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As Of Filer Filing For·On·As Docs:Size Issuer Agent 12/01/17 Franklin Templeton ETF Trust N-CSRS 9/30/17 4:5.3M Donnelley … Solutions/FA → Franklin Dynamic Municipal Bond ETF ⇒ FLMI → Franklin Emerging Market Core Dividend Tilt Index ETF ⇒ DIEM → Franklin International Core Dividend Tilt Index ETF ⇒ DIVI → Franklin Investment Grade Corporate ETF ⇒ FLCO → Franklin Liberty International Opportunities ETF ⇒ FLIO → Franklin Municipal Green Bond ETF ⇒ FLMB → Franklin U.S. Core Dividend Tilt Index ETF ⇒ UDIV → Franklin U.S. Equity Index ETF ⇒ USPX → Franklin U.S. Large Cap Multifactor Index ETF ⇒ FLQL → Franklin U.S. Low Volatility ETF ⇒ FLLV → Franklin U.S. Mid Cap Multifactor Index ETF ⇒ FLQM → Franklin U.S. Small Cap Multifactor Index ETF ⇒ FLQS |
Document/Exhibit Description Pages Size 1: N-CSRS Franklin Templeton Etf Trust HTML 2.74M 4: EX-99.906CE 906 Certifications HTML 7K 3: EX-99.CERT 302 Certifications HTML 12K 2: EX-99.CODE Code of Ethics HTML 43K
FRANKLIN TEMPLETON ETF TRUST |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSRS
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)
Craig S. Tyle, 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: 9/30/17
Item 1. Reports to Stockholders.
Franklin Templeton
ETF Trust
Semiannual Report
Franklin LibertyQ Emerging Markets ETF |
Franklin LibertyQ Global Dividend ETF |
Franklin LibertyQ Global Equity ETF |
Franklin LibertyQ International Equity Hedged ETF |
FRANKLIN TEMPLETON INVESTMENTS
Gain From Our Perspective®
At Franklin Templeton Investments, we’re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we’re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world’s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe.
Visit libertyshares.com for fund updates and documents.
Not FDIC Insured | | | May Lose Value | | | No Bank Guarantee |
libertyshares.com | Not part of the semiannual report | 1 |
SEMIANNUAL REPORT
The global economy generally expanded during the six-month period under review. In this environment, global developed and emerging market stocks rose, as measured by the MSCI All Country World Index. Global markets were aided by generally upbeat economic data across regions, Emmanuel Macron’s election as France’s president, encouraging corporate earnings reports, and the tax reform plan under the Trump administration toward period-end.
However, investors expressed concerns about political uncertainty in the US and the European Union, geopolitical tensions in the Korean peninsula and other regions, global oil oversupply despite a pact by major oil-producing countries to extend production cuts, and hawkish comments from key central bankers around the world.
The US economy strengthened in 2017’s second and third quarters, largely due to growth in consumer spending, business investment, exports and federal government spending. The unemployment rate decreased from 4.5% in March 2017 to 4.2% at period-end.1 Annual inflation, as measured by the Consumer Price Index, decreased from 2.4% in March 2017 to 2.2% at period-end.1 At its June meeting, the US Federal Reserve (Fed) raised its target range for the federal funds rate by 0.25% to 1.00%–1.25%, amid signs of a growing US economy, strengthening labor market and improving business spending. At its July and September 2017 meetings, the Fed kept its target range unchanged. However, in September the Fed mentioned that it would begin implementing its balance sheet reduction in October, and most committee members indicated a likelihood of one more rate hike during 2017.
In Europe, the UK’s economy grew faster in 2017’s third quarter over the previous quarter. The Bank of England kept its key policy rate unchanged during the period but indicated in September that it expected a rate hike to be soon so that
inflation could return to target levels. The eurozone’s growth increased in 2017’s second quarter over the previous quarter. The bloc’s annual inflation rate fluctuated during the reporting period and ended the period where it began. The European Central Bank (ECB) kept its key policy rates unchanged during the period. However, at its September meeting, ECB President Mario Draghi signaled that the bank would reassess its policy stance on quantitative easing in October 2017.
In Asia, Japan’s quarterly gross domestic product (GDP) grew for the sixth consecutive quarter, in 2017’s second quarter, driven by household spending, capital expenditure and government spending. In July 2017, the Bank of Japan marginally raised its GDP forecasts for fiscal years 2017 and 2018, but lowered its inflation forecasts for the same period.
In emerging markets, Brazil’s quarterly GDP grew compared to the previous quarter. The country’s central bank cut its benchmark interest rate four times during the period to spur economic growth. Russia’s GDP grew in 2017’s second quarter compared to the prior-year period amid the Bank of Russia’s continued policy support. China’s economic growth accelerated in 2017’s second and third quarters compared to the prior-year periods, largely driven by higher government spending. The People’s Bank of China left its benchmark interest rate unchanged during the period. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose during the period.
The foregoing information reflects our analysis and opinions as of September 30, 2017. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.
1. Source: Bureau of Labor Statistics.
2 | Semiannual Report | libertyshares.com |
Franklin LibertyQ Emerging Markets ETF
This semiannual report for Franklin LibertyQ Emerging Markets ETF covers the period ended September 30, 2017.
Your Fund’s Goal and Main Investments
The Fund seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the LibertyQ Emerging Markets (EM) Index.1 Under normal market conditions, the Fund invests at least 80% of its assets in the component securities of the index and in depositary receipts representing such securities. The index includes stocks from emerging market countries that have favorable exposure to four investment-style factors: quality, value, momentum and low volatility, subject to a maximum 1% per company weighting. The index seeks to achieve a lower level of risk and higher risk-adjusted performance than the MSCI EM Index over the long term by selecting equity securities from the MSCI EM Index that have exposure to these investment-style factors.
Performance Overview
During the six-month period, the Fund posted cumulative total returns of +9.00% based on market price and +9.21% based on net asset value (NAV).2 In comparison, the LibertyQ EM Index generated a +9.76% total return for the same period, while the MSCI EM Index (Net Returns) produced a +14.66% total return.3 You can find more of the Fund’s performance data in the Performance Summary beginning on page 5.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to libertyshares.com or call (800) 342-5236.
Geographic Composition |
Based on Total Net Assets as of 9/30/17 |
Investment Strategy
The Fund, using a passive or indexing investment approach, seeks investment results that closely correspond, before fees and expenses, to the performance of the LibertyQ EM Index. The investment manager seeks to achieve, over time, a correlation between the Fund’s performance, before fees and expenses, and that of the index of 0.95 or better. A figure of 1.00 would indicate perfect correlation. The Fund’s intention is to replicate the component securities of the index as closely as possible. However, under various circumstances, it may not be possible or practicable to purchase all of the component securities in their respective weightings in the index. In these circumstances, the Fund may use a “representative sampling” strategy whereby the Fund would invest in what it believes to be a representative sample of the component securities of the index, but may not track the index with the same degree of accuracy as would an investment vehicle replicating the entire index. The Fund’s portfolio is reconstituted semiannually following the semiannual reconstitution of the index.
1. The LibertyQ EM Index is a systematic, rules-based proprietary index that is owned and calculated by MSCI Inc. (MSCI). It is based on the MSCI EM Index using a methodology developed with Franklin Templeton to reflect Franklin Templeton’s desired investment strategy. The MSCI EM Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of emerging markets.
2. 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 (6/3/16), the NAV of the Fund is used as a proxy for the market price to calculate market returns.
3. Source: Factset.
The index is unmanaged and includes reinvestment of any income or distributions (after the deduction of certain withholding taxes). It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 25.
libertyshares.com | Semiannual Report | 3 |
FRANKLIN LIBERTYQ EMERGING MARKETS ETF
Top 10 Sectors/Industries | ||||
9/30/17 | ||||
% of Total Net Assets |
||||
Oil, Gas & Consumable Fuels | 12.0% | |||
Wireless Telecommunication Services | 7.7% | |||
Banks | 5.7% | |||
Automobiles | 5.7% | |||
Electronic Equipment, Instruments & Components | 5.6% | |||
Semiconductors & Semiconductor Equipment | 4.6% | |||
IT Services | 4.2% | |||
Real Estate Management & Development | 4.2% | |||
Technology Hardware, Storage & Peripherals | 4.0% | |||
Metals & Mining | 3.6% |
Top 10 Countries | ||||
9/30/17 | ||||
% of Total Net Assets |
||||
China | 15.7% | |||
South Korea | 15.6% | |||
India | 13.1% | |||
Taiwan | 13.0% | |||
Russia | 10.7% | |||
Brazil | 5.0% | |||
South Africa | 3.8% | |||
Indonesia | 3.5% | |||
Thailand | 3.4% | |||
Malaysia | 2.9% |
Top 10 Holdings | ||||
9/30/17 | ||||
Company Sector/Industry, Country |
% of Total Net Assets |
|||
iShares MSCI India ETF Diversified Financial Services, India |
1.6% | |||
SK Hynix Inc. Semiconductors & Semiconductor Equipment, South Korea |
1.4% | |||
AAC Technologies Holdings Inc. Electronic Equipment, Instruments & Components, China |
1.3% | |||
Sunac China Holdings Ltd. Real Estate Management & Development, China |
1.3% | |||
Sunny Optical Technology Group Co. Ltd. Electronic Equipment, Instruments & Components, China |
1.3% | |||
WisdomTree India Earnings ETF Diversified Financial Services, India |
1.2% | |||
Hon Hai Precision Industry Co. Ltd. Electronic Equipment, Instruments & Components, Taiwan |
1.2% | |||
Advanced Info Service PCL, NVDR Wireless Telecommunication Services, Thailand |
1.1% | |||
Ambev SA Beverages, Brazil |
1.1% | |||
MMC Norilsk Nickel PJSC Metals & Mining, Russia |
1.1% |
Thank you for your participation in Franklin LibertyQ Emerging Markets ETF. We look forward to serving your future investment needs.
Dina Ting, CFA | ||
Portfolio Manager |
The foregoing information reflects our analysis, opinions and portfolio holdings as of September 30, 2017, the end of the reporting period. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
CFA® is a trademark owned by CFA Institute.
4 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTYQ EMERGING MARKETS ETF
Performance Summary as of September 30, 2017
Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table does not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale 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 (6/3/16), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/171
Cumulative Total Return2 | Average Annual Total Return2 | |||||||||||||||
Based on NAV3 |
Based on market price4 |
Based on NAV3 |
Based on market price4 |
|||||||||||||
6-Month |
+9.21% | +9.00% | +9.21% | +9.00% | ||||||||||||
Since Inception (6/1/16) |
+25.10% | +25.50% | +18.31% | +18.60% |
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 libertyshares.com or call (800) 342-5236.
See page 6 for Performance Summary footnotes.
libertyshares.com | Semiannual Report | 5 |
FRANKLIN LIBERTYQ EMERGING MARKETS ETF
PERFORMANCE SUMMARY
Distributions (4/1/17–9/30/17)
Net Investment Income |
$0.289255 |
Total Annual Operating Expenses5
With Waiver | Without Waiver | |||
0.55% | 0.79% |
All investments involve risks, including possible loss of principal. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. The Fund is designed for the aggressive portion of a well-diversified portfolio. There can be no assurance that the Fund’s multi-factor stock selection process will enhance performance. Exposure to such investment factors may detract from performance in some market environments, perhaps for extended periods. The Fund’s prospectus also includes a description of the main investment risks.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. The Fund has an expense reduction contractually guaranteed through 7/31/18. 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. 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.
6 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTYQ EMERGING MARKETS 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 4/1/17 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 4/1/17–9/30/171,2 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 4/1/17–9/30/171,2 |
Net Annualized Expense Ratio2 |
|||||||||||||||||
$1,000.00 | $ | 1,092.10 | $ | 2.83 | $ | 1,022.36 | $ | 2.74 | 0.54 | % |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
libertyshares.com | Semiannual Report | 7 |
Franklin LibertyQ Global Dividend ETF
This semiannual report for Franklin LibertyQ Global Dividend ETF covers the period ended September 30, 2017.
Your Fund’s Goal and Main Investments
The Fund seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the LibertyQ Global Dividend Index.1 Under normal market conditions, the Fund invests at least 80% of its assets in the component securities of the index and in depositary receipts representing such securities. The index includes stocks from developed and emerging market countries with high and persistent dividend income that have favorable exposure to a quality investment-style factor, subject to a maximum 2% per company weighting. The index seeks to achieve a lower level of risk and higher risk-adjusted performance than the MSCI All Country World Index (ACWI) ex REITs Index over the long term by applying dividend persistence and yield screens and the quality factor selection process.
Performance Overview
For the six-month period, the Fund posted cumulative total returns of +5.12% based on market price and +5.25% based on net asset value (NAV).2 In comparison, the LibertyQ Global Dividend Index delivered a +5.25% total return for the same period, while the MSCI ACWI ex REITs Index (Net Returns) produced a +9.82% total return for the same period.3 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 libertyshares.com or call (800) 342-5236.
Geographic Composition |
Based on Total Net Assets as of 9/30/17 |
Investment Strategy
The Fund, using a passive or indexing investment approach, seeks investment results that closely correspond, before fees and expenses, to the performance of the LibertyQ Global Dividend Index. The investment manager seeks to achieve, over time, a correlation between the Fund’s performance, before fees and expenses, and that of the index of 0.95 or better. A figure of 1.00 would indicate perfect correlation. The Fund’s intention is to replicate the component securities of the index as closely as possible. However, under various circumstances, it may not be possible or practicable to purchase all of the component securities in their respective weightings in the index. In these circumstances, the Fund may use a “representative sampling” strategy whereby the Fund would invest in what it believes to be a representative sample of the component securities of the index, but may not track the index with the same degree of accuracy as would an investment vehicle replicating the entire index. The Fund’s portfolio is reconstituted semiannually following the semiannual reconstitution of the index.
1. The LibertyQ Global Dividend Index is a systematic, rules-based proprietary index that is owned and calculated by MSCI Inc. (MSCI). It is based on the MSCI ACWI ex REITs Index using a methodology developed with Franklin Templeton to reflect Franklin Templeton’s desired investment strategy. The MSCI ACWI ex REITs Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed and emerging markets, excluding REIT securities.
2. 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 (6/3/16), the NAV of the Fund is used as a proxy for the market price to calculate market returns.
3. Source: Factset.
The index is unmanaged and includes reinvestment of any income or distributions (after the deduction of certain withholding taxes). It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 31.
8 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTYQ GLOBAL DIVIDEND ETF
Top 10 Sectors/Industries | ||||
9/30/17 | ||||
% of Total Net Assets |
||||
Banks | 17.6% | |||
Pharmaceuticals | 16.2% | |||
Household Products | 5.4% | |||
Tobacco | 5.4% | |||
Diversified Telecommunication Services | 4.6% | |||
Semiconductors & Semiconductor Equipment | 4.3% | |||
Hotels, Restaurants & Leisure | 4.3% | |||
Personal Products | 4.3% | |||
Food & Staples Retailing | 4.0% | |||
Aerospace & Defense | 3.6% |
Top 10 Countries | ||||
9/30/17 | ||||
% of Total Net Assets |
||||
US | 36.3% | |||
UK | 14.1% | |||
Canada | 10.0% | |||
Australia | 9.5% | |||
Switzerland | 5.5% | |||
Brazil | 4.8% | |||
Japan | 4.0% | |||
Sweden | 3.7% | |||
South Africa | 2.2% | |||
France | 2.1% |
Top 10 Holdings | ||||
9/30/17 | ||||
Company Sector/Industry, Country |
% of Total Net Assets |
|||
Itau Unibanco Holding SA Banks, Brazil |
2.5% | |||
Westpac Banking Corp. Banks, Australia |
2.4% | |||
The Toronto-Dominion Bank Banks, Canada |
2.4% | |||
Bristol-Myers Squibb Co. Pharmaceuticals, US |
2.3% | |||
Ambev SA Beverages, Brazil |
2.3% | |||
Bank of Nova Scotia Banks, Canada |
2.2% | |||
Lockheed Martin Corp. Aerospace & Defense, US |
2.2% | |||
Royal Bank of Canada Banks, Canada |
2.2% | |||
Canadian Imperial Bank of Commerce Banks, Canada |
2.2% | |||
Commonwealth Bank of Australia Banks, Australia |
2.2% |
Thank you for your participation in Franklin LibertyQ Global Dividend ETF. We look forward to serving your future investment needs.
Dina Ting, CFA | ||
Portfolio Manager |
The foregoing information reflects our analysis, opinions and portfolio holdings as of September 30, 2017, the end of the reporting period. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
libertyshares.com | Semiannual Report | 9 |
FRANKLIN LIBERTYQ GLOBAL DIVIDEND ETF
Performance Summary as of September 30, 2017
Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance tables do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale 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 (6/3/16), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/171
Cumulative Total Return2 | Average Annual Total Return2 | |||||||||||||||
Based on NAV3 |
Based on market price4 |
Based on NAV3 |
Based on market price4 |
|||||||||||||
6-Month |
+5.25% | +5.12% | +5.25% | +5.12% | ||||||||||||
Since Inception (6/1/16) |
+15.56% | +16.04% | +11.47% | +11.82% |
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 libertyshares.com or call (800) 342-5236.
See page 11 for Performance Summary footnotes.
10 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTYQ GLOBAL DIVIDEND ETF
PERFORMANCE SUMMARY
Distributions (4/1/17–9/30/17)
Net Investment Income |
$0.621895 |
Total Annual Operating Expenses5
With Waiver | Without Waiver | |||
0.45% | 0.98% |
All investments involve risks, including possible loss of principal. 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 on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. Companies that have historically paid regular dividends to shareholders may decrease or eliminate dividend payments in the future. A decrease in dividend payments by an issuer may result in a decrease in the value of the issuer’s stock and less available income for the Fund. There can be no assurance that the Fund’s multi-factor stock selection process will enhance performance. Exposure to such investment factors may detract from performance in some market environments, perhaps for extended periods. The Fund’s prospectus also includes a description of the main investment risks.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. The Fund has an expense reduction contractually guaranteed through 7/31/18. 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. 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.
libertyshares.com | Semiannual Report | 11 |
FRANKLIN LIBERTYQ GLOBAL DIVIDEND 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 4/1/17 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 4/1/17–9/30/171,2 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 4/1/17–9/30/171,2 |
Net Annualized Expense Ratio2 |
|||||||||||||||||
$1,000.00 | $ | 1,052.50 | $ | 2.32 | $ | 1,022.81 | $ | 2.28 | 0.45 | % |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
12 | Semiannual Report | libertyshares.com |
Franklin LibertyQ Global Equity ETF
This semiannual report for Franklin LibertyQ Global Equity ETF covers the period ended September 30, 2017.
Your Fund’s Goal and Main Investments
The Fund seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the LibertyQ Global Equity Index.1 Under normal market conditions, the Fund invests at least 80% of its assets in the component securities of the index and in depositary receipts representing such securities. The index includes stocks from developed and emerging market countries that have favorable exposure to four investment-style factors: quality, value, momentum and low volatility, subject to a maximum 1% per company weighting. The index seeks to achieve a lower level of risk and higher risk-adjusted performance than the MSCI All Country World Index (ACWI) over the long term by selecting equity securities from the MSCI ACWI that have exposure to these investment-style factors.
Performance Overview
During the six-month period, the Fund posted cumulative total returns of +8.52% based on market price and +8.68% based on net asset value (NAV).2 In comparison, the LibertyQ Global Equity Index delivered a +8.71% total return for the same period, while the MSCI ACWI (Net Returns) produced a +9.68% total return.3 You can find more of the Fund’s performance data in the Performance Summary beginning on page 15.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to libertyshares.com or call (800) 342-5236.
Geographic Composition |
Based on Total Net Assets as of 9/30/17 |
Investment Strategy
The Fund, using a passive or indexing investment approach, seeks investment results that closely correspond, before fees and expenses, to the performance of the LibertyQ Global Equity Index. The investment manager seeks to achieve, over time, a correlation between the Fund’s performance, before fees and expenses, and that of the index of 0.95 or better. A figure of 1.00 would indicate perfect correlation. The Fund’s intention is to replicate the component securities of the index as closely as possible. However, under various circumstances, it may not be possible or practicable to purchase all of the component securities in their respective weightings in the index. In these circumstances, the Fund may use a “representative sampling” strategy whereby the Fund would invest in what it believes to be a representative sample of the component securities of the index, but may not track the index with the same degree of accuracy as would an investment vehicle replicating the entire index. The Fund’s portfolio is reconstituted semiannually following the semiannual reconstitution of the index.
1. The LibertyQ Global Equity Index is a systematic, rules-based proprietary index that is owned and calculated by MSCI Inc. (MSCI). It is based on the MSCI ACWI using a methodology developed with Franklin Templeton to reflect Franklin Templeton’s desired investment strategy. The MSCI ACWI is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed and emerging markets.
2. 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 (6/3/16), the NAV of the Fund is used as a proxy for the market price to calculate market returns.
3. Source: Factset.
The index is unmanaged and includes reinvestment of any income or distributions (after the deduction of certain withholding taxes). It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 35.
libertyshares.com | Semiannual Report | 13 |
FRANKLIN LIBERTYQ GLOBAL EQUITY ETF
Top 10 Sectors/Industries | ||||
9/30/17 | ||||
% of Total Net Assets |
||||
Pharmaceuticals | 8.8% | |||
Banks | 5.8% | |||
Semiconductors & Semiconductor Equipment | 5.7% | |||
Aerospace & Defense | 4.4% | |||
Specialty Retail | 4.2% | |||
Diversified Telecommunication Services | 4.2% | |||
IT Services | 4.1% | |||
Biotechnology | 3.8% | |||
Hotels, Restaurants & Leisure | 3.3% | |||
Technology Hardware, Storage & Peripherals | 3.2% |
Top 10 Countries | ||||
9/30/17 | ||||
% of Total Net Assets |
||||
US | 54.6% | |||
UK | 9.4% | |||
Japan | 4.2% | |||
Australia | 4.1% | |||
Canada | 3.8% | |||
China | 3.5% | |||
South Korea | 2.9% | |||
Taiwan | 2.5% | |||
Switzerland | 2.0% | |||
Russia | 1.3% |
Top 10 Holdings | ||||
9/30/17 | ||||
Company Sector/Industry, Country |
% of Total Net Assets |
|||
The Boeing Co. Aerospace & Defense, US |
|
1.3% |
| |
AbbVie Inc. Biotechnology, US |
|
1.3% |
| |
Mastercard Inc., A IT Services, US |
|
1.2% |
| |
Gilead Sciences Inc. Biotechnology, US |
|
1.2% |
| |
Novo Nordisk AS, B Pharmaceuticals, Denmark |
|
1.1% |
| |
Taiwan Semiconductor Manufacturing Co. Ltd. Semiconductors & Semiconductor Equipment, Taiwan |
|
1.1% |
| |
Microsoft Corp. Software, US |
|
1.1% |
| |
HSBC Holdings PLC Banks, UK |
|
1.1% |
| |
UnitedHealth Group Inc. Health Care Providers & Services, US |
|
1.1% |
| |
Accenture PLC, A IT Services, US |
1.1% |
Thank you for your participation in Franklin LibertyQ Global Equity ETF. We look forward to serving your future investment needs.
Dina Ting, CFA | ||
Portfolio Manager |
The foregoing information reflects our analysis, opinions and portfolio holdings as of September 30, 2017, the end of the reporting period. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
14 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTYQ GLOBAL EQUITY ETF
Performance Summary as of September 30, 2017
Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table does not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale 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 (6/3/16), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/171
Cumulative Total Return2 | Average Annual Total Return2 | |||||||||||||||
Based on NAV3 |
Based on market price4 |
Based on NAV3 |
Based on market price4 |
|||||||||||||
6-Month |
+8.68% | +8.52% | +8.68% | +8.52% | ||||||||||||
Since Inception (6/1/16) |
+19.49% | +19.92% | +14.31% | +14.62% |
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 libertyshares.com or call (800) 342-5236.
See page 16 for Performance Summary footnotes.
libertyshares.com | Semiannual Report | 15 |
FRANKLIN LIBERTYQ GLOBAL EQUITY ETF
PERFORMANCE SUMMARY
Distributions (4/1/17–9/30/17)
Net Investment Income |
$0.324710 |
Total Annual Operating Expenses5
With Waiver | Without Waiver | |||
0.35% | 1.05% |
All investments involve risks, including possible loss of principal. 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 on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. Performance of the Fund may vary significantly from the performance of an index, as a result of transaction costs, expenses and other factors. There can be no assurance that the Fund’s multi-factor stock selection process will enhance performance. Exposure to such investment factors may detract from performance in some market environments, perhaps for extended periods. The Fund’s prospectus also includes a description of the main investment risks.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. The Fund has an expense reduction contractually guaranteed through 7/31/18. 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. 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.
16 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTYQ GLOBAL EQUITY 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 4/1/17 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 4/1/17–9/30/171,2 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 4/1/17–9/30/171,2 |
Net Annualized Expense Ratio2 |
|||||||||||||||||
$1,000.00 | $ | 1,086.80 | $ | 1.83 | $ | 1,023.31 | $ | 1.78 | 0.35 | % |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
libertyshares.com | Semiannual Report | 17 |
Franklin LibertyQ International Equity Hedged ETF
This semiannual report for Franklin LibertyQ International Equity Hedged ETF covers the period ended September 30, 2017.
Your Fund’s Goal and Main Investments
The Fund seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the LibertyQ International Equity Hedged Index.1 Under normal market conditions, the Fund invests at least 80% of its assets in the component securities of the index and in depositary receipts representing such securities. The index includes stocks from developed market countries in Europe, Australasia and the Far East that have favorable exposure to four investment-style factors: quality, value, momentum and low volatility, subject to a maximum 2% per company weighting. The index seeks to achieve a lower level of risk and higher risk-adjusted performance than the MSCI EAFE Index over the long term by selecting equity securities from the MSCI EAFE Index that have exposure to these investment-style factors. The index incorporates a hedge against non-US currency fluctuations by reflecting the impact of rolling monthly currency forward contracts on the currencies represented in the index. In order to replicate the hedge impact incorporated in the calculation of the index, the Fund intends to enter into monthly foreign currency forward contracts designed to offset the Fund’s exposure to the component currencies of the index.
What is a currency forward contract?
A currency forward contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency in exchange for another currency at a specific exchange rate on a future date.
Geographic Composition* |
Based on Total Net Assets as of 9/30/17 |
*Figures are stated as a percentage of total and may not equal 100% or may be negative due to rounding, use of derivatives, unsettled trades or other factors.
Performance Overview
During the six-month period, the Fund posted cumulative total returns of +3.94% based on market price and +4.78% based on net asset value (NAV).2 In comparison, the LibertyQ International Equity Hedged Index had a +4.93% total return for the same period, while the MSCI EAFE 100% Hedged to USD Index (Net Returns) produced a +6.95% total return.3 You can find more of the Fund’s performance data in the Performance Summary beginning on page 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 libertyshares.com or call (800) 342-5236.
1. The LibertyQ International Equity Hedged Index is a systematic, rules-based proprietary index that is owned and calculated by MSCI Inc. (MSCI). It is based on the MSCI EAFE Index using a methodology developed with Franklin Templeton to reflect Franklin Templeton’s desired investment strategy. The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US and Canada.
2. 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 (6/3/16), the NAV of the Fund is used as a proxy for the market price to calculate market returns.
3. Source: Factset.
The index is unmanaged and includes reinvestment of any income or distributions. It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index.
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 Statement of Investments (SOI). The SOI begins on page 48.
18 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTYQ INTERNATIONAL EQUITY HEDGED ETF
Investment Strategy
The Fund, using a passive or indexing investment approach, seeks investment results that closely correspond, before fees and expenses, to the performance of the LibertyQ International Equity Hedged Index. The investment manager seeks to achieve, over time, a correlation between the Fund’s performance, before fees and expenses, and that of the index of 0.95 or better. A figure of 1.00 would indicate perfect correlation. The Fund’s intention is to replicate the component securities of the index as closely as possible. However, under various circumstances, it may not be possible or practicable to purchase all of the component securities in their respective weightings in the index. In these circumstances, the Fund may use a “representative sampling” strategy whereby the Fund would invest in what it believes to be a representative sample of the component securities of the index, but may not track the index with the same degree of accuracy as would an investment vehicle replicating the entire index. The Fund’s portfolio is reconstituted semiannually following the semiannual reconstitution of the index.
Top 10 Sectors/Industries | ||||
9/30/17 | ||||
% of Total Net Assets |
||||
Banks | 11.4% | |||
Pharmaceuticals | 9.8% | |||
Insurance | 5.6% | |||
Diversified Telecommunication Services | 5.3% | |||
Personal Products | 5.0% | |||
Tobacco | 4.2% | |||
Automobiles | 4.1% | |||
Specialty Retail | 3.0% | |||
Professional Services | 2.9% | |||
Chemicals | 2.9% |
Top 10 Countries | ||||
9/30/17 | ||||
% of Total Net Assets |
||||
UK | 28.1% | |||
Japan | 20.6% | |||
Australia | 17.1% | |||
Switzerland | 6.8% | |||
France | 4.3% | |||
Denmark | 3.8% | |||
Hong Kong | 3.7% | |||
Sweden | 3.3% | |||
Spain | 2.7% | |||
Singapore | 2.2% |
Top 10 Holdings | ||||
9/30/17 | ||||
Company Sector/Industry, Country |
% of Total Net Assets |
|||
Novo Nordisk AS, B Pharmaceuticals, Denmark |
|
2.3% |
| |
HSBC Holding PLC Banks, UK |
|
2.2% |
| |
Toyota Motor Corp. Automobiles, Japan |
|
2.2% |
| |
Westpac Banking Corp. Banks, Australia |
|
2.1% |
| |
Unilever NV Personal Products, UK |
|
2.1% |
| |
Unilever PLC Personal Products, UK |
|
2.1% |
| |
AstraZeneca PLC Pharmaceuticals, UK |
|
1.9% |
| |
CSL Ltd. Biotechnology, Australia |
|
1.9% |
| |
Roche Holding AG Pharmaceuticals, Switzerland |
|
1.8% |
| |
GlaxoSmithKline PLC Pharmaceuticals, UK |
|
1.8% |
|
libertyshares.com | Semiannual Report | 19 |
FRANKLIN LIBERTYQ INTERNATIONAL EQUITY HEDGED ETF
Thank you for your participation in Franklin LibertyQ International Equity Hedged ETF. We look forward to serving your future investment needs.
