleton.com | Annual Report | 191 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty U.S. Treasury Bond ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| Short Term Investments 1.2% | ||||||||||||||
| Money Market Funds 1.2% | ||||||||||||||
| a,b | Institutional Fiduciary Trust Portfolio, 0.01% | United States | 4,633,381 | $ | 4,633,381 | |||||||||
|
| |||||||||||||
Total Short Term Investments (Cost $4,633,381) | 4,633,381 | |||||||||||||
|
| |||||||||||||
Total Investments (Cost $430,731,801) 99.2% | 400,223,402 | |||||||||||||
Other Assets, less Liabilities 0.8% | 3,319,315 | |||||||||||||
|
| |||||||||||||
Net Assets 100.0% | $ | 403,542,717 | ||||||||||||
|
| |||||||||||||
See Abbreviations on page 240.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aSee Note 3(d) regarding investments in affiliated management investment companies.
bThe rate shown is the annualized seven-day effective yield at period end.
| 192 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin Liberty Ultra Short Bond ETF
| Year Ended March 31, | ||||||||
| 2022 | 2021a | |||||||
| Per share operating performance (for a share outstanding throughout the year) |
| |||||||
Net asset value, beginning of year | $ | 24.88 | $ | 25.00 | ||||
|
| |||||||
| Income from investment operationsb: |
| |||||||
Net investment incomec | 0.14 | 0.10 | ||||||
Net realized and unrealized gains (losses) | (0.33 | ) | 0.13 | |||||
|
| |||||||
Total from investment operations | (0.19 | ) | 0.23 | |||||
|
| |||||||
| Less distributions from: |
| |||||||
Net investment income | (0.14 | ) | (0.33 | ) | ||||
Net realized gains | — | (0.02 | ) | |||||
|
| |||||||
Total Distributions | (0.14 | ) | (0.35 | ) | ||||
|
| |||||||
Net asset value, end of year | $ | 24.55 | $ | 24.88 | ||||
|
| |||||||
Total returnd | (0.78)% | 0.91% | ||||||
| Ratios to average net assetse |
| |||||||
Expenses before waiver and payments by affiliates | 1.71% | 4.17% | ||||||
Expenses net of waiver and payments by affiliates | 0.15% | 0.15% | ||||||
Net investment income | 0.55% | 0.58% | ||||||
| Supplemental data |
| |||||||
Net assets, end of year (000’s) | $3,682 | $2,488 | ||||||
Portfolio turnover ratef | 24.71% | g | 10.49% | g | ||||
aFor the period July 14, 2020 (commencement of operations) to March 31, 2021.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of Creation Unit Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year. Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period.
eRatios are annualized for periods less than one year.
fPortfolio turnover rate includes portfolio transactions that are executed as a result of the Fund offering and redeeming Creation Units solely for cash (“Cash creations”).
| gPortfolio turnover rate excluding cash creations was as follows: | 24.17% | 10.49% |
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 193 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Schedule of Investments, March 31, 2022
Franklin Liberty Ultra Short Bond ETF
| Country | Principal Amount* | Value | ||||||||||||
| Corporate Bonds & Notes 92.6% | ||||||||||||||
| Aerospace & Defense 2.7% | ||||||||||||||
The Boeing Co., senior note, 1.167%, 2/04/23 | United States | 100,000 | $ | 99,248 | ||||||||||
|
| |||||||||||||
| Automobiles 4.1% | ||||||||||||||
| a | Hyundai Capital America, Senior note, 144A, 2.375%, 2/10/23 | United States | 150,000 | 149,579 | ||||||||||
|
| |||||||||||||
| Banks 21.7% | ||||||||||||||
Bank of America Corp., senior note, FRN thereafter, 1.259%, 4/24/23 | United States | 50,000 | 50,014 | |||||||||||
Bank of Montreal, senior note, FRN thereafter, 0.931%, 3/10/23 | Canada | 50,000 | 50,069 | |||||||||||
Canadian Imperial Bank of Commerce, senior note, FRN thereafter, 1.072%, 3/17/23 | Canada | 50,000 | 50,112 | |||||||||||
Citigroup Inc., senior note, FRN thereafter, 1.953%, 9/01/23 | United States | 150,000 | 150,545 | |||||||||||
JPMorgan Chase & Co., senior note, FRN thereafter, 1.158%, 4/25/23 | United States | 100,000 | 100,028 | |||||||||||
M&T Bank Corp., senior note, FRN thereafter, 0.947%, 7/26/23 | United States | 150,000 | 150,687 | |||||||||||
Morgan Stanley, senior unsecured note, FRN thereafter, 0.731%, 4/05/24 | United States | 100,000 | 97,992 | |||||||||||
Sumitomo Mitsui Financial Group Inc., senior note, FRN thereafter, 0.981%, 1/17/23 | Japan | 50,000 | 50,138 | |||||||||||
The Goldman Sachs Group Inc., senior unsecured note, FRN thereafter, 0.737%, 11/17/23 | United States | 100,000 | 99,521 | |||||||||||
|
| |||||||||||||
| 799,106 | ||||||||||||||
|
| |||||||||||||
| Biotechnology 4.1% | ||||||||||||||
Abbvie Inc., senior unsecured, 1.13%, 11/21/22 | United States | 50,000 | 50,125 | |||||||||||
Biogen Inc., senior note, 3.625%, 9/15/22 | United States | 100,000 | 100,881 | |||||||||||
|
| |||||||||||||
| 151,006 | ||||||||||||||
|
| |||||||||||||
| Capital Markets 1.4% | ||||||||||||||
Goldman Sachs Group Inc., senior note, FRN thereafter, 1.214%, 2/23/23 | United States | 50,000 | 50,102 | |||||||||||
|
| |||||||||||||
| Chemicals 4.9% | ||||||||||||||
DuPont de Nemours Inc., senior note, FRN thereafter, 1.616%, 11/15/23 | United States | 150,000 | 151,544 | |||||||||||
LYB International Finance BV, senior note, 4.00%, 7/15/23 | United States | 28,000 | 28,454 | |||||||||||
|
| |||||||||||||
| 179,998 | ||||||||||||||
|
| |||||||||||||
| Consumer Finance 8.1% | ||||||||||||||
Bunge Ltd. Finance Corp. 3.00%, 9/25/22 | United States | 100,000 | 100,533 | |||||||||||
Capital One Financial Corp., senior note, 2.60%, 5/11/23 | United States | 50,000 | 50,175 | |||||||||||
General Motors Financial Co. Inc., senior unsecured, 1.70%, 8/18/23 | United States | 100,000 | 98,971 | |||||||||||
Royalty Pharma PLC 0.75%, 9/02/23 | United Kingdom | 50,000 | 48,570 | |||||||||||
|
| |||||||||||||
| 298,249 | ||||||||||||||
|
| |||||||||||||
| Electric Utilities 1.3% | ||||||||||||||
| a | Vistra Operations Co. LLC, senior secured note, first lien, 144A, 3.55%, 7/15/24 | United States | 50,000 | 49,563 | ||||||||||
|
| |||||||||||||
| Energy Equipment & Services 5.5% | ||||||||||||||
Energy Transfer LP, senior unsecured, 3.60%, 2/01/23 | United States | 50,000 | 50,303 | |||||||||||
Kinder Morgan Energy Partners LP 3.95%, 9/01/22 | United States | 100,000 | 100,376 | |||||||||||
| a | Schlumberger Finance Canada Ltd., senior note, 144A, 2.65%, 11/20/22 | Canada | 50,000 | 50,237 | ||||||||||
|
| |||||||||||||
| 200,916 | ||||||||||||||
|
| |||||||||||||
| Entertainment 1.4% | ||||||||||||||
| a | Magallanes Inc., 144A, 3.428%, 3/15/24 | United States | 50,000 | 50,309 | ||||||||||
|
| |||||||||||||
| Food Products 4.0% | ||||||||||||||
BAT Capital Corp., senior note, 2.764%, 8/15/22 | United States | 50,000 | 50,150 | |||||||||||
Hormel Foods Corp., senior unsecured note, 0.65%, 6/03/24 | United States | 100,000 | 96,074 | |||||||||||
|
| |||||||||||||
| 146,224 | ||||||||||||||
|
| |||||||||||||
| Health Care Equipment & Supplies 2.6% | ||||||||||||||
Thermo Fisher Scientific Inc., Sr. Unsecured, 0.797%, 10/18/23 | United States | 100,000 | 97,607 | |||||||||||
|
| |||||||||||||
| 194 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
SCHEDULE OF INVESTMENTS
Franklin Liberty Ultra Short Bond ETF (continued)
| Country | Principal Amount* | Value | ||||||||||||
| Corporate Bonds & Notes (continued) | ||||||||||||||
| Industrial Conglomerates 1.4% | ||||||||||||||
General Electric Co., senior unsecured, FRN thereafter, 1.826%, 3/15/23 | United States | 50,000 | $ | 50,123 | ||||||||||
|
| |||||||||||||
| Insurance 4.0% | ||||||||||||||
| a | Brighthouse Financial Global Funding, Secured, 144A, 1.20%, 12/15/23 | United States | 100,000 | 97,155 | ||||||||||
| a | Liberty Mutual Group Inc., senior note, 144A, 4.95%, 5/01/22 | United States | 50,000 | 50,120 | ||||||||||
|
| |||||||||||||
| 147,275 | ||||||||||||||
|
| |||||||||||||
| Internet & Direct Marketing Retail 4.1% | ||||||||||||||
eBay Inc., senior note, 1.169%, 1/30/23 | United States | 150,000 | 150,306 | |||||||||||
|
| |||||||||||||
| Multiline Retail 1.3% | ||||||||||||||
Walgreens Boots Alliance Inc., Sr. Unsecured, 0.95%, 11/17/23 | United States | 50,000 | 48,748 | |||||||||||
|
| |||||||||||||
| Oil, Gas & Consumable Fuels 1.4% | ||||||||||||||
| a | Kinder Morgan Inc., 144A, 5.625%, 11/15/23 | United States | 50,000 | 51,638 | ||||||||||
|
| |||||||||||||
| Pharmaceuticals 10.8% | ||||||||||||||
AmerisourceBergen Corp., senior note, 0.737%, 3/15/23 | United States | 150,000 | 147,869 | |||||||||||
AstraZeneca PLC, senior note, 1.134%, 8/17/23 | United Kingdom | 150,000 | 150,572 | |||||||||||
| a | Bristol-Myers Squibb Co., senior note, 144A, 2.60%, 5/16/22 | United States | 50,000 | 50,050 | ||||||||||
GlaxoSmithKline Capital PLC, senior note, 0.534%, 10/01/23 | United Kingdom | 50,000 | 48,867 | |||||||||||
|
| |||||||||||||
| 397,358 | ||||||||||||||
|
| |||||||||||||
| Road & Rail 4.1% | ||||||||||||||
| a | Penske Truck Leasing Co. LP/PTL Finance Corp., senior note, 144A, 2.70%, 3/14/23 | United States | 150,000 | 150,736 | ||||||||||
|
| |||||||||||||
| Semiconductors & Semiconductor Equipment 3.8% | ||||||||||||||
| a | Microchip Technology Inc., senior secured note, 144A, 0.983%, 9/01/24 | United States | 150,000 | 142,145 | ||||||||||
|
| |||||||||||||
Total Corporate Bonds & Notes (Cost $3,452,490) | 3,410,236 | |||||||||||||
|
| |||||||||||||
| Asset-Backed Securities 5.5% | ||||||||||||||
Citibank Credit Card Issuance Trust, Series 2017-A5, Class A5, FRN thereafter, 1.067%, 4/22/26 | United States | 100,000 | 100,567 | |||||||||||
Discover Card Execution Note Trust, Series 2017-A5, Class A5, FRN thereafter, 0.997%, 12/15/26 | United States | 100,000 | 100,731 | |||||||||||
|
| |||||||||||||
Total Asset-Backed Securities (Cost $200,922) | 201,298 | |||||||||||||
|
| |||||||||||||
Total Investments before Short Term Investments (Cost $3,653,412) | 3,611,534 | |||||||||||||
|
| |||||||||||||
| Short Term Investments 2.2% | ||||||||||||||
| Money Market Funds 2.2% | ||||||||||||||
| b,c | Institutional Fiduciary Trust Portfolio, 0.01% | United States | 81,009 | 81,009 | ||||||||||
|
| |||||||||||||
Total Short Term Investments (Cost $81,009) | 81,009 | |||||||||||||
|
| |||||||||||||
Total Investments (Cost $3,734,421) 100.3% | 3,692,543 | |||||||||||||
Other Assets, less Liabilities (0.3)% | (10,562 | ) | ||||||||||||
|
| |||||||||||||
Net Assets 100.0% | $ | 3,681,981 | ||||||||||||
|
| |||||||||||||
See Abbreviations on page 240.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. At March 31, 2022, the aggregate value of these securities was $841,532, representing 22.9% of net assets.
bSee Note 3(d) regarding investments in affiliated management investment companies.
cThe rate shown is the annualized seven-day effective yield at period end.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 195 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
March 31, 2022
| Franklin Disruptive Commerce ETF | Franklin Exponential Data ETF | Franklin Genomic Advancements ETF | Franklin Intelligent Machines ETF | |||||||||||||
Assets: |
| |||||||||||||||
Investments in securities: |
| |||||||||||||||
Cost – Unaffiliated issuers | $ | 20,302,379 | $ | 3,245,418 | $ | 17,138,284 | $ | 9,187,863 | ||||||||
Cost – Non-controlled affiliates (Note 3c) | — | 591 | — | — | ||||||||||||
Value – Unaffiliated issuers | $ | 18,145,175 | $ | 3,435,499 | $ | 14,341,855 | $ | 11,285,786 | ||||||||
Value – Non-controlled affiliates (Note 3c) | — | 591 | — | — | ||||||||||||
Cash | 471,925 | 720 | 487,051 | 323,522 | ||||||||||||
Foreign currency, at value (cost $-,1,175, 901,-) | — | 1,185 | 898 | — | ||||||||||||
Receivables: |
| |||||||||||||||
Dividends | 3,751 | 1 | 10,688 | 4,143 | ||||||||||||
|
| |||||||||||||||
Total assets | 18,620,851 | 3,437,996 | 14,840,492 | 11,613,451 | ||||||||||||
|
| |||||||||||||||
Liabilities: |
| |||||||||||||||
Payables: |
| |||||||||||||||
Investment securities purchased | — | 1 | — | — | ||||||||||||
Management fees | 37,072 | 20,869 | 41,815 | 39,635 | ||||||||||||
|
| |||||||||||||||
Total liabilities | 37,072 | 20,870 | 41,815 | 39,635 | ||||||||||||
|
| |||||||||||||||
Net assets, at value | $ | 18,583,779 | $ | 3,417,126 | $ | 14,798,677 | $ | 11,573,816 | ||||||||
|
| |||||||||||||||
Net assets consist of: |
| |||||||||||||||
Paid-in capital | $ | 27,036,587 | $ | 3,779,731 | $ | 23,648,235 | $ | 10,143,738 | ||||||||
Total distributable earnings (loss) | (8,452,808 | ) | (362,605 | ) | (8,849,558 | ) | 1,430,078 | |||||||||
|
| |||||||||||||||
Net assets, at value | $ | 18,583,779 | $ | 3,417,126 | $ | 14,798,677 | $ | 11,573,816 | ||||||||
|
| |||||||||||||||
Shares outstanding | 600,000 | 150,000 | 400,000 | 250,000 | ||||||||||||
|
| |||||||||||||||
Net asset value per share | $ | 30.97 | $ | 22.78 | $ | 37.00 | $ | 46.30 | ||||||||
|
| |||||||||||||||
| 196 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (continued)
March 31, 2022
| Franklin Dynamic Municipal Bond ETF | Franklin Liberty Federal Tax-Free Bond ETF | Franklin Liberty High Yield Corporate ETF | Franklin Liberty International Aggregate Bond ETF | |||||||||||||
Assets: |
| |||||||||||||||
Investments in securities: |
| |||||||||||||||
Cost – Unaffiliated issuers | $ | 77,838,921 | $ | 109,291,453 | $ | 349,513,376 | $ | 190,792,264 | ||||||||
Value – Unaffiliated issuers | $ | 74,158,707 | $ | 103,319,762 | $ | 333,199,486 | $ | 175,138,158 | ||||||||
Cash | 4,019,399 | 1,192,357 | 343,123 | 3,695,255 | ||||||||||||
Foreign currency, at value (cost $-, -, - and $10,217,103 respectively) | — | — | — | 9,637,405 | ||||||||||||
Receivables: |
| |||||||||||||||
Interest | 666,344 | 1,099,701 | 5,217,988 | 851,854 | ||||||||||||
Investment securities sold | — | — | 13,477,687 | — | ||||||||||||
Unrealized appreciation on OTC forward exchange contracts | — | — | — | 5,190,265 | ||||||||||||
|
| |||||||||||||||
Total assets | 78,844,450 | 105,611,820 | 352,238,284 | 194,512,937 | ||||||||||||
|
| |||||||||||||||
Liabilities: |
| |||||||||||||||
Payables: |
| |||||||||||||||
Investment securities purchased | 1,859,765 | 599,335 | 4,163,807 | — | ||||||||||||
Capital shares redeemed | — | — | 13,619,052 | — | ||||||||||||
Management fees | 25,342 | 26,432 | 169,594 | 107,361 | ||||||||||||
Transfer agent fees | 3,000 | 3,000 | — | — | ||||||||||||
Custodian fees | 312 | 454 | — | — | ||||||||||||
Professional fees | 23,109 | 23,108 | — | — | ||||||||||||
Reports to shareholders | 3,164 | 3,189 | — | — | ||||||||||||
Registration and filing fees | 12,930 | 9,086 | — | — | ||||||||||||
Deferred tax | — | — | — | 1,629 | ||||||||||||
Unrealized depreciation on OTC forward exchange contracts | — | — | — | 436,142 | ||||||||||||
Accrued expenses and other liabilities | 8,407 | 8,674 | — | — | ||||||||||||
|
| |||||||||||||||
Total liabilities | 1,936,029 | 673,278 | 17,952,453 | 545,132 | ||||||||||||
|
| |||||||||||||||
Net assets, at value | $ | 76,908,421 | $ | 104,938,542 | $ | 334,285,831 | $ | 193,967,805 | ||||||||
|
| |||||||||||||||
Net assets consist of: |
| |||||||||||||||
Paid-in capital | $ | 80,746,585 | $ | 112,972,912 | $ | 350,411,948 | $ | 206,925,068 | ||||||||
Total distributable earnings (loss) | (3,838,164 | ) | (8,034,370 | ) | (16,126,117 | ) | (12,957,263 | ) | ||||||||
|
| |||||||||||||||
Net assets, at value | $ | 76,908,421 | $ | 104,938,542 | $ | 334,285,831 | $ | 193,967,805 | ||||||||
|
| |||||||||||||||
Shares outstanding | 3,100,000 | 4,200,000 | 13,500,000 | 8,200,000 | ||||||||||||
|
| |||||||||||||||
Net asset value per share | $ | 24.81 | $ | 24.99 | $ | 24.76 | $ | 23.65 | ||||||||
|
| |||||||||||||||
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 197 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (continued)
March 31, 2022
| Franklin Liberty Investment Grade Corporate ETF | Franklin Liberty Senior Loan ETF | Franklin Liberty Systematic Style Premia ETFa | Franklin Liberty U.S. Core Bond ETF | |||||||||||||
Assets: |
| |||||||||||||||
Investments in securities: |
| |||||||||||||||
Cost – Unaffiliated issuers | $ | 1,030,961,892 | $ | 296,659,319 | $ | 31,430,864 | $ | 1,538,989,637 | ||||||||
Cost – Non-controlled affiliates (Note 3c) | — | — | — | 48,548,641 | ||||||||||||
Value – Unaffiliated issuers | $ | 959,005,938 | $ | 293,416,373 | $ | 34,903,099 | $ | 1,448,058,291 | ||||||||
Value – Non-controlled affiliates (Note 3c) | — | — | — | 48,548,641 | ||||||||||||
Cash | 12,975,736 | 14,373,526 | 16,961,736 | — | ||||||||||||
Foreign currency, at value (cost $-,-,216,873,-) | — | — | 215,743 | — | ||||||||||||
Receivables: |
| |||||||||||||||
Interest | 8,110,286 | 1,161,726 | 111,759 | 6,554,254 | ||||||||||||
Investment securities sold | — | 2,151,349 | — | 263,003 | ||||||||||||
Capital shares sold | 13,040,604 | — | — | 58,568,168 | ||||||||||||
Closed swap contracts | — | — | 48,850,973 | — | ||||||||||||
Deposits with brokers for: |
| |||||||||||||||
Futures contracts | 434,350 | — | 2,883,955 | 248,435 | ||||||||||||
Swap contracts | — | — | 1,130,000 | 290,000 | ||||||||||||
Unrealized appreciation on OTC forward exchange contracts | — | — | 678,673 | — | ||||||||||||
Unrealized appreciation on OTC swap contracts | — | — | 878 | 31,603 | ||||||||||||
OTC swap contracts premiums paid | — | — | — | 14,678 | ||||||||||||
Other assets | — | — | — | 363,049 | ||||||||||||
|
| |||||||||||||||
Total assets | 993,566,914 | 311,102,974 | 105,736,816 | 1,562,940,122 | ||||||||||||
|
| |||||||||||||||
Liabilities: |
| |||||||||||||||
Payables: |
| |||||||||||||||
Closed swap contracts | — | — | 49,647,290 | — | ||||||||||||
Investment securities purchased | 11,563,296 | 18,230,674 | 19 | 52,079,764 | ||||||||||||
Management fees | 334,339 | 150,057 | 128,224 | 300,806 | ||||||||||||
Transfer agent fees | — | — | 2,500 | — | ||||||||||||
Custodian fees | — | — | 391 | — | ||||||||||||
Professional fees | — | — | 333 | — | ||||||||||||
Variation margin on futures contracts | 67,452 | — | 293,789 | 54,139 | ||||||||||||
Funds advanced by custodian | — | — | — | 186,974 | ||||||||||||
Unrealized depreciation on OTC forward exchange contracts | — | — | 405,191 | — | ||||||||||||
Unrealized depreciation on OTC swap contracts | — | — | — | 49,631 | ||||||||||||
OTC swap contracts premiums received | — | — | — | 307,500 | ||||||||||||
Accrued expenses and other liabilities | — | — | 765 | — | ||||||||||||
|
| |||||||||||||||
Total liabilities | 11,965,087 | 18,380,731 | 50,478,502 | 52,978,814 | ||||||||||||
|
| |||||||||||||||
Net assets, at value | $ | 981,601,827 | $ | 292,722,243 | $ | 55,258,314 | $ | 1,509,961,308 | ||||||||
|
| |||||||||||||||
Net assets consist of: |
| |||||||||||||||
Paid-in capital | $ | 1,061,903,112 | $ | 296,622,413 | $ | 64,771,914 | $ | 1,638,586,290 | ||||||||
Total distributable earnings (loss) | (80,301,285 | ) | (3,900,170 | ) | (9,513,600 | ) | (128,624,982 | ) | ||||||||
|
| |||||||||||||||
Net assets, at value | $ | 981,601,827 | $ | 292,722,243 | $ | 55,258,314 | $ | 1,509,961,308 | ||||||||
|
| |||||||||||||||
Shares outstanding | 41,400,000 | 11,850,000 | 2,600,000 | 64,450,000 | ||||||||||||
|
| |||||||||||||||
Net asset value per share | $ | 23.71 | $ | 24.70 | $ | 21.25 | $ | 23.43 | ||||||||
|
| |||||||||||||||
aConsolidated financial statements. See Notes 14.