Dina Ting, CFA | ||
Portfolio Manager |
The foregoing information reflects our analysis, opinions and portfolio holdings as of September 30, 2017, the end of the reporting period. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
20 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTYQ INTERNATIONAL EQUITY HEDGED ETF
Performance Summary as of September 30, 2017
Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table does not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale 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 (6/3/16), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/171
Cumulative Total Return2 | Average Annual Total Return2 | |||||||||||||||
Based on NAV3 |
Based on market price4 |
Based on NAV3 |
Based on market price4 |
|||||||||||||
6-Month |
+4.78% | +3.94% | +4.78% | +3.94% | ||||||||||||
Since Inception (6/1/16) |
+13.47% | +13.55% | +9.95% | +10.01 |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to libertyshares.com or call (800) 342-5236.
See page 22 for Performance Summary footnotes.
libertyshares.com | Semiannual Report | 21 |
FRANKLIN LIBERTYQ INTERNATIONAL EQUITY HEDGED ETF
PERFORMANCE SUMMARY
Distributions (4/1/17–9/30/17)
Net Investment Income |
$1.297820 |
Total Annual Operating Expenses5
With Waiver | Without Waiver | |||
0.40% | 1.25% |
All investments involve risks, including possible loss of principal. 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 on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. The Fund will attempt to hedge the currency exposure of non-US dollar denominated securities held in its portfolio by investing in foreign currency forward contracts. Foreign currency forward contracts do not eliminate movements in the value of non-US currencies and securities but rather allow the Fund to establish a fixed rate of exchange for a future point in time. 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. Currency management strategies could result in losses to the Fund if currencies do not perform as the investment manager expects. There can be no assurance that the Fund’s multi-factor stock selection process will enhance performance. Exposure to such investment factors may detract from performance in some market environments, perhaps for extended periods. The Fund’s prospectus also includes a description of the main investment risks.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. The Fund has an expense reduction contractually guaranteed through 7/31/18. 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. 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.
22 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTYQ INTERNATIONAL EQUITY HEDGED ETF
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares; and (2) ongoing Fund costs, including management fees and other Fund expenses. All funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value.” You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 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 4/1/17 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 4/1/17–9/30/171,2 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 4/1/17–9/30/171,2 |
Net Annualized Expense Ratio2 |
|||||||||||||||||
$1,000.00 | $ | 1,047.80 | $ | 2.05 | $ | 1,023.06 | $ | 2.03 | 0.40 | % |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
libertyshares.com | Semiannual Report | 23 |
FRANKLIN TEMPLETON ETF TRUST
Franklin LibertyQ Emerging Markets ETF
Six Months Ended September 30, 2017 (unaudited) |
Year Ended March 31, 2017a |
|||||||
Per share operating performance (for a share outstanding throughout the period) |
||||||||
Net asset value, beginning of period |
$ | 29.29 | $ | 25.66 | ||||
|
|
|||||||
Income from investment operationsb: | ||||||||
Net investment incomec |
0.55 | 0.47 | ||||||
Net realized and unrealized gains (losses) |
2.16 | 3.25 | ||||||
|
|
|||||||
Total from investment operations |
2.71 | 3.72 | ||||||
|
|
|||||||
Less distributions from net investment income |
(0.29 | ) | (0.09 | ) | ||||
|
|
|||||||
Net asset value, end of period |
$ | 31.71 | $ | 29.29 | ||||
|
|
|||||||
Total returnd |
9.32% | 14.55% | ||||||
Ratios to average net assetse | ||||||||
Expenses before waiver and payments by affiliates |
0.71% | 0.75% | ||||||
Expenses net of waiver and payments by affiliates |
0.54% | 0.55% | ||||||
Net investment income |
3.56% | 2.09% | ||||||
Supplemental data | ||||||||
Net assets, end of period (000’s) |
$405,902 | $328,086 | ||||||
Portfolio turnover ratef |
13.95% | 31.66% |
aFor the period June 1, 2016 (commencement of operations) to March 31, 2017.
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 of 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 excludes the value of portfolio securities received or delivered as a result of processing capital share transactions in Creation Units, if any.
24 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
Statement of Investments, September 30, 2017 (unaudited)
Franklin LibertyQ Emerging Markets ETF
Industry | Shares | Value | ||||||||||||
Common Stocks 94.8% | ||||||||||||||
Brazil 5.0% | ||||||||||||||
Ambev SA |
Beverages | 678,408 | $ | 4,512,497 | ||||||||||
BB Seguridade Participacoes SA |
Insurance | 435,208 | 3,939,113 | |||||||||||
Cielo SA |
IT Services | 556,816 | 3,869,186 | |||||||||||
Companhia de Saneamento Basico do Estado de Sao Paulo |
Water Utilities | 96,000 | 1,010,031 | |||||||||||
EDP-Energias do Brasil SA |
Electric Utilities | 195,808 | 937,209 | |||||||||||
Engie Brasil SA |
Independent Power and Renewable Electricity Producers | 121,688 | 1,394,556 | |||||||||||
Fibria Celulose SA |
Paper & Forest Products | 115,252 | 1,561,275 | |||||||||||
M Dias Branco SA |
Food Products | 25,600 | 402,232 | |||||||||||
Odontoprev SA |
Health Care Providers & Services | 205,528 | 1,002,576 | |||||||||||
Qualicorp SA |
Health Care Providers & Services | 108,888 | 1,304,666 | |||||||||||
Transmissora Alianca de Energia Eletrica SA |
Electric Utilities | 76,800 | 540,221 | |||||||||||
|
|
|||||||||||||
20,473,562 | ||||||||||||||
|
|
|||||||||||||
Chile 0.7% | ||||||||||||||
Aguas Andinas SA, A |
Water Utilities | 2,015,872 | 1,284,439 | |||||||||||
Enel Chile SA |
Electric Utilities | 5,304,128 | 647,653 | |||||||||||
Enel Generacion Chile SA |
Independent Power and Renewable Electricity Producers | 994,944 | 869,955 | |||||||||||
|
|
|||||||||||||
2,802,047 | ||||||||||||||
|
|
|||||||||||||
China 15.7% | ||||||||||||||
AAC Technologies Holdings Inc. |
Electronic Equipment, Instruments & Components | 320,000 | 5,375,190 | |||||||||||
Agricultural Bank of China Ltd., H |
Banks | 7,980,000 | 3,575,864 | |||||||||||
Anta Sports Products Ltd. |
Textiles, Apparel & Luxury Goods | 704,000 | 2,960,861 | |||||||||||
China Everbright Bank Co. Ltd., H |
Banks | 1,792,000 | 828,238 | |||||||||||
China Mobile Ltd. |
Wireless Telecommunication Services | 352,000 | 3,567,004 | |||||||||||
Chongqing Changan Automobile Co. Ltd., B |
Automobiles | 627,110 | 829,381 | |||||||||||
Chongqing Rural Commercial Bank Co. Ltd., H |
Banks | 1,408,000 | 892,314 | |||||||||||
Country Garden Holdings Co. Ltd. |
Real Estate Management & Development | 2,624,000 | 4,172,492 | |||||||||||
CSPC Pharmaceutical Group Ltd. |
Pharmaceuticals | 1,280,000 | 2,143,521 | |||||||||||
Dongfeng Motor Group Co. Ltd., H |
Automobiles | 1,920,000 | 2,536,828 | |||||||||||
Great Wall Motor Co. Ltd., H |
Automobiles | 2,144,000 | 2,635,154 | |||||||||||
Guangdong Investment Ltd. |
Water Utilities | 1,792,000 | 2,555,838 | |||||||||||
Guangzhou Automobile Group Co. Ltd., H |
Automobiles | 896,000 | 2,074,037 | |||||||||||
Huaneng Power International Inc., H |
Independent Power and Renewable Electricity Producers | 2,176,000 | 1,345,600 | |||||||||||
Jiangsu Expressway Co. Ltd., H |
Transportation Infrastructure | 768,000 | 1,175,987 | |||||||||||
Longfor Properties Co. Ltd. |
Real Estate Management & Development | 864,000 | 2,179,164 | |||||||||||
NetEase Inc., ADR |
Internet Software & Services | 13,824 | 3,646,909 | |||||||||||
Shenzhou International Group Holdings Ltd. |
Textiles, Apparel & Luxury Goods | 384,000 | 3,008,796 | |||||||||||
Sihuan Pharmaceutical Holdings Group Ltd. |
Pharmaceuticals | 1,216,000 | 442,142 | |||||||||||
Sino-Ocean Land Holdings Ltd. |
Real Estate Management & Development | 1,056,000 | 704,388 | |||||||||||
Sinopec Engineering Group Co. Ltd. |
Construction & Engineering | 832,000 | 733,927 | |||||||||||
Sinopec Shanghai Petrochemical Co. Ltd., H |
Chemicals | 1,792,000 | 1,066,844 | |||||||||||
Sunac China Holdings Ltd. |
Real Estate Management & Development | 1,152,000 | 5,272,767 | |||||||||||
Sunny Optical Technology Group Co. Ltd. |
Electronic Equipment, Instruments & Components | 320,000 | 5,088,404 | |||||||||||
a | Yum China Holdings Inc. |
Hotels, Restaurants & Leisure | 104,448 | 4,174,787 | ||||||||||
a | YY Inc., ADR |
Internet Software & Services | 9,664 | 838,642 | ||||||||||
|
|
|||||||||||||
63,825,079 | ||||||||||||||
|
|
|||||||||||||
Colombia 0.3% | ||||||||||||||
Grupo Inversiones Suramericcana SA. |
Diversified Financial Services | 76,800 | 1,069,073 | |||||||||||
|
|
libertyshares.com | Semiannual Report | 25 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ Emerging Markets ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks (continued) | ||||||||||||||
Czech Republic 0.4% | ||||||||||||||
Moneta Money Bank AS |
Banks | 204,608 | $ | 720,316 | ||||||||||
O2 Czech Republic AS |
Diversified Telecommunication Services | 62,848 | 771,818 | |||||||||||
|
|
|||||||||||||
1,492,134 | ||||||||||||||
|
|
|||||||||||||
Hungary 0.7% | ||||||||||||||
MOL Hungarian Oil and Gas PLC |
Oil, Gas & Consumable Fuels | 264,704 | 3,021,950 | |||||||||||
|
|
|||||||||||||
India 10.3% | ||||||||||||||
Asian Paints Ltd. |
Chemicals | 141,888 | 2,458,277 | |||||||||||
Bajaj Auto Ltd. |
Automobiles | 33,280 | 1,584,214 | |||||||||||
Bharat Petroleum Corp. Ltd. |
Oil, Gas & Consumable Fuels | 425,292 | 3,068,587 | |||||||||||
Coal India Ltd. |
Oil, Gas & Consumable Fuels | 348,672 | 1,445,772 | |||||||||||
Dabur India Ltd. |
Personal Products | 210,624 | 983,471 | |||||||||||
Eicher Motors Ltd. |
Machinery | 5,628 | 2,689,352 | |||||||||||
HCL Technologies Ltd. |
IT Services | 253,760 | 3,398,488 | |||||||||||
Hero Motocorp Ltd. |
Automobiles | 28,608 | 1,653,128 | |||||||||||
Hindustan Petroleum Corp. Ltd. |
Oil, Gas & Consumable Fuels | 300,416 | 1,962,914 | |||||||||||
Hindustan Unilever Ltd. |
Household Products | 214,336 | 3,851,945 | |||||||||||
Indian Oil Corp. Ltd. |
Oil, Gas & Consumable Fuels | 134,592 | 825,231 | |||||||||||
Infosys Ltd. |
IT Services | 199,668 | 2,750,784 | |||||||||||
ITC Ltd. |
Tobacco | 730,176 | 2,887,392 | |||||||||||
Marico Ltd. |
Personal Products | 222,464 | 1,058,339 | |||||||||||
Maruti Suzuki India Ltd. |
Automobiles | 32,384 | 3,955,389 | |||||||||||
Rural Electrification Corp. Ltd. |
Diversified Financial Services | 56,000 | 131,084 | |||||||||||
Tata Consultancy Services Ltd. |
IT Services | 81,024 | 3,021,592 | |||||||||||
Tech Mahindra Ltd. |
IT Services | 218,944 | 1,534,653 | |||||||||||
Wipro Ltd. |
IT Services | 601,408 | 2,580,291 | |||||||||||
|
|
|||||||||||||
41,840,903 | ||||||||||||||
|
|
|||||||||||||
Indonesia 3.5% | ||||||||||||||
Hanjaya Mandala Sampoerna Tbk PT |
Tobacco | 6,009,600 | 1,722,255 | |||||||||||
Matahari Department Store Tbk PT |
Multiline Retail | 1,894,400 | 1,304,519 | |||||||||||
PT Telekom Indonesia (Persero) Tbk |
Diversified Telecommunication Services | 11,078,400 | 3,849,351 | |||||||||||
Surya Citra Media Tbk PT |
Media | 4,320,000 | 702,413 | |||||||||||
Unilever Indonesia Tbk PT |
Household Products | 1,126,400 | 4,095,734 | |||||||||||
United Tractors Tbk PT |
Oil, Gas & Consumable Fuels | 1,011,200 | 2,402,435 | |||||||||||
|
|
|||||||||||||
14,076,707 | ||||||||||||||
|
|
|||||||||||||
Malaysia 2.9% | ||||||||||||||
AirAsia Bhd. |
Airlines | 403,200 | 329,435 | |||||||||||
Astro Malaysia Holdings Bhd. |
Media | 1,126,400 | 752,267 | |||||||||||
British American Tobacco Malaysia Bhd. |
Tobacco | 134,400 | 1,392,222 | |||||||||||
Digi.com Bhd. |
Wireless Telecommunication Services | 2,976,000 | 3,453,499 | |||||||||||
Hartalega Holdings Bhd. |
Health Care Equipment & Supplies | 377,600 | 622,403 | |||||||||||
Maxis Bhd. |
Wireless Telecommunication Services | 1,171,200 | 1,608,753 | |||||||||||
Petronas Chemicals Group Bhd. |
Chemicals | 1,484,800 | 2,563,456 | |||||||||||
Petronas Dagangan Bhd. |
Oil, Gas & Consumable Fuels | 76,800 | 442,339 | |||||||||||
Westports Holdings Bhd. |
Transportation Infrastructure | 723,200 | 652,550 | |||||||||||
|
|
|||||||||||||
11,816,924 | ||||||||||||||
|
|
|||||||||||||
Mexico 2.5% | ||||||||||||||
Gruma SAB de CV |
Food Products | 120,512 | 1,766,808 | |||||||||||
Grupo Aeroportuario del Pacifico SAB de CV |
Transportation Infrastructure | 219,456 | 2,252,659 | |||||||||||
Kimberly-Clark de Mexico SAB de CV, A |
Household Products | 1,047,744 | 2,137,694 | |||||||||||
Wal-Mart de Mexico SAB de CV, V |
Food & Staples Retailing | 1,753,984 | 4,027,762 | |||||||||||
|
|
|||||||||||||
10,184,923 | ||||||||||||||
|
|
|||||||||||||
Pakistan 0.4% | ||||||||||||||
Engro Corp. Ltd. |
Chemicals | 83,200 | 239,422 | |||||||||||
Habib Bank Ltd. |
Banks | 172,800 | 296,561 |
26 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ Emerging Markets ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks (continued) | ||||||||||||||
Pakistan (continued) | ||||||||||||||
Lucky Cement Ltd. |
Construction Materials | 44,800 | $ | 240,323 | ||||||||||
MCB Bank Ltd. |
Banks | 128,000 | 251,552 | |||||||||||
Oil & Gas Development Co. Ltd. |
Oil, Gas & Consumable Fuels | 224,000 | 315,397 | |||||||||||
United Bank Ltd. |
Banks | 134,400 | 239,897 | |||||||||||
|
|
|||||||||||||
1,583,152 | ||||||||||||||
|
|
|||||||||||||
Philippines 0.2% | ||||||||||||||
DMCI Holdings Inc. |
Industrial Conglomerates | 755,200 | 231,914 | |||||||||||
Globe Telecom Inc. |
Wireless Telecommunication Services | 17,920 | 723,157 | |||||||||||
|
|
|||||||||||||
955,071 | ||||||||||||||
|
|
|||||||||||||
Poland 1.5% | ||||||||||||||
a | PGE Polska Grupa Energetyczna SA |
Electric Utilities | 608,000 | 2,219,130 | ||||||||||
Polski Koncern Naftowy Orlen SA |
Oil, Gas & Consumable Fuels | 100,800 | 3,366,501 | |||||||||||
a | Tauron Polska Energia SA |
Electric Utilities | 557,184 | 573,400 | ||||||||||
|
|
|||||||||||||
6,159,031 | ||||||||||||||
|
|
|||||||||||||
Qatar 1.0% | ||||||||||||||
a | The Commercial Bank QSC |
Banks | 742 | 5,933 | ||||||||||
Doha Bank QSC |
Banks | 97,377 | 775,646 | |||||||||||
Industries Qatar QSC |
Industrial Conglomerates | 94,400 | 2,377,405 | |||||||||||
Qatar Electricity & Water Co. QSC |
Multi-Utilities | 20,992 | 1,007,870 | |||||||||||
|
|
|||||||||||||
4,166,854 | ||||||||||||||
|
|
|||||||||||||
Russia 9.9% | ||||||||||||||
Alrosa PJSC |
Metals & Mining | 2,352,896 | 3,338,183 | |||||||||||
Federal Hydrogenerating Co. |
Electric Utilities | 51,377,216 | 767,210 | |||||||||||
Gazprom PJSC |
Oil, Gas & Consumable Fuels | 1,708,224 | 3,616,927 | |||||||||||
Inter RAO UES PJSC |
Electric Utilities | 19,866,560 | 1,289,001 | |||||||||||
LUKOIL PJSC |
Oil, Gas & Consumable Fuels | 75,456 | 4,010,904 | |||||||||||
MMC Norilsk Nickel PJSC |
Metals & Mining | 25,728 | 4,442,698 | |||||||||||
Mobile TeleSystems PJSC, ADR |
Wireless Telecommunication Services | 416,384 | 4,347,049 | |||||||||||
NLMK PJSC |
Metals & Mining | 486,144 | 1,113,974 | |||||||||||
b | Novatek PJSC, GDR, Reg S |
Oil, Gas & Consumable Fuels | 29,376 | 3,445,805 | ||||||||||
b | PhosAgro PJSC, GDR, Reg S |
Chemicals | 101,568 | 1,447,344 | ||||||||||
Rosneft PJSC |
Oil, Gas & Consumable Fuels | 742,720 | 4,118,301 | |||||||||||
Severstal PJSC |
Metals & Mining | 164,416 | 2,485,200 | |||||||||||
Surgutneftegas OAO |
Oil, Gas & Consumable Fuels | 3,492,608 | 1,784,305 | |||||||||||
Tatneft PAO |
Oil, Gas & Consumable Fuels | 556,160 | 3,951,555 | |||||||||||
|
|
|||||||||||||
40,158,456 | ||||||||||||||
|
|
|||||||||||||
South Africa 3.8% | ||||||||||||||
Bidvest Group Ltd. |
Industrial Conglomerates | 146,112 | 1,868,372 | |||||||||||
Fortress Income Fund Ltd., A |
Equity Real Estate Investment Trusts (REITs | ) | 499,904 | 638,648 | ||||||||||
Mr. Price Group Ltd. |
Specialty Retail | 186,048 | 2,480,732 | |||||||||||
Pick ‘N Pay Stores Ltd. |
Food & Staples Retailing | 192,448 | 821,102 | |||||||||||
Sibanye-Stillwater |
Metals & Mining | 1,070,720 | 1,206,914 | |||||||||||
Tiger Brands Ltd. |
Food Products | 85,120 | 2,378,821 | |||||||||||
Truworths International Ltd. |
Specialty Retail | 330,496 | 1,890,822 | |||||||||||
Vodacom Group Ltd. |
Wireless Telecommunication Services | 328,448 | 3,919,727 | |||||||||||
|
|
|||||||||||||
15,205,138 | ||||||||||||||
|
|
|||||||||||||
South Korea 14.5% | ||||||||||||||
BGF Retail Co. Ltd. |
Food & Staples Retailing | 10,688 | 774,527 | |||||||||||
BNK Financial Group Inc. |
Banks | 75,264 | 657,127 | |||||||||||
Coway Co. Ltd. |
Household Durables | 40,000 | 3,282,839 | |||||||||||
DGB Financial Group Inc. |
Banks | 81,920 | 751,002 | |||||||||||
Hana Financial Group Inc. |
Banks | 105,984 | 4,381,492 | |||||||||||
Hankook Tire Co. Ltd. |
Auto Components | 43,840 | 2,304,246 | |||||||||||
Hanon Systems |
Auto Components | 121,152 | 1,332,794 | |||||||||||
Hanssem Co. Ltd. |
Household Durables | 5,888 | 778,829 |
libertyshares.com | Semiannual Report | 27 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ Emerging Markets ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks (continued) | ||||||||||||||
South Korea (continued) | ||||||||||||||
Hanwha Life Insurance Co. Ltd. |
Insurance | 103,680 | $ | 620,079 | ||||||||||
Hyundai Marine & Fire Insurance Co. Ltd. |
Insurance | 36,160 | 1,430,172 | |||||||||||
Hyundai Mobis Co. Ltd. |
Auto Components | 16,576 | 3,473,384 | |||||||||||
Industrial Bank of Korea |
Banks | 132,032 | 1,659,982 | |||||||||||
Kangwon Land Inc. |
Hotels, Restaurants & Leisure | 76,160 | 2,327,324 | |||||||||||
KB Financial Group Inc. |
Banks | 86,144 | 4,219,390 | |||||||||||
Kia Motors Corp. |
Automobiles | 111,872 | 3,091,412 | |||||||||||
KT&G Corp. |
Tobacco | 41,536 | 3,825,947 | |||||||||||
LG Display Co. Ltd. |
Electronic Equipment, Instruments & Components | 68,096 | 1,816,329 | |||||||||||
Lotte Chemical Corp. |
Chemicals | 9,280 | 3,062,680 | |||||||||||
Naver Corp. |
Internet Software & Services | 5,120 | 3,330,336 | |||||||||||
S-1 Corp. |
Commercial Services & Supplies | 13,568 | 1,056,677 | |||||||||||
S-Oil Corp. |
Oil, Gas & Consumable Fuels | 14,016 | 1,560,257 | |||||||||||
Samsung Electronics Co. Ltd. |
Technology Hardware, Storage & Peripherals | 1,856 | 4,154,873 | |||||||||||
SK Hynix Inc. |
Semiconductors & Semiconductor Equipment | 80,640 | 5,836,693 | |||||||||||
SK Telecom Co. Ltd. |
Wireless Telecommunication Services | 13,120 | 2,921,028 | |||||||||||
|
|
|||||||||||||
58,649,419 | ||||||||||||||
|
|
|||||||||||||
Taiwan 13.0% | ||||||||||||||
Advantech Co. Ltd. |
Technology Hardware, Storage & Peripherals | 208,194 | 1,462,384 | |||||||||||
Asustek Computer Inc. |
Technology Hardware, Storage & Peripherals | 384,000 | 3,140,483 | |||||||||||
Catcher Technology Co. Ltd. |
Technology Hardware, Storage & Peripherals | 384,000 | 3,735,655 | |||||||||||
Chicony Electronics Co. Ltd. |
Technology Hardware, Storage & Peripherals | 385,770 | 915,956 | |||||||||||
Chunghwa Telecom Co. Ltd. |
Diversified Telecommunication Services | 1,024,000 | 3,528,822 | |||||||||||
Eclat Textile Co. Ltd. |
Textiles, Apparel & Luxury Goods | 128,280 | 1,592,713 | |||||||||||
Far EasTone Telecommunications Co. Ltd. |
Wireless Telecommunication Services | 1,088,000 | 2,604,828 | |||||||||||
Feng Tay Enterprise Co. Ltd. |
Textiles, Apparel & Luxury Goods | 256,800 | 1,168,658 | |||||||||||
Formosa Petrochemical Corp. |
Oil, Gas & Consumable Fuels | 576,000 | 2,013,455 | |||||||||||
Foxconn Technology Co. Ltd. |
Technology Hardware, Storage & Peripherals | 448,200 | 1,308,063 | |||||||||||
Highwealth Construction Corp. |
Real Estate Management & Development | 576,000 | 780,689 | |||||||||||
Hon Hai Precision Industry Co. Ltd. |
Electronic Equipment, Instruments & Components | 1,344,000 | 4,742,382 | |||||||||||
Largan Precision Co. Ltd. |
Electronic Equipment, Instruments & Components | 24,000 | 4,254,056 | |||||||||||
Micro-Star International Co. Ltd. |
Technology Hardware, Storage & Peripherals | 256,000 | 553,806 | |||||||||||
Nanya Technology Corp. |
Semiconductors & Semiconductor Equipment | 384,000 | 1,092,837 | |||||||||||
Nien Made Enterprise Co. Ltd. |
Household Durables | 64,000 | 656,378 | |||||||||||
Novatek Microelectronics Corp. Ltd. |
Semiconductors & Semiconductor Equipment | 448,000 | 1,691,597 | |||||||||||
Phison Electronics Corp. |
Semiconductors & Semiconductor Equipment | 128,000 | 1,519,588 | |||||||||||
President Chain Store Corp. |
Food & Staples Retailing | 384,000 | 3,222,794 | |||||||||||
Realtek Semiconductor Corp. |
Semiconductors & Semiconductor Equipment | 256,000 | 899,090 | |||||||||||
Ruentex Industries Ltd. |
Textiles, Apparel & Luxury Goods | 320,000 | 478,037 | |||||||||||
Siliconware Precision Industries Co. |
Semiconductors & Semiconductor Equipment | 1,536,000 | 2,454,135 | |||||||||||
Taiwan Mobile Co. Ltd. |
Wireless Telecommunication Services | 960,000 | 3,434,903 | |||||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. |
Semiconductors & Semiconductor Equipment | 576,000 | 4,112,386 | |||||||||||
Transcend Information Inc. |
Technology Hardware, Storage & Peripherals | 192,000 | 548,318 | |||||||||||
Vanguard International Semiconductor Corp. |
Semiconductors & Semiconductor Equipment | 640,000 | 1,105,923 | |||||||||||
|
|
|||||||||||||
53,017,936 | ||||||||||||||
|
|
|||||||||||||
Thailand 3.4% | ||||||||||||||
Advanced Info Service PCL, NVDR |
Wireless Telecommunication Services | 806,400 | 4,618,363 | |||||||||||
BEC World PCL, NVDR |
Media | 800,000 | 391,004 | |||||||||||
Bumrungrad Hospital PCL, NVDR |
Health Care Providers & Services | 204,800 | 1,320,300 | |||||||||||
Central Pattana PCL, NVDR |
Real Estate Management & Development | 742,400 | 1,736,348 | |||||||||||
Delta Electronics Thailand PCL, NVDR |
Electronic Equipment, Instruments & Components | 371,200 | 971,130 | |||||||||||
Glow Energy PCL, NVDR |
Independent Power and Renewable Electricity Producers | 140,800 | 376,804 | |||||||||||
KCE Electronics PCL, NVDR |
Electronic Equipment, Instruments & Components | 128,000 | 383,808 | |||||||||||
The Siam Cement PCL, NVDR |
Construction Materials | 185,600 | 2,782,609 | |||||||||||
Thai Oil PCL, NVDR |
Oil, Gas & Consumable Fuels | 441,600 | 1,224,827 | |||||||||||
|
|
|||||||||||||
13,805,193 | ||||||||||||||
|
|
28 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ Emerging Markets ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks (continued) | ||||||||||||||
Turkey 2.9% | ||||||||||||||
Aselsan Elektronik Sanayi ve Ticaret AS |
Aerospace & Defense | 61,696 | $ | 456,288 | ||||||||||
BIM Birlesik Magazalar AS |
Food & Staples Retailing | 151,680 | 3,167,020 | |||||||||||
Eregli Demir ve Celik Fabrikalari AS |
Metals & Mining | 946,816 | 2,058,122 | |||||||||||
Ford Otomotiv Sanayi AS |
Automobiles | 49,472 | 634,381 | |||||||||||
Petkim Petrokimya Holding AS |
Chemicals | 308,160 | 518,207 | |||||||||||
TAV Havalimanlari Holding AS |
Transportation Infrastructure | 113,472 | 563,196 | |||||||||||
Tofas Turk Otomobil Fabrikasi AS |
Automobiles | 81,728 | 709,699 | |||||||||||
Tupras-Turkiye Petrol Rafinerileri AS |
Oil, Gas & Consumable Fuels | 84,352 | 2,884,397 | |||||||||||
Turkiye Is Bankasi, C |
Banks | 402,688 | 767,758 | |||||||||||
|
|
|||||||||||||
11,759,068 | ||||||||||||||
|
|
|||||||||||||
United Arab Emirates 2.2% | ||||||||||||||
Aldar Properties PJSC |
Real Estate Management & Development | 2,084,992 | 1,322,759 | |||||||||||
Damac Properties Dubai Co. PJSC |
Real Estate Management & Development | 792,832 | 820,324 | |||||||||||
Dubai Islamic Bank PJSC |
Banks | 414,784 | 683,279 | |||||||||||
Emirates Telecommunications Group Co. PJSC |
Diversified Telecommunication Services | 787,840 | 3,711,116 | |||||||||||
First Abu Dhabi Bank PJSC |
Banks | 870,382 | 2,417,300 | |||||||||||
|
|
|||||||||||||
8,954,778 | ||||||||||||||
|
|
|||||||||||||
Total Common Stocks |
385,017,398 | |||||||||||||
|
|
|||||||||||||
Management Investment Companies 2.8% | ||||||||||||||
India 2.8% | ||||||||||||||
iShares MSCI India ETF |
Diversified Financial Services | 198,080 | 6,506,928 | |||||||||||
WisdomTree India Earnings ETF |
Diversified Financial Services | 196,672 | 4,950,234 | |||||||||||
|
|
|||||||||||||
Total Management Investment Companies |
11,457,162 | |||||||||||||
|
|
|||||||||||||
Preferred Stocks 2.0% | ||||||||||||||
Colombia 0.1% | ||||||||||||||
c | Grupo de Inversiones Surameric SA, 1.498%, pfd. |
Diversified Financial Services | 26,496 | 362,515 | ||||||||||
|
|
|||||||||||||
Russia 0.8% | ||||||||||||||
Surgutneftegas OAO, 2.029%, pfd. |
Oil, Gas & Consumable Fuels | 4,127,168 | 2,119,962 | |||||||||||
Transneft PJSC, 4.604%, pfd. |
Oil, Gas & Consumable Fuels | 320 | 986,839 | |||||||||||
|
|
|||||||||||||
3,106,801 | ||||||||||||||
|
|
|||||||||||||
South Korea 1.1% | ||||||||||||||
c | Hyundai Motor Co., 4.327%, pfd. |
Automobiles | 14,912 | 1,218,635 | ||||||||||
c | Hyundai Motor Co., 4.000%, pfd., 2 |
Automobiles | 23,936 | 2,142,087 | ||||||||||
LG Chem Ltd., 1.992%, pfd. |
Chemicals | 3,200 | 708,255 | |||||||||||
c | Samsung Electronics Co., Ltd., 2.015%, pfd. |
Technology Hardware, Storage & Peripherals | 256 | 460,883 | ||||||||||
|
|
|||||||||||||
4,529,860 | ||||||||||||||
|
|
|||||||||||||
Total Preferred Stocks (Cost $7,347,505) |
7,999,176 | |||||||||||||
|
|
|||||||||||||
Total Investments |
404,473,736 | |||||||||||||
Other Assets, less Liabilities 0.4% |
1,428,318 | |||||||||||||
|
|
|||||||||||||
Net Assets 100.0% |
$ | 405,902,054 | ||||||||||||
|
|
See Abbreviations on page 69.
aNon-income producing.
bSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption registration. These securities have been deemed liquid under guidelines approved by the Fund’s Board of Trustees. At September 30, 2017, the aggregate value of these securities was $4,893,149, representing 1.2% of net assets.
cVariable rate securities. The rate shown represents the yield at period end.
libertyshares.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 29 |
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin LibertyQ Global Dividend ETF
Six Months Ended September 30, 2017 (unaudited) |
Year Ended March 31, 2017a |
|||||||
Per share operating performance (for a share outstanding throughout the period) |
||||||||
Net asset value, beginning of period |
$ | 27.31 | $ | 25.43 | ||||
|
|
|||||||
Income from investment operationsb: | ||||||||
Net investment incomec |
0.44 | 0.67 | ||||||
Net realized and unrealized gains (losses) |
0.99 | 1.79 | ||||||
|
|
|||||||
Total from investment operations |
1.43 | 2.46 | ||||||
|
|
|||||||
Less distributions from net investment income |
(0.62 | ) | (0.58 | ) | ||||
|
|
|||||||
Net asset value, end of period |
$ | 28.12 | $ | 27.31 | ||||
|
|
|||||||
Total returnd |
5.25% | 9.79% | ||||||
Ratios to average net assetse | ||||||||
Expenses before waiver and payments by affiliates |
0.97% | 0.98% | ||||||
Expenses net of waiver and payments by affiliates |
0.45% | 0.45% | ||||||
Net investment income |
3.16% | 3.11% | ||||||
Supplemental data | ||||||||
Net assets, end of period (000’s) |
$16,870 | $27,306 | ||||||
Portfolio turnover ratef |
23.62% | 13.38% |
aFor the period June 1, 2016 (commencement of operations) to March 31, 2017.
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 of 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 excludes the value of portfolio securities received or delivered as a result of processing capital share transactions in Creation Units, if any.
30 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
Statement of Investments, September 30, 2017 (unaudited)
Franklin LibertyQ Global Dividend ETF
Industry | Shares | Value | ||||||||||||
Common Stocks 97.0% | ||||||||||||||
Australia 9.5% | ||||||||||||||
Amcor Ltd. |
Containers & Packaging | 14,124 | $ | 168,563 | ||||||||||
Challenger Ltd. |
Diversified Financial Services | 7,275 | 71,069 | |||||||||||
Commonwealth Bank of Australia |
Banks | 6,264 | 369,857 | |||||||||||
Flight Centre Travel Group Ltd. |
Hotels, Restaurants & Leisure | 795 | 28,077 | |||||||||||
Macquarie Group Ltd. |
Capital Markets | 2,889 | 206,102 | |||||||||||
Wesfarmers Ltd. |
Food & Staples Retailing | 11,205 | 363,374 | |||||||||||
Westpac Banking Corp. |
Banks | 15,867 | 397,405 | |||||||||||
|
|
|||||||||||||
1,604,447 | ||||||||||||||
|
|
|||||||||||||
Belgium 0.4% | ||||||||||||||
Proximus SADP |
Diversified Telecommunication Services | 2,103 | 72,484 | |||||||||||
|
|
|||||||||||||
Brazil 2.3% | ||||||||||||||
Ambev SA |
Beverages | 58,280 | 387,655 | |||||||||||
|
|
|||||||||||||
Canada 10.0% | ||||||||||||||
Bank of Nova Scotia |
Banks | 5,925 | 379,950 | |||||||||||
Canadian Imperial Bank of Commerce |
Banks | 4,245 | 370,548 | |||||||||||
IGM Financial Inc. |
Capital Markets | 1,335 | 44,769 | |||||||||||
Royal Bank of Canada |
Banks | 4,809 | 371,216 | |||||||||||
TELUS Corp. |
Diversified Telecommunication Services | 2,058 | 73,852 | |||||||||||
The Toronto-Dominion Bank |
Banks | 7,071 | 397,184 | |||||||||||
Vermilion Energy Inc. |
Oil, Gas & Consumable Fuels | 1,551 | 55,001 | |||||||||||
|
|
|||||||||||||
1,692,520 | ||||||||||||||
|
|
|||||||||||||
Denmark 0.2% | ||||||||||||||
Tryg AS |
Insurance | 1,164 | 26,887 | |||||||||||
|
|
|||||||||||||
Finland 1.4% | ||||||||||||||
Elisa OYJ |
Diversified Telecommunication Services | 1,278 | 55,025 | |||||||||||
Kone OYJ, B |
Machinery | 2,316 | 122,661 | |||||||||||
Nokian Renkaat OYJ |
Auto Components | 1,437 | 63,927 | |||||||||||
|
|
|||||||||||||
241,613 | ||||||||||||||
|
|
|||||||||||||
France 2.1% | ||||||||||||||
CNP Assurances |
Insurance | 1,335 | 31,296 | |||||||||||
Sanofi |
Pharmaceuticals | 3,336 | 331,320 | |||||||||||
|
|
|||||||||||||
362,616 | ||||||||||||||
|
|
|||||||||||||
Germany 1.9% | ||||||||||||||
Deutsche Boerse AG |
Capital Markets | 1,590 | 172,387 | |||||||||||
Hannover Rueck SE |
Insurance | 450 | 54,236 | |||||||||||
Hugo Boss AG |
Textiles, Apparel & Luxury Goods | 1,023 | 90,209 | |||||||||||
|
|
|||||||||||||
316,832 | ||||||||||||||
|
|
|||||||||||||
Hong Kong 0.4% | ||||||||||||||
Sands China Ltd. |
Hotels, Restaurants & Leisure | 13,200 | 68,698 | |||||||||||
|
|
|||||||||||||
Japan 4.0% | ||||||||||||||
Daito Trust Construction Co. Ltd. |
Real Estate Management & Development | 1,400 | 254,963 | |||||||||||
NTT DoCoMo Inc. |
Wireless Telecommunication Services | 13,500 | 308,282 | |||||||||||
Resona Holdings Inc. |
Banks | 22,200 | 113,993 | |||||||||||
|
|
|||||||||||||
677,238 | ||||||||||||||
|
|
|||||||||||||
Qatar 0.5% | ||||||||||||||
Qatar National Bank SAQ |
Banks | 2,544 | 85,248 | |||||||||||
|
|
|||||||||||||
Singapore 1.6% | ||||||||||||||
SATS Ltd. |
Transportation Infrastructure | 6,900 | 23,424 | |||||||||||
Singapore Telecommunications Ltd. |
Diversified Telecommunication Services | 87,900 | 238,140 | |||||||||||
|
|
|||||||||||||
261,564 | ||||||||||||||
|
|
libertyshares.com | Semiannual Report | 31 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ Global Dividend ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks (continued) | ||||||||||||||
South Africa 2.2% | ||||||||||||||
Barclays Africa Group Ltd. |
Banks | 5,022 | $ | 51,698 | ||||||||||
FirstRand Ltd. |
Diversified Financial Services | 33,579 | 129,392 | |||||||||||
Rand Merchant Investment Holdings Ltd. |
Insurance | 3,984 | 12,236 | |||||||||||
RMB Holdings Ltd. |
Diversified Financial Services | 9,813 | 46,149 | |||||||||||
Sanlam Ltd. |
Insurance | 12,201 | 61,138 | |||||||||||
The Spar Group Ltd. |
Food & Staples Retailing | 2,604 | 32,222 | |||||||||||
Truworths International Ltd. |
Specialty Retail | 6,672 | 38,172 | |||||||||||
|
|
|||||||||||||
371,007 | ||||||||||||||
|
|
|||||||||||||
Spain 0.5% | ||||||||||||||
Red Electrica Corp. SA |
Electric Utilities | 3,699 | 77,751 | |||||||||||
|
|
|||||||||||||
Sweden 3.7% | ||||||||||||||
Atlas Copco AB |
Machinery | 5,013 | 193,952 | |||||||||||
Hennes & Mauritz AB, B |
Specialty Retail | 13,479 | 348,438 | |||||||||||
Skanska AB, B |
Construction & Engineering | 3,705 | 85,653 | |||||||||||
|
|
|||||||||||||
628,043 | ||||||||||||||
|
|
|||||||||||||
Switzerland 5.5% | ||||||||||||||
Novartis AG |
Pharmaceuticals | 4,074 | 349,044 | |||||||||||
Roche Holding AG |
Pharmaceuticals | 1,200 | 306,573 | |||||||||||
Zurich Insurance Group AG |
Insurance | 879 | 268,351 | |||||||||||
|
|
|||||||||||||
923,968 | ||||||||||||||
|
|
|||||||||||||
Taiwan 0.3% | ||||||||||||||
Feng Tay Enterprise Co. Ltd. |
Textiles, Apparel & Luxury Goods | 6,600 | 30,036 | |||||||||||
Phison Electronics Corp. |
Semiconductors & Semiconductor Equipment | 1,000 | 11,872 | |||||||||||
Vanguard International Semiconductor Corp. |
Semiconductors & Semiconductor Equipment | 9,000 | 15,522 | |||||||||||
|
|
|||||||||||||
57,430 | ||||||||||||||
|
|
|||||||||||||
United Arab Emirates 0.1% | ||||||||||||||
Aldar Properties PJSC |
Real Estate Management & Development | 32,058 | 20,338 | |||||||||||
|
|
|||||||||||||
United Kingdom 14.1% | ||||||||||||||
BAE Systems PLC |
Aerospace & Defense | 26,754 | 226,674 | |||||||||||
British American Tobacco PLC |
Tobacco | 4,689 | 293,915 | |||||||||||
BT Group PLC |
Diversified Telecommunication Services | 85,524 | 325,756 | |||||||||||
GlaxoSmithKline PLC |
Pharmaceuticals | 15,372 | 306,986 | |||||||||||
IMI PLC |
Machinery | 3,153 | 52,582 | |||||||||||
Marks & Spencer Group PLC |
Multiline Retail | 17,340 | 82,216 | |||||||||||
Relx NV |
Professional Services | 12,717 | 270,763 | |||||||||||
Smiths Group PLC |
Industrial Conglomerates | 3,471 | 73,439 | |||||||||||
Tate & Lyle PLC |
Food Products | 3,681 | 32,027 | |||||||||||
Unilever NV, IDR |
Personal Products | 5,985 | 354,056 | |||||||||||
Unilever PLC |
Personal Products | 6,123 | 354,802 | |||||||||||
|
|
|||||||||||||
2,373,216 | ||||||||||||||
|
|
|||||||||||||
United States 36.3% | ||||||||||||||
Altria Group Inc. |
Tobacco | 4,644 | 294,523 | |||||||||||
Bristol-Myers Squibb Co. |
Pharmaceuticals | 6,123 | 390,280 | |||||||||||
Cincinnati Financial Corp. |
Insurance | 1,116 | 85,452 | |||||||||||
Clorox Co. |
Household Products | 1,908 | 251,684 | |||||||||||
Darden Restaurants Inc. |
Hotels, Restaurants & Leisure | 1,395 | 109,898 | |||||||||||
Eli Lilly & Co. |
Pharmaceuticals | 4,248 | 363,374 | |||||||||||
Garmin Ltd. |
Household Durables | 984 | 53,107 | |||||||||||
General Mills Inc. |
Food Products | 3,579 | 185,249 | |||||||||||
H&R Block Inc. |
Diversified Consumer Services | 2,130 | 56,402 | |||||||||||
Hasbro Inc. |
Leisure Equipment & Products | 1,227 | 119,841 | |||||||||||
Intel Corp. |
Semiconductors & Semiconductor Equipment | 9,510 | 362,141 |
32 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ Global Dividend ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks (continued) | ||||||||||||||
United States (continued) | ||||||||||||||
Johnson & Johnson |
Pharmaceuticals | 2,595 | $ | 337,376 | ||||||||||
Kimberly-Clark Corp. |
Household Products | 2,631 | 309,616 | |||||||||||
Las Vegas Sands Corp. |
Hotels, Restaurants & Leisure | 2,487 | 159,566 | |||||||||||
Leggett & Platt Inc. |
Household Durables | 2,079 | 99,231 | |||||||||||
Lockheed Martin Corp. |
Aerospace & Defense | 1,209 | 375,141 | |||||||||||
LyondellBasell Industries NV, A |
Chemicals | 3,177 | 314,682 | |||||||||||
Maxim Integrated Products Inc. |
Semiconductors & Semiconductor Equipment | 3,657 | 174,475 | |||||||||||
McDonald’s Corp. |
Hotels, Restaurants & Leisure | 2,229 | 349,240 | |||||||||||
Merck & Co. Inc. |
Pharmaceuticals | 5,181 | 331,739 | |||||||||||
Microchip Technology Inc. |
Semiconductors & Semiconductor Equipment | 1,689 | 151,638 | |||||||||||
Paychex Inc. |
IT Services | 4,893 | 293,384 | |||||||||||
Philip Morris International Inc. |
Tobacco | 2,868 | 318,377 | |||||||||||
The Procter & Gamble Co. |
Household Products | 3,813 | 346,907 | |||||||||||
Seagate Technology PLC |
Technology Hardware, Storage & Peripherals | 442 | 14,661 | |||||||||||
Sysco Corp. |
Food & Staples Retailing | 4,959 | 267,538 | |||||||||||
|
|
|||||||||||||
6,115,522 | ||||||||||||||
|
|
|||||||||||||
Total Common Stocks (Cost $14,962,667) |
16,365,077 | |||||||||||||
|
|
|||||||||||||
Preferred Stocks 2.5% | ||||||||||||||
Brazil 2.5% | ||||||||||||||
a | Itau Unibanco Holding SA, 4.208%, pfd. |
Banks | 30,600 | 419,364 | ||||||||||
|
|
|||||||||||||
Total Investments (Cost $15,190,315) 99.5% |
16,784,441 | |||||||||||||
Other Assets, less Liabilities 0.5% |
85,707 | |||||||||||||
|
|
|||||||||||||
Net Assets 100.0% |
$ | 16,870,148 | ||||||||||||
|
|
See Abbreviations on page 69.
aVariable rate security. The rate shown represents the yield at period end.
libertyshares.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 33 |
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin LibertyQ Global Equity ETF
Six Months Ended September 30, 2017 (unaudited) |
Year Ended March 31, 2017a |
|||||||
Per share operating performance (for a share outstanding throughout the period) |
||||||||
Net asset value, beginning of period |
$ | 27.18 | $ | 25.32 | ||||
|
|
|||||||
Income from investment operationsb: | ||||||||
Net investment incomec |
0.41 | 0.56 | ||||||
Net realized and unrealized gains (losses) |
1.93 | 1.92 | ||||||
|
|
|||||||
Total from investment operations |
2.34 | 2.48 | ||||||
|
|
|||||||
Less distributions from net investment income |
(0.32 | ) | (0.62 | ) | ||||
|
|
|||||||
Net asset value, end of period |
$ | 29.20 | $ | 27.18 | ||||
|
|
|||||||
Total returnd |
8.68% | 9.95% | ||||||
Ratios to average net assetse | ||||||||
Expenses before waiver and payments by affiliates |
1.25% | 1.04% | ||||||
Expenses net of waiver and payments by affiliates |
0.35% | 0.35% | ||||||
Net investment income |
2.94% | 2.60% | ||||||
Supplemental data | ||||||||
Net assets, end of period (000’s) |
$17,522 | $21,744 | ||||||
Portfolio turnover ratef |
15.09% | 13.84% |
aFor the period June 1, 2016 (commencement of operations) to March 31, 2017.
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 of 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 excludes the value of portfolio securities received or delivered as a result of processing capital share transactions in Creation Units, if any.
34 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
Statement of Investments, September 30, 2017 (unaudited)
Franklin LibertyQ Global Equity ETF
Industry | Shares | Value | ||||||||||||
Common Stocks and Other Equity Interests 98.1% | ||||||||||||||
Australia 4.1% | ||||||||||||||
AGL Energy Ltd. |
Multi-Utilities | 1,206 | $ | 22,115 | ||||||||||
Amcor Ltd. |
Containers & Packaging | 2,325 | 27,748 | |||||||||||
Aristocrat Leisure Ltd. |
Hotels, Restaurants & Leisure | 1,116 | 18,389 | |||||||||||
Aurizon Holdings Ltd. |
Road & Rail | 3,441 | 13,230 | |||||||||||
Australia & New Zealand Banking Group Ltd. |
Banks | 3,339 | 77,550 | |||||||||||
Bluescope Steel Ltd. |
Metals & Mining | 633 | 5,449 | |||||||||||
Caltex Australia Ltd. |
Oil, Gas & Consumable Fuels | 498 | 12,543 | |||||||||||
Cimic Group Ltd. |
Construction & Engineering | 162 | 5,620 | |||||||||||
Cochlear Ltd. |
Health Care Equipment & Supplies | 156 | 19,488 | |||||||||||
Crown Resorts Ltd. |
Hotels, Restaurants & Leisure | 519 | 4,606 | |||||||||||
CSL Ltd. |
Biotechnology | 1,017 | 106,899 | |||||||||||
Dexus |
Equity Real Estate Investment Trusts (REITs | ) | 2,784 | 20,752 | ||||||||||
Flight Centre Travel Group Ltd. |
Hotels, Restaurants & Leisure | 117 | 4,132 | |||||||||||
Fortescue Metals Group Ltd. |
Metals & Mining | 2,421 | 9,764 | |||||||||||
Goodman Group |
Equity Real Estate Investment Trusts (REITs | ) | 2,889 | 18,679 | ||||||||||
GPT Group |
Equity Real Estate Investment Trusts (REITs | ) | 6,474 | 25,196 | ||||||||||
Harvey Norman Holdings Ltd. |
Multiline Retail | 1,728 | 5,261 | |||||||||||
James Hardie Industries PLC, CDI |
Construction Materials | 513 | 7,133 | |||||||||||
Macquarie Group Ltd. |
Capital Markets | 429 | 30,605 | |||||||||||
Medibank Private Ltd. |
Insurance | 6,564 | 15,039 | |||||||||||
Mirvac Group |
Equity Real Estate Investment Trusts (REITs | ) | 9,396 | 16,883 | ||||||||||
National Australia Bank Ltd. |
Banks | 2,262 | 55,909 | |||||||||||
Newcrest Mining Ltd. |
Metals & Mining | 957 | 15,784 | |||||||||||
Qantas Airways Ltd. |
Airlines | 1,086 | 4,968 | |||||||||||
REA Group Ltd. |
Media | 117 | 6,151 | |||||||||||
Sonic Healthcare Ltd. |
Health Care Providers & Services | 696 | 11,419 | |||||||||||
Tabcorp Holdings Ltd. |
Hotels, Restaurants & Leisure | 1,512 | 5,066 | |||||||||||
Tatts Group Ltd. |
Hotels, Restaurants & Leisure | 2,868 | 8,956 | |||||||||||
TPG Telecom Ltd. |
Diversified Telecommunication Services | 1,626 | 6,213 | |||||||||||
Vicinity Centres |
Equity Real Estate Investment Trusts (REITs | ) | 12,333 | 25,741 | ||||||||||
Wesfarmers Ltd. |
Food & Staples Retailing | 2,148 | 69,659 | |||||||||||
Woolworths Ltd. |
Food & Staples Retailing | 2,334 | 46,169 | |||||||||||
|
|
|||||||||||||
723,116 | ||||||||||||||
|
|
|||||||||||||
Austria 0.1% | ||||||||||||||
OMV AG |
Oil, Gas & Consumable Fuels | 243 | 14,160 | |||||||||||
|
|
|||||||||||||
Belgium 0.1% | ||||||||||||||
Colruyt SA |
Food & Staples Retailing | 153 | 7,838 | |||||||||||
Proximus SADP |
Diversified Telecommunication Services | 312 | 10,754 | |||||||||||
|
|
|||||||||||||
18,592 | ||||||||||||||
|
|
|||||||||||||
Bermuda 0.1% | ||||||||||||||
Axis Capital Holdings Ltd. |
Insurance | 195 | 11,175 | |||||||||||
|
|
|||||||||||||
Brazil 0.7% | ||||||||||||||
Ambev SA |
Beverages | 9,300 | 61,860 | |||||||||||
BB Seguridade Participacoes SA |
Insurance | 1,614 | 14,609 | |||||||||||
Cielo SA |
IT Services | 2,152 | 14,954 | |||||||||||
Companhia de Saneamento Basico do Estado de Sao Paulo |
Water Utilities | 300 | 3,156 | |||||||||||
EDP-Energias do Brasil SA |
Electric Utilities | 621 | 2,972 | |||||||||||
Engie Brasil SA |
Independent Power and Renewable Electricity Producers | 309 | 3,541 | |||||||||||
Fibria Celulose SA |
Paper & Forest Products | 325 | 4,403 | |||||||||||
Odontoprev SA |
Health Care Providers & Services | 516 | 2,517 | |||||||||||
Qualicorp SA |
Health Care Providers & Services | 362 | 4,337 | |||||||||||
Transmissora Alianca de Energia Eletrica SA |
Electric Utilities | 300 | 2,110 | |||||||||||
|
|
|||||||||||||
114,459 | ||||||||||||||
|
|
libertyshares.com | Semiannual Report | 35 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ Global Equity ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||
Canada 3.8% | ||||||||||||||
Agrium Inc. |
Chemicals | 228 | $ | 24,378 | ||||||||||
Alimentation Couche-Tard Inc., B |
Food & Staples Retailing | 750 | 34,122 | |||||||||||
BCE Inc. |
Diversified Telecommunication Services | 303 | 14,163 | |||||||||||
Canadian Imperial Bank of Commerce |
Banks | 597 | 52,112 | |||||||||||
Canadian National Railway Co. |
Road & Rail | 1,275 | 105,393 | |||||||||||
CCL Industries Inc., B |
Containers & Packaging | 270 | 13,035 | |||||||||||
CI Financial Corp. |
Capital Markets | 456 | 9,950 | |||||||||||
Constellation Software Inc. |
Software | 48 | 26,127 | |||||||||||
Dollarama Inc. |
Multiline Retail | 243 | 26,528 | |||||||||||
First Capital Realty Inc. |
Real Estate Management & Development | 198 | 3,116 | |||||||||||
Gildan Activewear Inc. |
Textiles, Apparel & Luxury Goods | 453 | 14,123 | |||||||||||
H&R Real Estate Investment Trust |
Equity Real Estate Investment Trusts (REITs | ) | 1,053 | 18,136 | ||||||||||
The Jean Coutu Group (PJC) Inc. |
Food & Staples Retailing | 156 | 3,031 | |||||||||||
Linamar Corp. |
Auto Components | 93 | 5,662 | |||||||||||
Magna International Inc. |
Auto Components | 789 | 42,010 | |||||||||||
Metro Inc., A |
Food & Staples Retailing | 456 | 15,645 | |||||||||||
RioCan REIT |
Equity Real Estate Investment Trusts (REITs | ) | 1,314 | 25,142 | ||||||||||
Rogers Communications Inc., B |
Wireless Telecommunication Services | 666 | 34,262 | |||||||||||
Saputo Inc. |
Food Products | 471 | 16,265 | |||||||||||
Shaw Communications Inc. |
Media | 762 | 17,499 | |||||||||||
Smart REIT |
Equity Real Estate Investment Trusts (REITs | ) | 924 | 21,751 | ||||||||||
TELUS Corp. |
Diversified Telecommunication Services | 396 | 14,211 | |||||||||||
The Toronto-Dominion Bank |
Banks | 2,160 | 121,329 | |||||||||||
|
|
|||||||||||||
657,990 | ||||||||||||||
|
|
|||||||||||||
Chile 0.1% | ||||||||||||||
Aguas Andinas SA, A |
Water Utilities | 6,588 | 4,197 | |||||||||||
Enel Americas SA |
Electric Utilities | 51,675 | 10,596 | |||||||||||
Enel Chile SA |
Electric Utilities | 35,553 | 4,341 | |||||||||||
Enel Generacion Chile SA |
Independent Power and Renewable Electricity Producers | 3,927 | 3,434 | |||||||||||
|
|
|||||||||||||
22,568 | ||||||||||||||
|
|
|||||||||||||
China 3.5% | ||||||||||||||
AAC Technologies Holdings Inc. |
Electronic Equipment, Instruments & Components | 1,500 | 25,196 | |||||||||||
Agricultural Bank of China Ltd., H |
Banks | 42,000 | 18,820 | |||||||||||
Bank of China Ltd., H |
Banks | 135,000 | 66,543 | |||||||||||
Bank of Communications Co. Ltd. |
Banks | 9,000 | 6,568 | |||||||||||
China Construction Bank Corp., H |
Banks | 144,000 | 119,467 | |||||||||||
China Everbright Bank Co. Ltd., H |
Banks | 9,000 | 4,160 | |||||||||||
China Mobile Ltd. |
Wireless Telecommunication Services | 10,500 | 106,402 | |||||||||||
China Resources Power Holdings Co. Ltd. |
Independent Power and Renewable Electricity Producers | 6,000 | 10,831 | |||||||||||
Chongqing Changan Automobile Co. Ltd., B |
Automobiles | 3,000 | 3,968 | |||||||||||
Chongqing Rural Commercial Bank Co. Ltd., H |
Banks | 9,000 | 5,704 | |||||||||||
Country Garden Holdings Co. Ltd. |
Real Estate Management & Development | 9,000 | 14,311 | |||||||||||
Dongfeng Motor Group Co. Ltd., H |
Automobiles | 6,000 | 7,928 | |||||||||||
Fuyao Group Glass Industries Co. Ltd., H |
Auto Components | 1,200 | 4,356 | |||||||||||
Great Wall Motor Co. Ltd., H |
Automobiles | 6,000 | 7,375 | |||||||||||
Guangdong Investment Ltd. |
Water Utilities | 6,000 | 8,557 | |||||||||||
Huaneng Power International Inc., H |
Independent Power and Renewable Electricity Producers | 6,000 | 3,710 | |||||||||||
Industrial and Commercial Bank of China Ltd., H |
Banks | 126,000 | 93,564 | |||||||||||
Longfor Properties Co. Ltd. |
Real Estate Management & Development | 4,500 | 11,350 | |||||||||||
NetEase Inc., ADR |
Internet Software & Services | 120 | 31,657 | |||||||||||
Sino-Ocean Land Holdings Ltd. |
Real Estate Management & Development | 10,500 | 7,004 | |||||||||||
Sinopec Engineering Group Co. Ltd. |
Construction & Engineering | 3,000 | 2,646 | |||||||||||
Sinopec Shanghai Petrochemical Co. Ltd., H |
Chemicals | 6,000 | 3,572 |
36 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ Global Equity ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||
China (continued) | ||||||||||||||
Sunac China Holdings Ltd. |
Real Estate Management & Development | 3,000 | $ | 13,731 | ||||||||||
Sunny Optical Technology Group Co. Ltd. |
Electronic Equipment, Instruments & Components | 1,000 | 15,901 | |||||||||||
a | Yum China Holdings Inc. |
Hotels, Restaurants & Leisure | 405 | 16,188 | ||||||||||
a | YY Inc., ADR |
Internet Software & Services | 42 | 3,645 | ||||||||||
|
|
|||||||||||||
613,154 | ||||||||||||||
|
|
|||||||||||||
Colombia 0.0%† | ||||||||||||||
Grupo Inversiones Suramericcana SA. |
Diversified Financial Services | 99 | 1,378 | |||||||||||
|
|
|||||||||||||
Czech Republic 0.0%† | ||||||||||||||
Moneta Money Bank AS |
Banks | 236 | 831 | |||||||||||
O2 Czech Republic AS |
Diversified Telecommunication Services | 249 | 3,058 | |||||||||||
|
|
|||||||||||||
3,889 | ||||||||||||||
|
|
|||||||||||||
Denmark 1.2% | ||||||||||||||
Coloplast AS, B |
Health Care Equipment & Supplies | 291 | 23,623 | |||||||||||
Novo Nordisk AS, B |
Pharmaceuticals | 4,080 | 195,094 | |||||||||||
|
|
|||||||||||||
218,717 | ||||||||||||||
|
|
|||||||||||||
Finland 0.4% | ||||||||||||||
Elisa OYJ |
Diversified Telecommunication Services | 252 | 10,850 | |||||||||||
Kone OYJ, B |
Machinery | 618 | 32,731 | |||||||||||
Neste Oil OYJ |
Oil, Gas & Consumable Fuels | 201 | 8,780 | |||||||||||
Nokian Renkaat OYJ |
Auto Components | 285 | 12,679 | |||||||||||
Orion OYJ |
Pharmaceuticals | 288 | 13,367 | |||||||||||
|
|
|||||||||||||
78,407 | ||||||||||||||
|
|
|||||||||||||
France 0.7% | ||||||||||||||
Cie Generale des Etablissements Michelin, B |
Auto Components | 321 | 46,867 | |||||||||||
CNP Assurances |
Insurance | 312 | 7,314 | |||||||||||
Hermes International |
Textiles, Apparel & Luxury Goods | 45 | 22,692 | |||||||||||
SCOR SE |
Insurance | 288 | 12,078 | |||||||||||
Unibail-Rodamco SE |
Equity Real Estate Investment Trusts (REITs | ) | 117 | 28,459 | ||||||||||
|
|
|||||||||||||
117,410 | ||||||||||||||
|
|
|||||||||||||
Germany 0.3% | ||||||||||||||
b | Covestro AG, 144A |
Chemicals | 180 | 15,481 | ||||||||||
Deutsche Lufthansa AG |
Airlines | 447 | 12,424 | |||||||||||
Hugo Boss AG |
Textiles, Apparel & Luxury Goods | 135 | 11,904 | |||||||||||
TUI AG |
Hotels, Restaurants & Leisure | 396 | 6,726 | |||||||||||
|
|
|||||||||||||
46,535 | ||||||||||||||
|
|
|||||||||||||
Hong Kong 1.0% | ||||||||||||||
ASM Pacific Technology Ltd. |
Semiconductors & Semiconductor Equipment | 300 | 4,321 | |||||||||||
CK Infrastructure Holdings Ltd. |