| 198 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (continued)
March 31, 2022
| Franklin Liberty U.S. Low Volatility ETF | Franklin Liberty U.S. Treasury Bond ETF | Franklin Liberty Ultra Short Bond ETF | ||||||||||
Assets: |
| |||||||||||
Investments in securities: |
| |||||||||||
Cost – Unaffiliated issuers | $ | 116,214,358 | $ | 426,098,420 | $ | 3,653,412 | ||||||
Cost – Non-controlled affiliates (Note 3c) | — | 4,633,381 | 81,009 | |||||||||
Value – Unaffiliated issuers | $ | 134,409,111 | $ | 395,590,021 | $ | 3,611,534 | ||||||
Value – Non-controlled affiliates (Note 3c) | — | 4,633,381 | 81,009 | |||||||||
Cash | 440,892 | — | — | |||||||||
Receivables: |
| |||||||||||
Dividends | 130,948 | 1,793,676 | 10,246 | |||||||||
Capital shares sold | — | 14,736,278 | — | |||||||||
|
| |||||||||||
Total assets | 134,980,951 | 416,753,356 | 3,702,789 | |||||||||
|
| |||||||||||
Liabilities: |
| |||||||||||
Payables: |
| |||||||||||
Investment securities purchased | — | 13,132,642 | 1 | |||||||||
Management fees | 45,536 | 77,997 | 20,807 | |||||||||
|
| |||||||||||
Total liabilities | 45,536 | 13,210,639 | 20,808 | |||||||||
|
| |||||||||||
Net assets, at value | $ | 134,935,415 | $ | 403,542,717 | $ | 3,681,981 | ||||||
|
| |||||||||||
Net assets consist of: |
| |||||||||||
Paid-in capital | $ | 117,152,676 | $ | 445,957,096 | $ | 3,742,849 | ||||||
Total distributable earnings (loss) | 17,782,739 | (42,414,379 | ) | (60,868 | ) | |||||||
|
| |||||||||||
Net assets, at value | $ | 134,935,415 | $ | 403,542,717 | $ | 3,681,981 | ||||||
|
| |||||||||||
Shares outstanding | 2,750,000 | 17,800,000 | 150,000 | |||||||||
|
| |||||||||||
Net asset value per share | $ | 49.07 | $ | 22.67 | $ | 24.55 | ||||||
|
| |||||||||||
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 199 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Operations
for the year ended March 31, 2022
| Franklin Disruptive Commerce ETF | Franklin Exponential Data ETF | Franklin Genomic Advancements ETF | Franklin Intelligent Machines ETF | |||||||||||||
Investment income: | ||||||||||||||||
Dividends: (net of foreign taxes)a | ||||||||||||||||
Unaffiliated issuers | $ | 32,199 | $ | 6,525 | $ | 36,995 | $ | 34,760 | ||||||||
Interest: | ||||||||||||||||
Unaffiliated issuers | — | — | 2,193 | — | ||||||||||||
|
| |||||||||||||||
Total investment income | 32,199 | 6,525 | 39,188 | 34,760 | ||||||||||||
|
| |||||||||||||||
Expenses: | ||||||||||||||||
Management fees (Note 3a) | 168,955 | 18,218 | 108,884 | 60,498 | ||||||||||||
Transfer agent fees | 3,000 | 6,081 | 3,000 | 3,000 | ||||||||||||
Custodian fees | 2,993 | 600 | 1,644 | 1,397 | ||||||||||||
Reports to shareholders | 8,424 | 2,700 | 3,290 | 2,846 | ||||||||||||
Registration and filing fees | 4,666 | 2,181 | 5,150 | 4,649 | ||||||||||||
Professional fees | 18,180 | 32,592 | 17,559 | 17,516 | ||||||||||||
Trustee fees (Note 3a) | 995 | 39 | 365 | 258 | ||||||||||||
Other | 3,266 | 755 | 3,260 | 3,230 | ||||||||||||
|
| |||||||||||||||
Total expenses | 210,479 | 63,166 | 143,152 | 93,394 | ||||||||||||
Expenses waived/paid by affiliates (Note 3c) | (41,524 | ) | (49,309 | ) | (34,267 | ) | (32,897 | ) | ||||||||
|
| |||||||||||||||
Net expenses | 168,955 | 13,857 | 108,885 | 60,497 | ||||||||||||
|
| |||||||||||||||
Net investment income | (136,756 | ) | (7,332 | ) | (69,697 | ) | (25,737 | ) | ||||||||
|
| |||||||||||||||
Realized and unrealized gains (losses): | ||||||||||||||||
Net realized gain (loss) from: | ||||||||||||||||
Investments: | ||||||||||||||||
Unaffiliated issuers | (6,203,705 | ) | (487,283 | ) | (5,875,881 | ) | (667,829 | ) | ||||||||
In-kind redemptions | 2,675,706 | — | 4,609,657 | — | ||||||||||||
Foreign currency transactions | (2,249 | ) | (113 | ) | (2,559 | ) | 243 | |||||||||
|
| |||||||||||||||
Net realized gain (loss) | (3,530,248 | ) | (487,396 | ) | (1,268,783 | ) | (667,586 | ) | ||||||||
|
| |||||||||||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||||||||||
Investments: | ||||||||||||||||
Unaffiliated issuers | (8,910,995 | ) | 292,275 | (5,044,121 | ) | 1,481,770 | ||||||||||
Translation of other assets and liabilities denominated in foreign currencies | 14 | 10 | (7 | ) | (6 | ) | ||||||||||
|
| |||||||||||||||
Net change in unrealized appreciation (depreciation) | (8,910,981 | ) | 292,285 | (5,044,128 | ) | 1,481,764 | ||||||||||
|
| |||||||||||||||
Net realized and unrealized gain (loss) | (12,441,229 | ) | (195,111 | ) | (6,312,911 | ) | 814,178 | |||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from operations | $ | (12,577,985 | ) | $ | (202,443 | ) | $ | (6,382,608 | ) | $ | 788,441 | |||||
|
| |||||||||||||||
aForeign taxes withheld on dividends | $ | 530 | $ | 120 | $ | 499 | $ | 2,677 | ||||||||
|
| |||||||||||||||
| 200 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Operations (continued)
for the year ended March 31, 2022
| Franklin Dynamic Municipal Bond ETF | Franklin Liberty Federal Tax-Free Bond ETF | Franklin Liberty High Yield Corporate ETF | Franklin Liberty International Aggregate Bond ETF | |||||||||||||
Investment income: | ||||||||||||||||
Interest: (net of foreign taxes)a | ||||||||||||||||
Unaffiliated issuers | 1,511,671 | 2,050,094 | 17,990,115 | 893,582 | ||||||||||||
|
| |||||||||||||||
Total investment income | 1,511,671 | 2,050,094 | 17,990,115 | 893,582 | ||||||||||||
|
| |||||||||||||||
Expenses: | ||||||||||||||||
Management fees (Note 3a) | 360,353 | 750,135 | 1,645,939 | 664,897 | ||||||||||||
Transfer agent fees | 9,000 | 8,998 | 3,000 | 3,000 | ||||||||||||
Custodian fees | 1,490 | 1,988 | 3,508 | 51,775 | ||||||||||||
Reports to shareholders | 4,735 | 5,559 | 1,850 | 857 | ||||||||||||
Registration and filing fees | 12,518 | 6,276 | 5,076 | — | ||||||||||||
Professional fees | 32,374 | 42,496 | 28,519 | 27,993 | ||||||||||||
Trustee fees (Note 3a) | 2,051 | 5,299 | 7,692 | 5,028 | ||||||||||||
Other | 9,743 | 10,122 | 2,374 | 2,995 | ||||||||||||
|
| |||||||||||||||
Total expenses | 432,264 | 830,873 | 1,697,958 | 756,545 | ||||||||||||
Expenses waived/paid by affiliates (Note 3c) | (259,294 | ) | (455,793 | ) | (264,348 | ) | (269,445 | ) | ||||||||
|
| |||||||||||||||
Net expenses | 172,970 | 375,080 | 1,433,610 | 487,100 | ||||||||||||
|
| |||||||||||||||
Net investment income | 1,338,701 | 1,675,014 | 16,556,505 | 406,482 | ||||||||||||
|
| |||||||||||||||
Realized and unrealized gains (losses): | ||||||||||||||||
Net realized gain (loss) from: | ||||||||||||||||
Investments: | ||||||||||||||||
Unaffiliated issuers | (4,924 | ) | (859,034 | ) | 2,644,036 | (1,120,445 | ) | |||||||||
In-kind redemptions | — | 445,707 | (2,272,357 | ) | — | |||||||||||
Foreign currency transactions | — | — | — | 179,821 | ||||||||||||
Forwards exchange contracts | — | — | — | 11,900,931 | ||||||||||||
|
| |||||||||||||||
Net realized gain (loss) | (4,924 | ) | (413,327 | ) | 371,679 | 10,960,307 | ||||||||||
|
| |||||||||||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||||||||||
Investments: | ||||||||||||||||
Unaffiliated issuers | (5,026,347 | ) | (7,422,486 | ) | (21,274,898 | ) | (16,135,738 | ) | ||||||||
Translation of other assets and liabilities denominated in foreign currencies | — | — | — | (237,072 | ) | |||||||||||
Forward exchange contracts | — | — | — | (2,266,963 | ) | |||||||||||
Change in deferred taxes on unrealized appreciation | — | — | — | (269 | ) | |||||||||||
|
| |||||||||||||||
Net change in unrealized appreciation (depreciation) | (5,026,347 | ) | (7,422,486 | ) | (21,274,898 | ) | (18,640,042 | ) | ||||||||
|
| |||||||||||||||
Net realized and unrealized gain (loss) | (5,031,271 | ) | (7,835,813 | ) | (20,903,219 | ) | (7,679,735 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from operations | $ | (3,692,570 | ) | $ | (6,160,799 | ) | $ | (4,346,714 | ) | $ | (7,273,253 | ) | ||||
|
| |||||||||||||||
aForeign taxes withheld on interest | $ | — | $ | — | $ | — | $ | 1,936 | ||||||||
|
| |||||||||||||||
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 201 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Operations (continued)
for the year ended March 31, 2022
| Franklin Liberty Investment Grade Corporate ETF | Franklin Liberty Senior Loan ETF | Franklin Liberty Systematic Style Premia ETFa | Franklin Liberty U.S. Core Bond ETF | |||||||||||||
Investment income: | ||||||||||||||||
Dividends: | ||||||||||||||||
Unaffiliated issuers | $ | — | $ | — | $ | 733,434 | $ | 3,277 | ||||||||
Interest: (net of foreign taxes)b | ||||||||||||||||
Unaffiliated issuers | 26,853,734 | 8,818,437 | 130 | 31,234,110 | ||||||||||||
|
| |||||||||||||||
Total investment income | 26,853,734 | 8,818,437 | 733,564 | 31,237,387 | ||||||||||||
|
| |||||||||||||||
Expenses: | ||||||||||||||||
Management fees (Note 3a) | 4,236,857 | 1,148,520 | 375,887 | 2,400,004 | ||||||||||||
Transfer agent fees | 3,000 | 3,000 | 10,500 | 3,000 | ||||||||||||
Custodian fees | 13,164 | 32,080 | 4,331 | 5,625 | ||||||||||||
Reports to shareholders | 4,229 | 1,083 | 4,897 | 8,959 | ||||||||||||
Registration and filing fees | 7,835 | 3,489 | 4,570 | 12,401 | ||||||||||||
Professional fees | 22,093 | 30,118 | 15,003 | 20,923 | ||||||||||||
Trustees’ fees and expenses | 24,675 | 4,357 | 1,199 | 37,252 | ||||||||||||
Other | 5,049 | 1,198 | — | 6,790 | ||||||||||||
|
| |||||||||||||||
Total expenses | 4,316,902 | 1,223,845 | 416,387 | 2,494,954 | ||||||||||||
Expenses waived/paid by affiliates (Note 3c) | (731,501 | ) | (271,462 | ) | (58,166 | ) | (92,076 | ) | ||||||||
|
| |||||||||||||||
Net expenses | 3,585,401 | 952,383 | 358,221 | 2,402,878 | ||||||||||||
|
| |||||||||||||||
Net investment income | 23,268,333 | 7,866,054 | 375,343 | 28,834,509 | ||||||||||||
|
| |||||||||||||||
Realized and unrealized gains (losses): | ||||||||||||||||
Net realized gain (loss) from: | ||||||||||||||||
Investments: | ||||||||||||||||
Unaffiliated issuers | 1,282,966 | (374,967 | ) | 2,537,443 | (24,376,427 | ) | ||||||||||
In-kind redemptions | 3,506,071 | — | — | — | ||||||||||||
Foreign currency transactions | — | — | (5,430 | ) | — | |||||||||||
Forwards exchange contracts | — | — | (300,831 | ) | — | |||||||||||
Futures contracts | 1,210,398 | — | 2,480,525 | (700,454 | ) | |||||||||||
Swap contracts | — | — | — | 112,950 | ||||||||||||
|
| |||||||||||||||
Net realized gain (loss) | 5,999,435 | (374,967 | ) | 4,711,707 | (24,963,931 | ) | ||||||||||
|
| |||||||||||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||||||||||
Investments: | ||||||||||||||||
Unaffiliated issuers | (70,433,482 | ) | (2,789,129 | ) | 39,404 | (78,617,679 | ) | |||||||||
Translation of other assets and liabilities denominated in foreign currencies | — | — | (7,692 | ) | — | |||||||||||
Futures contracts | 436,625 | — | (143,048 | ) | (234,420 | ) | ||||||||||
Swap contracts | — | — | (868 | ) | (18,028 | ) | ||||||||||
Forward exchange contracts | — | — | 173,508 | — | ||||||||||||
|
| |||||||||||||||
Net change in unrealized appreciation (depreciation) | (69,996,857 | ) | (2,789,129 | ) | 61,304 | (78,870,127 | ) | |||||||||
|
| |||||||||||||||
Net realized and unrealized gain (loss) | (63,997,422 | ) | (3,164,096 | ) | 4,773,011 | (103,834,058 | ) | |||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from operations | $ | (40,729,089 | ) | $ | 4,701,958 | $ | 5,148,354 | $ | (74,999,549 | ) | ||||||
|
| |||||||||||||||
aConsolidated financial statements. See Notes 14.