Electric Utilities | 1,500 | 12,905 | |||||||||||
CLP Holdings Ltd. |
Electric Utilities | 3,000 | 30,746 | |||||||||||
Hongkong Land Holdings Ltd. |
Real Estate Management & Development | 1,500 | 10,800 | |||||||||||
Hysan Development Co. Ltd. |
Real Estate Management & Development | 3,000 | 14,115 | |||||||||||
a | I-CABLE Communications Ltd. |
Media | 831 | 27 | ||||||||||
Kerry Properties Ltd. |
Real Estate Management & Development | 1,500 | 6,213 | |||||||||||
Link REIT |
Equity Real Estate Investment Trusts (REITs | ) | 3,000 | 24,313 | ||||||||||
MGM China Holdings Ltd. |
Hotels, Restaurants & Leisure | 2,400 | 5,752 | |||||||||||
NWS Holdings Ltd. |
Industrial Conglomerates | 3,000 | 5,846 | |||||||||||
Sands China Ltd. |
Hotels, Restaurants & Leisure | 4,800 | 24,981 | |||||||||||
Sino Land Co. Ltd. |
Real Estate Management & Development | 6,000 | 10,539 | |||||||||||
The Wharf Holdings Ltd. |
Real Estate Management & Development | 3,000 | 26,733 | |||||||||||
Yue Yuen Industrial Holdings Ltd. |
Textiles, Apparel & Luxury Goods | 1,500 | 5,704 | |||||||||||
|
|
|||||||||||||
182,995 | ||||||||||||||
|
|
libertyshares.com | Semiannual Report | 37 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ Global Equity ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||
Hungary 0.1% | ||||||||||||||
MOL Hungarian Oil and Gas PLC |
Oil, Gas & Consumable Fuels | 672 | $ | 7,672 | ||||||||||
Richter Gedeon Nyrt |
Pharmaceuticals | 228 | 5,683 | |||||||||||
|
|
|||||||||||||
13,355 | ||||||||||||||
|
|
|||||||||||||
Indonesia 0.4% | ||||||||||||||
Hanjaya Mandala Sampoerna Tbk PT |
Tobacco | 37,200 | 10,661 | |||||||||||
PT Telekom Indonesia (Persero) Tbk |
Diversified Telecommunication Services | 102,600 | 35,650 | |||||||||||
Unilever Indonesia Tbk PT |
Household Products | 3,300 | 11,999 | |||||||||||
United Tractors Tbk PT |
Oil, Gas & Consumable Fuels | 3,300 | 7,840 | |||||||||||
|
|
|||||||||||||
66,150 | ||||||||||||||
|
|
|||||||||||||
Israel 0.1% | ||||||||||||||
Azrieli Group Ltd. |
Real Estate Management & Development | 69 | 3,832 | |||||||||||
a | Check Point Software Technologies Ltd. |
Software | 141 | 16,077 | ||||||||||
Mizrahi Tefahot Bank Ltd. |
Banks | 255 | 4,572 | |||||||||||
|
|
|||||||||||||
24,481 | ||||||||||||||
|
|
|||||||||||||
Italy 0.3% | ||||||||||||||
Ferrari NV |
Automobiles | 114 | 12,601 | |||||||||||
c | Poste Italiane SpA, Reg S |
Insurance | 1,218 | 8,971 | ||||||||||
Recordati SpA |
Pharmaceuticals | 96 | 4,426 | |||||||||||
Snam SpA |
Oil, Gas & Consumable Fuels | 4,050 | 19,515 | |||||||||||
|
|
|||||||||||||
45,513 | ||||||||||||||
|
|
|||||||||||||
Japan 4.2% | ||||||||||||||
ABC-Mart Inc. |
Specialty Retail | 300 | 15,831 | |||||||||||
Astellas Pharma Inc. |
Pharmaceuticals | 4,500 | 57,227 | |||||||||||
Bandai Namco Holdings Inc. |
Leisure Equipment & Products | 300 | 10,287 | |||||||||||
Bridgestone Corp. |
Auto Components | 1,200 | 54,433 | |||||||||||
CANON Inc. |
Technology Hardware, Storage & Peripherals | 1,800 | 61,485 | |||||||||||
Concordia Financial Group Ltd. |
Banks | 1,500 | 7,410 | |||||||||||
Daito Trust Construction Co. Ltd. |
Real Estate Management & Development | 200 | 36,423 | |||||||||||
Fuji Heavy Industries Ltd. |
Automobiles | 1,500 | 54,102 | |||||||||||
Hitachi Chemical Co. Ltd. |
Chemicals | 300 | 8,222 | |||||||||||
Hoya Corp. |
Health Care Equipment & Supplies | 600 | 32,381 | |||||||||||
Iida Group Holdings Co. Ltd. |
Household Durables | 300 | 5,346 | |||||||||||
Isuzu Motors Ltd. |
Automobiles | 1,200 | 15,895 | |||||||||||
Japan Airlines Co. Ltd. |
Airlines | 300 | 10,149 | |||||||||||
KDDI Corp. |
Wireless Telecommunication Services | 3,300 | 86,982 | |||||||||||
Kuraray Co. Ltd. |
Chemicals | 900 | 16,822 | |||||||||||
Lawson Inc. |
Food & Staples Retailing | 300 | 19,855 | |||||||||||
Mitsubishi Gas Chemical Co. Inc. |
Chemicals | 300 | 7,028 | |||||||||||
Nippon Telegraph & Telephone Corp. |
Diversified Telecommunication Services | 1,200 | 54,976 | |||||||||||
Nitori Co. Ltd. |
Specialty Retail | 100 | 14,294 | |||||||||||
Nitto Denko Corp. |
Chemicals | 300 | 25,004 | |||||||||||
NTT DoCoMo Inc. |
Wireless Telecommunication Services | 3,000 | 68,507 | |||||||||||
Obayashi Corp. |
Construction & Engineering | 1,200 | 14,381 | |||||||||||
Resona Holdings Inc. |
Banks | 4,500 | 23,107 | |||||||||||
Start Today Co. Ltd. |
Internet & Direct Marketing Retail | 300 | 9,501 | |||||||||||
Sumitomo Rubber Industries Ltd. |
Auto Components | 600 | 10,991 | |||||||||||
Sundrug Co. Ltd. |
Food & Staples Retailing | 300 | 12,420 | |||||||||||
|
|
|||||||||||||
733,059 | ||||||||||||||
|
|
|||||||||||||
Malaysia 0.3% | ||||||||||||||
AirAsia Bhd. |
Airlines | 1,500 | 1,225 | |||||||||||
Astro Malaysia Holdings Bhd. |
Media | 5,100 | 3,406 | |||||||||||
Digi.com Bhd. |
Wireless Telecommunication Services | 8,100 | 9,400 | |||||||||||
Hartalega Holdings Bhd. |
Health Care Equipment & Supplies | 1,500 | 2,472 |
38 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ Global Equity ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||
Malaysia (continued) | ||||||||||||||
Malayan Banking Bhd. |
Banks | 3,600 | $ | 8,125 | ||||||||||
Maxis Bhd. |
Wireless Telecommunication Services | 2,400 | 3,297 | |||||||||||
Petronas Chemicals Group Bhd. |
Chemicals | 5,100 | 8,805 | |||||||||||
Petronas Dagangan Bhd. |
Oil, Gas & Consumable Fuels | 600 | 3,456 | |||||||||||
Westports Holdings Bhd. |
Transportation Infrastructure | 4,800 | 4,331 | |||||||||||
|
|
|||||||||||||
44,517 | ||||||||||||||
|
|
|||||||||||||
Mexico 0.2% | ||||||||||||||
Gruma SAB de CV |
Food Products | 651 | 9,544 | |||||||||||
Grupo Aeroportuario del Pacifico SAB de CV |
Transportation Infrastructure | 633 | 6,498 | |||||||||||
Wal-Mart de Mexico SAB de CV, V |
Food & Staples Retailing | 8,787 | 20,178 | |||||||||||
|
|
|||||||||||||
36,220 | ||||||||||||||
|
|
|||||||||||||
Netherlands 0.1% | ||||||||||||||
Aegon NV |
Insurance | 2,760 | 16,079 | |||||||||||
|
|
|||||||||||||
New Zealand 0.1% | ||||||||||||||
Fletcher Building Ltd. |
Construction Materials | 1,254 | 7,243 | |||||||||||
Spark New Zealand Ltd. |
Diversified Telecommunication Services | 5,160 | 13,615 | |||||||||||
|
|
|||||||||||||
20,858 | ||||||||||||||
|
|
|||||||||||||
Norway 0.3% | ||||||||||||||
a | Marine Harvest ASA |
Food Products | 600 | 11,871 | ||||||||||
Telenor ASA |
Diversified Telecommunication Services | 1,173 | 24,815 | |||||||||||
Yara International ASA |
Chemicals | 306 | 13,712 | |||||||||||
|
|
|||||||||||||
50,398 | ||||||||||||||
|
|
|||||||||||||
Pakistan 0.0%† | ||||||||||||||
MCB Bank Ltd. |
Banks | 1,800 | 3,538 | |||||||||||
Oil & Gas Development Co. Ltd. |
Oil, Gas & Consumable Fuels | 3,000 | 4,224 | |||||||||||
|
|
|||||||||||||
7,762 | ||||||||||||||
|
|
|||||||||||||
Philippines 0.0%† | ||||||||||||||
DMCI Holdings Inc. |
Industrial Conglomerates | 6,300 | 1,935 | |||||||||||
Globe Telecom Inc. |
Wireless Telecommunication Services | 60 | 2,421 | |||||||||||
|
|
|||||||||||||
4,356 | ||||||||||||||
|
|
|||||||||||||
Poland 0.2% | ||||||||||||||
a | PGE Polska Grupa Energetyczna SA |
Electric Utilities | 1,788 | 6,526 | ||||||||||
Polski Koncern Naftowy Orlen SA |
Oil, Gas & Consumable Fuels | 567 | 18,937 | |||||||||||
Polskie Gornictwo Naftowe i Gazownictwo SA |
Oil, Gas & Consumable Fuels | 1,647 | 3,069 | |||||||||||
a | Tauron Polska Energia SA |
Electric Utilities | 1,482 | 1,525 | ||||||||||
|
|
|||||||||||||
30,057 | ||||||||||||||
|
|
|||||||||||||
Qatar 0.1% | ||||||||||||||
Barwa Real Estate Co. |
Real Estate Management & Development | 99 | 872 | |||||||||||
a | The Commercial Bank QSC |
Banks | 2 | 19 | ||||||||||
Doha Bank QSC |
Banks | 380 | 3,027 | |||||||||||
Industries Qatar QSC |
Industrial Conglomerates | 345 | 8,688 | |||||||||||
Qatar Electricity & Water Co. QSC |
Multi-Utilities | 90 | 4,321 | |||||||||||
|
|
|||||||||||||
16,927 | ||||||||||||||
|
|
|||||||||||||
Russia 1.3% | ||||||||||||||
Alrosa PJSC |
Metals & Mining | 9,384 | 13,314 | |||||||||||
Federal Hydrogenerating Co. |
Electric Utilities | 350,562 | 5,235 | |||||||||||
Gazprom PJSC |
Oil, Gas & Consumable Fuels | 21,822 | 46,205 | |||||||||||
Inter RAO UES PJSC |
Electric Utilities | 77,838 | 5,051 | |||||||||||
LUKOIL PJSC |
Oil, Gas & Consumable Fuels | 921 | 48,956 | |||||||||||
MMC Norilsk Nickel PJSC |
Metals & Mining | 126 | 21,758 |
libertyshares.com | Semiannual Report | 39 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ Global Equity ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||
Russia (continued) | ||||||||||||||
Mobile TeleSystems PJSC, ADR |
Wireless Telecommunication Services | 1,287 | $ | 13,436 | ||||||||||
NLMK PJSC |
Metals & Mining | 1,764 | 4,042 | |||||||||||
c | Novatek PJSC, GDR, Reg S |
Oil, Gas & Consumable Fuels | 156 | 18,299 | ||||||||||
c | PhosAgro PJSC, GDR, Reg S |
Chemicals | 357 | 5,087 | ||||||||||
Rosneft PJSC |
Oil, Gas & Consumable Fuels | 2,280 | 12,642 | |||||||||||
Severstal PJSC |
Metals & Mining | 432 | 6,530 | |||||||||||
Surgutneftegas OAO |
Oil, Gas & Consumable Fuels | 23,730 | 12,123 | |||||||||||
Tatneft PAO |
Oil, Gas & Consumable Fuels | 2,970 | 21,102 | |||||||||||
|
|
|||||||||||||
233,780 | ||||||||||||||
|
|
|||||||||||||
Singapore 0.5% | ||||||||||||||
CapitaLand Commercial Trust |
Equity Real Estate Investment Trusts (REITs | ) | 3,900 | 4,753 | ||||||||||
a | CapitaLand Commercial Trust, rts., 10/19/17 |
Equity Real Estate investment Trusts (REITs | ) | 647 | 139 | |||||||||
CapitaLand Mall Trust |
Equity Real Estate Investment Trusts (REITs | ) | 4,500 | 6,628 | ||||||||||
SATS Ltd. |
Transportation Infrastructure | 1,500 | 5,092 | |||||||||||
Singapore Airlines Ltd. |
Airlines | 900 | 6,654 | |||||||||||
Singapore Exchange Ltd. |
Capital Markets | 2,100 | 11,428 | |||||||||||
Singapore Technologies Engineering Ltd. |
Aerospace & Defense | 2,700 | 6,840 | |||||||||||
Singapore Telecommunications Ltd. |
Diversified Telecommunication Services | 15,600 | 42,275 | |||||||||||
StarHub Ltd. |
Wireless Telecommunication Services | 2,700 | 5,170 | |||||||||||
Yangzijiang Shipbuilding Holdings Ltd. |
Machinery | 5,100 | 5,371 | |||||||||||
|
|
|||||||||||||
94,350 | ||||||||||||||
|
|
|||||||||||||
South Africa 0.3% | ||||||||||||||
Bidvest Group Ltd. |
Industrial Conglomerates | 510 | 6,522 | |||||||||||
Fortress Income Fund Ltd., A |
Equity Real Estate Investment Trusts (REITs | ) | 2,358 | 3,012 | ||||||||||
Mr. Price Group Ltd. |
Specialty Retail | 609 | 8,120 | |||||||||||
Pick ‘N Pay Stores Ltd. |
Food & Staples Retailing | 921 | 3,930 | |||||||||||
Tiger Brands Ltd. |
Food Products | 234 | 6,540 | |||||||||||
Truworths International Ltd. |
Specialty Retail | 1,290 | 7,380 | |||||||||||
Vodacom Group Ltd. |
Wireless Telecommunication Services | 927 | 11,063 | |||||||||||
|
|
|||||||||||||
46,567 | ||||||||||||||
|
|
|||||||||||||
South Korea 2.7% | ||||||||||||||
BNK Financial Group Inc. |
Banks | 192 | 1,676 | |||||||||||
Coway Co. Ltd. |
Household Durables | 129 | 10,587 | |||||||||||
DGB Financial Group Inc. |
Banks | 318 | 2,915 | |||||||||||
Dongbu Insurance Co. Ltd. |
Insurance | 81 | 5,163 | |||||||||||
Hana Financial Group Inc. |
Banks | 432 | 17,859 | |||||||||||
Hankook Tire Co. Ltd. |
Auto Components | 138 | 7,253 | |||||||||||
Hanon Systems |
Auto Components | 504 | 5,545 | |||||||||||
Hanssem Co. Ltd. |
Household Durables | 36 | 4,762 | |||||||||||
Hanwha Life Insurance Co. Ltd. |
Insurance | 288 | 1,722 | |||||||||||
Hyundai Marine & Fire Insurance Co. Ltd. |
Insurance | 114 | 4,509 | |||||||||||
Hyundai Mobis Co. Ltd. |
Auto Components | 135 | 28,288 | |||||||||||
Industrial Bank of Korea |
Banks | 285 | 3,583 | |||||||||||
Kangwon Land Inc. |
Hotels, Restaurants & Leisure | 225 | 6,876 | |||||||||||
KB Financial Group Inc. |
Banks | 606 | 29,682 | |||||||||||
KT&G Corp. |
Tobacco | 273 | 25,146 | |||||||||||
LG Display Co. Ltd. |
Electronic Equipment, Instruments & Components | 258 | 6,882 | |||||||||||
LG Uplus Corp. |
Diversified Telecommunication Services | 123 | 1,434 | |||||||||||
Lotte Chemical Corp. |
Chemicals | 24 | 7,921 | |||||||||||
Naver Corp. |
Internet Software & Services | 36 | 23,416 | |||||||||||
S-1 Corp. |
Commercial Services & Supplies | 54 | 4,206 | |||||||||||
S-Oil Corp. |
Oil, Gas & Consumable Fuels | 90 | 10,019 | |||||||||||
Samsung Electronics Co. Ltd. |
Technology Hardware, Storage & Peripherals | 75 | 167,896 | |||||||||||
SK Hynix Inc. |
Semiconductors & Semiconductor Equipment | 1,182 | 85,553 | |||||||||||
SK Telecom Co. Ltd. |
Wireless Telecommunication Services | 36 | 8,015 | |||||||||||
|
|
|||||||||||||
470,908 | ||||||||||||||
|
|
40 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ Global Equity ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||
Spain 0.8% | ||||||||||||||
Amadeus IT Group SA, A |
IT Services | 645 | $ | 41,931 | ||||||||||
Distribuidora Internacional de Alimentacion SA |
Food & Staples Retailing | 2,286 | 13,337 | |||||||||||
Endesa SA |
Electric Utilities | 597 | 13,463 | |||||||||||
Industria de Diseno Textil SA |
Specialty Retail | 1,965 | 74,069 | |||||||||||
|
|
|||||||||||||
142,800 | ||||||||||||||
|
|
|||||||||||||
Sweden 0.9% | ||||||||||||||
Electrolux AB, B |
Household Durables | 186 | 6,303 | |||||||||||
Hennes & Mauritz AB, B |
Specialty Retail | 2,241 | 57,931 | |||||||||||
ICA Gruppen AB |
Food & Staples Retailing | 132 | 4,950 | |||||||||||
L E Lundbergforetagen AB, B |
Diversified Financial Services | 45 | 3,589 | |||||||||||
Nordea Bank AB |
Banks | 3,483 | 47,109 | |||||||||||
Skanska AB, B |
Construction & Engineering | 816 | 18,865 | |||||||||||
Swedish Match AB |
Tobacco | 573 | 20,056 | |||||||||||
|
|
|||||||||||||
158,803 | ||||||||||||||
|
|
|||||||||||||
Switzerland 2.0% | ||||||||||||||
EMS-Chemie Holding AG |
Chemicals | 24 | 15,974 | |||||||||||
Geberit AG |
Building Products | 66 | 31,247 | |||||||||||
Kuehne + Nagel International AG |
Marine | 84 | 15,566 | |||||||||||
Partners Group Holding AG |
Capital Markets | 39 | 26,481 | |||||||||||
Roche Holding AG |
Pharmaceuticals | 621 | 158,651 | |||||||||||
Straumann Holding AG |
Health Care Equipment & Supplies | 9 | 5,785 | |||||||||||
a | Swiss Life Holding AG |
Insurance | 60 | 21,151 | ||||||||||
Swiss Re AG |
Insurance | 579 | 52,479 | |||||||||||
Swisscom AG |
Diversified Telecommunication Services | 45 | 23,077 | |||||||||||
|
|
|||||||||||||
350,411 | ||||||||||||||
|
|
|||||||||||||
Taiwan 2.5% | ||||||||||||||
Asustek Computer Inc. |
Technology Hardware, Storage & Peripherals | 1,000 | 8,228 | |||||||||||
Catcher Technology Co. Ltd. |
Technology Hardware, Storage & Peripherals | 1,000 | 9,316 | |||||||||||
Chicony Electronics Co. Ltd. |
Technology Hardware, Storage & Peripherals | 3,040 | 7,218 | |||||||||||
Chunghwa Telecom Co. Ltd. |
Diversified Telecommunication Services | 9,000 | 31,015 | |||||||||||
Far EasTone Telecommunications Co. Ltd. |
Wireless Telecommunication Services | 3,000 | 7,133 | |||||||||||
First Financial Holding Co. Ltd. |
Banks | 12,060 | 7,735 | |||||||||||
Formosa Petrochemical Corp. |
Oil, Gas & Consumable Fuels | 3,000 | 10,338 | |||||||||||
Foxconn Technology Co. Ltd. |
Technology Hardware, Storage & Peripherals | 3,050 | 8,801 | |||||||||||
Hon Hai Precision Industry Co. Ltd. |
Electronic Equipment, Instruments & Components | 30,000 | 103,878 | |||||||||||
Lite-On Technology Corp. |
Technology Hardware, Storage & Peripherals | 6,049 | 8,638 | |||||||||||
Ruentex Industries Ltd. |
Textiles, Apparel & Luxury Goods | 3,000 | 4,442 | |||||||||||
Siliconware Precision Industries Co. |
Semiconductors & Semiconductor Equipment | 6,000 | 9,596 | |||||||||||
Taiwan Mobile Co. Ltd. |
Wireless Telecommunication Services | 6,000 | 21,369 | |||||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. |
Semiconductors & Semiconductor Equipment | 27,000 | 192,768 | |||||||||||
Transcend Information Inc. |
Technology Hardware, Storage & Peripherals | 3,000 | 8,479 | |||||||||||
Vanguard International Semiconductor Corp. |
Semiconductors & Semiconductor Equipment | 3,000 | 5,174 | |||||||||||
|
|
|||||||||||||
444,128 | ||||||||||||||
|
|
|||||||||||||
Thailand 0.2% | ||||||||||||||
Advanced Info Service PCL, NVDR |
Wireless Telecommunication Services | 2,400 | 13,745 | |||||||||||
Bumrungrad Hospital PCL, NVDR |
Health Care Providers & Services | 600 | 3,868 | |||||||||||
Central Pattana PCL, NVDR |
Real Estate Management & Development | 2,700 | 6,315 | |||||||||||
Delta Electronics Thailand PCL, NVDR |
Electronic Equipment, Instruments & Components | 1,800 | 4,709 | |||||||||||
Glow Energy PCL, NVDR |
Independent Power and Renewable Electricity Producers | 600 | 1,606 | |||||||||||
Home Product Center PCL, NVDR |
Specialty Retail | 5,700 | 2,085 | |||||||||||
IRPC PCL, NVDR |
Oil, Gas & Consumable Fuels | 11,100 | 2,097 |
libertyshares.com | Semiannual Report | 41 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ Global Equity ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||
Thailand (continued) | ||||||||||||||
The Siam Cement PCL, NVDR |
Construction Materials | 300 | $ | 4,498 | ||||||||||
Thai Oil PCL, NVDR |
Oil, Gas & Consumable Fuels | 1,500 | 4,160 | |||||||||||
|
|
|||||||||||||
43,083 | ||||||||||||||
|
|
|||||||||||||
Turkey 0.2% | ||||||||||||||
Aselsan Elektronik Sanayi ve Ticaret AS |
Aerospace & Defense | 282 | 2,086 | |||||||||||
BIM Birlesik Magazalar AS |
Food & Staples Retailing | 396 | 8,268 | |||||||||||
Eregli Demir ve Celik Fabrikalari AS |
Metals & Mining | 3,327 | 7,232 | |||||||||||
Ford Otomotiv Sanayi AS |
Automobiles | 90 | 1,154 | |||||||||||
Petkim Petrokimya Holding AS |
Chemicals | 1,407 | 2,366 | |||||||||||
TAV Havalimanlari Holding AS |
Transportation Infrastructure | 282 | 1,400 | |||||||||||
Tofas Turk Otomobil Fabrikasi AS |
Automobiles | 225 | 1,954 | |||||||||||
Tupras-Turkiye Petrol Rafinerileri AS |
Oil, Gas & Consumable Fuels | 285 | 9,745 | |||||||||||
Turkiye Is Bankasi, C |
Banks | 600 | 1,144 | |||||||||||
|
|
|||||||||||||
35,349 | ||||||||||||||
|
|
|||||||||||||
United Arab Emirates 0.2% | ||||||||||||||
Damac Properties Dubai Co. PJSC |
Real Estate Management & Development | 2,124 | 2,198 | |||||||||||
Dubai Islamic Bank PJSC |
Banks | 1,059 | 1,744 | |||||||||||
Emirates Telecommunications Group Co. PJSC |
Diversified Telecommunication Services | 2,982 | 14,047 | |||||||||||
First Abu Dhabi Bank PJSC |
Banks | 2,886 | 8,015 | |||||||||||
|
|
|||||||||||||
26,004 | ||||||||||||||
|
|
|||||||||||||
United Kingdom 9.4% | ||||||||||||||
3i Group PLC |
Capital Markets | 1,371 | 16,794 | |||||||||||
Admiral Group PLC |
Insurance | 573 | 13,969 | |||||||||||
AstraZeneca PLC |
Pharmaceuticals | 2,229 | 148,181 | |||||||||||
BAE Systems PLC |
Aerospace & Defense | 5,721 | 48,471 | |||||||||||
Barratt Developments PLC |
Household Durables | 1,593 | 13,133 | |||||||||||
The Berkeley Group Holdings PLC |
Household Durables | 309 | 15,410 | |||||||||||
British American Tobacco PLC |
Tobacco | 2,511 | 157,394 | |||||||||||
BT Group PLC |
Diversified Telecommunication Services | 17,364 | 66,139 | |||||||||||
Burberry Group PLC |
Textiles, Apparel & Luxury Goods | 819 | 19,339 | |||||||||||
Capita PLC |
Professional Services | 1,062 | 8,050 | |||||||||||
Compass Group PLC |
Hotels, Restaurants & Leisure | 2,082 | 44,218 | |||||||||||
Croda International PLC |
Chemicals | 252 | 12,824 | |||||||||||
Direct Line Insurance Group PLC |
Insurance | 2,733 | 13,332 | |||||||||||
easyJet PLC |
Airlines | 348 | 5,682 | |||||||||||
Experian PLC |
Professional Services | 1,290 | 25,944 | |||||||||||
GKN PLC |
Auto Components | 1,848 | 8,579 | |||||||||||
GlaxoSmithKline PLC |
Pharmaceuticals | 7,740 | 154,571 | |||||||||||
Hargreaves Lansdown PLC |
Capital Markets | 537 | 10,663 | |||||||||||
HSBC Holdings PLC |
Banks | 19,194 | 189,815 | |||||||||||
IMI PLC |
Machinery | 192 | 3,202 | |||||||||||
International Consolidated Airlines Group SA |
Airlines | 1,062 | 8,462 | |||||||||||
Intertek Group PLC |
Professional Services | 255 | 17,044 | |||||||||||
Johnson Matthey PLC |
Chemicals | 294 | 13,490 | |||||||||||
Marks & Spencer Group PLC |
Multiline Retail | 3,771 | 17,880 | |||||||||||
Mondi PLC |
Paper & Forest Products | 462 | 12,428 | |||||||||||
Next PLC |
Multiline Retail | 426 | 30,063 | |||||||||||
Persimmon PLC |
Household Durables | 762 | 26,397 | |||||||||||
Reckitt Benckiser Group PLC |
Household Products | 1,110 | 101,461 | |||||||||||
Relx NV |
Professional Services | 2,040 | 43,435 | |||||||||||
RELX PLC |
Professional Services | 2,232 | 49,021 | |||||||||||
SSE PLC |
Electric Utilities | 2,001 | 37,504 | |||||||||||
Tate & Lyle PLC |
Food Products | 1,557 | 13,547 | |||||||||||
Taylor Wimpey PLC |
Household Durables | 3,450 | 9,049 | |||||||||||
Unilever NV, IDR |
Personal Products | 2,673 | 158,127 |
42 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ Global Equity ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||
United Kingdom (continued) | ||||||||||||||
Unilever PLC |
Personal Products | 2,271 | $ | 131,595 | ||||||||||
|
|
|||||||||||||
1,645,213 | ||||||||||||||
|
|
|||||||||||||
United States 54.6% | ||||||||||||||
3M Co. |
Industrial Conglomerates | 855 | 179,464 | |||||||||||
AbbVie Inc. |
Biotechnology | 2,535 | 225,260 | |||||||||||
Accenture PLC, A |
IT Services | 1,395 | 188,423 | |||||||||||
AGNC Investment Corp. |
Mortgage Real Estate Investment Trusts (REITs | ) | 726 | 15,740 | ||||||||||
Altria Group Inc. |
Tobacco | 2,691 | 170,663 | |||||||||||
American Airlines Group Inc. |
Airlines | 192 | 9,118 | |||||||||||
American Electric Power Co. Inc. |
Electric Utilities | 723 | 50,784 | |||||||||||
AmerisourceBergen Corp. |
Health Care Providers & Services | 243 | 20,108 | |||||||||||
Annaly Capital Management Inc. |
Mortgage Real Estate Investment Trusts (REITs | ) | 2,241 | 27,318 | ||||||||||
Apple Inc. |
Technology Hardware, Storage & Peripherals | 1,113 | 171,536 | |||||||||||
Applied Materials Inc. |
Semiconductors & Semiconductor Equipment | 1,149 | 59,851 | |||||||||||
AT&T Inc. |