bForeign taxes withheld on interest | $ | 893 | $ | — | $ | 39,838 | $ | 447 | ||||||||
|
| |||||||||||||||
| 202 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Operations (continued)
for the year ended March 31, 2022
| Franklin Liberty U.S. Low Volatility ETF | Franklin Liberty U.S. Treasury Bond ETF | Franklin Liberty Ultra Short Bond ETF | ||||||||||
Investment income: |
| |||||||||||
Dividends: (net of foreign taxes)a |
| |||||||||||
Unaffiliated issuers | $ | 2,456,203 | $ | 650 | $ | 7 | ||||||
Interest: |
| |||||||||||
Unaffiliated issuers | — | 3,167,746 | 22,469 | |||||||||
Inflation principal adjustments | — | 435,152 | — | |||||||||
|
| |||||||||||
Total investment income | 2,456,203 | 3,603,548 | 22,476 | |||||||||
|
| |||||||||||
Expenses: |
| |||||||||||
Management fees (Note 3a) | 404,547 | 1,147,764 | 11,010 | |||||||||
Transfer agent fees | 3,000 | 3,125 | 3,468 | |||||||||
Custodian fees | 1,056 | 3,056 | 9,441 | |||||||||
Reports to shareholders | 8,294 | 1,907 | 3,273 | |||||||||
Registration and filing fees | 5,290 | 7,714 | 11,932 | |||||||||
Professional fees | 25,847 | 14,692 | 14,739 | |||||||||
Trustee fees (Note 3a) | 3,248 | 10,025 | 59 | |||||||||
Other | 2,859 | 445 | 766 | |||||||||
|
| |||||||||||
Total expenses | 454,141 | 1,188,728 | 54,688 | |||||||||
Expenses waived/paid by affiliates (Note 3c) | (49,593 | ) | (808,161 | ) | (49,917 | ) | ||||||
|
| |||||||||||
Net expenses | 404,548 | 380,567 | 4,771 | |||||||||
|
| |||||||||||
Net investment income | 2,051,655 | 3,222,981 | 17,705 | |||||||||
|
| |||||||||||
Realized and unrealized gains (losses): |
| |||||||||||
Net realized gain (loss) from: |
| |||||||||||
Investments: |
| |||||||||||
Unaffiliated issuers | 2,411,847 | (939,252 | ) | 1,348 | ||||||||
In-kind redemptions | 15,037,764 | — | — | |||||||||
Foreign currency transactions | (331 | ) | — | — | ||||||||
|
| |||||||||||
Net realized gain (loss) | 17,449,280 | (939,252 | ) | 1,348 | ||||||||
|
| |||||||||||
Net change in unrealized appreciation (depreciation) on: |
| |||||||||||
Investments: |
| |||||||||||
Unaffiliated issuers | (1,376,857 | ) | (15,335,003 | ) | (51,611 | ) | ||||||
Translation of other assets and liabilities denominated in foreign currencies | 273 | — | — | |||||||||
|
| |||||||||||
Net change in unrealized appreciation (depreciation) | (1,376,584 | ) | (15,335,003 | ) | (51,611 | ) | ||||||
|
| |||||||||||
Net realized and unrealized gain (loss) | 16,072,696 | (16,274,255 | ) | (50,263 | ) | |||||||
|
| |||||||||||
Net increase (decrease) in net assets resulting from operations | $ | 18,124,351 | $ | (13,051,274 | ) | $ | (32,558 | ) | ||||
|
| |||||||||||
aForeign taxes withheld on dividends | $ | 12,252 | $ | — | $ | — | ||||||
|
| |||||||||||
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 203 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| Franklin Disruptive Commerce ETF | Franklin Exponential Data ETF | |||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2022 | Year Ended March 31, 2021a | |||||||||||||
Increase (decrease) in net assets: |
| |||||||||||||||
Operations: |
| |||||||||||||||
Net investment income | $ | (136,756 | ) | $ | (101,622 | ) | $ | (7,332 | ) | $ | (369 | ) | ||||
Net realized gain (loss) | (3,530,248 | ) | 296,353 | (487,396 | ) | (63,877 | ) | |||||||||
Net change in unrealized appreciation (depreciation) | (8,910,981 | ) | 7,116,842 | 292,285 | (102,194 | ) | ||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from operations | (12,577,985 | ) | 7,311,573 | (202,443 | ) | (166,440 | ) | |||||||||
|
| |||||||||||||||
Distributions to shareholders | (222,554 | ) | — | — | — | |||||||||||
|
| |||||||||||||||
Capital share transactions: (Note 2) | (10,442,439 | ) | 32,383,211 | 1,286,009 | 2,500,000 | |||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets | (23,242,978 | ) | 39,694,784 | 1,083,566 | 2,333,560 | |||||||||||
Net assets: |
| |||||||||||||||
Beginning of year | 41,826,757 | 2,131,973 | 2,333,560 | — | ||||||||||||
|
| |||||||||||||||
End of year | $ | 18,583,779 | $ | 41,826,757 | $ | 3,417,126 | $ | 2,333,560 | ||||||||
|
| |||||||||||||||
aFor the period January 12, 2021 (commencement of operations) to March 31, 2021.
| 204 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets (continued)
| Franklin Genomic Advancements ETF | Franklin Intelligent Machines ETF | |||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
Increase (decrease) in net assets: |
| |||||||||||||||
Operations: |
| |||||||||||||||
Net investment income | $ | (69,697 | ) | $ | (28,033 | ) | $ | (25,737 | ) | $ | (8,296 | ) | ||||
Net realized gain (loss) | (1,268,783 | ) | (90,186 | ) | (667,586 | ) | 1,145,627 | |||||||||
Net change in unrealized appreciation (depreciation) | (5,044,128 | ) | 2,487,194 | 1,481,764 | 1,049,747 | |||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from operations | (6,382,608 | ) | 2,368,975 | 788,441 | 2,187,078 | |||||||||||
|
| |||||||||||||||
Distributions to shareholders | (64,946 | ) | (10,356 | ) | (23,504 | ) | (432 | ) | ||||||||
|
| |||||||||||||||
Capital share transactions: (Note 2) | 6,106,586 | 10,522,838 | — | 6,555,405 | ||||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets | (340,968 | ) | 12,881,457 | 764,937 | 8,742,051 | |||||||||||
Net assets: |
| |||||||||||||||
Beginning of year | 15,139,645 | 2,258,188 | 10,808,879 | 2,066,828 | ||||||||||||
|
| |||||||||||||||
End of year | $ | 14,798,677 | $ | 15,139,645 | $ | 11,573,816 | $ | 10,808,879 | ||||||||
|
| |||||||||||||||
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 205 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets (continued)
| Franklin Dynamic Municipal Bond ETF | Franklin Liberty Federal Tax-Free Bond ETF | |||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
Increase (decrease) in net assets: |
| |||||||||||||||
Operations: |
| |||||||||||||||
Net investment income | $ | 1,338,701 | $ | 589,886 | $ | 1,675,014 | $ | 995,318 | ||||||||
Net realized gain (loss) | (4,924 | ) | (100,405 | ) | (413,327 | ) | (62,096 | ) | ||||||||
Net change in unrealized appreciation (depreciation) | (5,026,347 | ) | 1,451,268 | (7,422,486 | ) | 616,576 | ||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from operations | (3,692,570 | ) | 1,940,749 | (6,160,799 | ) | 1,549,798 | ||||||||||
|
| |||||||||||||||
Distributions to shareholders | (1,204,849 | ) | (611,513 | ) | (2,038,684 | ) | (1,352,931 | ) | ||||||||
|
| |||||||||||||||
Capital share transactions: (Note 2) | 39,693,714 | 28,420,573 | (13,082,950 | ) | 97,349,967 | |||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets | 34,796,295 | 29,749,809 | (21,282,433 | ) | 97,546,834 | |||||||||||
Net assets: |
| |||||||||||||||
Beginning of year | 42,112,126 | 12,362,317 | 126,220,975 | 28,674,141 | ||||||||||||
|
| |||||||||||||||
End of year | $ | 76,908,421 | $ | 42,112,126 | $ | 104,938,542 | $ | 126,220,975 | ||||||||
|
| |||||||||||||||
| 206 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets (continued)
| Franklin Liberty High Yield Corporate ETF | Franklin Liberty International Aggregate Bond ETF | |||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
Increase (decrease) in net assets: |
| |||||||||||||||
Operations: |
| |||||||||||||||
Net investment income | $ | 16,556,505 | $ | 9,492,814 | $ | 406,482 | $ | (59,641 | ) | |||||||
Net realized gain (loss) | 371,679 | 259,164 | 10,960,307 | (6,801,787 | ) | |||||||||||
Net change in unrealized appreciation (depreciation) | (21,274,898 | ) | 23,910,684 | (18,640,042 | ) | 7,120,781 | ||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from operations | (4,346,714 | ) | 33,662,662 | (7,273,253 | ) | 259,353 | ||||||||||
|
| |||||||||||||||
Distributions to shareholders | (17,355,367 | ) | (11,465,310 | ) | (4,976,496 | ) | (951,028 | ) | ||||||||
|
| |||||||||||||||
Capital share transactions: (Note 2) | 9,401,694 | 194,026,836 | 24,812,593 | 177,107,475 | ||||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets | (12,300,387 | ) | 216,224,188 | 12,562,844 | 176,415,800 | |||||||||||
Net assets: |
| |||||||||||||||
Beginning of year | 346,586,218 | 130,362,030 | 181,404,961 | 4,989,161 | ||||||||||||
|
| |||||||||||||||
End of year | $ | 334,285,831 | $ | 346,586,218 | $ | 193,967,805 | $ | 181,404,961 | ||||||||
|
| |||||||||||||||
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 207 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets (continued)
| Franklin Liberty Investment Grade Corporate ETF | Franklin Liberty Senior Loan ETF | |||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
Increase (decrease) in net assets: |
| |||||||||||||||
Operations: |
| |||||||||||||||
Net investment income | $ | 23,268,333 | $ | 21,040,801 | $ | 7,866,054 | $ | 2,113,893 | ||||||||
Net realized gain (loss) | 5,999,435 | 11,641,061 | (374,967 | ) | (660,335 | ) | ||||||||||
Net change in unrealized appreciation (depreciation) | (69,996,857 | ) | 18,598,433 | (2,789,129 | ) | 4,290,337 | ||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from operations | (40,729,089 | ) | 51,280,295 | 4,701,958 | 5,743,895 | |||||||||||
|
| |||||||||||||||
Distributions to shareholders | (28,480,201 | ) | (38,161,818 | ) | (6,696,117 | ) | (2,065,367 | ) | ||||||||
|
| |||||||||||||||
Capital share transactions: (Note 2) | 32,171,961 | 452,182,964 | 93,615,229 | 142,589,480 | ||||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets | (37,037,329 | ) | 465,301,441 | 91,621,070 | 146,268,008 | |||||||||||
Net assets: |
| |||||||||||||||
Beginning of year | 1,018,639,156 | 553,337,715 | 201,101,173 | 54,833,165 | ||||||||||||
|
| |||||||||||||||
End of year | $ | 981,601,827 | $ | 1,018,639,156 | $ | 292,722,243 | $ | 201,101,173 | ||||||||
|
| |||||||||||||||
| 208 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets (continued)
| Franklin Liberty Systematic Style Premia ETFa | Franklin Liberty U.S. Core Bond ETF | |||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
Increase (decrease) in net assets: |
| |||||||||||||||
Operations: |
| |||||||||||||||
Net investment income | $ | 375,343 | $ | 544,672 | $ | 28,834,509 | $ | 30,551,817 | ||||||||
Net realized gain (loss) | 4,711,707 | (15,476,749 | ) | (24,963,931 | ) | 12,812,674 | ||||||||||
Net change in unrealized appreciation (depreciation) | 61,304 | 10,192,871 | (78,870,127 | ) | (20,543,019 | ) | ||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from operations | 5,148,354 | (4,739,206 | ) | (74,999,549 | ) | 22,821,472 | ||||||||||
|
| |||||||||||||||
Distributions to shareholders | (697,021 | ) | (3,805,981 | ) | (35,701,883 | ) | (51,084,574 | ) | ||||||||
|
| |||||||||||||||
Capital share transactions: (Note 2) | 3,879,642 | 4,524,461 | 160,065,825 | 635,328,246 | ||||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets | 8,330,975 | (4,020,726 | ) | 49,364,393 | 607,065,144 | |||||||||||
Net assets: |
| |||||||||||||||
Beginning of year | 46,927,339 | 50,948,065 | 1,460,596,915 | 853,531,771 | ||||||||||||
|
| |||||||||||||||
End of year | $ | 55,258,314 | $ | 46,927,339 | $ | 1,509,961,308 | $ | 1,460,596,915 | ||||||||
|
| |||||||||||||||
aConsolidated financial statements. See Notes 14.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 209 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets (continued)
| Franklin Liberty U.S. Low Volatility ETF | Franklin Liberty U.S. Treasury Bond ETF | |||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2022 | Year Ended March 31, 2021a | |||||||||||||
Increase (decrease) in net assets: |
| |||||||||||||||
Operations: |
| |||||||||||||||
Net investment income | $ | 2,051,655 | $ | 1,950,473 | $ | 3,222,981 | $ | 1,690,423 | ||||||||
Net realized gain (loss) | 17,449,280 | 6,732,931 | (939,252 | ) | (3,618,092 | ) | ||||||||||
Net change in unrealized appreciation (depreciation) | (1,376,584 | ) | 28,828,473 | (15,335,003 | ) | (15,173,396 | ) | |||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from operations | 18,124,351 | 37,511,877 | (13,051,274 | ) | (17,101,065 | ) | ||||||||||
|
| |||||||||||||||
Distributions to shareholders | (2,063,975 | ) | (1,913,171 | ) | (6,661,686 | ) | (5,600,354 | ) | ||||||||
|
| |||||||||||||||
Capital share transactions: (Note 2) | (20,946,579 | ) | 30,000,322 | 5,056,701 | 440,900,395 | |||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets | (4,886,203 | ) | 65,599,028 | (14,656,259 | ) | 418,198,976 | ||||||||||
Net assets: |
| |||||||||||||||
Beginning of year | 139,821,618 | 74,222,590 | 418,198,976 | — | ||||||||||||
|
| |||||||||||||||
End of year | $ | 134,935,415 | $ | 139,821,618 | $ | 403,542,717 | $ | 418,198,976 | ||||||||
|
| |||||||||||||||
aFor the period June 9, 2020 (commencement of operations) to March 31, 2021.
| 210 | Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets (continued)
| Franklin Liberty Ultra Short Bond ETF | ||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021a | |||||||
Increase (decrease) in net assets: |
| |||||||
Operations: |
| |||||||
Net investment income | $ | 17,705 | $ | 10,284 | ||||
Net realized gain (loss) | 1,348 | 2,243 | ||||||
Net change in unrealized appreciation (depreciation) | (51,611 | ) | 9,733 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | (32,558 | ) | 22,260 | |||||
|
| |||||||
Distributions to shareholders | (17,586 | ) | (34,619 | ) | ||||
|
| |||||||
Capital share transactions: (Note 2) | 1,244,484 | 2,500,000 | ||||||
|
| |||||||
Net increase (decrease) in net assets | 1,194,340 | 2,487,641 | ||||||
Net assets: |
| |||||||
Beginning of year | 2,487,641 | — | ||||||
|
| |||||||
End of year | $ | 3,681,981 | $ | 2,487,641 | ||||
|
| |||||||
aFor the period July 14, 2020 (commencement of operations) to March 31, 2021.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 211 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
1. Organization and Significant Accounting Policies
Franklin Templeton ETF Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of forty-five separate funds, fifteen of which are included in this report (Funds) and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Each of the Funds are an exchange traded fund (ETF) and are actively managed, thus they are not designed to track an index.
On November 19, 2021, the Franklin Liberty Federal Intermediate Tax-Free Bond Opportunities ETF’s Board of Trustees, approved a proposal to change the name of the Fund to Franklin Dynamic Municipal Bond ETF, effective January 31, 2022.
On November 19, 2021 the Franklin Liberty Federal Tax-Free Bond ETF’s Board of Trustees, approved a proposal to change the name of the Fund to Franklin Municipal Green Bond ETF, effective May 3, 2022.
The following summarizes the Fund’s significant accounting policies.
a. Financial Instrument Valuation
The Funds’ investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Funds calculate the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Funds’ administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC).
The Funds may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities and exchange traded funds listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time. The value is then converted into its
U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. London time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Debt securities generally trade in the over-the-counter (OTC) market rather than on a securities exchange. The Funds’ pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the date that the values of the foreign debt securities are determined.
The Funds have procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Funds primarily employ a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Funds’ business day. Occasionally,
| 212 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies (continued)
a. Financial Instrument Valuation (continued)
events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Funds’ portfolio securities as determined at the foreign market close and the latest indications of value at 4 p.m. Eastern time. The VC monitors price movements for significant events following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Funds. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Funds’ NAV is not calculated, which could result in differences between the value of the Funds’ portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Funds for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Funds may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Funds do not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statements of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Derivative Financial Instruments
Certain or all Funds invested in derivative financial instruments in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market movements which expose the Fund to gains or losses in excess of the amounts shown in the Statements of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Statements of Operations.
Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. Certain or all Funds attempt to reduce their exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination.
Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Funds include failure of the Funds to maintain certain net asset levels and/or limit the
| franklintempleton.com | Annual Report | 213 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies (continued)
c. Derivative Financial Instruments (continued)
decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. Early termination by the counterparty may result in an immediate payment by the Funds of any net liability owed to that counterparty under the ISDA agreement.
The Funds entered into credit default swap contracts primarily to manage and/or gain exposure to credit risk. A credit default swap is an agreement between the Fund and a counterparty whereby the buyer of the contract receives credit protection and the seller of the contract guarantees the credit worthiness of a referenced debt obligation. These agreements may be privately negotiated in the over-the-counter market (OTC credit default swaps) or may be executed in a multilateral trade facility platform, such as a registered exchange (centrally cleared credit default swaps). The underlying referenced debt obligation may be a single issuer of corporate or sovereign debt, a credit index, a basket of issuers or indices, or a tranche of a credit index or basket of issuers or indices. In the event of a default of the underlying referenced debt obligation, the buyer is entitled to receive the notional amount of the credit default swap contract from the seller in exchange for the referenced debt obligation, a net settlement amount equal to the notional amount of the credit default swap less the recovery value of the referenced debt obligation, or other agreed upon amount. For centrally cleared credit default swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable. Over the term of the contract, the buyer pays the seller a periodic stream of payments, provided that no event of default has occurred. Such periodic payments are accrued daily as an unrealized appreciation or depreciation until the payments are made, at which time they are realized. Upfront payments and receipts are reflected in the Statements of Assets and Liabilities and represent compensating factors between stated terms of the credit default swap agreement and prevailing market conditions (credit spreads and other relevant factors). These upfront payments and receipts are amortized over the term of the contract as a realized gain or loss in the Statements of Operations.
Collateral requirements differ by type of derivative. Collateral terms are contract specific for OTC derivatives. For OTC
derivatives traded under an ISDA master agreement, posting of collateral is required by either the Fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values may be delivered by the Fund or the counterparty the next business day, or within a few business days. Collateral pledged and/or received by the Fund, if any, is held in segregated accounts with the Fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Funds’ investment objectives. To the extent that the amounts due to the Fund from its counterparties are not subject to collateralization or are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance.
Certain or all Funds entered into exchange traded futures contracts primarily to manage and/or gain exposure to equity price risk. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a future date. Required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statements of Assets and Liabilities.
See Note 12 regarding other derivative information.
d. Securities Purchased on a When-Issued and Delayed Delivery Basis
Certain or all Funds purchase securities on a when-issued and delayed delivery basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Funds will generally purchase these securities with the intention of holding the securities, they may sell the securities before the settlement date.
e. Senior Floating Rate Interests
Certain or all Funds invest in senior secured corporate loans that pay interest at rates which are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London InterBank Offered Rate (LIBOR). Senior secured corporate loans often require prepayment of principal from excess cash flows or at the discretion of the borrower. As
| 214 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies (continued)
e. Senior Floating Rate Interests (continued)
a result, actual maturity may be substantially less than the stated maturity. Senior secured corporate loans in which the Funds invest are generally readily marketable, but may be subject to certain restrictions on resale. On July 27, 2017, the United Kingdom Financial Conduct Authority announced its intention to cease sustaining LIBOR after 2021. There remains uncertainty regarding the future utilization of LIBOR and the nature of any replacement rate. As such, the potential effect of a transition away from LIBOR on the Fund or the Fund’s investments that use or may use a floating rate based on LIBOR cannot yet be determined.
f. Income and Deferred Taxes
It is each Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. Each Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Funds may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which the Funds invest. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Funds invest. When a capital gain tax is determined to apply, certain or all Funds record an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.
Each Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of March 31, 2022, each Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
g. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are
determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income and capital gain distributions are recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Funds. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust. Certain Fund specific expenses are allocated directly to the Fund that incurred the expense. These expenses are paid by the Fund or by the investment manager, as applicable, according to the terms of the unified management fee agreement.
h. Insurance
The scheduled payments of interest and principal for each insured municipal security in the Trust are insured by either a new issue insurance policy or a secondary insurance policy. Some municipal securities in the Funds are secured by collateral guaranteed by an agency of the U.S. government. Depending on the type of coverage, premiums for insurance are either added the cost basis of the security or paid by a third party.
Insurance companies typically insure municipal bonds that tend to be of very high quality, with the majority of underlying municipal bonds rated A or better. However, an event involving an insurer could have an adverse effect on the value of the securities insured by that insurance company. There can be no assurance the insurer will be able to fulfill its obligations under the terms of the policy.
i. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the
| franklintempleton.com | Annual Report | 215 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies (continued)
i. Accounting Estimates (continued)
amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
j. Guarantees and Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities
arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Funds, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
Shares of the Funds are issued and redeemed at their respective NAV only in aggregations of a specific number of shares or multiples thereof (Creation Units). Only certain large institutional investors (Authorized Participants) may engage in creation or redemption transactions directly with the Funds. Once created, shares of the Funds generally trade in the secondary market in amounts less than one Creation Unit. The market price of the Funds’ shares will be based on the price in the secondary market which may be at, above or below the most recent NAV. Creation Units may be issued and redeemed in exchange for a designated portfolio of securities and/or cash (which may include cash in lieu of certain securities).
Authorized Participants pay a standard transaction fee to the shareholder servicing agent when purchasing or redeeming Creation Units of the Funds regardless of the number of Creation Units that are being created or redeemed on the same day by the Authorized Participant. The standard transaction fee is imposed to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units and is not charged to or paid by the Funds.
In addition, for cash Creation Unit transactions, a variable fee for creation transactions and redemption transactions may be charged to the Authorized Participant to cover certain brokerage, tax, foreign exchange, execution, market impact and other costs and expenses related to the execution of trades. Variable fees, if any, are included in capital share transactions in the Statements of Changes in Net Assets.
At March 31, 2022, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:
| Franklin Disruptive Commerce ETF | ||||||||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||
Shares sold | — | $ | 157 | 750,000 | $ | 32,383,211 | ||||||||||||||
Shares redeemed | (250,000 | ) | (10,442,596 | ) | — | — | ||||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | (250,000 | ) | $ | (10,442,439 | ) | 750,000 | $ | 32,383,211 | ||||||||||||
|
| |||||||||||||||||||
| Franklin Exponential Data ETF | ||||||||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021a | |||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||
Shares sold | 50,000 | $ | 1,286,009 | 100,001 | $ | 2,500,025 | ||||||||||||||
Shares redeemed | — | — | (1 | ) | (25 | ) | ||||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | 50,000 | $ | 1,286,009 | 100,000 | $ | 2,500,000 | ||||||||||||||
|
| |||||||||||||||||||
| 216 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest (continued)
| Franklin Genomic Advancements ETF | ||||||||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||
Shares sold | 400,000 | $ | 22,040,989 | 250,000 | $ | 10,522,838 | ||||||||||||||
Shares redeemed | (350,000 | ) | (15,934,403 | ) | — | — | ||||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | 50,000 | $ | 6,106,586 | 250,000 | $ | 10,522,838 | ||||||||||||||
|
| |||||||||||||||||||
| Franklin Intelligent Machines ETF | ||||||||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||
Shares sold | — | $ | — | 200,000 | $ | 8,928,972 | ||||||||||||||
Shares redeemed | — | — | (50,000 | ) | (2,373,567 | ) | ||||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | — | $ | — | 150,000 | $ | 6,555,405 | ||||||||||||||
|
| |||||||||||||||||||
| Franklin Dynamic Municipal Bond ETF | ||||||||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||
Shares sold | 1,550,000 | $ | 40,942,801 | 1,100,000 | $ | 28,420,573 | ||||||||||||||
Shares redeemed | (50,000 | ) | (1,249,087 | ) | — | — | ||||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | 1,500,000 | $ | 39,693,714 | 1,100,000 | $ | 28,420,573 | ||||||||||||||
|
| |||||||||||||||||||
| Franklin Liberty Federal Tax-Free Bond | ||||||||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||
Shares sold | 1,200,000 | $ | 32,661,307 | 3,650,000 | $ | 98,699,200 | ||||||||||||||
Shares redeemed | (1,700,000 | ) | (45,744,257 | ) | (50,000 | ) | (1,349,233 | ) | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | (500,000 | ) | $ | (13,082,950 | ) | 3,600,000 | $ | 97,349,967 | ||||||||||||
|
| |||||||||||||||||||
| Franklin Liberty High Yield Corporate ETF | ||||||||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||
Shares sold | 4,500,000 | $ | 117,942,112 | 7,500,000 | $ | 194,026,836 | ||||||||||||||
Shares redeemed | (4,250,000 | ) | (108,540,418 | ) | — | — | ||||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | 250,000 | $ | 9,401,694 | 7,500,000 | $ | 194,026,836 | ||||||||||||||
|
| |||||||||||||||||||
| Franklin Liberty International Aggregate Bond ETF | ||||||||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||
Shares sold | 2,400,000 | $ | 60,490,312 | 9,000,000 | $ | 226,171,307 | ||||||||||||||
Shares redeemed | (1,450,000 | ) | (35,677,719 | ) | (1,950,000 | ) | (49,063,832 | ) | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | 950,000 | $ | 24,812,593 | 7,050,000 | $ | 177,107,475 | ||||||||||||||
|
| |||||||||||||||||||
| franklintempleton.com | Annual Report | 217 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest (continued)
| Franklin Liberty Investment Grade Corporate ETF | ||||||||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||
Shares sold | 4,300,000 | $ | 107,793,585 | 22,300,000 | $ | 585,231,109 | ||||||||||||||
Shares redeemed | (2,900,000 | ) | (75,621,624 | ) | (5,150,000 | ) | (133,048,145 | ) | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | 1,400,000 | $ | 32,171,961 | 17,150,000 | $ | 452,182,964 | ||||||||||||||
|
| |||||||||||||||||||
| Franklin Liberty Senior Loan ETF | ||||||||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||
Shares sold | 5,300,000 | $ | 132,222,340 | 5,850,000 | $ | 146,207,760 | ||||||||||||||
Shares redeemed | (1,550,000 | ) | (38,607,111 | ) | (150,000 | ) | (3,618,280 | ) | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | 3,750,000 | $ | 93,615,229 | 5,700,000 | $ | 142,589,480 | ||||||||||||||
|
| |||||||||||||||||||
| Franklin Liberty Systematic Style Premia ETF | ||||||||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||
Shares sold | 300,000 | $ | 6,039,974 | 200,000 | $ | 4,524,461 | ||||||||||||||
Shares sold | (100,000 | ) | (2,160,332 | ) | — | — | ||||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | 200,000 | $ | 3,879,642 | 200,000 | $ | 4,524,461 | ||||||||||||||
|
| |||||||||||||||||||
| Franklin Liberty U.S. Core Bond ETF | ||||||||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021a | |||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||
Shares sold | 14,950,000 | $ | 373,614,883 | 37,350,000 | $ | 966,046,417 | ||||||||||||||
Shares redeemed | (8,600,000 | ) | (213,549,058 | ) | (12,800,000 | ) | (330,718,171 | ) | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | 6,350,000 | $ | 160,065,825 | 24,550,000 | $ | 635,328,246 | ||||||||||||||
|
| |||||||||||||||||||
| Franklin Liberty U.S. Low Volatility ETF | ||||||||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||
Shares sold | 850,000 | $ | 39,828,368 | 1,450,000 | $ | 55,893,889 | ||||||||||||||
Shares redeemed | (1,300,000 | ) | (60,774,947 | (650,000 | ) | (25,893,567 | ) | |||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | (450,000 | ) | $ | (20,946,579 | ) | 800,000 | $ | 30,000,322 | ||||||||||||
|
| |||||||||||||||||||
| 218 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest (continued)
| Franklin Liberty U.S. Treasury Bond ETF | ||||||||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021b | |||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||
Shares sold | 1,850,000 | $ | 43,376,401 | 17,950,001 | $ | 450,866,696 | ||||||||||||||
Shares redeemed | (1,600,000 | ) | (38,319,700 | ) | (400,001 | ) | (9,966,301 | ) | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | 250,000 | $ | 5,056,701 | 17,550,000 | $ | 440,900,395 | ||||||||||||||
|
| |||||||||||||||||||
| Franklin Liberty Ultra Short Bond ETF | ||||||||||||||||||||
| Year Ended March 31, 2022 | Year Ended March 31, 2021c | |||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||
Shares sold | 50,000 | $ | 1,244,484 | 100,001 | $ | 2,500,025 | ||||||||||||||
Shares redeemed | — | — | (1 | ) | (25 | ) | ||||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | 50,000 | $ | 1,244,484 | 100,000 | $ | 2,500,000 | ||||||||||||||
|
| |||||||||||||||||||
aFor the period January 12, 2021 (commencement of operations) to March 31, 2021.
bFor the period June 9, 2020 (commencement of operations) to March 31, 2021.
cFor the period July 14, 2020 (commencement of operations) to March 31, 2021
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Funds are also officers and/or directors of the following subsidiaries:
| Subsidiary | Affiliation | |
Franklin Advisers, Inc. (Advisers) | Investment manager | |
Franklin Templeton Institutional, LLC (FT Institutional) | Investment manager | |
Franklin Templeton Investimentos (Brasil) Ltda. (FTI Brasil) | Investment manager | |
Franklin Templeton Investment Management Limited (FTIML) | Investment manager | |
Franklin Templeton Investment Trust Management Co., Ltd. (FT Korea) | Investment manager | |
Franklin Templeton Investments (ME) Limited (FTIME) | Investment manager | |
Franklin Templeton Investments Corp. (FTIC) | Investment manager | |
Franklin Advisory Services, LLC (FASL) | Investment manager | |
Templeton Asset Management Ltd. (TAML) | Investment manager | |
Franklin Templeton Services, LLC (FT Services) | Administrative manager | |
Franklin Templeton Distributors, LLC (Distributors) | Principal underwriter | |
a. Management Fees
Effective October 1, 2021, for each Fund except for Franklin Dynamic Municipal Bond ETF and Franklin Liberty Federal Tax-Free Bond (“Unitary Fee Funds”), the Board approved converting to a unitary fee structure as described below.
For the period April 1, 2021 to September 30, 2021, Franklin Disruptive Commerce ETF, Franklin Exponential Data ETF, Franklin Genomic Advancements ETF and Franklin Intelligent Machines ETF Funds pay an investment management fee to Advisers of 0.50%, respectively, per year of the average daily net assets of each of the Funds. Effective October 1, 2021, each of the Funds pay Advisers a unified management fee for managing the Funds’ assets, as approved by the Board. Pursuant to the investment management agreement with the Trust on behalf of the Funds’ effective October 1, 2021, Advisers reimburses
| franklintempleton.com | Annual Report | 219 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
a. Management Fees (continued)
the Funds for all acquired fund fees and expenses (such as those associated with the Funds’ investment in a Franklin Templeton money fund) and all expenses related to the Funds’ investments in the Subsidiary, and pays all of the ordinary operating expenses of the Funds, except for (i) the Funds’ management fee, (ii) payments under the Funds’ Rule 12b-1 plan (if any), (iii) brokerage expenses (including any costs incidental to transactions in portfolio securities or instruments), (iv) taxes, (v) interest (including borrowing costs and dividend expenses on securities sold short and overdraft charges), (vi) litigation expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto), and (vii) other non-routine or extraordinary expenses. These Funds pay 0.50% per year of the average daily net assets of each of the Funds.
For the period April 1, 2021 to September 30, 2021, Franklin Liberty Systematic Style Premia ETF, Franklin Liberty U.S. Core Bond ETF, Franklin Liberty U.S. Low Volatility ETF, Franklin Liberty U.S. Treasury Bond ETF and Franklin Liberty Ultra Short Bond ETF pay an investment management fee to Advisers of 0.650%, 0.150%, 0.290%, 0.450% and 0.610%, respectively, per year of the average daily net assets of each of the Funds. Effective October 1, 2021 Franklin Liberty Systematic Style Premia ETF, Franklin Liberty U.S. Core Bond ETF, Franklin Liberty U.S. Low Volatility ETF, Franklin Liberty U.S. Treasury Bond ETF and Franklin Liberty Ultra Short Bond ETF pay Advisers a unified management fee for managing the Funds’ assets, as approved by the Board. Pursuant to the investment management agreement with the Trust on behalf of the Funds’ effective October 1, 2021, Advisers reimburses the Funds for all acquired fund fees and expenses (such as those associated with the Funds’ investment in a Franklin Templeton money fund) and all expenses related to the Funds’ investments in the Subsidiary, and pays all of the ordinary operating expenses of the Funds, except for (i) the Funds’ management fee, (ii) payments under the Funds’ Rule 12b-1 plan (if any), (iii) brokerage expenses (including any costs incidental to transactions in portfolio securities or instruments), (iv) taxes, (v) interest (including borrowing costs and dividend expenses on securities sold short and overdraft charges), (vi) litigation expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto), and (vii) other non-routine or extraordinary expenses. These Funds pay 0.650%, 0.150%, 0.290%, 0.090% and 0.150%, respectively, per year of the average daily net assets of the Funds.
The Franklin Dynamic Municipal Bond ETF and Franklin Liberty Federal Tax-Free Bond Funds pay an investment management fee, calculated daily and paid monthly, to Advisers based on the daily net assets of each of the Funds as follows:
| Annualized Fee Rate | Net Assets | |
0.625% | Up to and including $100 million | |
0.500% | Over $100 million, up to and including $250 million | |
0.450% | Over $250 million, up to and including $7.5 billion | |
0.440% | Over $7.5 billion, up to and including $10 billion | |
0.430% | Over $10 billion, up to and including $12.5 billion | |
0.420% | Over $12.5 billion, up to and including $15 billion | |
0.400% | Over $15 billion, up to and including $17.5 billion | |
0.380% | Over $17.5 billion, up to and including $20 billion | |
0.360% | In excess of $50 billion | |
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FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
a. Management Fees (continued)
For the period April 1, 2021 to September 30, 2021, Franklin Liberty High Yield Corporate ETF and Franklin Liberty Investment Grade Corporate ETF Funds pay an investment management fee, calculated daily and paid monthly, to Advisers based on the daily net assets of each of the Funds as follows:
| Annualized Fee Rate | Net Assets | |
0.625% | Up to and including $100 million | |
0.500% | Over $100 million, up to and including $250 million | |
0.450% | Over $250 million, up to and including $7.5 billion | |
0.440% | Over $7.5 billion, up to and including $10 billion | |
0.430% | Over $10 billion, up to and including $12.5 billion | |
0.420% | Over $12.5 billion, up to and including $15 billion | |
0.400% | Over $15 billion, up to and including $17.5 billion | |
0.380% | Over $17.5 billion, up to and including $20 billion | |
0.360% | Over $20 billion, up to and including $35 billion | |
0.355% | Over $35 billion, up to and including $50 billion | |
0.350% | In excess of $50 billion | |
Effective October 1, 2021, the Franklin Liberty High Yield Corporate ETF Fund pays Advisers a unified management fee for managing the Fund’s assets, as approved by the Board. Pursuant to the investment management agreement with the Trust on behalf of the Fund effective October 1, 2021, Advisers reimburses the Fund for all acquired fund fees and expenses (such as those associated with the Fund’s investment in a Franklin Templeton money fund) and pays all of the ordinary operating expenses of the Fund, except for (i) the Fund’s management fee, (ii) payments under the Fund’s Rule 12b-1 plan (if any), (iii) brokerage expenses (including any costs incidental to transactions in portfolio securities or instruments), (iv) taxes, (v) interest (including borrowing costs and dividend expenses on securities sold short and overdraft charges), (vi) litigation expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto), and (vii) other non-routine or extraordinary expenses based on the daily net assets of the Fund as follows:
| Annualized Fee Rate | Net Assets | |
0.400% | Up to and including $17.5 billion | |
0.380% | Over $17.5 billion, up to and including $20 billion | |
0.360% | Over $20 billion, up to and including $35 billion | |
0.355% | Over $35 billion, up to and including $50 billion | |
0.350% | In excess of $50 billion | |
Effective October 1, 2021, the Franklin Liberty Investment Grade Corporate ETF Fund pays Advisers a unified management fee for managing the Fund’s assets, as approved by the Board. Pursuant to the investment management agreement with the Trust on behalf of the Fund effective October 1, 2021, Advisers reimburses the Fund for all acquired fund fees and expenses (such as those associated with the Fund’s investment in a Franklin Templeton money fund) and pays all of the ordinary operating expenses of the Fund, except for (i) the Fund’s management fee, (ii) payments under the Fund’s Rule 12b-1 plan (if any), (iii) brokerage expenses (including any costs incidental to transactions in portfolio securities or instruments), (iv) taxes, (v) interest (including borrowing costs and dividend expenses on securities sold short and overdraft charges), (vi) litigation expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto), and (vii) other non-routine or extraordinary expenses. The Fund pays 0.35% per year of the average daily net assets of the Fund.
| franklintempleton.com | Annual Report | 221 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
a. Management Fees (continued)
For the period April 1, 2021 to September 30, 2021, Franklin Liberty International Aggregate Bond ETF pays an investment management fee, calculated daily and paid monthly, to FTIML based on the average daily net assets of the fund as follows:
| Annualized Fee Rate | Net Assets | |
0.450% | Up to and including $1 billion | |
0.400% | Over $1 billion, up to and including $5 billion | |
0.350% | Over $5 billion, up to and including $10 billion | |
0.345% | Over $10 billion, up to and including $15 billion | |
0.340% | Over $15 billion, up to and including $20 billion | |
0.335% | In excess of $20 billion | |
Effective October 1, 2021, the Fund pays FTIML a unified management fee for managing the Fund’s assets, as approved by the Board. Pursuant to the investment management agreement with the Trust on behalf of the Fund effective October 1, 2021, FTIML reimburses the Fund for all acquired fund fees and expenses (such as those associated with the Fund’s investment in a Franklin Templeton money fund) and pays all of the ordinary operating expenses of the Fund, except for (i) the Fund’s management fee, (ii) payments under the Fund’s Rule 12b-1 plan (if any), (iii) brokerage expenses (including any costs incidental to transactions in portfolio securities or instruments), (iv) taxes, (v) interest (including borrowing costs and dividend expenses on securities sold short and overdraft charges), (vi) litigation expenses (including litigation to which the Trust or the Fund may be a party and indemnification of the Trustees and officers with respect thereto), and (vii) other non-routine or extraordinary expenses. The Fund pays 0.25% per year of the average daily net assets of the Fund.
For the period April 1, 2021 to September 30, 2021, Franklin Liberty Senior Loan ETF pays an investment management fee, calculated daily and paid monthly, to Advisers based on the average daily net assets of the fund as follows:
| Annualized Fee Rate | Net Assets | |
0.650% | Up to and including $500 million | |
0.550% | Over $500 million, up to and including $1 billion | |
0.500% | Over $250 million, up to and including $7.5 billion | |
0.450% | Over $7.5 billion, up to and including $10 billion | |
0.425% | Over $10 billion, up to and including $12.5 billion | |
0.400% | Over $12.5 billion, up to and including $15 billion | |
0.390% | Over $15 billion, up to and including $17.5 billion | |
0.380% | Over $17.5 billion, up to and including $20 billion | |
0.370% | In excess of $50 billion | |
Effective October 1, 2021, the Fund pays Advisers a unified management fee for managing the Fund’s assets, as approved by the Board. Pursuant to the investment management agreement with the Trust on behalf of the Fund effective October 1, 2021, Advisers reimburses the Fund for all acquired fund fees and expenses (such as those associated with the Fund’s investment in a Franklin Templeton money fund) and pays all of the ordinary operating expenses of the Fund, except for (i) the Fund’s management fee, (ii) payments under the Fund’s Rule 12b-1 plan (if any), (iii) brokerage expenses (including any costs incidental to transactions in portfolio securities or instruments), (iv) taxes, (v) interest (including borrowing costs and dividend expenses on securities sold short and overdraft charges), (vi) litigation expenses (including litigation to which the Trust or the Fund may
| 222 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
be a party and indemnification of the Trustees and officers with respect thereto), and (vii) other non-routine or extraordinary expenses based on the average daily net assets of the fund as follows:
| Annualized Fee Rate | Net Assets | |
0.450% | Up to and including $6.5 billion | |
0.425% | Over $6.5 billion, up to and including $11.5 billion | |
0.400% | Over $11.5 billion, up to and including $16.5 billion | |
0.390% | Over $16.5 billion, up to and including $19 billion | |
0.380% | Over $19 billion, up to and including $21.5 billion | |
0.370% | In excess of $21.5 billion | |
For the year ended March 31, 2022, each Fund’s annualized effective investment management fee rate based on
average daily net assets was as follows:
| Annualized Fee Rate | ||
Franklin Disruptive Commerce ETF | 0.50% | |
Franklin Exponential Data ETF | 0.50% | |
Franklin Geonomic Advancements ETF | 0.50% | |
Franklin Intelligent Machines ETF | 0.50% | |
Franklin Dynamic Municipal Bond ETF | 0.625% | |
Franklin Liberty Federal Tax-Free Bond | 0.60% | |
Franklin Liberty High Yield Corporate ETF | 0.46% | |
Franklin Liberty International Aggregate Bond ETF | 0.34% | |
Franklin Liberty Investment Grade Corporate ETF | 0.41% | |
Franklin Liberty Senior Loan ETF | 0.54% | |
Franklin Liberty Systematic Style Premia ETF | 0.65% | |
Franklin Liberty U.S. Core Bond ETF | 0.15% | |
Franklin Liberty U.S. Low Volatility ETF | 0.29% | |
Franklin Liberty U.S. Treasury Bond ETF | 0.27% | |
Franklin Liberty Ultra Short Bond ETF | 0.34% | |
b. Administrative Fees
Under an agreement with Advisers and FTIML, FT Services provides administrative services to the Funds. The fee is paid by Advisers and FTIML based on the Funds’ average daily net assets, and is not an additional expense of the Funds.
c. Waiver and Expense Reimbursements
Prior to October 1, 2021, Advisers had contractually agreed to waive or assume certain expenses so that total annual Fund operating expenses (including acquired fund fees and expenses, but excluding certain non-routine expenses) did not exceed 0.50% for the Franklin Disruptive Commerce ETF, Franklin Genomic Advancements ETF, Franklin Intelligent Machine ETF and Franklin Exponential Data ETF Funds until July 31, 2022.