Diversified Telecommunication Services | 4,476 | 175,325 | |||||||||||
Atmos Energy Corp. |
Gas Utilities | 135 | 11,318 | |||||||||||
Avery Dennison Corp. |
Containers & Packaging | 141 | 13,866 | |||||||||||
Baxter International Inc. |
Health Care Equipment & Supplies | 525 | 32,944 | |||||||||||
Best Buy Co. Inc. |
Specialty Retail | 594 | 33,834 | |||||||||||
a | Biogen Inc. |
Biotechnology | 342 | 107,087 | ||||||||||
The Boeing Co. |
Aerospace & Defense | 921 | 234,127 | |||||||||||
Broadridge Financial Solutions Inc. |
IT Services | 243 | 19,639 | |||||||||||
C.H. Robinson Worldwide Inc. |
Air Freight & Logistics | 318 | 24,200 | |||||||||||
CA Inc. |
Software | 609 | 20,328 | |||||||||||
a | Cadence Design Systems Inc. |
Software | 309 | 12,196 | ||||||||||
Carnival Corp. |
Hotels, Restaurants & Leisure | 297 | 19,177 | |||||||||||
CBOE Holdings Inc. |
Capital Markets | 84 | 9,041 | |||||||||||
Celanese Corp., A |
Chemicals | 108 | 11,261 | |||||||||||
Church & Dwight Co. Inc. |
Household Products | 528 | 25,582 | |||||||||||
Cisco Systems Inc. |
Communications Equipment | 5,409 | 181,905 | |||||||||||
Clorox Co. |
Household Products | 318 | 41,947 | |||||||||||
Coach Inc. |
Textiles, Apparel & Luxury Goods | 570 | 22,960 | |||||||||||
The Coca-Cola Co. |
Beverages | 3,987 | 179,455 | |||||||||||
Colgate-Palmolive Co. |
Household Products | 1,518 | 110,586 | |||||||||||
Colony NorthStar Inc., A |
Equity Real Estate Investment Trusts (REITs | ) | 1,251 | 15,713 | ||||||||||
Consolidated Edison Inc. |
Multi-Utilities | 459 | 37,032 | |||||||||||
Corning Inc. |
Electronic Equipment, Instruments & Components | 870 | 26,030 | |||||||||||
Cummins Inc. |
Machinery | 255 | 42,848 | |||||||||||
Darden Restaurants Inc. |
Hotels, Restaurants & Leisure | 231 | 18,198 | |||||||||||
a | Dell Technologies Inc., V |
Software | 234 | 18,067 | ||||||||||
Delphi Automotive PLC |
Auto Components | 462 | 45,461 | |||||||||||
Delta Air Lines Inc. |
Airlines | 321 | 15,479 | |||||||||||
Dollar General Corp. |
Multiline Retail | 414 | 33,555 | |||||||||||
Dominos Pizza Inc. |
Hotels, Restaurants & Leisure | 60 | 11,913 | |||||||||||
DowDuPont Inc. |
Chemicals | 1,416 | 98,030 | |||||||||||
Dr. Pepper Snapple Group Inc. |
Beverages | 513 | 45,385 | |||||||||||
Eli Lilly & Co. |
Pharmaceuticals | 1,662 | 142,167 | |||||||||||
Emerson Electric Co. |
Electrical Equipment | 1,092 | 68,621 | |||||||||||
Estee Lauder Cos. Inc., A |
Personal Products | 360 | 38,822 | |||||||||||
Everest Re Group Ltd. |
Insurance | 78 | 17,814 | |||||||||||
Expeditors International of Washington Inc. |
Air Freight & Logistics | 336 | 20,113 | |||||||||||
a | F5 Networks Inc. |
Communications Equipment | 150 | 18,084 | ||||||||||
Fastenal Co. |
Trading Companies & Distributors | 594 | 27,075 | |||||||||||
FirstEnergy Corp. |
Electric Utilities | 375 | 11,561 | |||||||||||
The Gap Inc. |
Specialty Retail | 576 | 17,009 | |||||||||||
Garmin Ltd. |
Household Durables | 231 | 12,467 | |||||||||||
a | Gartner Inc., A |
IT Services | 90 | 11,197 |
libertyshares.com | Semiannual Report | 43 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ Global Equity ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||
United States (continued) | ||||||||||||||
General Dynamics Corp. |
Aerospace & Defense | 450 | $ | 92,511 | ||||||||||
General Motors Co. |
Automobiles | 2,382 | 96,185 | |||||||||||
Gilead Sciences Inc. |
Biotechnology | 2,577 | 208,789 | |||||||||||
The Goodyear Tire & Rubber Co. |
Auto Components | 357 | 11,870 | |||||||||||
H&R Block Inc. |
Diversified Consumer Services | 423 | 11,201 | |||||||||||
Hasbro Inc. |
Leisure Equipment & Products | 192 | 18,753 | |||||||||||
The Hershey Co. |
Food Products | 429 | 46,834 | |||||||||||
The Home Depot Inc. |
Specialty Retail | 1,074 | 175,663 | |||||||||||
Hormel Foods Corp. |
Food Products | 849 | 27,287 | |||||||||||
HP Inc. |
Technology Hardware, Storage & Peripherals | 2,931 | 58,503 | |||||||||||
Huntington Ingalls Industries Inc. |
Aerospace & Defense | 60 | 13,586 | |||||||||||
Illinois Tool Works Inc. |
Machinery | 489 | 72,352 | |||||||||||
Ingredion Inc. |
Food Products | 159 | 19,182 | |||||||||||
Intel Corp. |
Semiconductors & Semiconductor Equipment | 4,653 | 177,186 | |||||||||||
International Business Machines Corp. |
IT Services | 1,200 | 174,096 | |||||||||||
International Flavors & Fragrances Inc. |
Chemicals | 123 | 17,578 | |||||||||||
Intuit Inc. |
Software | 573 | 81,446 | |||||||||||
a | Intuitive Surgical Inc. |
Health Care Equipment & Supplies | 63 | 65,890 | ||||||||||
J.B. Hunt Transport Services Inc. |
Road & Rail | 150 | 16,662 | |||||||||||
Jack Henry & Associates Inc. |
IT Services | 108 | 11,101 | |||||||||||
Johnson & Johnson |
Pharmaceuticals | 1,308 | 170,053 | |||||||||||
Kimberly-Clark Corp. |
Household Products | 750 | 88,260 | |||||||||||
KLA-Tencor Corp. |
Semiconductors & Semiconductor Equipment | 330 | 34,980 | |||||||||||
Kohl’s Corp. |
Multiline Retail | 414 | 18,899 | |||||||||||
Las Vegas Sands Corp. |
Hotels, Restaurants & Leisure | 684 | 43,885 | |||||||||||
Lear Corp. |
Auto Components | 96 | 16,616 | |||||||||||
Lennox International Inc. |
Building Products | 48 | 8,591 | |||||||||||
Lockheed Martin Corp. |
Aerospace & Defense | 528 | 163,833 | |||||||||||
Lowe’s Cos. Inc. |
Specialty Retail | 1,482 | 118,471 | |||||||||||
LyondellBasell Industries NV, A |
Chemicals | 828 | 82,013 | |||||||||||
Macy’s Inc. |
Multiline Retail | 636 | 13,878 | |||||||||||
Marsh & McLennan Cos. Inc. |
Insurance | 807 | 67,635 | |||||||||||
Mastercard Inc., A |
IT Services | 1,500 | 211,800 | |||||||||||
Maxim Integrated Products Inc. |
Semiconductors & Semiconductor Equipment | 546 | 26,050 | |||||||||||
McCormick & Co. Inc. |
Food Products | 273 | 28,021 | |||||||||||
McDonald’s Corp. |
Hotels, Restaurants & Leisure | 1,131 | 177,205 | |||||||||||
Merck & Co. Inc. |
Pharmaceuticals | 2,586 | 165,582 | |||||||||||
a | Mettler-Toledo International Inc. |
Life Sciences Tools & Services | 48 | 30,056 | ||||||||||
a | Michael Kors Holdings Ltd. |
Textiles, Apparel & Luxury Goods | 465 | 22,250 | ||||||||||
Microsoft Corp. |
Software | 2,586 | 192,631 | |||||||||||
MSCI Inc. |
Capital Markets | 81 | 9,469 | |||||||||||
Nordstrom Inc. |
Multiline Retail | 297 | 14,004 | |||||||||||
Northrop Grumman Corp. |
Aerospace & Defense | 297 | 85,453 | |||||||||||
a | NVR Inc. |
Household Durables | 3 | 8,565 | ||||||||||
Packaging Corp. of America |
Containers & Packaging | 108 | 12,385 | |||||||||||
Paychex Inc. |
IT Services | 708 | 42,452 | |||||||||||
PepsiCo Inc. |
Beverages | 1,620 | 180,517 | |||||||||||
Pfizer Inc. |
Pharmaceuticals | 4,992 | 178,214 | |||||||||||
Philip Morris International Inc. |
Tobacco | 1,461 | 162,186 | |||||||||||
Pinnacle West Capital Corp. |
Electric Utilities | 183 | 15,474 | |||||||||||
Polaris Industries Inc. |
Leisure Equipment & Products | 138 | 14,439 | |||||||||||
The Procter & Gamble Co. |
Household Products | 1,893 | 172,225 | |||||||||||
Public Service Enterprise Group Inc. |
Multi-Utilities | 927 | 42,874 | |||||||||||
QUALCOMM Inc. |
Semiconductors & Semiconductor Equipment | 2,784 | 144,323 | |||||||||||
Raytheon Co. |
Aerospace & Defense | 504 | 94,036 | |||||||||||
Reinsurance Group of America Inc. |
Insurance | 57 | 7,953 | |||||||||||
ResMed Inc. |
Health Care Equipment & Supplies | 255 | 19,625 |
44 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ Global Equity ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||
United States (continued) | ||||||||||||||
Robert Half International Inc. |
Professional Services | 327 | $ | 16,461 | ||||||||||
Rockwell Automation Inc. |
Electrical Equipment | 198 | 35,286 | |||||||||||
Rockwell Collins Inc. |
Aerospace & Defense | 144 | 18,822 | |||||||||||
Rollins Inc. |
Commercial Services & Supplies | 102 | 4,706 | |||||||||||
Ross Stores Inc. |
Specialty Retail | 957 | 61,793 | |||||||||||
Scripps Networks Interactive Inc., A |
Media | 201 | 17,264 | |||||||||||
Seagate Technology PLC |
Technology Hardware, Storage & Peripherals | 774 | 25,674 | |||||||||||
SEI Investments Co. |
Capital Markets | 234 | 14,288 | |||||||||||
The Sherwin-Williams Co. |
Chemicals | 165 | 59,077 | |||||||||||
Skyworks Solutions Inc. |
Semiconductors & Semiconductor Equipment | 363 | 36,990 | |||||||||||
Southwest Airlines Co. |
Airlines | 282 | 15,786 | |||||||||||
Starbucks Corp. |
Hotels, Restaurants & Leisure | 2,760 | 148,240 | |||||||||||
Sysco Corp. |
Food & Staples Retailing | 975 | 52,601 | |||||||||||
Target Corp. |
Multiline Retail | 978 | 57,712 | |||||||||||
TE Connectivity Ltd. |
Electronic Equipment, Instruments & Components | 315 | 26,164 | |||||||||||
Texas Instruments Inc. |
Semiconductors & Semiconductor Equipment | 2,076 | 186,093 | |||||||||||
The TJX Cos. Inc. |
Specialty Retail | 1,548 | 114,134 | |||||||||||
Tractor Supply Co. |
Specialty Retail | 207 | 13,101 | |||||||||||
Tyson Foods Inc. |
Food Products | 504 | 35,507 | |||||||||||
a | Ulta Beauty Inc. |
Specialty Retail | 108 | 24,414 | ||||||||||
Union Pacific Corp. |
Road & Rail | 711 | 82,455 | |||||||||||
a | United Continental Holdings Inc. |
Airlines | 132 | 8,036 | ||||||||||
United Parcel Service Inc., B |
Air Freight & Logistics | 1,350 | 162,122 | |||||||||||
a | United Therapeutics Corp. |
Biotechnology | 108 | 12,657 | ||||||||||
UnitedHealth Group Inc. |
Health Care Providers & Services | 969 | 189,779 | |||||||||||
Vail Resorts Inc. |
Hotels, Restaurants & Leisure | 36 | 8,212 | |||||||||||
Valero Energy Corp. |
Oil, Gas & Consumable Fuels | 858 | 66,006 | |||||||||||
VEREIT Inc. |
Equity Real Estate Investment Trusts (REITs | ) | 4,890 | 40,538 | ||||||||||
Verizon Communications Inc. |
Diversified Telecommunication Services | 3,765 | 186,330 | |||||||||||
VF Corp. |
Textiles, Apparel & Luxury Goods | 672 | 42,719 | |||||||||||
a | VMware Inc., A |
Software | 81 | 8,844 | ||||||||||
Wal-Mart Stores Inc. |
Food & Staples Retailing | 2,121 | 165,735 | |||||||||||
Waste Management Inc. |
Commercial Services & Supplies | 609 | 47,666 | |||||||||||
WEC Energy Group Inc. |
Multi-Utilities | 531 | 33,336 | |||||||||||
Wyndham Worldwide Corp. |
Hotels, Restaurants & Leisure | 84 | 8,854 | |||||||||||
Xcel Energy Inc. |
Electric Utilities | 732 | 34,638 | |||||||||||
Xilinx Inc. |
Semiconductors & Semiconductor Equipment | 438 | 31,024 | |||||||||||
|
|
|||||||||||||
9,572,326 | ||||||||||||||
|
|
|||||||||||||
Total Common Stocks and Other Equity Interests |
17,197,999 | |||||||||||||
|
|
|||||||||||||
Management Investment Companies (Cost $157,005) 1.0% |
||||||||||||||
India 1.0% | ||||||||||||||
iShares MSCI India ETF |
Diversified Financial Services | 5,415 | 177,883 | |||||||||||
|
|
|||||||||||||
Preferred Stocks 0.4% | ||||||||||||||
Brazil 0.1% | ||||||||||||||
d | Itausa-Investimentos Itau SA, 5.257%, pfd. |
Banks | 5,770 | 20,120 | ||||||||||
|
|
|||||||||||||
Colombia 0.0%† | ||||||||||||||
d | Grupo de Inversiones Surameric SA, 1.498%, pfd. |
Diversified Financial Services | 291 | 3,981 | ||||||||||
|
|
|||||||||||||
Germany 0.1% | ||||||||||||||
Fuchs Petrolub SE, 1.777%, pfd. |
Chemicals | 132 | 7,817 | |||||||||||
|
|
libertyshares.com | Semiannual Report | 45 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ Global Equity ETF (continued)
Industry | Shares | Value | ||||||||||||
Preferred Stocks (continued) | ||||||||||||||
South Korea 0.2% | ||||||||||||||
d | Hyundai Motor Co., 4.327%, pfd. |
Automobiles | 45 | $ | 3,677 | |||||||||
d | Hyundai Motor Co., 4.000%, pfd., 2 |
Automobiles | 66 | 5,907 | ||||||||||
LG Chem Ltd., 1.992%, pfd. |
Chemicals | 15 | 3,320 | |||||||||||
d | Samsung Electronics Co., Ltd., 2.015%, pfd. |
Technology Hardware, Storage & Peripherals | 12 | 21,604 | ||||||||||
|
|
|||||||||||||
34,508 | ||||||||||||||
|
|
|||||||||||||
Total Preferred Stocks (Cost $44,931) |
66,426 | |||||||||||||
|
|
|||||||||||||
Total Investments (Cost $15,484,757) 99.5% |
17,442,308 | |||||||||||||
Other Assets, less Liabilities 0.5% |
79,812 | |||||||||||||
|
|
|||||||||||||
Net Assets 100.0% |
$ | 17,522,120 | ||||||||||||
|
|
See Abbreviations on page 69.
†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. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At September 30, 2017, the aggregate value of these securities was $15,481, 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 registration. These securities have been deemed liquid under guidelines approved by the Fund’s Board of Trustees. At September 30, 2017, the aggregate value of these securities was $32,357, representing 0.2% of net assets.
dVariable rate security. The rate shown represents the yield at period end.
46 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin LibertyQ International Equity Hedged ETF
Six Months Ended September 30, 2017 (unaudited) |
Year Ended March 31, 2017a |
|||||||
Per share operating performance (for a share outstanding throughout the period) |
||||||||
Net asset value, beginning of period |
$ | 24.70 | $ | 25.45 | ||||
|
|
|||||||
Income from investment operationsb: | ||||||||
Net investment incomec |
0.44 | 0.52 | ||||||
Net realized and unrealized gains (losses) |
0.74 | 1.45 | ||||||
|
|
|||||||
Total from investment operations |
1.18 | 1.97 | ||||||
|
|
|||||||
Less distributions from net investment income and net foreign currency gains |
(1.30 | ) | (2.72 | ) | ||||
|
|
|||||||
Net asset value, end of period |
$ | 24.58 | $ | 24.70 | ||||
|
|
|||||||
Total returnd |
4.78% | 8.30% | ||||||
Ratios to average net assetse | ||||||||
Expenses before waiver and payments by affiliates |
2.22% | 1.25% | ||||||
Expenses net of waiver and payments by affiliates |
0.40% | 0.40% | ||||||
Net investment income |
3.52% | 2.47% | ||||||
Supplemental data | ||||||||
Net assets, end of period (000’s) |
$ | 9,832 | $ | 9,880 | ||||
Portfolio turnover ratef |
13.37% | 19.09% |
aFor the period June 1, 2016 (commencement of operations) to March 31, 2017.
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 of 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 excludes the value of portfolio securities received or delivered as a result of processing capital share transactions in Creation Units, if any.
libertyshares.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 47 |
FRANKLIN TEMPLETON ETF TRUST
Statement of Investments, September 30, 2017 (unaudited)
Franklin LibertyQ International Equity Hedged ETF
Industry | Shares | Value | ||||||||||||
Common Stocks and Other Equity Interests 99.4% | ||||||||||||||
Australia 17.1% | ||||||||||||||
AGL Energy Ltd. |
Multi-Utilities | 2,040 | $ | 37,408 | ||||||||||
Amcor Ltd. |
Containers & Packaging | 3,836 | 45,781 | |||||||||||
Aristocrat Leisure Ltd. |
Hotels, Restaurants & Leisure | 1,936 | 31,901 | |||||||||||
Aurizon Holdings Ltd. |
Road & Rail | 6,190 | 23,799 | |||||||||||
Australia & New Zealand Banking Group Ltd. |
Banks | 5,986 | 139,029 | |||||||||||
Australian Stock Exchange Ltd. |
Capital Markets | 402 | 16,538 | |||||||||||
Bluescope Steel Ltd. |
Metals & Mining | 888 | 7,644 | |||||||||||
Brambles Ltd. |
Commercial Services & Supplies | 4,744 | 33,501 | |||||||||||
Caltex Australia Ltd. |
Oil, Gas & Consumable Fuels | 806 | 20,301 | |||||||||||
Challenger Ltd. |
Diversified Financial Services | 1,202 | 11,742 | |||||||||||
Cimic Group Ltd. |
Construction & Engineering | 274 | 9,505 | |||||||||||
Coca-Cola Amatil Ltd. |
Beverages | 1,650 | 10,008 | |||||||||||
Cochlear Ltd. |
Health Care Equipment & Supplies | 256 | 31,981 | |||||||||||
Commonwealth Bank of Australia |
Banks | 2,328 | 137,456 | |||||||||||
Computershare Ltd. |
IT Services | 682 | 7,743 | |||||||||||
Crown Resorts Ltd. |
Hotels, Restaurants & Leisure | 822 | 7,295 | |||||||||||
CSL Ltd. |
Biotechnology | 1,786 | 187,729 | |||||||||||
Dexus |
Equity Real Estate Investment Trusts (REITs | ) | 3,322 | 24,763 | ||||||||||
Flight Centre Travel Group Ltd. |
Hotels, Restaurants & Leisure | 210 | 7,417 | |||||||||||
Fortescue Metals Group Ltd. |
Metals & Mining | 4,414 | 17,802 | |||||||||||
Goodman Group |
Equity Real Estate Investment Trusts (REITs | ) | 5,104 | 33,000 | ||||||||||
GPT Group |
Equity Real Estate Investment Trusts (REITs | ) | 5,746 | 22,363 | ||||||||||
Harvey Norman Holdings Ltd. |
Multiline Retail | 2,200 | 6,698 | |||||||||||
James Hardie Industries PLC, CDI |
Construction Materials | 1,264 | 17,575 | |||||||||||
Macquarie Group Ltd. |
Capital Markets | 782 | 55,788 | |||||||||||
Medibank Private Ltd. |
Insurance | 11,136 | 25,515 | |||||||||||
Mirvac Group |
Equity Real Estate Investment Trusts (REITs | ) | 9,534 | 17,131 | ||||||||||
National Australia Bank Ltd. |
Banks | 3,982 | 98,421 | |||||||||||
Newcrest Mining Ltd. |
Metals & Mining | 1,600 | 26,389 | |||||||||||
Qantas Airways Ltd. |
Airlines | 1,916 | 8,765 | |||||||||||
REA Group Ltd. |
Media | 200 | 10,514 | |||||||||||
Rio Tinto Ltd. |
Metals & Mining | 594 | 31,008 | |||||||||||
Sonic Healthcare Ltd. |
Health Care Providers & Services | 1,250 | 20,509 | |||||||||||
Tabcorp Holdings Ltd. |
Hotels, Restaurants & Leisure | 2,654 | 8,892 | |||||||||||
Tatts Group Ltd. |
Hotels, Restaurants & Leisure | 3,958 | 12,360 | |||||||||||
Telstra Corp. Ltd. |
Diversified Telecommunication Services | 18,696 | 51,198 | |||||||||||
TPG Telecom Ltd. |
Diversified Telecommunication Services | 1,066 | 4,073 | |||||||||||
Vicinity Centres |
Equity Real Estate Investment Trusts (REITs | ) | 9,476 | 19,778 | ||||||||||
Wesfarmers Ltd. |
Food & Staples Retailing | 3,700 | 119,989 | |||||||||||
Westpac Banking Corp. |
Banks | 8,350 | 209,134 | |||||||||||
Woolworths Ltd. |
Food & Staples Retailing | 3,918 | 77,502 | |||||||||||
|
|
|||||||||||||
1,685,945 | ||||||||||||||
|
|
|||||||||||||
Austria 0.3% | ||||||||||||||
OMV AG |
Oil, Gas & Consumable Fuels | 428 | 24,940 | |||||||||||
|
|
|||||||||||||
Belgium 0.3% | ||||||||||||||
Colruyt SA |
Food & Staples Retailing | 220 | 11,271 | |||||||||||
Proximus SADP |
Diversified Telecommunication Services | 524 | 18,060 | |||||||||||
|
|
|||||||||||||
29,331 | ||||||||||||||
|
|
|||||||||||||
Denmark 3.8% | ||||||||||||||
Coloplast AS, B |
Health Care Equipment & Supplies | 494 | 40,102 | |||||||||||
Danske Bank AS |
Banks | 1,522 | 60,882 | |||||||||||
Novo Nordisk AS, B |
Pharmaceuticals | 4,678 | 223,689 | |||||||||||
Pandora AS |
Textiles, Apparel & Luxury Goods | 456 | 45,022 | |||||||||||
Tryg AS |
Insurance | 312 | 7,207 | |||||||||||
|
|
|||||||||||||
376,902 | ||||||||||||||
|
|
48 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ International Equity Hedged ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||
Finland 1.3% | ||||||||||||||
Elisa OYJ |
Diversified Telecommunication Services | 422 | $ | 18,170 | ||||||||||
Kone OYJ, B |
Machinery | 1,080 | 57,200 | |||||||||||
Neste Oil OYJ |
Oil, Gas & Consumable Fuels | 352 | 15,376 | |||||||||||
Nokian Renkaat OYJ |
Auto Components | 340 | 15,125 | |||||||||||
Orion OYJ |
Pharmaceuticals | 400 | 18,565 | |||||||||||
|
|
|||||||||||||
124,436 | ||||||||||||||
|
|
|||||||||||||
France 4.3% | ||||||||||||||
AXA SA |
Insurance | 5,116 | 154,772 | |||||||||||
Cie Generale des Etablissements Michelin, B |
Auto Components | 552 | 80,593 | |||||||||||
CNP Assurances |
Insurance | 492 | 11,534 | |||||||||||
Hermes International |
Textiles, Apparel & Luxury Goods | 76 | 38,324 | |||||||||||
Ipsen SA |
Pharmaceuticals | 50 | 6,647 | |||||||||||
Peugeot SA |
Automobiles | 702 | 16,722 | |||||||||||
SCOR SE |
Insurance | 488 | 20,466 | |||||||||||
Societe BIC SA |
Commercial Services & Supplies | 80 | 9,590 | |||||||||||
Thales SA |
Aerospace & Defense | 246 | 27,855 | |||||||||||
Unibail-Rodamco SE |
Equity Real Estate Investment Trusts (REITs | ) | 218 | 53,026 | ||||||||||
|
|
|||||||||||||
419,529 | ||||||||||||||
|
|
|||||||||||||
Germany 1.5% | ||||||||||||||
Continental AG |
Auto Components | 152 | 38,589 | |||||||||||
a | Covestro AG, 144A |
Chemicals | 342 | 29,414 | ||||||||||
Deutsche Lufthansa AG |
Airlines | 700 | 19,455 | |||||||||||
Hugo Boss AG |
Textiles, Apparel & Luxury Goods | 238 | 20,987 | |||||||||||
ProSiebenSat.1 Media SE |
Media | 754 | 25,703 | |||||||||||
TUI AG |
Hotels, Restaurants & Leisure | 662 | 11,244 | |||||||||||
|
|
|||||||||||||
145,392 | ||||||||||||||
|
|
|||||||||||||
Hong Kong 3.7% | ||||||||||||||
ASM Pacific Technology Ltd. |
Semiconductors & Semiconductor Equipment | 400 | 5,761 | |||||||||||
CK Infrastructure Holdings Ltd. |
Electric Utilities | 2,000 | 17,207 | |||||||||||
CLP Holdings Ltd. |
Electric Utilities | 4,500 | 46,119 | |||||||||||
HKT Trust and HKT Ltd. |
Diversified Telecommunication Services | 12,000 | 14,580 | |||||||||||
Hongkong Land Holdings Ltd. |
Real Estate Management & Development | 3,200 | 23,040 | |||||||||||
Hysan Development Co. Ltd. |
Real Estate Management & Development | 2,000 | 9,410 | |||||||||||
b | I-CABLE Communications Ltd. |
Media | 1,109 | 36 | ||||||||||
Kerry Properties Ltd. |
Real Estate Management & Development | 2,000 | 8,284 | |||||||||||
Link REIT |
Equity Real Estate Investment Trusts (REITs | ) | 7,000 | 56,730 | ||||||||||
MGM China Holdings Ltd. |
Hotels, Restaurants & Leisure | 3,200 | 7,670 | |||||||||||
New World Development Co. Ltd. |
Real Estate Management & Development | 16,000 | 22,984 | |||||||||||
NWS Holdings Ltd. |
Industrial Conglomerates | 6,000 | 11,692 | |||||||||||
PCCW Ltd. |
Diversified Telecommunication Services | 12,000 | 6,499 | |||||||||||
Sands China Ltd. |
Hotels, Restaurants & Leisure | 8,000 | 41,635 | |||||||||||
Sino Land Co. Ltd. |
Real Estate Management & Development | 8,000 | 14,053 | |||||||||||
Swire Properties Ltd. |
Real Estate Management & Development | 3,200 | 10,857 | |||||||||||
Techtronic Industries Co. Ltd. |
Household Durables | 2,000 | 10,678 | |||||||||||
c | WH Group Ltd., Reg S |
Food Products | 11,000 | 11,689 | ||||||||||
The Wharf Holdings Ltd. |
Real Estate Management & Development | 4,000 | 35,643 | |||||||||||
Yue Yuen Industrial Holdings Ltd. |
Textiles, Apparel & Luxury Goods | 3,000 | 11,407 | |||||||||||
|
|
|||||||||||||