Prior to October 1, 2021, Advisers had contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by Franklin Liberty High Yield Corporate ETF, Franklin Liberty Investment Grade Corporate ETF, Franklin Liberty Senior Loan ETF , Franklin Liberty U.S. Core Bond ETF, Franklin Liberty U.S. Low Volatility
| franklintempleton.com | Annual Report | 223 | ||||||||
3. Transactions with Affiliates (continued)
a. Management Fees (continued)
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
c. Waiver and Expense Reimbursements (continued)
ETF, Franklin Liberty U.S. Treasury Bond ETF and Franklin Liberty Ultra Short Bond ETF so that the expenses (including acquired fund fees and expenses) of the Funds did not exceed 0.40%, 0.35%, 0.45%, 0.15%, 0.29%, 0.09% and 0.15%, respectively, based on the average net assets (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until July 31, 2022.
Prior to October 1, 2021, FTIML had contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by Franklin Liberty International Aggregate Bond ETF so that the expenses (including acquired fund fees and expenses) of the Fund did not exceed 0.25% based on the average net assets (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until July 31, 2022.
For Franklin Liberty Systematic Style Premia ETF, prior to October 1, 2021 the investment manager had contractually agreed to waive the management fee it receives from the Fund in an amount equal to the management fee paid by a Cayman Islands-based company that is wholly-owned by the Fund (Subsidiary). Additionally, prior to October 1, 2021 the investment manager had contractually agreed to waive or assume certain expenses so that total annual Fund operating expenses (including acquired fund fees and expenses, but excluding certain non-routine expenses) for the Fund did not exceed 0.65% until July 31, 2022.
For the Franklin Dynamic Municipal Bond ETF, Franklin Liberty Federal Tax-Free Bond ETF, Advisers has contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by so that the expenses (including acquired fund fees and expenses) of the Funds do not exceed 0.30%, and 0.30%, respectively, based on the average net assets (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until July 31, 2022.
Total expenses waived or paid are not subject to recapture subsequent to the Funds’ fiscal year end.
Advisers additionally waived 0.25% of annual Fund operating expenses for the Franklin Exponential Data ETF for the period from the commencement of its operations until September 30, 2021 due to a scrivener’s error which accrued to the benefit of the Fund. As noted above, Advisers may not recover fees previously waived.
d. Investments in Affiliated Management Investment Companies
Certain or all Funds invest in one or more affiliated management investment companies. As defined in the 1940 Act, an investment is deemed to be a “Controlled Affiliate” of a fund when a fund owns, either directly or indirectly, 25% or more of the affiliated fund’s outstanding shares or has the power to exercise control over management or policies of such fund. The Fund’s do not invest for purposes of exercising a controlling influence over the management or policies. Management fees paid by the Funds are waived on assets invested in the affiliated management investment companies, as noted in the Statements of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended March 31, 2022, investments in affiliated management investment companies were as follows:
Value at Year | Purchases | Sales | Realized Gain (Loss) | Net Change In (Depreciation) | Value at End of Year | Number of Shares Held at End | Investment Income | |||||||||||||||||||||||||
| Franklin Exponential Data ETF | ||||||||||||||||||||||||||||||||
| Non-Controlled Affiliates | Dividend Income | |||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Institutional Fiduciary Trust Money Market Portfolio 0.01% | $ | 59,857 | $ | 734,286 | $ | (793,552 | ) | $ | — | $ | — | $ | 591 | $ | 591 | $ | — | |||||||||||||||
|
| |||||||||||||||||||||||||||||||
| 224 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
d. Investments in Affiliated Management Investment Companies (continued)
Value at Year | Purchases | Sales | Realized Gain (Loss) | Net Change In (Depreciation) | Value at End of Year | Number of Shares Held at End | Investment Income | |||||||||||||||||||||||||
| Franklin Liberty U.S. Core Bond ETF | ||||||||||||||||||||||||||||||||
| Non-Controlled Affiliates | Dividend Income | |||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Institutional Fiduciary Trust Money Market Portfolio 0.01% | $ | 21,162,095 | $ | 599,950,423 | $ | (572,563,877 | ) | $ | — | $ | — | $ | 48,548,641 | $ | 48,548,641 | $ | — | |||||||||||||||
|
| |||||||||||||||||||||||||||||||
| Franklin Liberty U.S. Treasury Bond ETF | ||||||||||||||||||||||||||||||||
| Non-Controlled Affiliates | Dividend Income | |||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Institutional Fiduciary Trust Money Market Portfolio 0.01% | $ | 19,594,757 | $ | 46,530,374 | $ | (61,491,750 | ) | $ | — | $ | — | $ | 4,633,381 | $ | 4,633,381 | $ | — | |||||||||||||||
|
| |||||||||||||||||||||||||||||||
| Franklin Liberty Ultra Short Bond ETF | ||||||||||||||||||||||||||||||||
| Non-Controlled Affiliates | Dividend Income | |||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Institutional Fiduciary Trust Money Market Portfolio 0.01% | $ | 22,444 | $ | 1,189,681 | $ | (1,131,116 | ) | $ | — | $ | — | $ | 81,009 | $ | 81,009 | $ | — | |||||||||||||||
|
| |||||||||||||||||||||||||||||||
e. Other Affiliated Transactions
At March 31, 2022, the shares of the funds were owned by the following investment entities:
| Funds | Shares | Percentage of Outstanding Sharesa | ||||||
| Franklin Exponential Data ETF | ||||||||
Franklin Resources Inc. | 30,000 | 20.0% | ||||||
|
| |||||||
| Franklin Intelligent Machines ETF | ||||||||
Franklin Resources Inc. | 20,000 | 8.0% | ||||||
|
| |||||||
| Franklin Liberty High Yield Corporate ETF | ||||||||
Franklin Conservative Allocation Fund | 2,179,258 | 16.1% | ||||||
Franklin Moderate Allocation Fund | 2,148,845 | 15.9% | ||||||
Franklin Total Return Fund | 2,900,000 | 21.5% | ||||||
Franklin 529 Portfolios | 3,020,643 | 22.4% | ||||||
|
| |||||||
| 10,248,746 | 75.9% | |||||||
|
| |||||||
| Franklin Liberty International Aggregate Bond ETF | ||||||||
Franklin Conservative Allocation Fund | 1,032,691 | 12.6% | ||||||
Franklin Moderate Allocation Fund | 971,513 | 11.8% | ||||||
Franklin Growth Allocation Fund | 450,649 | 5.5% | ||||||
Franklin 529 Portfolios | 4,997,261 | 60.9% | ||||||
|
| |||||||
| 7,452,114 | 90.8% | |||||||
|
| |||||||
| Franklin Liberty Investment Grade Corporate ETF | ||||||||
Franklin Total Return Fund | 18,335,000 | 44.3% | ||||||
Franklin 529 Portfolios | 14,057,294 | 34.0% | ||||||
|
| |||||||
| 32,392,294 | 78.3% | |||||||
|
| |||||||
| franklintempleton.com | Annual Report | 225 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
e. Other Affiliated Transactions (continued)
| Funds | Shares | Percentage of Outstanding Sharesa | ||||||
| Franklin Liberty Senior Loan ETF | ||||||||
Franklin Conservative Allocation Fund | 1,223,757 | 10.3% | ||||||
Franklin Moderate Allocation Fund | 1,206,700 | 10.2% | ||||||
Franklin Total Return Fund | 1,737,400 | 14.7% | ||||||
|
| |||||||
| 4,167,857 | 35.2% | |||||||
|
| |||||||
| Franklin Liberty Systematic Style Premia ETF | ||||||||
Franklin Conservative Allocation Fund | 281,751 | 10.8% | ||||||
Franklin Moderate Allocation Fund | 441,748 | 17.0% | ||||||
Franklin Growth Allocation Fund | 307,382 | 11.8% | ||||||
Franklin Managed Income Fund | 1,175,000 | 45.2% | ||||||
Franklin LifeSmart™ 2020 – 2055 Retirement Target Funds | 129,020 | 5.0% | ||||||
|
| |||||||
| 2,334,901 | 89.8% | |||||||
|
| |||||||
| Franklin Liberty U.S. Core Bond ETF | ||||||||
Franklin Conservative Allocation Fund | 9,579,466 | 14.9% | ||||||
Franklin Moderate Allocation Fund | 9,445,816 | 14.7% | ||||||
Franklin 529 Portfolios | 29,468,829 | 45.7% | ||||||
|
| |||||||
| 48,494,111 | 75.3% | |||||||
|
| |||||||
| Franklin Liberty U.S. Low Volatility ETF | ||||||||
Franklin Managed Income Fund | 860,000 | 31.3% | ||||||
|
| |||||||
| Franklin Liberty U.S. Treasury Bond ETF | ||||||||
Franklin Conservative Allocation Fund | 2,074,412 | 11.7% | ||||||
Franklin Moderate Allocation Fund | 2,045,447 | 11.5% | ||||||
Franklin 529 Portfolios | 10,824,209 | 60.8% | ||||||
|
| |||||||
| 14,944,068 | 84.0% | |||||||
|
| |||||||
| Franklin Liberty Ultra Short Bond ETF | ||||||||
Franklin Resources Inc. | 33,000 | 22.0% | ||||||
|
| |||||||
aInvestment activities of significant shareholders could have a material impact on the Funds.
4. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains, if any. At March 31, 2022, the capital loss carryforwards were as follows:
| Franklin Disruptive Commerce ETF | Franklin Exponential Data ETF | Franklin Genomic Advancements ETF | Franklin Intelligent Machines ETF | |||||||||||||
| Capital loss carryforwards not subject to expiration: | ||||||||||||||||
Long term | $ | 129,808 | $ | 99,216 | $ | 339,406 | $ | 44,508 | ||||||||
Short term | 6,001,047 | 404,511 | 5,641,835 | 623,321 | ||||||||||||
|
| |||||||||||||||
Total capital loss carryforwards | $ | 6,130,855 | $ | 503,727 | $ | 5,981,241 | $ | 667,829 | ||||||||
|
| |||||||||||||||
| 226 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
4. Income Taxes (continued)
| Franklin Dynamic Municipal Bond ETF | Franklin Liberty Federal Tax- Free Bond ETF | Franklin Liberty High Yield Corporate ETF | Franklin Liberty International Aggregate Bond ETF | |||||||||||||
| Capital loss carryforwards not subject to expiration: | ||||||||||||||||
Long term | $ | 77,115 | $ | 477,407 | $ | — | $ | 661,680 | ||||||||
Short term | 165,126 | 1,277,016 | — | 621,329 | ||||||||||||
|
| |||||||||||||||
Total capital loss carryforwards | $ | 242,241 | $ | 1,754,423 | $ | — | $ | 1,283,009 | ||||||||
|
| |||||||||||||||
| Franklin Liberty Investment Grade Corporate ETF | Franklin Liberty Senior Loan ETF | Franklin Liberty Systematic Style Premia ETF | Franklin Liberty U.S. Core Bond ETF | |||||||||||||
| Capital loss carryforwards not subject to expiration: | ||||||||||||||||
Long term | $ | — | $ | 1,148,492 | $ | — | $ | 12,324,674 | ||||||||
Short term | — | 792,621 | 12,077,714 | 16,633,065 | ||||||||||||
|
| |||||||||||||||
Total capital loss carryforwards | $ | — | $ | 1,941,113 | $ | 12,077,714 | $ | 28,957,739 | ||||||||
|
| |||||||||||||||
| Franklin Liberty U.S. Low Volatility ETF | Franklin Liberty U.S. Treasury Bond ETF | Franklin Liberty ETF | ||||||||||||||
| Capital loss carryforwards not subject to expiration: | ||||||||||||||||
Long term | $ | — | $ | 1,016,578 | $ | 2,468 | ||||||||||
Short term | 599,857 | 6,131,158 | 14,153 | |||||||||||||
|
| |||||||||||||||
Total capital loss carryforwards | $ | 599,857 | $ | 7,147,736 | $ | 16,621 | ||||||||||
|
| |||||||||||||||
For tax purposes, the Funds may elect to defer any portion of a post-October capital loss or late-year ordinary loss to the first day of the following fiscal year. At March 31, 2022, the deferred losses were as follows:
| Franklin Disruptive Commerce ETF | Franklin Exponential Data ETF | Franklin Genomic Advancements ETF | Franklin Intelligent Machines ETF | |||||||||||||
Post October capital losses | $ | — | $ | — | $ | — | $ | — | ||||||||
Late-year ordinary losses | $ | (8,346 | ) | $ | (1,550 | ) | $ | (70,594 | ) | $ | (3,084 | ) | ||||
Franklin Dynamic Municipal | Franklin Liberty Federal Tax-Free Bond ETF | Franklin Liberty High Yield ETF | Franklin Liberty International Aggregate Bond | |||||||||||||
Post October capital losses | $ | — | $ | — | $ | (683,473 | ) | $ | — | |||||||
Late-year ordinary losses | $ | — | $ | — | $ | — | $ | — | ||||||||
| Franklin Liberty Investment Grade Corporate ETF | Franklin Liberty Senior Loan ETF | Franklin Liberty Systematic Style | Franklin Liberty U.S. Core Bond ETF | |||||||||||||
Post October capital losses | $ | (1,223,159 | ) | $ | — | $ | — | $ | — | |||||||
Late-year ordinary losses | $ | — | $ | — | $ | — | $ | — | ||||||||
| franklintempleton.com | Annual Report | 227 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
4. Income Taxes (continued)
| Franklin Liberty U.S. Low Volatility ETF | Franklin Liberty U.S. Treasury Bond ETF | Franklin Liberty Ultra Short Bond ETF | ||||||||||||||
Post October capital losses | $ | — | $ | — | $ | — | ||||||||||
Late-year ordinary losses | $ | — | $ | — | $ | — | ||||||||||
The tax character of distributions paid during the years ended March 31, 2022 and 2021, were as follows:
| Franklin Disruptive Commerce ETF | ||||||||
| 2022 | 2021 | |||||||
| Distributions paid from: | ||||||||
Ordinary income | $ | 206,803 | $ | — | ||||
Long-Term Capital Gain | 15,751 | — | ||||||
|
| |||||||
Total Distributions paid | $ | 222,554 | $ | — | ||||
|
| |||||||
| Franklin Genomic Advancements ETF | ||||||||
| 2022 | 2021 | |||||||
Distributions paid from ordinary income | $ | 64,946 | $ | 10,356 | ||||
|
| |||||||
| Franklin Intelligent Machines ETF | ||||||||
| 2022 | 2021 | |||||||
| Distributions paid from: | ||||||||
Ordinary income | $ | 7,989 | $ | 432 | ||||
Long-Term Capital Gain | 15,515 | — | ||||||
|
| |||||||
Total Distributions paid | $ | 23,504 | $ | 432 | ||||
|
| |||||||
| Franklin Dynamic Municipal Bond ETF | ||||||||
| 2022 | 2021 | |||||||
Distributions paid from tax exempt income | $ | 1,204,849 | $ | 611,513 | ||||
|
| |||||||
| Franklin Liberty Federal Tax-Free Bond ETF | ||||||||
| 2022 | 2021 | |||||||
Distributions paid from tax exempt income | $ | 2,038,684 | $ | 1,352,931 | ||||
|
| |||||||
| Franklin Liberty High Yield Corporate ETF | ||||||||
| 2022 | 2021 | |||||||
| Distributions paid from: | ||||||||
Ordinary income | $ | 16,174,896 | $ | 11,465,310 | ||||
Long-Term Capital Gain | 1,180,471 | — | ||||||
|
| |||||||
Total Distributions paid | $ | 17,355,367 | $ | 11,465,310 | ||||
|
| |||||||
| 228 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
4. Income Taxes (continued)
| Franklin Liberty International Aggregate Bond ETF | ||||||||
| 2022 | 2021 | |||||||
| Distributions paid from: | ||||||||
Ordinary income | $ | 4,976,042 | $ | 951,028 | ||||
Long-Term Capital Gain | 454 | — | ||||||
|
| |||||||
Total Distributions paid | $ | 4,976,496 | $ | 951,028 | ||||
|
| |||||||
| Franklin Liberty Investment Grade Corporate ETF | ||||||||
| 2022 | 2021 | |||||||
| Distributions paid from: | ||||||||
Ordinary income | $ | 26,432,804 | $ | 34,905,788 | ||||
Long-Term Capital Gain | 2,047,397 | 3,256,030 | ||||||
|
| |||||||
Total Distributions paid | $ | 28,480,201 | $ | 38,161,818 | ||||
|
| |||||||
| Franklin Liberty Senior Loan ETF | ||||||||
| 2022 | 2021 | |||||||
Distributions paid from ordinary income | $ | 6,696,117 | $ | 2,065,367 | ||||
|
| |||||||
| Franklin Liberty Systematic Style Premia ETF | ||||||||
| 2022 | 2021 | |||||||
Distributions paid from ordinary income | $ | 697,021 | $ | 3,805,981 | ||||
|
| |||||||
| Franklin Liberty U.S. Core Bond ETF | ||||||||
| 2022 | 2021 | |||||||
| Distributions paid from: | ||||||||
Ordinary income | $ | 32,245,500 | $ | 48,744,964 | ||||
Long-Term Capital Gain | 3,456,383 | 2,339,610 | ||||||
|
| |||||||
Total Distributions paid | $ | 35,701,883 | $ | 51,084,574 | ||||
|
| |||||||
| Franklin Liberty U.S. Low Volatility ETF | ||||||||
| 2022 | 2021 | |||||||
Distributions paid from ordinary income | $ | 2,063,975 | $ | 1,913,171 | ||||
|
| |||||||
| Franklin Liberty U.S. Treasury Bond ETF | ||||||||
| 2022 | 2021 | |||||||
Distributions paid from ordinary income | $ | 6,661,686 | $ | 5,600,354 | ||||
|
| |||||||
| Franklin Liberty Ultra Short Bond ETF | ||||||||
| 2022 | 2021 | |||||||
Distributions paid from ordinary income | $ | 17,586 | $ | 34,619 | ||||
|
| |||||||
| franklintempleton.com | Annual Report | 229 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
4. Income Taxes (continued)
At March 31, 2022, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
| Franklin Disruptive Commerce ETF | Franklin Exponential Data ETF | Franklin Genomic Advancements ETF | Franklin Intelligent Machines ETF | |||||||||||||
Cost of investments | $ | 20,458,775 | $ | 3,293,429 | $ | 17,139,571 | $ | 9,187,863 | ||||||||
|
|
|
| |||||||||||||
Unrealized appreciation | $ | 583,526 | $ | 457,805 | $ | 349,949 | $ | 2,315,043 | ||||||||
Unrealized depreciation | (2,897,126 | ) | (315,144 | ) | (3,147,665 | ) | (217,120 | ) | ||||||||
|
|
|
| |||||||||||||
Net unrealized appreciation (depreciation) | $ | (2,313,600 | ) | $ | 142,661 | $ | (2,797,716 | ) | $ | 2,097,923 | ||||||
|
|
|
| |||||||||||||
Distributable earnings – undistributed ordinary income | $ | — | $ | — | $ | — | $ | — | ||||||||
|
| |||||||||||||||
| Franklin Dynamic Municipal Bond ETF | Franklin Liberty Federal Tax-Free Bond ETF | Franklin Liberty High Yield Corporate ETF | Franklin Liberty International Aggregate Bond ETF | |||||||||||||
Cost of investments | $ | 77,916,334 | $ | 109,776,991 | $ | 350,632,494 | $ | 193,867,770 | ||||||||
|
|
|
| |||||||||||||
Unrealized appreciation | $ | 202,797 | $ | 547,728 | $ | 3,916,236 | $ | 6,886,056 | ||||||||
Unrealized depreciation | (3,960,424 | ) | (7,004,957 | ) | (21,349,244 | ) | (25,615,668 | ) | ||||||||
|
|
|
| |||||||||||||
Net unrealized appreciation (depreciation) | $ | (3,757,627 | ) | $ | (6,457,229 | ) | $ | (17,433,008 | ) | $ | (18,729,612 | ) | ||||
|
|
|
| |||||||||||||
Distributable earnings – undistributed ordinary income | $ | — | $ | — | $ | 1,990,364 | $ | 7,635,056 | ||||||||
|
| |||||||||||||||
Distributable earnings – undistributed tax exempt income | $ | 161,704 | $ | 177,282 | ||||||||||||
|
| |||||||||||||||
| Franklin Liberty Investment Grade Corporate ETF | Franklin Liberty ETF | Franklin Liberty Systematic Style Premia ETF | Franklin Liberty U.S. Core Bond ETF | |||||||||||||
Cost of investments | $ | 1,038,817,266 | $ | 296,715,161 | $ | 35,170,202 | $ | 1,596,332,971 | ||||||||
|
|
|
| |||||||||||||
Unrealized appreciation | $ | 8,893,994 | $ | 405,603 | $ | 4,092,576 | $ | 10,456,472 | ||||||||
Unrealized depreciation | (88,705,322 | ) | (3,704,391 | ) | (4,359,679 | ) | (110,182,511 | ) | ||||||||
|
|
|
| |||||||||||||
Net unrealized appreciation (depreciation) | $ | (79,811,328 | ) | $ | (3,298,788 | ) | $ | (267,103 | ) | $ | (99,726,039 | ) | ||||
|
|
|
| |||||||||||||
Distributable earnings – undistributed ordinary income | $ | 733,202 | $ | 1,339,731 | $ | 2,835,434 | $ | 58,797 | ||||||||
|
| |||||||||||||||
| Franklin Liberty U.S. Low Volatility ETF | Franklin Liberty U.S. Treasury Bond ETF | Franklin Liberty Ultra Short Bond ETF | ||||||||||||||
Cost of investments | $ | 116,214,358 | $ | 436,164,401 | $ | 3,736,790 | ||||||||||
|
|
|
| |||||||||||||
Unrealized appreciation | $ | 21,007,063 | $ | 3,416,063 | $ | 2,950 | ||||||||||
Unrealized depreciation | (2,812,310 | ) | (39,357,062 | ) | (47,197 | ) | ||||||||||
|
|
|
| |||||||||||||
Net unrealized appreciation (depreciation) | $ | 18,194,753 | $ | (35,940,999 | ) | $ | (44,247 | ) | ||||||||
|
|
|
| |||||||||||||
Distributable earnings – undistributed ordinary income | $ | 187,469 | $ | 674,356 | $ | — | ||||||||||
|
|
|
| |||||||||||||
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of corporate actions, passive foreign investment company shares and wash sales.
| 230 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
5. Investment Transactions
Purchases and sales of investments (excluding short term securities and in-kind transactions, if any) for the year ended March 31, 2022, were as follows:
| Franklin Disruptive Commerce ETF | Franklin Data ETF | Franklin Genomic Advancements ETF | Franklin Intelligent Machines ETF | |||||||||||||
Purchases | $ | 30,191,020 | $ | 1,837,567 | $ | 13,144,305 | $ | 4,306,639 | ||||||||
Sales | $ | 29,677,695 | $ | 1,765,953 | $ | 13,054,910 | $ | 4,386,381 | ||||||||
Franklin Dynamic Municipal Bond ETF | Franklin Liberty Federal Tax-Free Bond ETF | Franklin Liberty High Yield Corporate ETF | Franklin Liberty International Aggregate Bond ETF | |||||||||||||
Purchases | $ | 53,237,192 | $ | 88,060,091 | $ | 152,552,722 | $ | 58,585,832 | ||||||||
Sales | $ | 15,693,695 | $ | 58,723,684 | $ | 151,976,078 | $ | 42,716,382 | ||||||||
| Franklin Liberty Investment Grade Corporate ETF | Franklin Liberty Senior Loan ETF | Franklin Liberty Systematic Style Premia ETF | Franklin Liberty U.S. Core Bond ETF | |||||||||||||
Purchases | $ | 385,080,364 | $ | 161,660,892 | $ | 79,683,502 | $ | 1,220,494,775 | ||||||||
Sales | $ | 367,704,518 | $ | 73,129,831 | $ | 82,686,050 | $ | 1,095,568,102 | ||||||||
| Franklin Liberty U.S. Low Volatility ETF | Franklin Liberty U.S. Treasury Bond ETF | Franklin Liberty Ultra Short Bond ETF | ||||||||||||||
Purchases | $ | 30,355,736 | $ | 75,602,837 | $ | 2,178,280 | ||||||||||
Sales | $ | 31,160,782 | $ | 56,670,487 | $ | 780,516 | ||||||||||
In-kind transactions associated with creation and redemptions for the year ended March 31, 2022, were as follows:
| Franklin Disruptive Commerce ETF | Franklin Data ETF | Franklin Genomic Advancements ETF | Franklin Intelligent Machines ETF | |||||||||||||
Cost of Securities Received | $ | — | $ | 1,268,729 | $ | 21,197,239 | $ | — | ||||||||
Value of Securities Delivereda | $ | 10,110,332 | $ | — | $ | 15,497,146 | $ | — | ||||||||
Franklin Dynamic Bond ETF | Franklin Liberty Federal Tax-Free Bond ETF | Franklin Liberty High Yield Corporate ETF | Franklin Liberty International Aggregate Bond ETF | |||||||||||||
Cost of Securities Received | $ | — | $ | — | $ | 113,055,338 | $ | — | ||||||||
Value of Securities Delivereda | $ | — | $ | 38,022,311 | $ | 108,170,176 | $ | — | ||||||||
| Franklin Liberty Investment Grade Corporate ETF | Franklin Liberty Senior Loan ETF | Franklin Liberty Systematic Style Premia ETF | Franklin Liberty U.S. Core Bond ETF | |||||||||||||
Cost of Securities Received | $ | 74,100,743 | $ | — | $ | — | $ | — | ||||||||
Value of Securities Delivereda | $ | 70,145,501 | $ | — | $ | — | $ | — | ||||||||
| Franklin Liberty U.S. Low Volatility ETF | Franklin Liberty U.S. Treasury Bond ETF | Franklin Liberty Ultra Short Bond ETF | ||||||||||||||
Cost of Securities Received | $ | 39,371,371 | $ | — | $ | — | ||||||||||
Value of Securities Delivereda | $ | 60,100,881 | $ | — | $ | — | ||||||||||
aRealized gains and losses from in-kind redemptions, as shown on the Statement of Operations, are not recognized by the Funds for tax purposes.
| franklintempleton.com | Annual Report | 231 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
6. Credit Risk
At March 31, 2022, Franklin Dynamic Municipal Bond ETF, Franklin Liberty Federal Tax-Free Bond ETF, Franklin Liberty High Yield Corporate ETF, Franklin Liberty Investment Grade Corporate ETF and Franklin Liberty Senior Loan ETF had 36.59%, 4.89%, 96.68%, 3.53% and 93.06%, respectively, of their portfolio invested in high yield securities, senior secured floating rate notes, or other securities rated below investment grade and unrated securities, if any. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.
7. Global Credit Facility
The Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2.675 billion (Global Credit Facility) which matures on February 3, 2023. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.
Under the terms of the Global Credit Facility, the Funds shall, in addition to interest charged on any borrowings made by the
Funds and other costs incurred by the Funds, pay its/their share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon their relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the reporting year ended March 31, 2022 the Funds did not use the Global Credit Facility.
8. Concentration of Risk
Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local, regional and global economic, political and social conditions,
which may result in greater market volatility. Political and financial uncertainty in many foreign regions may increase market
volatility and the economic risk of investing in foreign securities. In addition, certain foreign securities may not be as liquid as
U.S. securities.
9. Geopolitical Risk
On February 24, 2022, Russia engaged in military actions in the sovereign territory of Ukraine. The current political and financial uncertainty surrounding Russia and Ukraine may increase market volatility and the economic risk of investing in securities in these countries and may also cause uncertainty for the global economy and broader financial markets. The ultimate fall out and long-term impact form these events are not known. The Fund will continue to assess the impact on valuations and liquidity and will take any potential actions needed in accordance with procedures approved by the Board of Trustees.
10. Novel Coronavirus Pandemic
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Funds, their ability to buy and sell fund investments at appropriate valuations and their ability to achieve their investment objectives.
11. Credit Risk and Defaulted Securities
At March 31, 2022, Franklin Dynamic Municipal Bond ETF had 0.20% of its portfolio invested in high yield securities, or other securities rated below investment grade and unrated securities, if any. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.
| 232 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
11. Credit Risk and Defaulted Securities (continued)
The Fund may purchase the pre-default or defaulted debt of distressed companies. Distressed companies are financially troubled and could be or are already involved in financial restructuring or bankruptcy. Risks associated with purchasing these securities include the possibility that the bankruptcy or other restructuring process takes longer than expected, or that distributions in restructuring are less than anticipated, either or both of which may result in unfavorable consequences to the Fund. If it becomes probable that the income on debt securities, including those distressed companies, will not be collected, the Fund discontinues accruing income and recognizes an adjustment for uncollectible interest. At March 31, 2022, the aggregate long value of distressed company securities for which interest recognition has been discontinued representing 36.59% of the Fund’s net assets. For information as to specific securities, see the accompanying Schedule of Investments
12. Other Derivative Information
At March 31, 2022, the Funds’ investments in derivative contracts are reflected in the Statements of Assets and Liabilities as follows:
Asset Derivatives | Liability Derivatives | |||||||||||
| Statements of Assets and Liabilities Location | Fair Value | Statements of Assets and Liabilities Location | Fair Value | |||||||||
| Franklin Liberty International Aggregate Bond ETF | ||||||||||||
Foreign exchange contracts | Unrealized appreciation on OTC forward exchange contracts | $ | 5,190,265 | Unrealized appreciation on OTC forward exchange contracts | $ | 436,142 | ||||||
|
|
|
| |||||||||
| Franklin Liberty Investment Grade Corporate ETF | ||||||||||||
Equity contracts | Variation margin on futures contracts | $ | 870,886 | a | Variation margin on futures contracts | $ | — | |||||
|
|
|
| |||||||||
| Franklin Liberty Systematic Style ETF | ||||||||||||
Equity contracts | Swap contracts | $ | 878 | Swap contracts | $ | — | ||||||
Foreign exchange contracts | Unrealized appreciation on OTC forward exchange contracts | 678,673 | Unrealized appreciation on OTC forward exchange contracts | 405,191 | ||||||||
Equity contracts | Variation margin on futures contracts | 867,571 | a | Variation margin on futures contracts | 1,217,359 | a | ||||||
|
|
|
| |||||||||
Total | $ | 1,547,122 | $ | 1,622,550 | ||||||||
|
|
|
| |||||||||
| Franklin Liberty U.S. Core Bond ETF | ||||||||||||
Interest rate contracts | Swap contracts | $ | 31,603 | Swap contracts | $ | 49,631 | ||||||
Equity contracts | Variation margin on futures contracts | 399,726 | a | Variation margin on futures contracts | 283,744 | a | ||||||
|
|
|
| |||||||||
Totals | $ | 431,329 | $ | 333,375 | ||||||||
|
|
|
| |||||||||
aThis amount reflects the cumulative appreciation (depreciation) of futures contracts as reported in the Schedule of Investments. Only the variation margin receivable/payable at period end is separately reported within the Statements of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.
| franklintempleton.com | Annual Report | 233 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
12. Other Derivative Information (continued)
For the year ended March 31, 2022, the effect of derivative contracts in the Funds’ Statements of Operations was
as follows:
| Derivative Contracts Not Accounted for as Hedging Instruments | Statements of Operations Locations | Net Realized Gain (Loss) for the Period | Statements of Operations Locations | Net Change in Unrealized Appreciation (Depreciation) for the Period | ||||||||
| Franklin Liberty International Aggregate Bond ETF | ||||||||||||
Net realized gain (loss) from: | Net change in unrealized appreciation (depreciation) on: | |||||||||||
Foreign exchange contract | Forward exchange contracts | $ | 11,900,931 | Forward exchange contracts | $ | (2,266,963 | ) | |||||
|
|
|
| |||||||||
| Franklin Liberty Investment Grade Corporate ETF | ||||||||||||
Net realized gain (loss) from: | Net change in unrealized appreciation (depreciation) on: | |||||||||||
Interest rate contracts | Futures contracts | $ | 1,210,398 | Futures contracts | $ | 436,625 | ||||||
|
|
|
| |||||||||
| Franklin Liberty Systematic Style ETF | ||||||||||||
Net realized gain (loss) from: | Net change in unrealized appreciation (depreciation) on: | |||||||||||
Equity contracts | Swap contracts | $ | — | Swap contracts | $ | (868 | ) | |||||
Foreign exchange contracts | Forward exchange contracts | (300,831 | ) | Forward exchange contracts | 173,508 | |||||||
Index contracts | Futures contracts | 2,480,525 | Futures contracts | (143,048 | ) | |||||||
|
|
|
| |||||||||
Toral | $ | 2,179,694 | $ | 29,592 | ||||||||
|
|
|
| |||||||||
| Franklin Liberty U.S. Core Bond ETF | ||||||||||||
Net realized gain (loss) from: | Net change in unrealized appreciation (depreciation) on: | |||||||||||
Interest rate contracts | Swap contracts | $ | 112,950 | Swap contracts | $ | (18,028 | ) | |||||
Index contracts | Futures contracts | $ | (700,454 | ) | Futures contracts | $ | (234,420 | ) | ||||
|
|
|
| |||||||||
Totals | $ | (587,504 | ) | $ | (252,448 | ) | ||||||
|
|
|
| |||||||||
| 234 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
12. Other Derivative Information (continued)
For the year ended March 31, 2022, the average month end notional amount of futures and swaps contracts were as follows:
| Franklin Liberty International Aggregate Bond ETF | Franklin Liberty Investment Grade Corporate ETF | Franklin Liberty Systematic Style ETF | Franklin Liberty U.S. Core Bond ETF | |||||||||||||
Equity contracts | $ | — | $ | — | $ | 27,765,149 | $ | — | ||||||||
Credit Default contracts | $ | — | $ | — | $ | — | $ | 7,587,273 | ||||||||
Futures contracts | $ | — | $ | 52,136,796 | $ | 73,112,996 | $ | 53,587,445 | ||||||||
Forward exchange contracts | $ | 197,246,032 | $ | — | $ | 71,023,226 | $ | — | ||||||||
See Note 1(c) regarding derivative financial instruments.
At March 31, 2022, the Funds’ OTC derivative assets and liabilities are as follows:
| Gross and Net Amounts of Assets and Liabilities Presented in the Statements of Assets and Liabilities | ||||||||
| Assetsa | Liabilitiesa | |||||||
| Franklin Liberty International Aggregate Bond ETF | ||||||||
Foreign exchange contracts | $ | 5,190,265 | $ | 436,142 | ||||
|
| |||||||
| Franklin Liberty Systematic Style ETF | ||||||||
Equity contracts | $ | 878 | $ | — | ||||
Foreign exchange contracts | $ | 678,673 | $ | 405,191 | ||||
|
| |||||||
| Franklin Liberty U.S. Core Bond ETF | ||||||||
Interest rate contracts | $ | 31,603 | $ | 49,631 | ||||
|
| |||||||
aAbsent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statements of Assets and Liabilities.
At March 31, 2022, the Funds’ OTC derivative assets, which may be offset against the Funds’ OTC derivative liabilities and collateral received from the counterparty, are as follows:
| Amounts Not Offset in the Statements of Assets and Liabilities | ||||||||||||||||||||
| Gross and Net Amounts of Assets Presented in the Statements of Assets and Liabilities | Financial Instruments Available for Offset | Financial Instruments Collateral Receiveda | Cash Collateral Receiveda | Net Amount (Not less than zero) | ||||||||||||||||
| Franklin Liberty International Aggregate Bond ETF | ||||||||||||||||||||
| Counterparty | ||||||||||||||||||||
CITI | $ | 5,190,265 | $ | (436,142 | ) | $ | — | $ | — | $ | 4,754,123 | |||||||||
|
| |||||||||||||||||||
| Franklin Liberty Systematic Style ETF | ||||||||||||||||||||
| Counterparty | ||||||||||||||||||||
MSCO | $ | 678,673 | $ | (405,191 | ) | $ | — | $ | — | $ | 273,482 | |||||||||
MSCS | 878 | — | — | — | 878 | |||||||||||||||
|
| |||||||||||||||||||
Total | $ | 679,551 | $ | (405,191 | ) | $ | — | $ | — | $ | 274,360 | |||||||||
|
| |||||||||||||||||||
| franklintempleton.com | Annual Report | 235 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
12. Other Derivative Information (continued)
At March 31, 2022, the Funds’ OTC derivative liabilities, which may be offset against the Funds’ OTC derivative assets and collateral pledged to the counterparty, are as follows:
| Amounts Not Offset in the Statements of Assets and Liabilities | ||||||||||||||||||||
Gross and Net Amounts in the Statements of | Financial Instruments Available for Offset | Financial Instruments Collateral Pledgeda | Cash Collateral Pledgeda | Net Amount (Not less than zero) | ||||||||||||||||
| Franklin Liberty International Aggregate Bond ETF | ||||||||||||||||||||
| Counterparty | ||||||||||||||||||||
CITI | $ | 436,142 | $ | (436,142 | ) | $ | — | $ | — | $ | — | |||||||||
|
| |||||||||||||||||||
| Franklin Liberty Systematic Style ETF | ||||||||||||||||||||
| Counterparty | ||||||||||||||||||||
MSCO | $ | 405,191 | $ | (405,191 | ) | $ | — | $ | — | $ | — | |||||||||
|
| |||||||||||||||||||
aIn some instances, the collateral amounts disclosed in the table above were adjusted due to the requirement to limit collateral amounts to avoid the effect of overcollateralization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.