365,974 | ||||||||||||||
|
|
|||||||||||||
Ireland 0.1% | ||||||||||||||
b | Ryanair Holdings PLC |
Airlines | 420 | 8,103 | ||||||||||
|
|
|||||||||||||
Israel 0.8% | ||||||||||||||
Azrieli Group Ltd. |
Real Estate Management & Development | 148 | 8,220 | |||||||||||
Bank Hapoalim BM |
Banks | 2,824 | 19,769 |
libertyshares.com | Semiannual Report | 49 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ International Equity Hedged ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||
Israel (continued) | ||||||||||||||
Bezeq Israeli Telecommunication Corp. Ltd. |
Diversified Telecommunication Services | 8,822 | $ | 12,614 | ||||||||||
b | Check Point Software Technologies Ltd. |
Software | 206 | 23,488 | ||||||||||
Mizrahi Tefahot Bank Ltd. |
Banks | 370 | 6,633 | |||||||||||
b | Taro Pharmaceutical Industries Ltd. |
Pharmaceuticals | 40 | 4,508 | ||||||||||
|
|
|||||||||||||
75,232 | ||||||||||||||
|
|
|||||||||||||
Italy 0.7% | ||||||||||||||
Ferrari NV |
Automobiles | 188 | 20,781 | |||||||||||
Intesa Sanpaolo SpA, di Risp |
Banks | 1,320 | 4,369 | |||||||||||
c | Poste Italiane SpA, Reg S |
Insurance | 758 | 5,583 | ||||||||||
Recordati SpA |
Pharmaceuticals | 202 | 9,313 | |||||||||||
Snam SpA |
Oil, Gas & Consumable Fuels | 6,388 | 30,782 | |||||||||||
|
|
|||||||||||||
70,828 | ||||||||||||||
|
|
|||||||||||||
Japan 20.6% | ||||||||||||||
ABC-Mart Inc. |
Specialty Retail | 100 | 5,277 | |||||||||||
Asahi Kasei Corp. |
Chemicals | 4,000 | 49,216 | |||||||||||
Ashikaga Holdings Co. Ltd. |
Banks | 2,000 | 7,729 | |||||||||||
Astellas Pharma Inc. |
Pharmaceuticals | 7,200 | 91,563 | |||||||||||
Bandai Namco Holdings Inc. |
Leisure Equipment & Products | 400 | 13,716 | |||||||||||
Bridgestone Corp. |
Auto Components | 2,000 | 90,721 | |||||||||||
CANON Inc. |
Technology Hardware, Storage & Peripherals | 3,200 | 109,306 | |||||||||||
Concordia Financial Group Ltd. |
Banks | 1,600 | 7,904 | |||||||||||
Daito Trust Construction Co. Ltd. |
Real Estate Management & Development | 300 | 54,635 | |||||||||||
Fuji Heavy Industries Ltd. |
Automobiles | 2,600 | 93,777 | |||||||||||
Hitachi Chemical Co. Ltd. |
Chemicals | 200 | 5,481 | |||||||||||
Hoya Corp. |
Health Care Equipment & Supplies | 1,200 | 64,763 | |||||||||||
Idemitsu Kosan Co. Ltd. |
Oil, Gas & Consumable Fuels | 200 | 5,641 | |||||||||||
Iida Group Holdings Co. Ltd. |
Household Durables | 200 | 3,564 | |||||||||||
Isuzu Motors Ltd. |
Automobiles | 1,800 | 23,842 | |||||||||||
Japan Airlines Co. Ltd. |
Airlines | 600 | 20,298 | |||||||||||
Japan Post Bank Co. Ltd. |
Banks | 1,000 | 12,348 | |||||||||||
Japan Tobacco Inc. |
Tobacco | 3,000 | 98,290 | |||||||||||
Kajima Corp. |
Construction & Engineering | 2,000 | 19,864 | |||||||||||
Kakaku.com Inc. |
Internet Software & Services | 600 | 7,644 | |||||||||||
Kansai Electric Power Co. Inc. |
Electric Utilities | 1,000 | 12,788 | |||||||||||
KAO Corp. |
Personal Products | 1,400 | 82,335 | |||||||||||
KDDI Corp. |
Wireless Telecommunication Services | 6,000 | 158,149 | |||||||||||
Konami Holdings Corp. |
Software | 200 | 9,612 | |||||||||||
Kuraray Co. Ltd. |
Chemicals | 800 | 14,953 | |||||||||||
Lawson Inc. |
Food & Staples Retailing | 200 | 13,237 | |||||||||||
Mitsubishi Gas Chemical Co. Inc. |
Chemicals | 600 | 14,056 | |||||||||||
Mitsubishi Tanabe Pharma Corp. |
Pharmaceuticals | 600 | 13,752 | |||||||||||
mixi, Inc. |
Internet Software & Services | 200 | 9,648 | |||||||||||
Murata Manufacturing Co. Ltd. |
Electronic Equipment, Instruments & Components | 600 | 88,162 | |||||||||||
Nippon Telegraph & Telephone Corp. |
Diversified Telecommunication Services | 2,200 | 100,790 | |||||||||||
Nissan Motor Co. Ltd. |
Automobiles | 3,200 | 31,683 | |||||||||||
Nitori Co. Ltd. |
Specialty Retail | 200 | 28,588 | |||||||||||
Nitto Denko Corp. |
Chemicals | 400 | 33,339 | |||||||||||
NTT DoCoMo Inc. |
Wireless Telecommunication Services | 5,000 | 114,178 | |||||||||||
Obayashi Corp. |
Construction & Engineering | 1,600 | 19,175 | |||||||||||
Oracle Corp. Japan |
Software | 200 | 15,706 | |||||||||||
Otsuka Corp. |
IT Services | 200 | 12,810 | |||||||||||
Park24 Co. Ltd. |
Commercial Services & Supplies | 400 | 9,737 | |||||||||||
Recruit Holdings Co. Ltd. |
Professional Services | 1,600 | 34,639 | |||||||||||
Resona Holdings Inc. |
Banks | 5,600 | 28,755 | |||||||||||
Sekisui House Ltd. |
Household Durables | 1,000 | 16,848 | |||||||||||
Shionogi & Co. Ltd. |
Pharmaceuticals | 800 | 43,715 |
50 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ International Equity Hedged ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||
Japan (continued) | ||||||||||||||
Start Today Co. Ltd. |
Internet & Direct Marketing Retail | 600 | $ | 19,002 | ||||||||||
Sumitomo Rubber Industries Ltd. |
Auto Components | 600 | 10,991 | |||||||||||
Sundrug Co. Ltd. |
Food & Staples Retailing | 200 | 8,280 | |||||||||||
Taisei Corp. |
Construction & Engineering | 400 | 20,966 | |||||||||||
Tokyo Electron Ltd. |
Semiconductors & Semiconductor Equipment | 200 | 30,702 | |||||||||||
Tosoh Corp. |
Chemicals | 500 | 11,265 | |||||||||||
Toyota Motor Corp. |
Automobiles | 3,600 | 214,596 | |||||||||||
Trend Micro Inc. |
Software | 100 | 4,922 | |||||||||||
USS Co. Ltd. |
Specialty Retail | 800 | 16,133 | |||||||||||
|
|
|||||||||||||
2,029,091 | ||||||||||||||
|
|
|||||||||||||
Luxembourg 0.1% | ||||||||||||||
RTL Group SA |
Media | 138 | 10,448 | |||||||||||
|
|
|||||||||||||
Netherlands 0.3% | ||||||||||||||
Aegon NV |
Insurance | 4,842 | 28,209 | |||||||||||
|
|
|||||||||||||
New Zealand 0.4% | ||||||||||||||
Fletcher Building Ltd. |
Construction Materials | 2,126 | 12,280 | |||||||||||
Ryman Healthcare Ltd. |
Health Care Providers & Services | 1,030 | 6,902 | |||||||||||
Spark New Zealand Ltd. |
Diversified Telecommunication Services | 7,962 | 21,008 | |||||||||||
|
|
|||||||||||||
40,190 | ||||||||||||||
|
|
|||||||||||||
Norway 0.9% | ||||||||||||||
b | Marine Harvest ASA |
Food Products | 1,048 | 20,736 | ||||||||||
Telenor ASA |
Diversified Telecommunication Services | 2,208 | 46,710 | |||||||||||
Yara International ASA |
Chemicals | 582 | 26,079 | |||||||||||
|
|
|||||||||||||
93,525 | ||||||||||||||
|
|
|||||||||||||
Portugal 0.1% | ||||||||||||||
Jeronimo Martins SGPS SA |
Food & Staples Retailing | 738 | 14,561 | |||||||||||
|
|
|||||||||||||
Singapore 2.2% | ||||||||||||||
CapitaLand Commercial Trust |
Equity Real Estate Investment Trusts (REITs | ) | 5,800 | 7,069 | ||||||||||
b | CapitaLand Commercial Trust, rts., 10/19/17 |
Equity Real Estate Investment Trusts (REITs | ) | 963 | 207 | |||||||||
CapitaLand Mall Trust |
Equity Real Estate Investment Trusts (REITs | ) | 6,800 | 10,015 | ||||||||||
ComfortDelGro Corp. Ltd. |
Road & Rail | 7,200 | 11,028 | |||||||||||
DBS Group Holdings Ltd. |
Banks | 2,400 | 36,797 | |||||||||||
Jardine Cycle & Carriage Ltd. |
Distributors | 200 | 5,794 | |||||||||||
SATS Ltd. |
Transportation Infrastructure | 2,000 | 6,790 | |||||||||||
Singapore Airlines Ltd. |
Airlines | 1,400 | 10,351 | |||||||||||
Singapore Exchange Ltd. |
Capital Markets | 3,400 | 18,503 | |||||||||||
Singapore Technologies Engineering Ltd. |
Aerospace & Defense | 4,800 | 12,159 | |||||||||||
Singapore Telecommunications Ltd. |
Diversified Telecommunication Services | 27,400 | 74,249 | |||||||||||
StarHub Ltd. |
Wireless Telecommunication Services | 2,600 | 4,978 | |||||||||||
Suntec REIT |
Equity Real Estate Investment Trusts (REITs | ) | 6,600 | 9,064 | ||||||||||
Yangzijiang Shipbuilding Holdings Ltd. |
Machinery | 7,800 | 8,214 | |||||||||||
|
|
|||||||||||||
215,218 | ||||||||||||||
|
|
|||||||||||||
Spain 2.7% | ||||||||||||||
Amadeus IT Group SA, A |
IT Services | 1,194 | 77,621 | |||||||||||
Distribuidora Internacional de Alimentacion SA |
Food & Staples Retailing | 1,978 | 11,540 | |||||||||||
Endesa SA |
Electric Utilities | 1,016 | 22,911 | |||||||||||
Industria de Diseno Textil SA |
Specialty Retail | 3,424 | 129,066 | |||||||||||
Red Electrica Corp. SA |
Electric Utilities | 1,188 | 24,971 | |||||||||||
|
|
|||||||||||||
266,109 | ||||||||||||||
|
|
|||||||||||||
Sweden 3.3% | ||||||||||||||
Atlas Copco AB |
Machinery | 1,114 | 43,100 | |||||||||||
Electrolux AB, B |
Household Durables | 344 | 11,657 | |||||||||||
Hennes & Mauritz AB, B |
Specialty Retail | 3,506 | 90,632 |
libertyshares.com | Semiannual Report | 51 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ International Equity Hedged ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||
Sweden (continued) | ||||||||||||||
ICA Gruppen AB |
Food & Staples Retailing | 240 | $ | 9,000 | ||||||||||
L E Lundbergforetagen AB, B |
Diversified Financial Services | 70 | 5,583 | |||||||||||
Nordea Bank AB |
Banks | 6,448 | 87,213 | |||||||||||
Skandinaviska Enskilda Banken AB, A |
Banks | 2,942 | 38,675 | |||||||||||
Skanska AB, B |
Construction & Engineering | 842 | 19,466 | |||||||||||
Swedish Match AB |
Tobacco | 594 | 20,791 | |||||||||||
|
|
|||||||||||||
326,117 | ||||||||||||||
|
|
|||||||||||||
Switzerland 6.8% | ||||||||||||||
EMS-Chemie Holding AG |
Chemicals | 28 | 18,636 | |||||||||||
Geberit AG |
Building Products | 116 | 54,919 | |||||||||||
Kuehne + Nagel International AG |
Marine | 164 | 30,390 | |||||||||||
Partners Group Holding AG |
Capital Markets | 72 | 48,888 | |||||||||||
Roche Holding AG |
Pharmaceuticals | 700 | 178,834 | |||||||||||
Sika AG |
Chemicals | 4 | 29,785 | |||||||||||
Straumann Holding AG |
Health Care Equipment & Supplies | 14 | 9,000 | |||||||||||
b | Swiss Life Holding AG |
Insurance | 92 | 32,432 | ||||||||||
Swiss Re AG |
Insurance | 1,010 | 91,543 | |||||||||||
Swisscom AG |
Diversified Telecommunication Services | 74 | 37,948 | |||||||||||
Zurich Insurance Group AG |
Insurance | 432 | 131,886 | |||||||||||
|
|
|||||||||||||
664,261 | ||||||||||||||
|
|
|||||||||||||
United Kingdom 28.1% | ||||||||||||||
3i Group PLC |
Capital Markets | 2,390 | 29,276 | |||||||||||
Admiral Group PLC |
Insurance | 894 | 21,794 | |||||||||||
AstraZeneca PLC |
Pharmaceuticals | 2,874 | 191,060 | |||||||||||
BAE Systems PLC |
Aerospace & Defense | 9,892 | 83,810 | |||||||||||
Barratt Developments PLC |
Household Durables | 3,370 | 27,784 | |||||||||||
The Berkeley Group Holdings PLC |
Household Durables | 490 | 24,436 | |||||||||||
British American Tobacco PLC |
Tobacco | 2,738 | 171,623 | |||||||||||
BT Group PLC |
Diversified Telecommunication Services | 28,416 | 108,235 | |||||||||||
Burberry Group PLC |
Textiles, Apparel & Luxury Goods | 1,412 | 33,342 | |||||||||||
Capita PLC |
Professional Services | 1,598 | 12,113 | |||||||||||
Compass Group PLC |
Hotels, Restaurants & Leisure | 4,816 | 102,284 | |||||||||||
Croda International PLC |
Chemicals | 416 | 21,170 | |||||||||||
Direct Line Insurance Group PLC |
Insurance | 4,360 | 21,269 | |||||||||||
Dixons Carphone PLC |
Specialty Retail | 1,382 | 3,586 | |||||||||||
easyJet PLC |
Airlines | 588 | 9,601 | |||||||||||
Experian PLC |
Professional Services | 2,856 | 57,438 | |||||||||||
GKN PLC |
Auto Components | 4,606 | 21,382 | |||||||||||
GlaxoSmithKline PLC |
Pharmaceuticals | 8,928 | 178,296 | |||||||||||
Hargreaves Lansdown PLC |
Capital Markets | 948 | 18,824 | |||||||||||
HSBC Holdings PLC |
Banks | 22,056 | 218,118 | |||||||||||
IMI PLC |
Machinery | 800 | 13,341 | |||||||||||
Imperial Brands PLC |
Tobacco | 2,740 | 117,048 | |||||||||||
International Consolidated Airlines Group SA |
Airlines | 1,874 | 14,932 | |||||||||||
Intertek Group PLC |
Professional Services | 462 | 30,880 | |||||||||||
ITV PLC |
Media | 16,258 | 38,106 | |||||||||||
Johnson Matthey PLC |
Chemicals | 416 | 19,088 | |||||||||||
Kingfisher PLC |
Specialty Retail | 6,140 | 24,590 | |||||||||||
Land Securities Group PLC |
Equity Real Estate Investment Trusts (REITs | ) | 1,027 | 13,400 | ||||||||||
Marks & Spencer Group PLC |
Multiline Retail | 5,392 | 25,566 | |||||||||||
Mondi PLC |
Paper & Forest Products | 1,012 | 27,223 | |||||||||||
Next PLC |
Multiline Retail | 660 | 46,577 | |||||||||||
Persimmon PLC |
Household Durables | 1,294 | 44,826 | |||||||||||
Randgold Resources Ltd. |
Metals & Mining | 222 | 21,787 | |||||||||||
Reckitt Benckiser Group PLC |
Household Products | 1,922 | 175,683 | |||||||||||
Relx NV |
Professional Services | 3,162 | 67,323 |
52 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ International Equity Hedged ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||
United Kingdom (continued) | ||||||||||||||
RELX PLC |
Professional Services | 3,840 | $ | 84,337 | ||||||||||
Rio Tinto PLC |
Metals & Mining | 1,732 | 80,703 | |||||||||||
Royal Mail PLC |
Air Freight & Logistics | 3,024 | 15,588 | |||||||||||
SSE PLC |
Electric Utilities | 2,958 | 55,441 | |||||||||||
Tate & Lyle PLC |
Food Products | 1,380 | 12,007 | |||||||||||
Taylor Wimpey PLC |
Household Durables | 9,352 | 24,530 | |||||||||||
The Sage Group PLC |
Software | 3,074 | 28,808 | |||||||||||
Unilever NV, IDR |
Personal Products | 3,478 | 205,749 | |||||||||||
Unilever PLC |
Personal Products | 3,538 | 205,012 | |||||||||||
Whitbread PLC |
Hotels, Restaurants & Leisure | 268 | 13,541 | |||||||||||
|
|
|||||||||||||
2,761,527 | ||||||||||||||
|
|
|||||||||||||
Total Common Stocks and Other Equity Interests |
9,775,868 | |||||||||||||
|
|
|||||||||||||
Preferred Stocks 0.2% | ||||||||||||||
Germany 0.2% | ||||||||||||||
Fuchs Petrolub SE, 1.777%, pfd. |
Chemicals | 210 | 12,435 | |||||||||||
Schaeffler AG, 3.663%, pfd. |
Auto Components | 380 | 6,132 | |||||||||||
|
|
|||||||||||||
Total Preferred Stocks (Cost $14,770) |
18,567 | |||||||||||||
|
|
|||||||||||||
Total Investments |
9,794,435 | |||||||||||||
Other Assets, less Liabilities 0.4% |
37,256 | |||||||||||||
|
|
|||||||||||||
Net Assets 100.0% |
$ | 9,831,691 | ||||||||||||
|
|
†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. This security has been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At September 30, 2017, the value of this security was $29,414, representing 0.3% of net assets.
bNon-income producing.
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 registration. These securities have been deemed liquid under guidelines approved by the Fund’s Board of Trustees. At September 30, 2017, the aggregate value of these securities was $17,272, representing 0.2% of net assets.
At September 30, 2017 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 |
GSCO | Buy | 1,064,882 | $ | 835,560 | 10/03/17 | $ | — | $ | — | ||||||||||||||||||
Australian Dollar |
GSCO | Sell | 1,064,882 | 844,339 | 10/03/17 | 8,779 | — | |||||||||||||||||||||
Australian Dollar |
MSCO | Buy | 1,064,882 | 835,560 | 10/03/17 | — | — | |||||||||||||||||||||
Australian Dollar |
MSCO | Sell | 1,064,882 | 844,337 | 10/03/17 | 8,778 | — | |||||||||||||||||||||
Danish Krone |
GSCO | Buy | 1,144,292 | 181,784 | 10/03/17 | — | — | |||||||||||||||||||||
Danish Krone |
GSCO | Sell | 1,144,292 | 183,201 | 10/03/17 | 1,418 | — | |||||||||||||||||||||
Danish Krone |
MSCO | Buy | 1,144,292 | 181,784 | 10/03/17 | — | — | |||||||||||||||||||||
Danish Krone |
MSCO | Sell | 1,144,292 | 183,202 | 10/03/17 | 1,418 | — | |||||||||||||||||||||
Euro |
GSCO | Buy | 588,463 | 695,681 | 10/03/17 | — | — | |||||||||||||||||||||
Euro |
GSCO | Sell | 588,463 | 700,682 | 10/03/17 | 5,001 | — |
libertyshares.com | Semiannual Report | 53 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ International Equity Hedged ETF (continued)
Forward Exchange Contracts (continued) | ||||||||||||||||||||||||||||
Currency | Counterpartya | Type | Quantity | Contract Amount |
Settlement Date |
Unrealized Appreciation |
Unrealized Depreciation |
|||||||||||||||||||||
OTC Forward Exchange Contracts (continued) | ||||||||||||||||||||||||||||
Euro |
MSCO | Buy | 588,463 | $ | 695,681 | 10/03/17 | $ | — | $ | — | ||||||||||||||||||
Euro |
MSCO | Sell | 588,463 | 700,683 | 10/03/17 | 5,002 | — | |||||||||||||||||||||
Great British Pound |
GSCO | Buy | 922,096 | 1,237,130 | 10/03/17 | — | — | |||||||||||||||||||||
Great British Pound |
GSCO | Sell | 922,096 | 1,189,338 | 10/03/17 | — | (47,792 | ) | ||||||||||||||||||||
Great British Pound |
MSCO | Buy | 922,096 | 1,237,130 | 10/03/17 | — | — | |||||||||||||||||||||
Great British Pound |
MSCO | Sell | 922,096 | 1,189,323 | 10/03/17 | — | (47,807 | ) | ||||||||||||||||||||
Hong Kong Dollar |
GSCO | Sell | 1,314,717 | 168,119 | 10/03/17 | — | (204 | ) | ||||||||||||||||||||
Hong Kong Dollar |
MSCO | Buy | 1,314,717 | 168,323 | 10/03/17 | — | — | |||||||||||||||||||||
Hong Kong Dollar |
MSCO | Sell | 1,314,717 | 168,118 | 10/03/17 | — | (205 | ) | ||||||||||||||||||||
Israeli Shekel |
GSCO | Sell | 84,208 | 23,500 | 10/03/17 | — | (338 | ) | ||||||||||||||||||||
Israeli Shekel |
MSCO | Buy | 84,208 | 23,837 | 10/03/17 | — | — | |||||||||||||||||||||
Israeli Shekel |
MSCO | Sell | 84,208 | 23,499 | 10/03/17 | — | (338 | ) | ||||||||||||||||||||
Japanese Yen |
GSCO | Buy | 110,731,140 | 983,708 | 10/03/17 | — | — | |||||||||||||||||||||
Japanese Yen |
GSCO | Sell | 110,731,140 | 1,007,432 | 10/03/17 | 23,724 | — | |||||||||||||||||||||
Japanese Yen |
MSCO | Buy | 110,731,140 | 983,708 | 10/03/17 | — | — | |||||||||||||||||||||
Japanese Yen |
MSCO | Sell | 110,731,140 | 1,007,422 | 10/03/17 | 23,713 | — | |||||||||||||||||||||
New Zealand Dollar |
GSCO | Buy | 28,599 | 20,674 | 10/03/17 | — | — | |||||||||||||||||||||
New Zealand Dollar |
GSCO | Sell | 28,599 | 20,472 | 10/03/17 | — | (203 | ) | ||||||||||||||||||||
New Zealand Dollar |
MSCO | Buy | 28,599 | 20,674 | 10/03/17 | — | — | |||||||||||||||||||||
New Zealand Dollar |
MSCO | Sell | 28,599 | 20,471 | 10/03/17 | — | (203 | ) | ||||||||||||||||||||
Norwegian Krone |
GSCO | Buy | 335,885 | 42,195 | 10/03/17 | — | — | |||||||||||||||||||||
Norwegian Krone |
GSCO | Sell | 335,885 | 43,201 | 10/03/17 | 1,006 | — | |||||||||||||||||||||
Norwegian Krone |
MSCO | Buy | 335,885 | 42,195 | 10/03/17 | — | — | |||||||||||||||||||||
Norwegian Krone |
MSCO | Sell | 335,885 | 43,199 | 10/03/17 | 1,004 | — | |||||||||||||||||||||
Singapore Dollar |
GSCO | Buy | 146,817 | 108,117 | 10/03/17 | — | — | |||||||||||||||||||||
Singapore Dollar |
GSCO | Sell | 146,817 | 108,132 | 10/03/17 | 15 | — | |||||||||||||||||||||
Singapore Dollar |
MSCO | Buy | 146,817 | 108,117 | 10/03/17 | — | — | |||||||||||||||||||||
Singapore Dollar |
MSCO | Sell | 146,817 | 108,136 | 10/03/17 | 19 | — | |||||||||||||||||||||
Swedish Krona |
GSCO | Buy | 1,261,746 | 154,581 | 10/03/17 | — | — | |||||||||||||||||||||
Swedish Krona |
GSCO | Sell | 1,261,746 | 158,816 | 10/03/17 | 4,235 | — | |||||||||||||||||||||
Swedish Krona |
MSCO | Buy | 1,261,746 | 154,581 | 10/03/17 | — | — | |||||||||||||||||||||
Swedish Krona |
MSCO | Sell | 1,261,746 | 158,813 | 10/03/17 | 4,232 | — | |||||||||||||||||||||
Swiss Franc |
GSCO | Buy | 309,279 | 319,635 | 10/03/17 | — | — | |||||||||||||||||||||
Swiss Franc |
GSCO | Sell | 309,279 | 322,464 | 10/03/17 | 2,829 | — | |||||||||||||||||||||
Swiss Franc |
MSCO | Buy | 309,279 | 319,635 | 10/03/17 | — | — | |||||||||||||||||||||
Swiss Franc |
MSCO | Sell | 309,279 | 322,419 | 10/03/17 | 2,784 | — | |||||||||||||||||||||
Australian Dollar |
GSCO | Sell | 1,073,261 | 841,850 | 11/02/17 | — | (2 | ) | ||||||||||||||||||||
Australian Dollar |
MSCO | Sell | 1,073,261 | 841,844 | 11/02/17 | — | (7 | ) | ||||||||||||||||||||
Danish Krone |
GSCO | Sell | 1,190,557 | 189,453 | 11/02/17 | — | (5 | ) | ||||||||||||||||||||
Danish Krone |
MSCO | Sell | 1,190,557 | 189,455 | 11/02/17 | — | (3 | ) | ||||||||||||||||||||
Euro |
GSCO | Sell | 604,757 | 716,078 | 11/02/17 | — | (7 | ) | ||||||||||||||||||||
Euro |
MSCO | Sell | 604,757 | 716,069 | 11/02/17 | — | (16 | ) | ||||||||||||||||||||
Great British Pound |
GSCO | Sell | 919,005 | 1,234,177 | 11/02/17 | — | (15 | ) | ||||||||||||||||||||
Great British Pound |
MSCO | Sell | 919,005 | 1,234,168 | 11/02/17 | — | (24 | ) | ||||||||||||||||||||
Hong Kong Dollar |
GSCO | Sell | 1,332,910 | 170,780 | 11/02/17 | — | (1 | ) | ||||||||||||||||||||
Hong Kong Dollar |
MSCO | Sell | 1,332,910 | 170,781 | 11/02/17 | — | — | |||||||||||||||||||||
Israeli Shekel |
GSCO | Sell | 84,208 | 23,837 | 11/02/17 | — | (24 | ) | ||||||||||||||||||||
Israeli Shekel |
MSCO | Sell | 84,208 | 23,861 | 11/02/17 | — | (1 | ) | ||||||||||||||||||||
Japanese Yen |
GSCO | Sell | 114,409,480 | 1,017,756 | 11/02/17 | 1 | — | |||||||||||||||||||||
Japanese Yen |
MSCO | Sell | 114,409,480 | 1,017,742 | 11/02/17 | — | (12 | ) | ||||||||||||||||||||
New Zealand Dollar |
GSCO | Sell | 28,599 | 20,674 | 11/02/17 | 12 | — | |||||||||||||||||||||
New Zealand Dollar |
MSCO | Sell | 28,599 | 20,662 | 11/02/17 | — | — | |||||||||||||||||||||
Norwegian Krone |
GSCO | Sell | 369,612 | 46,463 | 11/02/17 | — | — | |||||||||||||||||||||
Norwegian Krone |
MSCO | Sell | 369,612 | 46,462 | 11/02/17 | — | (1 | ) | ||||||||||||||||||||
Singapore Dollar |
GSCO | Sell | 146,817 | 108,117 | 11/02/17 | — | (36 | ) | ||||||||||||||||||||
Singapore Dollar |
MSCO | Sell | 146,817 | 108,148 | 11/02/17 | — | (5 | ) | ||||||||||||||||||||
Swedish Krona |
GSCO | Sell | 1,322,917 | 162,341 | 11/02/17 | — | (2 | ) |
54 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ International Equity Hedged ETF (continued)
Forward Exchange Contracts (continued) | ||||||||||||||||||||||||||||
Currency | Counterpartya | Type | Quantity | Contract Amount |
Settlement Date |
Unrealized Appreciation |
Unrealized Depreciation |
|||||||||||||||||||||
OTC Forward Exchange Contracts (continued) | ||||||||||||||||||||||||||||
Swedish Krona |
MSCO | Sell | 1,322,917 | $ | 162,340 | 11/02/17 | $ | — | $ | (4 | ) | |||||||||||||||||
Swiss Franc |
GSCO | Sell | 318,593 | 329,900 | 11/02/17 | — | (4 | ) | ||||||||||||||||||||
Swiss Franc |
MSCO | Sell | 318,593 | 329,891 | 11/02/17 | — | (13 | ) | ||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Total Forward Exchange Contracts |
|
$ | 93,970 | $ | (97,272 | ) | ||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) |
|
$ | (3,302 | ) | ||||||||||||||||||||||||
|
|
aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.
See Abbreviations on page 69.
See Note 7 regarding other derivative information.
libertyshares.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 55 |
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
September 30, 2017 (unaudited)
Franklin LibertyQ Emerging Markets ETF |
Franklin LibertyQ Global Dividend ETF |
Franklin LibertyQ Global Equity ETF |
Franklin LibertyQ International Equity Hedged ETF |
|||||||||||||
Assets: |
| |||||||||||||||
Investments in securities: |
| |||||||||||||||
Cost – Unaffiliated issuers |
$ | 359,819,697 | $ | 15,190,315 | $ | 15,484,757 | $ | 8,957,066 | ||||||||
|
|
|||||||||||||||
Value – Unaffiliated issuers |
$ | 404,473,736 | $ | 16,784,441 | $ | 17,442,308 | $ | 9,794,435 | ||||||||
Cash |
127,125 | 18,113 | 34,325 | 30,019 | ||||||||||||
Foreign currency, at value (cost $1,545,914, $83,968, $52,747 and $54,038, respectively) |
1,537,101 | 83,805 | 52,817 | 53,796 | ||||||||||||
Receivables: |
| |||||||||||||||
Investment securities sold |
— | 429,363 | — | — | ||||||||||||
Dividends |
521,716 | 47,603 | 32,461 | 37,906 | ||||||||||||
Affiliates |
— | 8,501 | 19,684 | 15,387 | ||||||||||||
Unrealized appreciation on OTC forward exchange contracts |
— | — | — | 93,970 | ||||||||||||
|
|
|||||||||||||||
Total assets |
406,659,678 | 17,371,826 | 17,581,595 | 10,025,513 | ||||||||||||
|
|
|||||||||||||||
Liabilities: |
| |||||||||||||||
Payables: |
| |||||||||||||||
Investment securities purchased |
— | 459,018 | 4,827 | 32,533 | ||||||||||||
Management fees |
92,654 | — | — | — | ||||||||||||
Transfer agent fees |
6,521 | 6,521 | 6,521 | 6,521 | ||||||||||||
Custody fees |
110,600 | 2,058 | 1,846 | 14,232 | ||||||||||||
Professional fees |
18,046 | 20,882 | 18,313 | 22,274 | ||||||||||||
Reports to shareholders |
12,718 | 3,124 | 3,091 | 2,949 | ||||||||||||
Pricing fees |
9,030 | 4,493 | 14,864 | 11,047 | ||||||||||||
Deferred tax |
503,514 | — | — | — | ||||||||||||
Unrealized depreciation on OTC forward exchange contracts |
— | — | — | 97,272 | ||||||||||||
Accrued expenses and other liabilities |
4,541 | 5,582 | 10,013 | 6,994 | ||||||||||||
|
|
|||||||||||||||
Total liabilities |
757,624 | 501,678 | 59,475 | 193,822 | ||||||||||||
|
|
|||||||||||||||
Net assets, at value |
$ | 405,902,054 | $ | 16,870,148 | $ | 17,522,120 | $ | 9,831,691 | ||||||||
|
|
|||||||||||||||
Net assets consist of: |
| |||||||||||||||
Paid-in capital |
$ | 357,090,428 | $ | 14,278,951 | $ | 15,024,525 | $ | 9,415,148 | ||||||||
Undistributed net investment income |
4,690,083 | 37,291 | 162,892 | 169,383 | ||||||||||||
Net unrealized appreciation (depreciation) |
44,140,141 | 1,594,359 | 1,957,669 | 833,927 | ||||||||||||
Accumulated net realized gain (loss) |
(18,598 | ) | 959,547 | 377,034 | (586,767 | ) | ||||||||||
|
|
|||||||||||||||
Net assets, at value |
$ | 405,902,054 | $ | 16,870,148 | $ | 17,522,120 | $ | 9,831,691 | ||||||||
|
|
|||||||||||||||
Shares outstanding |
12,800,000 | 600,000 | 600,000 | 400,000 | ||||||||||||
|
|
|||||||||||||||
Net asset value per share |
$ | 31.71 | $ | 28.12 | $ | 29.20 | $ | 24.58 | ||||||||
|
|
56 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Operations
for the period ended September 30, 2017 (unaudited)
Franklin LibertyQ Emerging Markets ETF |
Franklin LibertyQ Global Dividend ETF |
Franklin LibertyQ Global Equity ETF |
Franklin LibertyQ International Equity Hedged ETF |
|||||||||||||
Investment income: |
| |||||||||||||||
Dividends: (net of foreign taxes)a |
||||||||||||||||
Unaffiliated issuers |
$ | 7,465,323 | $ | 400,516 | $ | 280,538 | $ | 194,382 | ||||||||
Income from securities loaned (net of fees and rebates) |
— | — | 1 | — | ||||||||||||
|
|
|||||||||||||||
Total investment income |
7,465,323 | 400,516 | 280,539 | 194,382 | ||||||||||||
|
|
|||||||||||||||
Expenses: |
| |||||||||||||||
Management fees (Note 3a) |
1,001,588 | 49,970 | 29,861 | 19,830 | ||||||||||||
Transfer agent fees |
7,821 | 7,821 | 7,821 | 7,821 | ||||||||||||
Custodian fees |
141,281 | 2,340 | 2,636 | 17,466 | ||||||||||||
Reports to shareholders |
7,141 | 2,635 | 2,634 | 2,634 | ||||||||||||
Registration and filing fees |
38,771 | 4,333 | 3,747 | 3,164 | ||||||||||||
Professional fees |
30,939 | 25,481 | 28,492 | 35,266 | ||||||||||||
Trustees’ fees and expenses |
45,109 | 3,977 | 2,492 | 1,262 | ||||||||||||
Pricing fees |
16,570 | 6,740 | 22,296 | 16,570 | ||||||||||||
Other |
3,139 | 4,936 | 6,528 | 6,172 | ||||||||||||
|
|
|||||||||||||||
Total expenses |
1,292,359 | 108,233 | 106,507 | 110,185 | ||||||||||||
Expenses waived/paid by affiliates (Note 3c) |
(304,127 | ) | (58,265 | ) | (76,776 | ) | (90,355 | ) | ||||||||
|
|
|||||||||||||||
Net expenses |
988,232 | 49,968 | 29,731 | 19,830 | ||||||||||||
|
|
|||||||||||||||
Net investment income |
6,477,091 | 350,548 | 250,808 | 174,552 | ||||||||||||
|
|
|||||||||||||||
Realized and unrealized gains (losses): |
| |||||||||||||||
Net realized gain (loss) from: |
| |||||||||||||||
Investments unaffiliated issuers |
1,652,052 | 106,538 | (89,327 | ) | 93,281 | |||||||||||
In-kind redemptions |
981,315 | 967,165 | 470,610 | — | ||||||||||||
Foreign currency transactions |
(17,881 | ) | 1,524 | 1,323 | 3,382 | |||||||||||
Forward exchange contracts |
— | — | — | (420,799 | ) | |||||||||||
|
|
|||||||||||||||
Net realized gain (loss) |
2,615,486 | 1,075,227 | 382,606 | (324,136 | ) | |||||||||||
|
|
|||||||||||||||
Net change in unrealized appreciation (depreciation) on: |
| |||||||||||||||
Investments |
22,911,950 | (267,964 | ) | 769,245 | 612,875 | |||||||||||
Translation of other assets and liabilities denominated in foreign currencies |
(74,258 | ) | 469 | (211 | ) | (79 | ) | |||||||||
Forward exchange contracts |
— | — | — | 7,198 | ||||||||||||
|
|
|||||||||||||||
Net change in unrealized appreciation (depreciation) |
22,837,692 | (267,495 | ) | 769,034 | 619,994 | |||||||||||
|
|
|||||||||||||||
Net realized and unrealized gain (loss) |
25,453,178 | 807,732 | 1,151,640 | 295,858 | ||||||||||||
|
|
|||||||||||||||
Net increase (decrease) in net assets resulting from operations |
$ | 31,930,269 | $ | 1,158,280 | $ | 1,402,448 | $ | 470,410 | ||||||||
|
|
|||||||||||||||
aForeign taxes withheld on dividends |
$ | 941,752 | $ | 24,902 | $ | 17,244 | $ | 16,069 |
libertyshares.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 57 |
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
Franklin LibertyQ Emerging Markets ETF |
Franklin LibertyQ Global Dividend ETF |
|||||||||||||||
Six Months Ended September 30, 2017 (unaudited) |
Year Ended March 31, 2017a |
Six Months Ended September 30, 2017 (unaudited) |
Year Ended March 31, 2017a |
|||||||||||||
Increase (decrease) in net assets: |
| |||||||||||||||
Operations: |
| |||||||||||||||
Net investment income |
$ | 6,477,091 | $ | 2,587,948 | $ | 350,548 | $ | 673,825 | ||||||||
Net realized gain (loss) |
2,615,486 | (3,009,052 | ) | 1,075,227 | (80,576 | ) | ||||||||||
Net change in unrealized appreciation (depreciation) |
22,837,692 | 21,302,449 | (267,495 | ) | 1,861,854 | |||||||||||
|
|
|||||||||||||||
Net increase (decrease) in net assets resulting from operations |
31,930,269 | 20,881,345 | 1,158,280 | 2,455,103 | ||||||||||||
|
|
|||||||||||||||
Distributions to shareholders from net investment income |
(3,123,954 | ) | (876,033 | ) | (443,503 | ) | (580,561 | ) | ||||||||
|
|
|||||||||||||||
Capital share transactions: (Note 2) |
49,010,189 | 308,080,238 | (11,150,857 | ) | 25,431,686 | |||||||||||
|
|
|||||||||||||||
Net increase (decrease) in net assets |
77,816,504 | 328,085,550 | (10,436,080 | ) | 27,306,228 | |||||||||||
Net assets: |
| |||||||||||||||
Beginning of period |
328,085,550 | — | 27,306,228 | — | ||||||||||||
|
|
|||||||||||||||
End of period |
$ | 405,902,054 | $ | 328,085,550 | $ | 16,870,148 | $ | 27,306,228 | ||||||||
|
|
|||||||||||||||
Undistributed net investment income included in net assets, end of period |
$ | 4,690,083 | $ | 1,336,946 | $ | 37,291 | $ | 130,246 | ||||||||
|
|
aFor the period June 1, 2016 (commencement of operations) to March 31, 2017.
58 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
Franklin LibertyQ Global Equity ETF |
Franklin LibertyQ International Equity Hedged ETF |
|||||||||||||||
Six Months Ended September 30, 2017 (unaudited) |
Year Ended March 31, 2017a |
Six Months Ended September 30, 2017 (unaudited) |
Year Ended March 31, 2017a |
|||||||||||||
Increase (decrease) in net assets: |
| |||||||||||||||
Operations: |
| |||||||||||||||
Net investment income |
$ | 250,808 | $ | 486,816 | $ | 174,552 | $ | 380,260 | ||||||||
Net realized gain (loss) |
382,606 | 27,979 | (324,136 | ) | (56,879 | ) | ||||||||||
Net change in unrealized appreciation (depreciation) |
769,034 | 1,188,635 | 619,994 | 213,933 | ||||||||||||
|
|
|||||||||||||||
Net increase (decrease) in net assets resulting from operations |
1,402,448 | 1,703,430 | 470,410 | 537,314 | ||||||||||||
|
|
|||||||||||||||
Distributions to shareholders from net investment income and net foreign currency gains |
(194,826 | ) | (371,677 | ) | (519,128 | ) | (1,086,182 | ) | ||||||||
|
|
|||||||||||||||
Capital share transactions: (Note 2) |
(5,429,740 | ) | 20,412,485 | — | 10,429,277 | |||||||||||
|
|
|||||||||||||||
Net increase (decrease) in net assets |
(4,222,118 | ) | 21,744,238 | (48,718 | ) | 9,880,409 | ||||||||||
Net assets: |
| |||||||||||||||
Beginning of period |
21,744,238 | — | 9,880,409 | — | ||||||||||||
|
|
|||||||||||||||
End of period |
$ | 17,522,120 | $ | 21,744,238 | $ | 9,831,691 | $ | 9,880,409 | ||||||||
|
|
|||||||||||||||
Undistributed net investment income included in net assets, end of period |
$ | 162,892 | $ | 106,910 | $ | 169,383 | $ | 513,959 | ||||||||
|
|
aFor the period June 1, 2016 (commencement of operations) to March 31, 2017.
libertyshares.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 59 |
FRANKLIN TEMPLETON ETF TRUST
Notes to Financial Statements (unaudited)
1. Organization and Significant Accounting Policies
Franklin Templeton ETF Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of twelve separate funds, four of which are included in this report (Funds) and the financial statements of the remaining funds are presented separately, 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 seek to provide the investment results that closely correspond, before fees and expenses, to the performance of each Fund’s corresponding underlying index.
The following summarizes the Funds’ 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 VC provides administration and oversight of the Funds’ valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Funds to 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.
Certain derivative financial instruments (derivatives) trade in the OTC market. The Funds’ pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Funds’ net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.
The 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 VC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.
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, 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 Funds. 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).
60 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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. Franklin LibertyQ Emerging Markets ETF Statement of Investments has been adjusted to reflect investment values as of September 30, 2017.
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 derivatives 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.
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 the 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 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 OTC forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or
libertyshares.com | Semiannual Report | 61 |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Significant Accounting Policies (continued)
c. Derivative Financial Instruments (continued)
sell a foreign currency at a specific exchange rate on a future date.
See Note 7 regarding other derivative information.
d. Securities Lending
Certain or all Funds participate in an agency based securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/or third-party vendor, is reported separately in the Statements of Operations. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. At September 30, 2017, the Funds had no securities on loan.
e. 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 invests. 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 September 30, 2017, 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.
f. 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. Estimated expenses are accrued daily. Dividend income and realized 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. Fund specific expenses are charged directly to the fund that incurred the expense.
g. 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
62 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
h. 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 in blocks of 200,000 shares or multiples thereof (Creation Units). 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 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 or 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 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 received by the Funds, if any, are included in capital share transactions in the Statements of Changes in Net Assets.
At September 30, 2017, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:
Franklin LibertyQ Emerging Markets ETF | ||||||||||||||||||||
Six Months Ended September 30, 2017 | Year Ended March 31, 2017a | |||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||
Shares sold |
2,000,000 | $ | 61,092,740 | 11,200,000 | $ | 308,080,238 | ||||||||||||||
Shares redeemed |
(400,000 | ) | (12,082,551 | ) | — | — | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net increase (decrease) |
1,600,000 | $ | 49,010,189 | 11,200,000 | $ | 308,080,238 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Franklin LibertyQ Global Dividend ETF | ||||||||||||||||||||
Six Months Ended September 30, 2017 | Year Ended March 31, 2017a | |||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||
Shares sold |
— | — | 1,000,000 | $ | 25,431,686 | |||||||||||||||
Shares redeemed |
(400,000 | ) | $ | (11,150,857 | ) | — | — | |||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net increase (decrease) |
(400,000 | ) | $ | (11,150,857 | ) | 1,000,000 | $ | 25,431,686 | ||||||||||||
|
|
|
|
|
|
libertyshares.com | Semiannual Report | 63 |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
2. Shares of Beneficial Interest (continued)
Franklin LibertyQ Global Equity ETF | ||||||||||||||||||||
Six Months Ended September 30, 2017 | Year Ended March 31, 2017a | |||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||
Shares sold |
— | — | 1,200,000 | $ | 30,695,587 | |||||||||||||||
Shares redeemed |
(200,000 | ) | $ | (5,429,740 | ) | (400,000 | ) | (10,283,102 | ) | |||||||||||
|
|
|
|
|
|
|||||||||||||||
Net increase (decrease) |
(200,000 | ) | $ | (5,429,740 | ) | 800,000 | $ | 20,412,485 | ||||||||||||
|
|
|
|
|
|
|||||||||||||||
Franklin LibertyQ International Equity Hedged ETF | ||||||||||||||||||||
Six Months Ended September 30, 2017 | Year Ended March 31, 2017a | |||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||
Shares sold |
— | — | 1,000,000 | $ | 25,447,822 | |||||||||||||||
Shares redeemed |
— | — | (600,000 | ) | (15,018,545 | ) | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net increase (decrease) |
— | — | 400,000 | $ | 10,429,277 | |||||||||||||||
|
|
|
|
|
|
aFor the period June 1, 2016 (commencement of operations) to March 31, 2017.
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Funds are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation | |
Franklin Advisers, Inc. (Advisers) |
Investment manager | |
Franklin Templeton Services, LLC (FT Services) |
Administrative manager | |
Franklin Templeton Distributors, Inc. (Distributors) |
Principal underwriter |
a. Management Fees
The Funds pay an investment management fee to Advisers based on the average net assets of each of the Funds as follows:
Annualized Fee Rate | ||
Franklin LibertyQ Emerging Markets ETF |
0.55% | |
Franklin LibertyQ Global Dividend ETF |
0.45% | |
Franklin LibertyQ Global Equity ETF |
0.35% | |
Franklin LibertyQ International Equity Hedged ETF |
0.40% |
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Funds. The fee is paid by Advisers based on the Funds’ average daily net assets, and is not an additional expense of the Funds.
c. Waiver and Expense Reimbursements
Effective September 1, 2017, Advisers has contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by Franklin LibertyQ Emerging Markets ETF, Franklin LibertyQ Global Dividend ETF, Franklin LibertyQ Global Equity ETF and Franklin LibertyQ International Equity Hedged ETF so that the expenses (including acquired fund fees and expenses) of the Funds do not exceed 0.55%, 0.45%, 0.35%, and 0.40%, 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, 2018. Total expenses waived or paid are not subject to recapture subsequent to the Funds’ fiscal year end.
64 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Prior to September 1, 2017, 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 LibertyQ Emerging Markets ETF, Franklin LibertyQ Global Dividend ETF, Franklin LibertyQ Global Equity ETF and Franklin LibertyQ International Equity Hedged ETF so that the expenses (excluding acquired fund fees and expenses) of the Funds do not exceed 0.55%, 0.45%, 0.35%, and 0.40%, respectively, based on the average net assets (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations).
The Franklin LibertyQ Global Equity ETF invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. During the period ended September 30, 2017, the Fund held investments in affiliated management investment companies as follows:
Number of Shares Held at Beginning of Period |
Gross Additions |
Gross Reductions |
Number of Shares Held at End of Period |
Value Held at End of Period |
Dividend Income |
Realized Gain (Loss) |
Change in Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||||||
Franklin LibertyQ Global Equity ETF | ||||||||||||||||||||||||||||||||
Non-Controlled Affiliates | ||||||||||||||||||||||||||||||||
Institutional Fiduciary Trust | ||||||||||||||||||||||||||||||||
Money Market Portfolio, 0.67% |
— | 4,900 | (4,900 | ) | — | $ | — | $ | — | $ | — | $ | — |
d. Other Affiliated Transactions
At September 30, 2017, the shares of the Funds were owned by the following entities.
Funds | Shares | Percentage of Outstanding Sharesa |
||||||
Franklin LibertyQ Emerging Markets ETF | ||||||||
Franklin Moderate Allocation Fund |
3,869,400 | 30.2% | ||||||
Franklin Growth Allocation Fund |
3,249,800 | 25.4% | ||||||
Franklin 529 Portfolios |
1,909,000 | 14.9% | ||||||
Franklin Conservative Allocation Fund |
1,693,800 | 13.2% | ||||||
Franklin LifeSmart™ 2020 – 2055 Retirement Target Funds |
1,005,400 | 7.9% | ||||||
|
|
|||||||
Total |
11,727,400 | 91.6% | ||||||
|
|
|||||||
Franklin LibertyQ Global Dividend ETF | ||||||||
Franklin Resources Inc. |
193,300 | 32.2% | ||||||
|
|
|||||||
Franklin LibertyQ Global Equity ETF | ||||||||
Franklin Resources Inc. |
109,400 | 18.2% | ||||||
|
|
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, 2017, the capital loss carryforwards were as follows:
Franklin LibertyQ Emerging Markets ETF |
Franklin LibertyQ Global Dividend ETF |
Franklin LibertyQ Global Equity ETF |
Franklin LibertyQ International Equity Hedged ETF |
|||||||||||||
Capital loss carryforwards: | ||||||||||||||||
Short term |
$ | 2,253,131 | $ | 64,583 | $ | 3,758 | $ | 203,280 | ||||||||
Long term |
— | — | — | — | ||||||||||||
|
|
|||||||||||||||
Total capital loss carryforwards |
$ | 2,253,131 | $ | 64,583 | $ | 3,758 | $ | 203,280 | ||||||||
|
|
libertyshares.com | Semiannual Report | 65 |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
4. Income Taxes (continued)
At September 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
Franklin LibertyQ Emerging Markets ETF |
Franklin LibertyQ Global Dividend ETF |
Franklin LibertyQ Global Equity ETF |
Franklin LibertyQ International Equity Hedged ETF |
|||||||||||||
Cost of investments |
$ | 360,685,892 | $ | 15,243,649 | $ | 15,495,823 | $ | 9,031,293 | ||||||||
|
|
|||||||||||||||
Unrealized appreciation |
$ | 53,829,159 | $ | 1,878,743 | $ | 2,191,149 | $ | 1,277,375 | ||||||||
Unrealized depreciation |
(10,041,315 | ) | (337,951 | ) | (244,664 | ) | (517,535 | ) | ||||||||
|
|
|||||||||||||||
Net unrealized appreciation (depreciation) |
$ | 43,787,844 | $ | 1,540,792 | $ | 1,946,485 | $ | 759,840 | ||||||||
|
|
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing
treatment of corporate actions, passive foreign investment company shares, in-kind redemptions and wash sales.
5. Investment Transactions
Purchases and sales of investments (excluding short term securities and in-kind transactions) for the period ended September 30, 2017, were as follows:
Franklin LibertyQ Emerging Markets ETF |
Franklin LibertyQ Global Dividend ETF |
Franklin LibertyQ Global Equity ETF |
Franklin LibertyQ International Equity Hedged ETF |
|||||||||||||
Purchases |
$ | 83,148,999 | $ | 5,035,679 | $ | 2,654,205 | $ | 1,317,352 | ||||||||
Sales |
$ | 50,345,588 | $ | 5,660,563 | $ | 2,987,531 | $ | 2,072,352 |
In-kind transactions associated with creation and redemptions for the period ended September 30, 2017, were as follows:
Franklin LibertyQ Emerging Markets ETF |
Franklin LibertyQ Global Dividend ETF |
Franklin LibertyQ Global Equity ETF |
Franklin LibertyQ International Equity Hedged ETF |
|||||||||||||
Cost of Securities Received |
$ | 28,230,341 | $ | — | $ | — | $ | — | ||||||||
Value of Securities Delivereda |
$ | 5,584,797 | $ | 10,563,080 | $ | 5,033,001 | $ | — |
aRealized gains and losses from in-kind redemptions, as shown on the Statement of Operations, are not recognized by the Funds for tax purposes.
6. 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 and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities.
The United States and other nations have imposed and could impose additional sanctions on certain issuers in Russia due to regional conflicts. These sanctions could result in the devaluation of Russia’s currency, a downgrade in Russian issuers’ credit ratings, or a decline in the value and liquidity of Russian stocks or other securities. Such sanctions could also adversely affect Russia’s economy, possibly forcing the economy into a recession. Certain or all Funds may be prohibited from investing in securities issued by companies subject to such sanctions. In addition, if the Fund holds the securities of an issuer that is subject to such sanctions, an immediate freeze of that issuer’s securities could result, impairing the ability of the Fund to buy, sell, receive or deliver those securities. There is also the risk that countermeasures could be taken by Russia’s government, which could involve the seizure of the Fund’s assets. These risks could affect the value of the Funds’ portfolio. While the Funds hold
66 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
securities of certain companies recently impacted by the sanctions, the restrictions do not impact the existing investments in those issuers. At September 30, 2017, Franklin LibertyQ Emerging Markets ETF had 10.7% of its net assets invested in Russia. The remaining Funds in the Trust did not have significant investment in Russia.
7. Other Derivative Information
At September 30, 2017, the Funds’ investments in derivative contracts are reflected in the Statements of Assets and Liabilities as follows:
Asset Derivatives |
Liability Derivatives |
|||||||||||
Derivative Contracts Not Accounted for as Hedging Instruments |
Statements of Assets and Liabilities Location |
Fair Value | Statements of Assets and Liabilities Location |
Fair Value | ||||||||
Franklin LibertyQ International Equity Hedged ETF | ||||||||||||
Foreign exchange contracts |
Unrealized appreciation on OTC forward exchange contracts |
$ | 93,970 | Unrealized depreciation on OTC forward exchange contracts |
$ | 97,272 |
For the period ended September 30, 2017, the effect of derivative contracts in the Funds’ Statements of Operations was as follows:
Asset Derivatives |
Liability Derivatives |
|||||||||||
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 LibertyQ International Equity Hedged ETF | ||||||||||||
Net realized gain (loss) from: |
Net change in unrealized appreciation (depreciation) on: |
|||||||||||
Foreign exchange contracts |
Forward exchange contracts |
$ | (420,799 | ) | Forward exchange contracts |
$ | 7,198 |
For the period ended September 30, 2017, the average month end contract value of forward exchange contracts was $29,977,224.
At September 30, 2017, 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 LibertyQ International Equity Hedged ETF | ||||||||
Derivatives |
||||||||
Forward exchange contracts |
$ | 93,970 | $ | 97,272 |
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.
libertyshares.com | Semiannual Report | 67 |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
7. Other Derivative Information (continued)
At September 30, 2017, 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 Received |
Cash Collateral Received |
Net Amount (Not less than zero) |
||||||||||||||||
Franklin LibertyQ International Equity Hedged ETF | ||||||||||||||||||||
Counterparty | ||||||||||||||||||||
GSCO |
$ | 47,020 | $ | (47,020 | ) | $ | — | $ | — | $ | — | |||||||||
MSCO |
$ | 46,950 | $ | (46,950 | ) | $ | — | $ | — | $ | — |
At September 30, 2017, the Funds’ OTC derivative liabilities, which may be offset against the Funds’ OTC derivative assets and collateral received from the counterparty, are as follows:
Amounts Not Offset in the Statements of Assets and Liabilities |
||||||||||||||||||||
Gross and Net Amounts of Liabilities Presented in the Statements of Assets and Liabilities |
Financial Instruments Available for Offset |
Financial Instruments Collateral Pledged |
Cash Collateral Pledged |
Net Amount (Not less than zero) |
||||||||||||||||
Franklin LibertyQ International Equity Hedged ETF | ||||||||||||||||||||
Counterparty | ||||||||||||||||||||
GSCO |
$ | 48,633 | $ | (47,020 | ) | $ | — | $ | — | $ | 1,613 | |||||||||
MSCO |
$ | 48,639 | $ | (46,950 | ) | $ | — | $ | — | $ | 1,689 |
See Note 1(c) regarding derivative financial instruments.
See Abbreviations on page 69.
8. 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.
For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.
68 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
A summary of inputs used as of September 30, 2017, in valuing the Funds’ assets and liabilities carried at fair value, is as follows:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Franklin LibertyQ Emerging Markets ETF | ||||||||||||||||
Assets: | ||||||||||||||||
Investments in Securities:a |
||||||||||||||||
China |
$ | 61,189,925 | $ | 2,635,154 | $ | — | $ | 63,825,079 | ||||||||
Other Equity Investmentsb |
340,648,657 | — | — | 340,648,657 | ||||||||||||
|
|
|||||||||||||||
Total Investments in Securities |
$ | 401,838,582 | $ | 2,635,154 | $ | — | $ | 404,473,736 | ||||||||
|
|
|||||||||||||||
Franklin LibertyQ Global Dividend ETF | ||||||||||||||||
Assets: | ||||||||||||||||
Investments in Securities: |
||||||||||||||||
Equity Investmentsa,b |
$ | 16,784,441 | $ | — | $ | — | $ | 16,784,441 | ||||||||
|
|
|||||||||||||||
Franklin LibertyQ Global Equity ETF | ||||||||||||||||
Assets: | ||||||||||||||||
Investments in Securities:a |
||||||||||||||||
China |
$ | 605,779 | $ | 7,375 | $ | — | $ | 613,154 | ||||||||
Other Equity Investmentsb |
16,829,154 | — | — | 16,829,154 | ||||||||||||
|
|
|||||||||||||||
Total Investments in Securities |
$ | 17,434,933 | $ | 7,375 | $ | — | $ | 17,442,308 | ||||||||
|
|
|||||||||||||||
Franklin LibertyQ International Equity Hedged ETF | ||||||||||||||||
Assets: | ||||||||||||||||
Investments in Securities: |
||||||||||||||||
Equity Investmentsa,b |
$ | 9,794,435 | $ | — | $ | — | $ | 9,794,435 | ||||||||
|
|
|||||||||||||||
Other Financial Instruments: |
||||||||||||||||
Forward Exchange Contracts |
$ | — | $ | 93,970 | $ | — | $ | 93,970 | ||||||||
|
|
|||||||||||||||
Liabilities: | ||||||||||||||||
Other Financial Instruments: |
||||||||||||||||
Forward Exchange Contracts |
$ | — | $ | 97,272 | $ | — | $ | 97,272 | ||||||||
|
|
aIncludes common and preferred stocks, management investment companies, as well as other equity investments.
bFor detailed categories, see the accompanying Statement of Investments.
9. Subsequent Events
The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.
Counterparty | ||
GSCO | Goldman Sachs Banks US | |
MSCO | Morgan Stanley & Co. LLC |
Selected Portfolio | ||
ADR | American Depository Receipt | |
CDI | Clearing House Electronic Subregister System Depositary Interest | |
ETF | Exchange Traded Fund | |
GDR | Global Depositary Receipt | |
IDR | International Depositary Receipt | |
NVDR | Non Voting Depositary Receipt | |
REIT | Real Estate Investment Trust |
libertyshares.com | Semiannual Report | 69 |
FRANKLIN TEMPLETON ETF TRUST
At March 31, 2017, more than 50% of Franklin LibertyQ Emerging Markets ETF, Franklin LibertyQ Global Dividend ETF, and Franklin LibertyQ International Equity Hedged ETF total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Funds on these investments. As shown in the table below, the Funds hereby reports to shareholders the foreign source income and foreign taxes paid, pursuant to Section 853 of the Internal Revenue Code (Code). This written statement will allow shareholders of record on June 22, 2017, to treat their proportionate share of foreign taxes paid by the Funds as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.
The following tables provide a detailed analysis of foreign tax paid, foreign source income, and foreign source qualified dividends as reported by the Funds to shareholders of record.
Fund | Foreign Tax Paid Per Share |
Foreign Source Income Per Share |
Foreign Source Qualified Dividends Per Share |
|||||||||
Franklin LibertyQ Emerging Markets ETF |
$ | 0.0389 | $ | 0.2824 | $ | 0.1926 | ||||||
Franklin LibertyQ Global Dividend ETF |
$ | 0.0393 | $ | 0.5627 | $ | 0.5401 | ||||||
Franklin LibertyQ International Equity Hedged ETF |
$ | 0.0655 | $ | 1.1317 | $ | 0.2733 |
Foreign Tax Paid Per Share (Column 1) is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the 31-day period beginning 15 days before the ex-dividend date of the Fund’ distribution to which the foreign taxes relate), or, as a tax deduction.
Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the Fund, plus any foreign taxes withheld on these dividends. The amounts reported include foreign source qualified dividends that have not been adjusted for the rate differential applicable to such dividend income.1
Foreign Source Qualified Dividends Per Share (Column 3) is the amount per share of foreign source qualified dividends, plus any foreign taxes withheld on these dividends. These amounts represent the portion of the Foreign Source Income reported to you in column 2 that were derived from qualified foreign securities held by the Fund.1
By mid-February 2018, shareholders will receive Form 1099-DIV which will include their share of taxes paid and foreign source income distributed during the calendar year 2017. The Foreign Source Income reported on Form 1099-DIV has not been adjusted for the rate differential on foreign source qualified dividend income. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their 2017 individual income tax returns.
1. Qualified dividends are taxed at reduced long term capital gains tax rates. In determining the amount of foreign tax credit that may be applied against the U.S. tax liability of individuals receiving foreign source qualified dividends, adjustments may be required to the foreign tax credit limitation calculation to reflect the rate differential applicable to such dividend income. The rules however permit certain individuals to elect not to apply the rate differential adjustments for capital gains and/or dividends for any taxable year. Please consult your tax advisor and the instructions to Form 1116 for more information.
70 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
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 US 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 US Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q 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 the Funds and the Funds’ net asset value may be found on the Funds’ website at libertyshares.com.
libertyshares.com | Semiannual Report | 71 |
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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.
Semiannual Report | ||||||
Franklin Templeton ETF Trust | ||||||
Investment Manager Franklin Advisers, Inc. |
Distributor Franklin Templeton Distributors, Inc. (800) DIAL BEN®/342-5236 libertyshares.com |
Investor Services Transfer Agent State Street Bank and 1 Heritage Drive |
© 2017 Franklin Templeton Investments. All rights reserved. | ETF S 11/17 |
Franklin Templeton
ETF Trust
Semiannual Report
Franklin LibertyQ U.S. Equity ETF |
Franklin LibertyQ U.S. Mid Cap Equity ETF |
Franklin LibertyQ U.S. Small Cap Equity ETF |
Franklin Templeton Investments
Gain From Our Perspective®
At Franklin Templeton Investments, we’re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we’re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world’s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe.