13. Fair Value Measurements
The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds’ own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds’ financial instruments and are summarized in the following fair value hierarchy:
| • | Level 1 – quoted prices in active markets for identical financial instruments |
| • | Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.) |
| • | Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of financial instruments) |
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
A summary of inputs used as of March 31, 2022, in valuing the Funds’ assets and liabilities carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Franklin Disruptive Commerce ETF | ||||||||||||||||
| Assets: | ||||||||||||||||
Investments in Securities:a |
| |||||||||||||||
Equity Investmentsb | $ | 18,145,175 | $ | — | $ | — | $ | 18,145,175 | ||||||||
|
| |||||||||||||||
| Franklin Exponential Data ETF | ||||||||||||||||
| Assets: | ||||||||||||||||
Investments in Securities:a |
| |||||||||||||||
Equity Investmentsb | $ | 3,435,499 | $ | — | $ | — | $ | 3,435,499 | ||||||||
Short-Term Investments | 591 | — | — | 591 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 3,436,090 | $ | — | $ | — | $ | 3,436,090 | ||||||||
|
| |||||||||||||||
| 236 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
13. Fair Value Measurements (continued)
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Franklin Genomic Advancements ETF | ||||||||||||||||
| Assets: | ||||||||||||||||
Investments in Securities:a |
| |||||||||||||||
Equity Investmentsb | $ | 14,341,855 | $ | — | $ | — | $ | 14,341,855 | ||||||||
|
| |||||||||||||||
| Franklin Intelligent Machines ETF | ||||||||||||||||
| Assets: | ||||||||||||||||
Investments in Securities:a |
| |||||||||||||||
Equity Investmentsb | $ | 11,285,786 | $ | — | $ | — | $ | 11,285,786 | ||||||||
|
| |||||||||||||||
| Franklin Dynamic Municipal Bond ETF | ||||||||||||||||
| Assets: | ||||||||||||||||
Investments in Securities:a |
| |||||||||||||||
Municipal Bonds | $ | — | $ | 74,158,707 | $ | — | $ | 74,158,707 | ||||||||
|
| |||||||||||||||
| Franklin Liberty Federal Tax-Free Bond | ||||||||||||||||
| Assets: | ||||||||||||||||
Investments in Securities:a |
| |||||||||||||||
Municipal Bonds | $ | — | $ | 103,319,762 | $ | — | $ | 103,319,762 | ||||||||
|
| |||||||||||||||
| Franklin Liberty High Yield Corporate ETF | ||||||||||||||||
| Assets: | ||||||||||||||||
Investments in Securities:a |
| |||||||||||||||
Corporate Bonds & Notes | $ | — | $ | 315,693,837 | $ | 240 | $ | 315,694,077 | ||||||||
Floating Rate Loans | — | 7,505,409 | — | 7,505,409 | ||||||||||||
Short-Term Investments | — | 10,000,000 | — | 10,000,000 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | — | $ | 333,199,246 | $ | 240 | $ | 333,199,486 | ||||||||
|
| |||||||||||||||
| Franklin Liberty International Aggregate Bond ETF | ||||||||||||||||
| Assets: | ||||||||||||||||
Investments in Securities:a |
| |||||||||||||||
Foreign Government & Agency Securities | $ | — | $ | 158,298,903 | $ | — | $ | 158,298,903 | ||||||||
Corporate Bonds & Notes | — | 11,319,255 | $ | — | 11,319,255 | |||||||||||
Short-Term Investments | — | 5,520,000 | $ | — | 5,520,000 | |||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | — | $ | 175,138,158 | $ | — | $ | 175,138,158 | ||||||||
|
| |||||||||||||||
Other Financial Instruments: | ||||||||||||||||
Forward Exchange Contracts | $ | — | $ | 5,190,265 | $ | — | $ | 5,190,265 | ||||||||
|
| |||||||||||||||
| Liabilities: | ||||||||||||||||
Other Financial Instruments: | ||||||||||||||||
Forward Exchange Contracts | $ | — | $ | 436,142 | $ | — | $ | 436,142 | ||||||||
|
| |||||||||||||||
| Franklin Liberty Investment Grade Corporate ETF | ||||||||||||||||
| Assets: | ||||||||||||||||
Investments in Securities:a |
| |||||||||||||||
Corporate Bonds & Notes | $ | — | $ | 937,627,149 | $ | — | $ | 937,627,149 | ||||||||
U.S. Government & Agency Securities | — | 1,938,789 | — | 1,938,789 | ||||||||||||
Short-Term Investments | — | 19,440,000 | — | 19,440,000 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | — | $ | 959,005,938 | $ | — | $ | 959,005,938 | ||||||||
|
| |||||||||||||||
Other Financial Instruments: | ||||||||||||||||
Futures Contracts | $ | 870,886 | $ | — | $ | — | $ | 870,886 | ||||||||
|
| |||||||||||||||
| franklintempleton.com | Annual Report | 237 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
13. Fair Value Measurements (continued)
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Franklin Liberty Senior Loan ETF | ||||||||||||||||
| Assets: | ||||||||||||||||
Investments in Securities:a |
| |||||||||||||||
Corporate Bonds & Notes | $ | — | $ | 6,198,213 | $ | — | $ | 6,198,213 | ||||||||
Senior Floating Rate Interests | — | 270,251,668 | — | 270,251,668 | ||||||||||||
Asset-Backed Securities | — | 1,966,492 | — | 1,966,492 | ||||||||||||
Short-Term Investments | — | 15,000,000 | — | 15,000,000 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | — | $ | 293,416,373 | $ | — | $ | 293,416,373 | ||||||||
|
| |||||||||||||||
| Franklin Liberty Systematic Style Premia ETF | ||||||||||||||||
| Assets: | ||||||||||||||||
Investments in Securities:a |
| |||||||||||||||
Equity Investmentsb | $ | 34,903,099 | $ | — | $ | — | $ | 34,903,099 | ||||||||
|
| |||||||||||||||
Other Financial Instruments: | ||||||||||||||||
Forward Exchange Contracts | $ | — | $ | 678,673 | $ | — | $ | 678,673 | ||||||||
Futures Contracts | 867,571 | — | — | 867,571 | ||||||||||||
Swap Contracts | — | 878 | — | 878 | ||||||||||||
|
| |||||||||||||||
Total Other Financial Instruments | $ | 867,571 | $ | 679,551 | $ | — | $ | 1,547,122 | ||||||||
|
| |||||||||||||||
| Liabilities: | ||||||||||||||||
Other Financial Instruments: | ||||||||||||||||
Forward Exchange Contracts | $ | — | $ | 405,191 | $ | — | $ | 405,191 | ||||||||
Futures Contracts | 1,217,359 | — | — | 1,217,359 | ||||||||||||
|
| |||||||||||||||
Total Other Financial Instruments | $ | 1,217,359 | $ | 405,191 | $ | — | $ | 1,622,550 | ||||||||
|
| |||||||||||||||
| Franklin Liberty U.S. Core Bond ETF | ||||||||||||||||
| Assets: | ||||||||||||||||
Investments in Securities:a |
| |||||||||||||||
Corporate Bonds & Notes | $ | — | $ | 391,863,564 | $ | — | $ | 391,863,564 | ||||||||
U.S. Government & Agency Securities | — | 622,540,745 | $ | — | 622,540,745 | |||||||||||
Municipal Bonds | — | 64,303,960 | $ | — | 64,303,960 | |||||||||||
Mortgage-Backed Securities | — | 278,217,466 | $ | — | 278,217,466 | |||||||||||
Foreign Government & Agency Securities | — | 50,039,763 | $ | — | 50,039,763 | |||||||||||
Asset-Backed Securities | — | 41,092,793 | $ | — | 41,092,793 | |||||||||||
Short-Term Investments | 48,548,641 | — | $ | — | 48,548,641 | |||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 48,548,641 | $ | 1,448,058,291 | $ | — | $ | 1,496,606,932 | ||||||||
|
| |||||||||||||||
Other Financial Instruments: | ||||||||||||||||
Swap Contracts | — | 31,603 | — | 31,603 | ||||||||||||
Futures Contracts | 399,726 | — | — | 399,726 | ||||||||||||
|
| |||||||||||||||
Total Other Financial Instruments | $ | 399,726 | $ | 31,603 | $ | — | $ | 431,329 | ||||||||
|
| |||||||||||||||
| Liabilities: | ||||||||||||||||
Other Financial Instruments: | ||||||||||||||||
Swap Contracts | — | 49,631 | — | 49,631 | ||||||||||||
Futures Contracts | 283,744 | — | — | 283,744 | ||||||||||||
|
| |||||||||||||||
Total Other Financial Instruments | $ | 283,744 | $ | 49,631 | $ | — | $ | 333,375 | ||||||||
|
| |||||||||||||||
| 238 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
13. Fair Value Measurements (continued)
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Franklin Liberty U.S. Low Volatility ETF | ||||||||||||||||
| Assets: | ||||||||||||||||
Investments in Securities:a |
| |||||||||||||||
Equity Investmentsb | $ | 133,749,111 | $ | — | $ | — | $ | 133,749,111 | ||||||||
Short-Term Investments | — | 660,000 | — | 660,000 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 133,749,111 | $ | 660,000 | $ | — | $ | 134,409,111 | ||||||||
|
| |||||||||||||||
| Franklin Liberty U.S. Treasury Bond ETF | ||||||||||||||||
| Assets: | ||||||||||||||||
Investments in Securities:a |
| |||||||||||||||
U.S. Government and Agency Securities | $ | — | $ | 389,423,090 | $ | — | $ | 389,423,090 | ||||||||
Mortgage-Backed Securities | — | 6,166,931 | — | 6,166,931 | ||||||||||||
Short-Term Investments | 4,633,381 | — | — | 4,633,381 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 4,633,381 | $ | 395,590,021 | $ | — | $ | 400,223,402 | ||||||||
|
| |||||||||||||||
| Franklin Liberty Ultra Short Bond ETF | ||||||||||||||||
| Assets: | ||||||||||||||||
Investments in Securities:a |
| |||||||||||||||
Corporate Bonds & Notes | $ | — | $ | 3,410,236 | $ | — | $ | 3,410,236 | ||||||||
Asset-Backed Securities | — | 201,298 | — | 201,298 | ||||||||||||
Short-Term Investments | 81,009 | — | — | 81,009 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 81,009 | $ | 3,611,534 | $ | — | $ | 3,692,543 | ||||||||
|
| |||||||||||||||
aFor detailed categories, see the accompanying Schedule of Investments.
bIncludes common and preferred stocks.
14. Investments in FLSP Holdings Corporation
Franklin Liberty Systematic Style Premia ETF, (the “Fund”), invests in certain financial instruments and commodities/or commodity-linked derivative investments. The FLSP Holdings Corporation is a Cayman Islands exempted company with limited liability, is a wholly-owned subsidiary of the Fund, and is able to invest in certain financial instruments and/or commodity-linked derivative investments consistent with the investment objective of the Fund. At March 31, 2022, the Franklin Liberty Systematic Style Premia ETF investment(s) FLSP Holdings Corporation is reflected in the Fund’s Consolidated Schedule of Investments. March 31, 2022, the net assets of the FLSP Holdings Corporation were $4,213,669, representing 7.6% of the Fund’s consolidated net assets. The Fund’s investment(s) in the FLSP Holdings Corporation is limited to 25% of consolidated assets.
15. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In January 2021, the FASB issued ASU No. 2021-01, with further amendments to Topic 848. The amendments in the ASUs provides optional temporary accounting recognition and financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021 and 2023. The ASUs are effective for certain reference rate-related contact modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of these ASUs will not have a material impact on the financial statements.
| franklintempleton.com | Annual Report | 239 | ||||||||
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS
16. Subsequent Events
The Funds have evaluated subsequent events through the issuance of these Financial Statements and determined that no events have occurred that require disclosure.
| Selected Portfolio | Currency | |||||
| FHLB | Federal Home Loan Bank Rate | AUD | Australian Dollar | |||
| NCI | National Median Cost of Funds Index | CAD | Canadian Dollar | |||
| PIK | Payment-In-Kind | DKK | Danish Krone | |||
| USD | Unified/Union School District | EUR | Euro | |||
| CAC | Cotation Assistée en Continu | HUF | Hungary | |||
| FRN | Floating Rate Note | IDR | Indonesian Rupiah | |||
| TBD | To be determined | JPY | Japanese Yen | |||
| REIT | Real Estate Investment Trust | MXN | Mexican Peso | |||
| ADR | American Depositary Receipt | USD | United States Dollar | |||
| MTA | Metropolitan Transit Authority | |||||
| CSCDA | California Statewide Communities Development Authority | |||||
| 240 | Annual Report | franklintempleton.com | ||||||||
FRANKLIN TEMPLETON ETF TRUST
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Templeton ETF Trust and Shareholders of Franklin Disruptive Commerce ETF, Franklin Exponential Data ETF, Franklin Genomic Advancements ETF, Franklin Intelligent Machines ETF, Franklin Dynamic Municipal Bond ETF, Franklin Municipal Green Bond ETF, Franklin Liberty High Yield Corporate ETF, Franklin Liberty International Aggregate Bond ETF, Franklin Liberty Investment Grade Corporate ETF, Franklin Liberty Senior Loan ETF, Franklin Liberty Systematic Style Premia ETF, Franklin Liberty U.S. Core Bond ETF, Franklin Liberty U.S. Low Volatility ETF, Franklin Liberty U.S. Treasury Bond ETF and Franklin Liberty Ultra Short Bond ETF
Opinions on the Financial Statements
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Franklin Disruptive Commerce ETF, Franklin Exponential Data ETF, Franklin Genomic Advancements ETF, Franklin Intelligent Machines ETF, Franklin Dynamic Municipal Bond ETF, Franklin Liberty Federal Tax-Free Bond ETF, Franklin Liberty High Yield Corporate ETF, Franklin Liberty International Aggregate Bond ETF, Franklin Liberty Investment Grade Corporate ETF, Franklin Liberty Senior Loan ETF, Franklin Liberty Systematic Style Premia ETF, Franklin Liberty U.S. Core Bond ETF, Franklin Liberty U.S. Low Volatility ETF, Franklin Liberty U.S. Treasury Bond ETF and Franklin Liberty Ultra Short Bond ETF (fifteen of the funds constituting Franklin Templeton ETF Trust, hereafter collectively referred to as the “Funds”) as of March 31, 2022, the related statements of operations and of changes in net assets for each of the periods indicated in the table below, including the related notes, and the financial highlights for each of the periods indicated in the table below (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of March 31, 2022, the results of each of their operations, the changes in each of their net assets, and each of the financial highlights for each of the periods indicated in the table below in conformity with accounting principles generally accepted in the United States of America.
| Franklin Templeton ETF Trust | Statement of Operations | Statement of Changes in Net Assets | Financial Highlights | |||
Franklin Disruptive Commerce ETF Franklin Genomic Advancements ETF Franklin Intelligent Machines ETF | For the year ended March 31, 2022 | For the years ended March 31, 2022 and 2021 | For the years ended March 31, 2022 and 2021, and the period February 25, 2020 (commencement of operations) through March 31, 2020 | |||
Franklin Exponential Data ETF | For the year ended March 31, 2022 | For the year ended March 31, 2022 and for the period January 12, 2021 (commencement of operations) through March 31, 2021 | For the year ended March 31, 2022 and the period January 12, 2021 (commencement of operations) through March 31, 2021 | |||
Franklin Dynamic Municipal Bond ETF Franklin Liberty Federal Tax-Free Bond ETF | For the year ended March 31, 2022 | For the years ended March 31, 2022 and 2021 | For the years ended March 31, 2022, 2021, 2020 and 2019, and the period August 31, 2017 (commencement of operations) through March 31, 2018 | |||
Franklin Liberty High Yield Corporate ETF Franklin Liberty International Aggregate Bond ETF Franklin Liberty Senior Loan ETF | For the year ended March 31, 2022 | For the years ended March 31, 2022 and 2021 | For the years ended March 31, 2022, 2021 and 2020, and the period from May 30, 2018 (commencement of operations) through March 31, 2019 | |||
Franklin Liberty Investment Grade Corporate ETF Franklin Liberty U.S. Low Volatility ETF | For the year ended March 31, 2022 | For the years ended March 31, 2022 and 2021 | For each of the five years in the period ended March 31, 2022 | |||
Franklin Liberty Systematic Style Premia ETF | For the year ended March 31, 2022 | For the years ended March 31, 2022 and 2021 | For the years ended March 31, 2022 and 2021, and the period December 18, 2019 (commencement of operations) through March 31, 2020 | |||
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FRANKLIN TEMPLETON ETF TRUST
Report of Independent Registered Public Accounting Firm (continued)
| Franklin Templeton ETF Trust | Statement of Operations | Statement of Changes in Net Assets | Financial Highlights | |||
Franklin Liberty U.S. Core Bond ETF | For the year ended March 31, 2022 | For the years ended March 31, 2022 and 2021 | For the years ended March 31, 2022 and 2021, and the period September 17, 2019 (commencement of operations) through March 31, 2020 | |||
Franklin Liberty U.S. Treasury Bond ETF | For the year ended March 31, 2022 | For the year ended March 31, 2022 and for the period June 9, 2020 (commencement of operations) through March 31, 2021 | For the year ended March 31, 2022 and the period June 9, 2020 (commencement of operations) through March 31, 2021 | |||
Franklin Liberty Ultra Short Bond ETF | For the year ended March 31, 2022 | For the year ended March 31, 2022 and for the period July 14, 2020 (commencement of operations) through March 31, 2021 | For the year ended March 31, 2022 and the period July 14, 2020 (commencement of operations) through March 31, 2021 | |||
Basis for Opinions
These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of March 31, 2022 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.
San Francisco, California
May 19, 2022
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
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By mid-February, tax information related to a shareholder’s proportionate share of distributions paid during the preceding calendar year will be received, if applicable. Please also refer to www.franklintempleton.com for per share tax information related to any distributions paid during the preceding calendar year. Shareholders are advised to consult with their tax advisors for further information on the treatment of these amounts on their tax returns.
The following tax information for the Funds is required to be furnished to shareholders with respect to income earned and distributions paid during their fiscal year.
The Funds below hereby report the following amounts, or if subsequently determined to be different, the maximum allowable amounts, for the fiscal year ended March 31, 2022:
| Pursuant to: | Franklin Disruptive Commerce ETF | Franklin Exponential Data ETF | Franklin Genomic Advancements ETF | Franklin Intelligent Machines ETF | ||||||||||||||||
Long-Term Capital Gain Dividends | §852(b)(3)(C) | $ | 15,751 | $ | — | $ | — | $ | 15,515 | |||||||||||
Dividends Received Deduction (DRD) | §854(b)(1)(A) | $ | 14,777 | $ | — | $ | 13,435 | $ | 7,989 | |||||||||||
Qualified Dividend Income (QDI) | §854(b)(1)(B) | $ | 20,215 | $ | — | $ | 25,773 | $ | 7,989 | |||||||||||
Short-Term Capital Gain Dividends | §871(k)(2)(C) | $ | 206,803 | $ | — | $ | — | $ | 7,989 | |||||||||||
| Pursuant to: | Franklin Dynamic Municipal Bond ETF | Franklin Liberty Federal Tax-Free Bond ETF | Franklin Liberty High Yield Corporate ETF | Franklin Liberty International Aggregate Bond ETF | ||||||||||||||||
Long-Term Capital Gain Dividends | §852(b)(3)(C) | $ | — | $ | — | $ | 1,180,471 | $ | 454 | |||||||||||
Exempt-Interest Dividends | §852(b)(5)(A) | $ | 1,204,849 | $ | 2,038,684 | $ | — | $ | — | |||||||||||
Dividends Received Deduction (DRD) | §854(b)(1)(A) | $ | — | $ | — | $ | — | $ | — | |||||||||||
Interest-Related Dividends | §871(k)(1)(C) | $ | — | $ | — | $ | 12,999,638 | $ | — | |||||||||||
Short-Term Capital Gain Dividends | §871(k)(2)(C) | $ | — | $ | — | $ | — | $ | 1,152,126 | |||||||||||
| Pursuant to: | Franklin Liberty Investment Grade Corporate ETF | Franklin Liberty Senior Loan ETF | Franklin Liberty Systematic Style Premia ETF | Franklin Liberty U.S. Core Bond ETF | ||||||||||||||||
Long-Term Capital Gain Dividends | §852(b)(3)(C) | $ | 2,047,397 | $ | — | $ | — | $ | 3,456,383 | |||||||||||
Dividends Received Deduction (DRD) | §854(b)(1)(A) | $ | — | $ | — | $ | — | $ | — | |||||||||||
Qualified Dividend Income (QDI) | §854(b)(1)(B) | $ | — | $ | — | $ | 671,753 | $ | — | |||||||||||
Interest-Related Dividends | §871(k)(1)(C) | $ | 17,896,799 | $ | 6,085,446 | $ | — | $ | 26,275,024 | |||||||||||
| Pursuant to: | Franklin Liberty U.S. Low Volatility ETF | Franklin Liberty U.S. Treasury Bond ETF | Franklin Liberty Ultra Short Bond ETF | |||||||||||||
Dividends Received Deduction (DRD) | §854(b)(1)(A) | $ | 2,063,975 | $ | — | $ | — | |||||||||
Qualified Dividend Income (QDI) | §854(b)(1)(B) | $ | 2,063,975 | $ | — | $ | — | |||||||||
Interest-Related Dividends | §871(k)(1)(C) | $ | — | $ | 6,661,686 | $ | 17,586 | |||||||||
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Tax Information (unaudited) (continued)
Under Section 853 of the Internal Revenue Code, the Funds below intend to elect to pass through to their shareholders the following amounts, or amounts as finally determined, of foreign taxes paid and foreign source income earned by the Funds during the fiscal year ended March 31, 2022:
| Franklin Disruptive Commerce ETF | Franklin Exponential Data ETF | Franklin Genomic Advancements ETF | Franklin Intelligent Machines ETF | |||||||||||||
Foreign Taxes Paid | $ | — | $ | — | $ | — | $ | — | ||||||||
Foreign Source Income | $ | — | $ | — | $ | — | $ | — | ||||||||
| Franklin Dynamic Municipal Bond ETF | Franklin Liberty Federal Tax-Free Bond ETF | Franklin Liberty High Yield Corporate ETF | Franklin Liberty International Aggregate Bond ETF | |||||||||||||
Foreign Taxes Paid | $ | — | $ | — | $ | — | $ | 1,954 | ||||||||
Foreign Source Income | $ | — | $ | — | $ | — | $ | 2,190,856 | ||||||||
| Franklin Liberty Investment Grade Corporate ETF | Franklin Liberty Senior Loan ETF | Franklin Liberty Systematic Style Premia ETF | Franklin Liberty U.S. Core Bond ETF | |||||||||||||
Foreign Taxes Paid | $ | — | $ | — | $ | — | $ | — | ||||||||
Foreign Source Income | $ | — | $ | — | $ | — | $ | — | ||||||||
| Franklin Liberty U.S. Low Volatility ETF | Franklin Liberty U.S. Treasury Bond ETF | Franklin Liberty Ultra Short Bond ETF | ||||||||||
Foreign Taxes Paid | $ | — | $ | — | $ | — | ||||||
Foreign Source Income | $ | — | $ | — | $ | — | ||||||
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FRANKLIN TEMPLETON ETF TRUST
The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of U.S. registered portfolios overseen in the Franklin Templeton/Legg Mason fund complex, are shown below. Generally, each board member serves until that person’s successor is elected and qualified.
Independent Board Members
| Name, Year of Birth and Address | Position | Length of Time Served | Number of Portfolios in Fund Complex Overseen by Board Member* | Other Directorships Held During at Least the Past 5 Years | ||||
| Rohit Bhagat (1964) One Franklin Parkway San Mateo, CA 94403-1906 | Lead Independent Trustee | Since 2016 | 61 | AssetMark Financial Holdings, Inc. (investment solutions) (2018-present) and PhonePe (2020-present) (payment and financial services); formerly, Axis Bank (financial) (2013-2021), FlipKart Limited (2019-2020) (eCommerce company); CapFloat Financial Services Pvt., Ltd. (non-banking finance company) (2018) and Zentific Investment Management (hedge fund) (2015-2018). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Managing Member, Mukt Capital, LLC (private investment firm) (2014-present); Advisor, Optimal Asset Management (investment technology and advisory services company) (2015-present); Chief Executive Officer and Director, FinTech Evolution Acquisition (eCommerce company) (February 2021-present); and formerly, Chairman, Asia Pacific, BlackRock (2009-2012); Global Chief Operating Officer, Barclays Global Investors (investment management) (2005-2009); and Senior Partner, The Boston Consulting Group (management consulting) (1992-2005). | ||||||||
| Deborah D. McWhinney (1955) One Franklin Parkway San Mateo, CA 94403-1906 | Trustee | Since 2020 | 61 | S&P Global, Inc. (financial information services) (February 2022), Borg Warner (automotive) (2018-present), LegalShield (consumer services) (2020-present); and formerly, IHS Markit (information services) (2015-2022), Fluor Corporation (construction and engineering) (2014-2020) and Focus Financial Partner, LLC (financial services) (2018-2020). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director of various companies; and formerly, Board Member, Lloyds Banking Group (2015-2018) (financial institution) and Fresenius Medical Group (2016-2018) (healthcare); Chief Executive Officer (2013-2014) and Chief Operating Officer (2011-2013), CitiGroup Global Enterprise Payments (financial services); and President, Citi’s Personal Banking and Wealth Management (2009-2011). | ||||||||
| Anantha K. Pradeep (1963) One Franklin Parkway San Mateo, CA 94403-1906 | Trustee | Since 2016 | 61 | None | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Chief Executive Officer, Smilable, Inc. (technology company) (2014-present); Chief Executive Officer, MachineVantage (technology company) (2018-present); Founder and Managing Partner, Consult Meridian, LLC (consulting company) (2009-present); and formerly, Founder, BoardVantage (board portal solutions provider delivering paperless process for boards and leadership) (2000-2002). | ||||||||
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Interested Board Members and Officers
| Name, Year of Birth and Address | Position | Length of Time Served | Number of Portfolios in Fund Complex Overseen by Board Member* | Other Directorships Held During at Least the Past 5 Years | ||||
| **Jennifer M. Johnson (1964) One Franklin Parkway San Mateo, CA 94403-1906 | Trustee and Chairperson of the Board | Since 2016 | 72 | None | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Chief Executive Officer, President and Director, Franklin Resources, Inc.; officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of certain funds in the Franklin Templeton/Legg Mason fund complex; and formerly, Chief Operating Officer and Executive Vice President, Franklin Resources, Inc. (1994-2015); Executive Vice President of Operations and Technology, Franklin Resources, Inc. (2005-2010); and Senior Vice President, Franklin Resources, Inc. (2003-2005). | ||||||||
| Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906 | Vice President | Since 2016 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Deputy General Counsel, Franklin Templeton; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of certain funds in the Franklin Templeton/Legg Mason fund complex. | ||||||||
| Steven J. Gray (1955) One Franklin Parkway San Mateo, CA 94403-1906 | Vice President | Since 2016 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Senior Associate General Counsel, Franklin Templeton; Assistant Secretary, Franklin Distributors, LLC; and officer of certain funds in the Franklin Templeton/Legg Mason fund complex. | ||||||||
Matthew T. Hinkle (1971) One Franklin Parkway | Chief Executive Officer – Finance and Administration | Since 2017 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Senior Vice President, Franklin Templeton Services, LLC; officer of certain funds in the Franklin Templeton/Legg Mason fund complex; and formerly, Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton (2009-2017). | ||||||||
Fred Jensen (1963) 620 Eighth Avenue, 47th Floor New York, NY 10018 | Chief Compliance Officer | Since July 2021 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director – Global Compliance of Franklin Templeton; Managing Director of Legg Mason & Co.; Director of Compliance, Legg Mason Office of the Chief Compliance Officer; Chief Compliance Officer, Franklin Advisory Services, LLC; Compliance Officer, Franklin Advisers, Inc.; officer of certain funds in the Franklin Templeton/Legg Mason fund complex; formerly, Chief Compliance Officer of Legg Mason Global Asset Allocation; Chief Compliance Officer, Legg Mason Private Portfolio; Chief Compliance Officer to The Reserves Funds (investment adviser, funds and broker-dealer) and Ambac Financial Group (investment adviser, funds and broker-dealer). | ||||||||
Susan Kerr (1949) New York, NY 10018 | Vice President – AML Compliance | Since September 2021 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Senior Compliance Analyst, Franklin Templeton; Chief Anti-Money Laundering Compliance Officer, Legg Mason & Co., or its affiliates; Anti Money Laundering Compliance Officer; Senior Compliance Officer, LMIS; and officer of certain funds in the Franklin Templeton/Legg Mason fund complex | ||||||||
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Interested Board Members and Officers (continued)
| Name, Year of Birth and Address | Position | Length of Time Served | Number of Portfolios in Fund Complex Overseen by Board Member* | Other Directorships Held During at Least the Past 5 Years | ||||
| Patrick O’Connor (1967) One Franklin Parkway San Mateo, CA 94403-1906 | President and Chief Executive Officer – Investment Management | Since 2016 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| President and Chief Investment Officer, Franklin Advisory Services, LLC; Senior Vice President, Franklin Advisers, Inc.; and officer of certain funds in the Franklin Templeton/Legg Mason fund complex. | ||||||||
Vivek Pai (1970) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 | Treasurer, Chief Financial Officer and Chief Accounting Officer | Since 2019 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Treasurer, U.S. Fund Administration & Reporting and officer of certain funds in the Franklin Templeton/Legg Mason fund complex. | ||||||||
| Navid J. Tofigh (1972) One Franklin Parkway San Mateo, CA 94403-1906 | Vice President and Secretary | Since 2015 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Senior Associate General Counsel, Franklin Templeton; and officer of certain funds in the Franklin Templeton/Legg Mason fund complex. | ||||||||
| Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 | Vice President | Since 2016 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Senior Associate General Counsel, Franklin Templeton; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of certain funds in the Franklin Templeton/Legg Mason fund complex. | ||||||||
*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton/Legg Mason fund complex. These portfolios have a common investment manager or affiliated investment managers.
**Jennifer M. Johnson is considered to be an interested person of the Fund under the federal securities laws due to her position as an officer and director of Franklin Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor.
Note 1: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.
The Sarbanes-Oxley Act of 2002 and Rules adopted by the Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there is at least one such financial expert on the Audit Committee and has designated Rohit Bhagat as its audit committee financial expert. The Board believes that Mr. Bhagat qualifies as such an expert in view of his extensive business background and experience, including extensive experience in the asset management and financial services industries. Mr. Bhagat has been a Member and Chairman of the Fund’s Audit Committee since 2016. As a result of such background and experience, the Board believes that Mr. Bhagat has acquired an understanding of generally accepted accounting principles and financial statements, the general application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting and an understanding of audit committee functions. Mr. Bhagat is an independent Board member as that term is defined under the relevant Securities and Exchange Commission Rules and Releases.
The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request. Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.
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Board Approval of Investment Management Agreements
FRANKLIN TEMPLETON ETF TRUST
Franklin Disruptive Commerce ETF
Franklin Exponential Data ETF
Franklin Genomic Advancements ETF
Franklin Intelligent Machines ETF
Franklin Liberty High Yield Corporate ETF
Franklin Liberty International Aggregate Bond ETF
Franklin Liberty Investment Grade Corporate ETF
Franklin Liberty Senior Loan ETF
Franklin Liberty Systematic Style Premia ETF
Franklin Liberty U.S. Core Bond ETF
Franklin Liberty U.S. Low Volatility ETF
Franklin Liberty U.S. Treasury Bond ETF
Franklin Liberty Ultra Short Bond ETF
(each a Fund)
At a meeting held on September 8, 2021 (Meeting), the Board of Trustees (Board) of Franklin Templeton ETF Trust (Trust), including a majority of the trustees who are not “interested persons” as defined in the Investment Company Act of 1940 (Independent Trustees), reviewed and approved an amended and restated investment management agreement to adopt a unified management fee (Unified Fee) between Franklin Advisers, Inc. (FAI) and the Trust, on behalf of each Fund (except the Franklin Liberty International Aggregate Bond ETF), and an amended and restated investment management agreement to adopt a Unified Fee between Franklin Templeton Investment Management Limited (FTIML) and the Trust, on behalf of the Franklin Liberty International Aggregate Bond ETF (each an Amended Management Agreement) for an initial two-year period effective October 1, 2021. The Independent Trustees received advice from and met separately with Independent Trustee counsel in considering whether to approve each Amended Management Agreement. Although the Amended Management Agreements for the Funds were considered at the same Board meeting, the Board considered the information provided to it about the Funds together and with respect to each Fund separately as the Board deemed appropriate. FAI and FTIML are each referred to herein as a Manager.
In considering the approval of each Amended Management Agreement, the Board reviewed and considered information provided by each Manager at the Meeting and throughout the year at meetings of the Board and its committees, including a number of special meetings during the pandemic to enhance Board oversight of Fund-related matters during this period.
The Board also reviewed and considered all of the factors it deemed relevant in approving each Amended Management Agreement, including, but not limited to: (i) the nature, extent and quality of the services to be provided by each Manager; and (ii) the costs of the services to be provided by each Manager and its affiliates from the relationship with each Fund. The Board further reviewed and considered the form of Amended Management Agreement and the terms of each Amended Management Agreement, which were explained at the Meeting, noting that, with the exception of the proposed Unified Fee structure, the form of Amended Management Agreement was substantially the same as the current investment management agreements for the Funds, and that the Unified Fee is consistent with the Unified Fee structure currently in place for passively managed series of the Trust. The Board noted management’s reasons for proposing the approval of each Amended Management Agreement, including that the Unitary Fee would help promote sales of the Funds and that many competitor funds already have implemented a unitary fee structure. The Board noted management’s explanation that it was relying on and had complied with the conditions of prior no-action relief that had been granted to another fund complex and investment adviser confirming that the Securities Exchange Commission would not recommend enforcement action if an investment advisory agreement was amended without a shareholder vote to establish a unified fee.
In approving each Amended Management Agreement, the Board, including a majority of the Independent Trustees, determined that the terms of the Amended Management Agreement are fair and reasonable and that such Amended Management Agreement is in the best interests of the applicable Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s determination.
Nature, Extent and Quality of Services
The Board reviewed and considered information regarding the nature, extent and quality of investment management services to be provided by each Manager and its affiliates to each Fund and its shareholders. This information included, among other things, management’s representation that each Amended Management Agreement will not reduce or modify in any way the nature, extent and quality of the services currently provided to each Fund. Following consideration of such information, the Board was satisfied with the nature, extent and quality of services to be provided by each Manager and its affiliates to each Fund and its shareholders under the Fund’s Amended Management Agreement.
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SHAREHOLDER INFORMATION
Fund Performance
The Board noted that each of the Franklin Exponential Data ETF, Franklin Liberty U.S. Treasury Bond ETF and Franklin Liberty Ultra Short Bond ETF had less than two years of performance and thus, the performance of these Funds was not a material factor in considering the approval of each Fund’s Amended Management Agreement. The Board further noted its review and consideration of and conclusions made regarding the performance results of each other Fund in connection with the May 2021 annual contract renewal (Annual Contract Renewal) of the Fund’s investment management agreement and at regular Board meetings throughout the year.
Comparative Fees and Expenses
The Board reviewed and considered information regarding the proposed Unified Fee. In particular, the Board noted management’s representation that changing to the Unified Fee would not result in any increase to a Manager’s management fee. The Board also noted management’s representation that each Fund’s net operating expenses under the Unified Fee are expected to be the same as such Fund’s current net operating expenses after expense waivers and reimbursements because, under the Unified Fee, the Manager’s obligation under the current fee waiver and expense reimbursement agreements to cap ordinary expenses at the same rate as the Fund’s management fee would become part of the Amended Management Agreement. The Board considered that pursuant to each Fund’s Amended Management Agreement, the Manager shall (1) reimburse the Fund for all of its acquired fund fees and expenses (if any), and, with respect to Franklin Liberty Systematic Style Premia ETF, reimburse all expenses related to the Fund’s investment in a Cayman Islands-based company that is wholly-owned by the Fund, and (2) pay all of the ordinary operating expenses of the Fund, except for (i) the Fund’s investment management fee, (ii) payments under the Fund’s Rule 12b-1 plan (if any), (iii) brokerage expenses (including any costs incidental to transactions in portfolio securities or instruments), (iv) taxes, (v) interest (including borrowing costs and dividend expenses on securities sold short and overdraft charges), (vi) litigation expenses (including litigation to which the Trust or a Fund may be a party and indemnification of the Trustees and officers with respect thereto), and (vii) other non-routine or extraordinary expenses (such arrangement, the Unified Fee). The Board concluded that the proposed Unified Fee for each Fund is reasonable.
Management Profitability and Economies of Scale
The Board noted management’s representation that changing to the Unified Fee would not result in any increase to a Manager’s management fee. The Board determined that its conclusions regarding profitability and economies of scale reached in connection with the Annual Contract Renewal of the investment management agreement with each Manager had not changed as a result of the proposal to approve each Amended Management Agreement.
Conclusion
Based on its review, consideration and evaluation of all factors it believed relevant, including the above-described factors and conclusions, the Board unanimously approved each Amended Management Agreement for an initial two-year period.
Proxy Voting Policies and Procedures
The Trust’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Trust’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.
Quarterly Statement of Investments
The Trust files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year as an exhibit to its report on Form N-PORT. Shareholders may view the filed Form N-PORT by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.
Premium/Discount Information
Information about the differences between the daily market price on the secondary market for the shares of each Fund and each Fund’s net asset value may be found on each Fund’s website at franklintempleton.com.
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Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other information; please read it carefully before investing.
To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.
 | Annual Report Franklin Templeton ETF Trust | |||||
| Investment Manager | Distributor | Investor Services | ||||
Franklin Advisers, Inc.
Franklin Templeton Investment Management Limited | Franklin Distributors, LLC (800) DIAL BEN®/342-5236 franklintempleton.com | Transfer Agent State Street Bank and 1 Heritage Drive North Quincy, MA 02171 | ||||
| © 2022 Franklin Templeton Investments. All rights reserved. | ETF2 A 05/22 | |||||
| Item 2. | Code of Ethics. |
(a) The Registrant has adopted a code of ethics that applies to its principal executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 13(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer.
| Item 3. | Audit Committee Financial Expert. |
(a)(1) The Registrant has an audit committee financial expert serving on its audit committee.
(2) The audit committee financial expert is Rohit Baghat and he is “independent” as defined under the relevant Securities and Exchange Commission Rules and Releases.
| Item 4. | Principal Accountant Fees and Services. |
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or for services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements were $832,900 for the fiscal year ended March 31, 2021 and $942,524 for the fiscal year ended March 31, 2020.
(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of Item 4.
There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that are reasonably related to the performance of the audit of their financial statements.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant for tax compliance, tax advice and tax planning.
The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant for tax compliance, tax advice and tax planning were $170,219 for the fiscal year ended March 31, 2021 and $232,351 for the fiscal year ended March 31, 2020. The services for which these fees were paid included tax compliance services related to year-end, and professional fees in connection with tax treatment of equipment lease transactions.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant not reported in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended March 31, 2021 and $1,038 for the fiscal year ended March 31, 2020. The services for which these fees were paid included review of materials provided to the fund Board in connection with the investment management contract renewal process.
The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant not reported in paragraphs (a)-(c) of Item 4 were $31,861 for the fiscal year ended March 31, 2021 and $208,155 for the fiscal year ended March 31, 2020. The services for which these fees were paid included compliance examination for Investment Advisor Act rule 204-2 and 206(4)-2, the issuance of an Auditor’s Certificate for South Korean regulatory shareholders disclosures, and assets under management certification.
(e) (1) The registrant’s audit committee is directly responsible for approving the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to the Fund by the auditors;
(iii) pre-approval of all non-audit related services to be provided to the registrant by the auditors to the registrant’s investment adviser or to any entity that controls, is controlled by or is under common control with the registrant’s investment adviser and that provides ongoing services to the registrant where the non-audit services relate directly to the operations or financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or appropriate, as an alternative to committee pre-approval of services to be provided by the auditors, as required by paragraphs (ii) and (iii) above, of policies and procedures to permit such services to be pre-approved by other means, such as through establishment of guidelines or by action of a designated member or members of the committee; provided the policies and procedures are detailed as to the particular service and the committee is informed of each service and such policies and procedures do not include delegation of audit committee responsibilities, as contemplated under the Securities Exchange Act of 1934, to management; subject, in the case of (ii) through (iv), to any waivers, exceptions or exemptions that may be available under applicable law or rules.
(e) (2) None of the services provided to the registrant described in paragraphs (b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for services rendered by the principal accountant to the registrant and the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant were $202,080 for the fiscal year ended March 31, 2021 and $441,544 for the fiscal year ended March 31, 2020.
(h) The registrant’s audit committee of the board has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
| Item 5. | Audit Committee of Listed Registrants. N/A |
| Item 6. | Schedule of Investments. N/A |
| Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. N/A |
| Item 8. | Portfolio Managers of Closed-End Management Investment Companies. N/A |
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. N/A |
| Item 10. | Submission of Matters to a Vote of Security Holders. |
There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees that would require disclosure herein.
| Item 11. | Controls and Procedures. |
(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding
required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.
(b) Changes in Internal Controls. There have been no changes in the Registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect the internal control over financial reporting.
| Item 12. | Disclosure of Securities Lending Activities for Closed-End Management Investment Company. N/A |
| Item 13. | Exhibits. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| FRANKLIN TEMPLETON ETF TRUST | ||
| By | /s/ Matthew T. Hinkle | |
| Matthew T. Hinkle | ||
| Chief Executive Officer – Finance and Administration | ||
| Date | June 17, 2022 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By | /s/ Matthew T. Hinkle | |
| Matthew T. Hinkle | ||
| Chief Executive Officer – Finance and Administration | ||
| Date | June 17, 2022 | |
| By | /s/ Vivek Pai | |
| Vivek Pai | ||
| Chief Financial Officer and Chief Accounting Officer | ||
| Date | June 17, 2022 | |