Visit libertyshares.com for fund updates and documents.
Not FDIC Insured | | | May Lose Value | | | No Bank Guarantee |
libertyshares.com | Not part of the semiannual report | 1 |
SEMIANNUAL REPORT
The US economy strengthened during the period since the Funds’ inception on April 26, 2017. Key growth drivers in 2017’s second and third quarters included consumer spending, business investment, exports and federal government spending. The manufacturing and services sectors expanded during the period. The unemployment rate decreased from 4.4% in April 2017 to 4.2% at period-end.1 Monthly retail sales were volatile during the period. Annual inflation, as measured by the Consumer Price Index, began at 2.2% in April 2017 and declined during most of the period, but rose again to 2.2% at period-end.1
At its June meeting, the US Federal Reserve (Fed) raised its target range for the federal funds rate by 0.25% to 1.00%–1.25%, amid signs of a growing US economy, strengthening labor market and improving business spending. At its July and September 2017 meetings, the Fed kept its target range unchanged. Furthermore in September, the Fed mentioned that it would begin implementing its balance sheet reduction in October.
US equity markets rose during the period, benefiting from mostly upbeat economic data and better US corporate earnings. The markets were also supported by investor optimism arising from pro-growth and pro-business policy plans in the US; Emmanuel Macron’s victory in France’s presidential election; comments from the US Fed chair indicating optimism about the US economy and the likelihood of gradual rate hikes; and the Republican tax reform plan. However, uncertainty about President Trump’s ability to implement reforms and geopolitical tensions in the Middle East and the Korean peninsula curbed market sentiment. The broad US stock market, as measured by the Standard & Poor’s® 500 Index, generated a +6.79% total return for the period.2
The foregoing information reflects our analysis and opinions as of September 30, 2017. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.
1. Source: Bureau of Labor Statistics.
2. Source: Morningstar.
See www.franklintempletondatasources.com for additional data provider information.
2 | Semiannual Report | libertyshares.com |
Franklin LibertyQ U.S. Equity ETF
This semiannual report for Franklin LibertyQ U.S. Equity ETF covers the period since the Fund’s inception on April 26, 2017, through September 30, 2017.
Your Fund’s Goal and Main Investments
The Fund seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the LibertyQ U.S. Large Cap Equity Index.1 Under normal market conditions, the Fund invests at least 80% of its assets in the component securities of the index. The index seeks to achieve a lower level of risk and higher risk-adjusted performance than the Russell 1000® Index over the long term by applying a multi-factor selection process, which is designed to select equity securities from the Russell 1000® Index that have favorable exposure to four investment-style factors: quality, value, momentum and low volatility.
Performance Overview
For the period since inception on April 26, 2017, through September 30, 2017, the Fund posted cumulative total returns of +5.80% based on market price and +5.88% based on net asset value (NAV).2 In comparison, the LibertyQ U.S. Large Cap Equity Index delivered a +6.02% total return for the same period, while the Russell 1000® Index produced a +6.37% total return.3 You can find more of the Fund’s performance data in the Performance Summary beginning on page 5.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to libertyshares.com or call (800) 342-5236.
Top 10 Sectors/Industries | ||||
9/30/17 | ||||
% of Total Net Assets |
||||
Information Technology | 20.9% | |||
Industrials | 17.5% | |||
Consumer Discretionary | 17.5% | |||
Consumer Staples | 14.5% | |||
Health Care | 11.6% | |||
Utilities | 7.7% | |||
Financials | 3.6% | |||
Materials | 2.6% | |||
Real Estate | 1.9% | |||
Energy | 1.0% |
Investment Strategy
The Fund, using a passive or indexing investment approach, seeks investment results that closely correspond, before fees and expenses, to the performance of the LibertyQ U.S. Large Cap Equity Index. The investment manager seeks to achieve, over time, a correlation between the Fund’s performance, before fees and expenses, and that of the index of 0.95 or better. A figure of 1.00 would indicate perfect correlation. The Fund’s intention is to replicate the component securities of the index as closely as possible. However, under various circumstances, it may not be possible or practicable to purchase all of the component securities in their respective weightings in the index. In these circumstances, the Fund may use a “representative sampling” strategy whereby the Fund would invest in what it believes to be a representative sample of the component securities of the index, but may not track the index with the same degree of accuracy as would an investment vehicle replicating the entire index. The Fund’s portfolio is reconstituted semiannually following the semiannual reconstitution of the index.
1. The LibertyQ U.S. Large Cap Equity Index is a systematic, rules-based proprietary index maintained and calculated by FTSE Russell (Russell) based on the Russell 1000® Index using a methodology developed with Franklin Templeton to reflect Franklin Templeton’s desired investment strategy. The Russell 1000® Index is a subset of the Russell 3000® Index and is designed to measure the performance of large capitalization stocks in the US. It includes approximately 1,000 of the largest issuers based on a combination of their market cap and current index membership. The Franklin LibertyQ U.S. Equity ETF is not sponsored, endorsed, issued, sold or promoted by, or affiliated with FTSE Russell. FTSE Russell does not make any representation regarding the advisability of investing in the Franklin LibertyQ U.S. Equity ETF.
2. 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 (4/28/17), the NAV of the Fund is used as a proxy for the market price to calculate market returns.
3. Source: Factset.
The index is unmanaged and includes reinvestment of any income or distributions (after the deduction of certain withholding taxes). It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 19.
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FRANKLIN LIBERTYQ U.S. EQUITY ETF
Top 10 Holdings | ||||
9/30/17 | ||||
Company Sector/Industry |
% of Total Net Assets |
|||
AbbVie Inc. Health Care |
|
1.3% |
| |
The Boeing Co. Industrials |
|
1.3% |
| |
Gilead Sciences Inc. Health Care |
|
1.2% |
| |
Biogen Inc. Health Care |
|
1.2% |
| |
General Motors Co. Consumer Discretionary |
|
1.2% |
| |
Mastercard Inc. Information Technology |
|
1.1% |
| |
Raytheon Co. Industrials |
|
1.1% |
| |
United Parcel Service Inc. Industrials |
|
1.1% |
| |
UnitedHealth Group Inc. Health Care |
|
1.1% |
| |
Northrop Grumman Corp. Industrials |
|
1.1% |
|
Thank you for your participation in Franklin LibertyQ U.S. Equity ETF. We look forward to serving your future investment needs.
Dina Ting, CFA | ||
Portfolio Manager |
The foregoing information reflects our analysis, opinions and portfolio holdings as of September 30, 2017, the end of the reporting period. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
CFA® is a trademark owned by CFA Institute.
4 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTYQ U.S. EQUITY ETF
Performance Summary as of September 30, 2017
Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table does not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale 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 (4/28/17), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/171
Cumulative Total Return2 | Average Annual Total Return2 | |||||||||||||||
Based on NAV3 |
Based on market price4 |
Based on NAV3 |
Based on market price4 |
|||||||||||||
Since Inception (4/26/17) |
+5.88% | +5.80% | +5.88% | +5.80% |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to libertyshares.com or call (800) 342-5236.
See page 6 for Performance Summary footnotes.
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FRANKLIN LIBERTYQ U.S. EQUITY ETF
Distributions (4/26/17–9/30/17)
Net Investment Income |
$0.164693 |
Total Annual Operating Expenses5
With Waiver | Without Waiver | |||
0.25% |
0.43% |
All investments involve risks, including possible loss of principal. Generally, those offering potential for higher returns are accompanied by a higher degree of risk. 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 on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. Companies that have historically paid regular dividends to shareholders may decrease or eliminate dividend payments in the future. A decrease in dividend payments by an issuer may result in a decrease in the value of the issuer’s stock and less available income for the Fund. There can be no assurance that the Fund’s multi-factor stock selection process will enhance performance. Exposure to such investment factors may detract from performance in some market environments, perhaps for extended periods. Performance of the Fund may vary significantly from the performance of an index, as a result of transactions costs, expenses and other factors. The Fund’s risk considerations are discussed in the prospectus. The Fund’s prospectus also includes a description of the main investment risks.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. The Fund has an expense reduction contractually guaranteed through 7/31/18. 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 period indicated. Return for less than one year, if any, has not been annualized.
3. Assumes reinvestment of distributions based on net asset value.
4. Assumes reinvestment of distributions based on market price.
5. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
6 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTYQ U.S. EQUITY 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 Value1 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 4/26/17–9/30/172,3 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 4/1/17–9/30/172,3 |
Net Annualized Expense Ratio3 |
|||||||||||||||||
$1,000.00 | $ | 1,058.80 | $ | 1.11 | $ | 1,023.82 | $ | 1.27 | 0.25 | % |
1. 4/26/17 for Actual; 4/1/17 for Hypothetical.
2. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period for Hypothetical expenses. For Actual expenses, the multiplier is 157/365 to reflect the number of days since commencement of operations.
3. Reflects expenses after fee waivers and expense reimbursements.
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Franklin LibertyQ U.S. Mid Cap Equity ETF
This semiannual report for Franklin LibertyQ U.S. Mid Cap Equity ETF covers the period since the Fund’s inception on April 26, 2017, through September 30, 2017.
Your Fund’s Goal and Main Investments
The Fund seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the LibertyQ U.S. Mid Cap Equity Index.1 Under normal market conditions, the Fund invests at least 80% of its assets in the component securities of the index. The index seeks to achieve a lower level of risk and higher risk-adjusted performance than the Russell Midcap® Index over the long term by applying a multi-factor selection process, which is designed to select equity securities from the Russell Midcap® Index that have favorable exposure to four investment-style factors: quality, value, momentum and low volatility.
Performance Overview
For the period since inception on April 26, 2017, through September 30, 2017, the Fund posted cumulative total returns of +1.93% based on market price and +1.82% based on net asset value (NAV).2 In comparison, the LibertyQ U.S. Mid Cap Equity Index delivered a +1.95% total return for the same period, while the Russell Midcap® Index produced a +4.75% total return for the same period.3 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 libertyshares.com or call (800) 342-5236.
Top 10 Sectors/Industries | ||||
9/30/17 | ||||
% of Total Net Assets |
||||
Consumer Discretionary | 23.3% | |||
Industrials | 17.7% | |||
Information Technology | 14.4% | |||
Financials | 14.3% | |||
Health Care | 10.4% | |||
Consumer Staples | 8.6% | |||
Real Estate | 6.6% | |||
Materials | 2.1% | |||
Utilities | 1.8% | |||
Telecommunication Services | 0.6% |
Investment Strategy
The Fund, using a passive or indexing investment approach, seeks investment results that closely correspond, before fees and expenses, to the performance of the LibertyQ U.S. Mid Cap Equity Index. The investment manager seeks to achieve, over time, a correlation between the Fund’s performance, before fees and expenses, and that of the index of 0.95 or better. A figure of 1.00 would indicate perfect correlation. The Fund’s intention is to replicate the component securities of the index as closely as possible. However, under various circumstances, it may not be possible or practicable to purchase all of the component securities in their respective weightings in the index. In these circumstances, the Fund may use a “representative sampling” strategy whereby the Fund would invest in what it believes to be a representative sample of the component securities of the index, but may not track the index with the same degree of accuracy as would an investment vehicle replicating the entire index. The Fund’s portfolio is reconstituted semiannually following the semiannual reconstitution of the index.
1. The LibertyQ U.S. Mid Cap Equity Index is a systematic, rules-based proprietary index that is maintained and calculated by FTSE Russell (Russell). It is based on the Russell Midcap® Index using a methodology developed with Franklin Templeton to reflect Franklin Templeton’s desired investment strategy. The Russell Midcap® Index is a subset of the Russell 1000® Index and is designed to measure the performance of mid-capitalization stocks in the US. It includes approximately 800 of the smallest issuers in the Russell 1000® Index. The Franklin LibertyQ U.S. Mid Cap Equity ETF is not sponsored, endorsed, issued, sold or promoted by, or affiliated with FTSE Russell. FTSE Russell does not make any representation regarding the advisability of investing in the Franklin LibertyQ U.S. Mid Cap Equity ETF.
2. 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 (4/28/17), the NAV of the Fund is used as a proxy for the market price to calculate market returns.
3. Source: Factset.
The index is unmanaged and includes reinvestment of any income or distributions (after the deduction of certain withholding taxes). It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 25.
8 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTYQ U.S. MID CAP EQUITY ETF
Top 10 Holdings | ||||
9/30/17 | ||||
Company Sector/Industry |
% of Total Net Assets |
|||
Moody’s Corp. Financials |
1.2% | |||
Amphenol Corp. Information Technology |
1.1% | |||
The Progressive Corp. Financials |
1.1% | |||
Rockwell Automation Inc. Industrials |
1.1% | |||
Dollar General Corp. Consumer Discretionary |
1.1% | |||
Cummins Inc. Industrials |
1.1% | |||
Mettler-Toledo International Inc. Health Care |
1.1% | |||
CR Bard Inc. Health Care |
1.1% | |||
Genuine Parts Co. Consumer Discretionary |
1.0% | |||
Zoetis Inc. Health Care |
1.0% |
Thank you for your participation in Franklin LibertyQ U.S. Mid Cap Equity ETF. We look forward to serving your future investment needs.
Dina Ting, CFA | ||
Portfolio Manager |
The foregoing information reflects our analysis, opinions and portfolio holdings as of September 30, 2017, the end of the reporting period. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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FRANKLIN LIBERTYQ U.S. MID CAP EQUITY ETF
Performance Summary as of September 30, 2017
Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table does not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale 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 (4/28/17), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/171
Cumulative Total Return2 | Average Annual Total Return2 | |||||||||||||||
Based on NAV3 |
Based on market price4 |
Based on NAV3 |
Based on market price4 |
|||||||||||||
Since Inception (4/26/17) |
+1.82% | +1.93% | +1.82% | +1.93% |
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 libertyshares.com or call (800) 342-5236.
See page 11 for Performance Summary footnotes.
10 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTYQ U.S. MID CAP EQUITY ETF
Distributions (4/26/17–9/30/17)
Net Investment Income |
$0.140770 |
Total Annual Operating Expenses5
With Waiver | Without Waiver | |||
0.30% | 0.48% |
All investments involve risks, including possible loss of principal. Generally, those offering potential for higher returns are accompanied by a higher degree of risk. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Historically, mid-size company securities have been more volatile in price than larger company securities, especially over the short term. Mid-size companies may be more susceptible to particular economic events or competitive factors than are larger, more broadly diversified companies. There can be no assurance that the Fund’s multi-factor stock selection process will enhance performance. Exposure to such investment factors may detract from performance in some market environments, perhaps for extended periods. Performance of the Fund may vary significantly from the performance of an index, as a result of transactions costs, expenses and other factors. The Fund’s prospectus also includes a description of the main investment risks.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. The Fund has an expense reduction contractually guaranteed through 7/31/18. 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 period indicated. Return for less than one year, if any, has not been annualized.
3. Assumes reinvestment of distributions based on net asset value.
4. Assumes reinvestment of distributions based on market price.
5. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
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FRANKLIN LIBERTYQ U.S. MID CAP EQUITY 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 Value1 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 4/26/17–9/30/172,3 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 4/1/17–9/30/172,3 |
Net Annualized Expense Ratio3 |
|||||||||||||||||
$1,000.00 | $ | 1,018.20 | $ | 1.30 | $ | 1,023.56 | $ | 1.52 | 0.30 | % |
1. 4/26/17 for Actual; 4/1/17 for Hypothetical.
2. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period for Hypothetical expenses. For Actual expenses, the multiplier is 157/365 to reflect the number of days since commencement of operations.
3. Reflects expenses after fee waivers and expense reimbursements.
12 | Semiannual Report | libertyshares.com |
Franklin LibertyQ U.S. Small Cap Equity ETF
This semiannual report for Franklin LibertyQ U.S. Small Cap Equity ETF covers the period since the Fund’s inception on April 26, 2017, through September 30, 2017.
Your Fund’s Goal and Main Investments
The Fund seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the LibertyQ U.S. Small Cap Equity Index.1 Under normal market conditions, the Fund invests at least 80% of its assets in the component securities of the index. The index seeks to achieve a lower level of risk and higher risk-adjusted performance than the Russell 2000® Index over the long term by applying a multi-factor selection process, which is designed to select equity securities from the Russell 2000® Index that have favorable exposure to four investment-style factors: quality, value, momentum and low volatility.
Performance Overview
For the period since the Fund’s inception on April 26, 2017, through September 30, 2017, the Fund had a cumulative total return of -1.42% based on market price and posted a cumulative total return of +1.83% based on net asset value (NAV).2 In comparison, the LibertyQ U.S. Small Cap Equity Index delivered a +1.96% total return for the same period, while the Russell 2000® Index produced a +5.67% total return.3 You can find more of the Fund’s performance data in the Performance Summary beginning on page 15.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to libertyshares.com or call (800) 342-5236.
Top 10 Sectors/Industries | ||||
9/30/17 | ||||
% of Total Net Assets |
||||
Consumer Discretionary | 24.4% | |||
Information Technology | 17.5% | |||
Industrials | 17.1% | |||
Health Care | 11.7% | |||
Financials | 8.6% | |||
Utilities | 7.1% | |||
Consumer Staples | 6.3% | |||
Real Estate | 4.7% | |||
Materials | 1.9% | |||
Telecommunication Services | 0.7% |
Investment Strategy
The Fund, using a passive or indexing investment approach, seeks investment results that closely correspond, before fees and expenses, to the performance of the LibertyQ U.S. Small Cap Equity Index. The investment manager seeks to achieve, over time, a correlation between the Fund’s performance, before fees and expenses, and that of the index of 0.95 or better. A figure of 1.00 would indicate perfect correlation. The Fund’s intention is to replicate the component securities of the index as closely as possible. However, under various circumstances, it may not be possible or practicable to purchase all of the component securities in their respective weightings in the index. In these circumstances, the Fund may use a “representative sampling” strategy whereby the Fund would invest in what it believes to be a representative sample of the component securities of the index, but may not track the index with the same degree of accuracy as would an investment vehicle replicating the entire index. The Fund’s portfolio is reconstituted semiannually following the semiannual reconstitution of the index.
1. The LibertyQ U.S. Small Cap Equity Index is a systematic, rules-based proprietary index that is maintained and calculated by FTSE Russell (Russell). It is based on the Russell 2000® Index using a methodology developed with Franklin Templeton to reflect Franklin Templeton’s desired investment strategy. The Russell 2000® Index is a subset of the Russell 3000® Index and is designed to measure the performance of small capitalization stocks in the US. It includes approximately 2000 of the smallest issuers in the Russell 3000® Index. The Franklin LibertyQ U.S. Small Cap Equity ETF is not sponsored, endorsed, issued, sold or promoted by, or affiliated with FTSE Russell. FTSE Russell does not make any representation regarding the advisability of investing in the Franklin LibertyQ U.S. Small Cap Equity ETF.
2. 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 (4/28/17), the NAV of the Fund is used as a proxy for the market price to calculate market returns.
3. Source: Factset.
The index is unmanaged and includes reinvestment of any income or distributions (after the deduction of certain withholding taxes). It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 30.
libertyshares.com | Semiannual Report | 13 |
FRANKLIN LIBERTYQ U.S. SMALL CAP EQUITY ETF
Top 10 Holdings | ||||
9/30/17 | ||||
Company Sector/Industry |
% of Total Net Assets |
|||
Aspen Technology Inc. Information Technology |
1.0% | |||
Knight-Swift Transportation Holdings Inc. Industrials |
0.9% | |||
Masimo Corp. Health Care |
0.9% | |||
Grand Canyon Education Inc. Consumer Discretionary |
0.9% | |||
Fair Isaac Corp. Information Technology |
0.9% | |||
HealthSouth Corp. Health Care |
0.9% | |||
Littlefuse Inc. Information Technology |
0.8% | |||
Deluxe Corp. Industrials |
0.9% | |||
EPAM Systems Inc. Information Technology |
0.8% | |||
WGL Holdings Inc. Utilities |
0.8% |
Thank you for your participation in Franklin LibertyQ U.S. Small Cap Equity ETF. We look forward to serving your future investment needs.
Dina Ting, CFA | ||
Portfolio Manager |
The foregoing information reflects our analysis, opinions and portfolio holdings as of September 30, 2017, the end of the reporting period. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
14 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTYQ U.S. SMALL CAP EQUITY ETF
Performance Summary as of September 30, 2017
Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table does not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale 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 (4/28/17), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/171
Cumulative Total Return2 | Average Annual Total Return2 | |||||||||||||||
Based on NAV3 |
Based on market price4 |
Based on NAV3 |
Based on market price4 |
|||||||||||||
Since Inception (4/26/17) |
+1.83% | -1.42% | +1.83% | -1.42% |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to libertyshares.com or call (800) 342-5236.
See page 16 for Performance Summary footnotes.
libertyshares.com | Semiannual Report | 15 |
FRANKLIN LIBERTYQ U.S. SMALL CAP EQUITY ETF
Distributions (4/26/17–9/30/17)
Net Investment Income |
$0.139392 |
Total Annual Operating Expenses5
With Waiver | Without Waiver | |||
0.35% | 0.53% |
All investments involve risks, including possible loss of principal. Generally, those offering potential for higher returns are accompanied by a higher degree of risk. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Smaller, mid-sized and relatively new or unseasoned companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. Historically, these securities have experienced more price volatility than larger company stocks, especially over the short term. Smaller companies may be more susceptible to particular events or economic conditions, less certain growth prospects, lack of depth of management and funds for growth and development and limited or less developed product lines and markets. There can be no assurance that the Fund’s multi-factor stock selection process will enhance performance. Exposure to such investment factors may detract from performance in some market environments, perhaps for extended periods. Performance of the Fund may vary significantly from the performance of an index, as a result of transactions costs, expenses and other factors. The Fund’s prospectus also includes a description of the main investment risks.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. The Fund has an expense reduction contractually guaranteed through 7/31/18. 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 period indicated. Return for less than one year, if any, has not been annualized.
3. Assumes reinvestment of distributions based on net asset value.
4. Assumes reinvestment of distributions based on market price.
5. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
16 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTYQ U.S. SMALL CAP EQUITY 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 Value1 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 4/26/17–9/30/172,3 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 4/1/17–9/30/172,3 |
Net Annualized Expense Ratio3 |
|||||||||||||||||
$1,000.00 | $ | 1,018.30 | $ | 1.52 | $ | 1,023.31 | $ | 1.78 | 0.35 | % |
1. 4/26/17 for Actual; 4/1/17 for Hypothetical.
2. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period for Hypothetical expenses. For Actual expenses, the multiplier is 157/365 to reflect the number of days since commencement of operations.
3. Reflects expenses after fee waivers and expense reimbursements.
libertyshares.com | Semiannual Report | 17 |
FRANKLIN TEMPLETON ETF TRUST
Franklin LibertyQ U.S. Equity ETF
Period Ended September 30, 2017 (unaudited)a |
||||
Per share operating performance (for a share outstanding throughout the period) |
||||
Net asset value, beginning of period |
$ | 25.44 | ||
|
|
|||
Income from investment operationsb: | ||||
Net investment incomec |
0.25 | |||
Net realized and unrealized gains (losses) |
1.24 | |||
|
|
|||
Total from investment operations |
1.49 | |||
|
|
|||
Less distributions from net investment income |
(0.16 | ) | ||
|
|
|||
Net asset value, end of period |
$ | 26.77 | ||
|
|
|||
Total returnd |
5.88% | |||
Ratios to average net assetse | ||||
Expenses before waiver and payments by affiliates |
0.38% | |||
Expenses net of waiver and payments by affiliates |
0.25% | |||
Net investment income |
2.25% | |||
Supplemental data | ||||
Net assets, end of period (000’s) |
$111,081 | |||
Portfolio turnover ratef |
15.41% |
aFor the period April 26, 2017 (commencement of operations) to September 30, 2017.
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 of 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 excludes the value of portfolio securities received or delivered as a result of processing capital share transactions in Creation Units, if any.
18 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
Statement of Investments, September 30, 2017 (unaudited)
Franklin LibertyQ U.S. Equity ETF
Shares | Value | |||||||||
Common Stocks 99.8% | ||||||||||
Consumer Discretionary 17.5% | ||||||||||
Bed Bath & Beyond Inc. |
5,727 | $ | 134,413 | |||||||
Best Buy Co. Inc. |
7,968 | 453,857 | ||||||||
Carnival Corp. |
5,976 | 385,870 | ||||||||
Carter’s Inc. |
1,245 | 122,944 | ||||||||
Choice Hotels International Inc. |
913 | 58,341 | ||||||||
Coach Inc. |
10,209 | 411,218 | ||||||||
Darden Restaurants Inc. |
4,316 | 340,014 | ||||||||
Delphi Automotive PLC |
2,241 | 220,514 | ||||||||
Dick’s Sporting Goods Inc. |
2,407 | 65,013 | ||||||||
Dominos Pizza Inc. |
1,411 | 280,154 | ||||||||
Dunkin’ Brands Group Inc. |
1,494 | 79,302 | ||||||||
GameStop Corp., A |
3,901 | 80,595 | ||||||||
The Gap Inc. |
9,130 | 269,609 | ||||||||
Garmin Ltd. |
4,233 | 228,455 | ||||||||
General Motors Co. |
32,121 | 1,297,046 | ||||||||
Gentex Corp. |
5,810 | 115,038 | ||||||||
Genuine Parts Co. |
4,897 | 468,398 | ||||||||
H&R Block Inc. |
8,300 | 219,784 | ||||||||
Hasbro Inc. |
3,569 | 348,584 | ||||||||
The Home Depot Inc. |
7,138 | 1,167,491 | ||||||||
Kohl’s Corp. |
6,142 | 280,382 | ||||||||
L Brands Inc. |
8,051 | 335,002 | ||||||||
Lear Corp. |
1,079 | 186,753 | ||||||||
Leggett & Platt Inc. |
4,067 | 194,118 | ||||||||
a | Lululemon Athletica Inc. |
2,573 | 160,169 | |||||||
Macy’s Inc. |
6,059 | 132,207 | ||||||||
Marriott International Inc., A |
5,146 | 567,398 | ||||||||
Mattel Inc. |
11,371 | 176,023 | ||||||||
McDonald’s Corp. |
7,221 | 1,131,386 | ||||||||
a | Michael Kors Holdings Ltd. |
5,810 | 278,008 | |||||||
a | The Michaels Cos. Inc. |
1,743 | 37,422 | |||||||
NIKE Inc., B |
20,584 | 1,067,280 | ||||||||
Nordstrom Inc. |
3,818 | 180,019 | ||||||||
a | NVR Inc. |
30 | 85,650 | |||||||
a | O’Reilly Automotive Inc. |
2,988 | 643,526 | |||||||
Omnicom Group Inc. |
4,316 | 319,686 | ||||||||
Polaris Industries Inc. |
2,324 | 243,160 | ||||||||
Pool Corp. |
830 | 89,781 | ||||||||
Regal Entertainment Group, A |
2,822 | 45,152 | ||||||||
Ross Stores Inc. |
14,608 | 943,239 | ||||||||
Signet Jewelers Ltd. |
581 | 38,666 | ||||||||
Starbucks Corp. |
17,015 | 913,876 | ||||||||
Target Corp. |
8,466 | 499,579 | ||||||||
Thor Industries Inc. |
1,162 | 146,307 | ||||||||
Tiffany & Co. |
1,660 | 152,355 | ||||||||
The TJX Cos. Inc. |
14,442 | 1,064,809 | ||||||||
Tractor Supply Co. |
3,237 | 204,870 | ||||||||
Tupperware Brands Corp. |
1,992 | 123,145 | ||||||||
a | Ulta Beauty Inc. |
1,577 | 356,497 | |||||||
a | Urban Outfitters Inc. |
2,324 | 55,544 | |||||||
Vail Resorts Inc. |
581 | 132,538 | ||||||||
VF Corp. |
10,624 | 675,368 | ||||||||
Williams-Sonoma Inc. |
3,071 | 153,120 | ||||||||
Yum! Brands Inc. |
14,857 | 1,093,624 | ||||||||
|
|
|||||||||
19,453,299 | ||||||||||
|
|
libertyshares.com | Semiannual Report | 19 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ U.S. Equity ETF (continued)
Shares | Value | |||||||||
Common Stocks (continued) | ||||||||||
Consumer Staples 14.5% | ||||||||||
Altria Group Inc. |
13,778 | $ | 873,801 | |||||||
a | Blue Buffalo Pet Products Inc. |
747 | 21,177 | |||||||
Brown-Forman Corp., A |
1,909 | 106,312 | ||||||||
Brown-Forman Corp., B |
1,494 | 81,124 | ||||||||
Campbell Soup Co. |
5,810 | 272,024 | ||||||||
Casey’s General Stores Inc. |
747 | 81,759 | ||||||||
Church & Dwight Co. Inc. |
8,466 | 410,178 | ||||||||
Clorox Co. |
4,897 | 645,963 | ||||||||
The Coca-Cola Co. |
23,987 | 1,079,655 | ||||||||
Colgate-Palmolive Co. |
14,193 | 1,033,960 | ||||||||
CVS Health Corp. |
14,110 | 1,147,425 | ||||||||
Dr. Pepper Snapple Group Inc. |
5,810 | 514,011 | ||||||||
Estee Lauder Cos. Inc., A |
7,138 | 769,762 | ||||||||
Flowers Foods Inc. |
4,067 | 76,500 | ||||||||
General Mills Inc. |
16,683 | 863,512 | ||||||||
The Hershey Co. |
5,063 | 552,728 | ||||||||
Hormel Foods Corp. |
8,466 | 272,097 | ||||||||
Ingredion Inc. |
1,411 | 170,223 | ||||||||
Kimberly-Clark Corp. |
8,051 | 947,442 | ||||||||
Lamb Weston Holdings Inc. |
2,241 | 105,080 | ||||||||
McCormick & Co. Inc. |
3,818 | 391,879 | ||||||||
Nu Skin Enterprises Inc., A |
1,162 | 71,440 | ||||||||
PepsiCo Inc. |
9,296 | 1,035,853 | ||||||||
Philip Morris International Inc. |
9,047 | 1,004,307 | ||||||||
a | Pilgrim’s Pride Corp. |
1,992 | 56,593 | |||||||
The Procter & Gamble Co. |
12,367 | 1,125,150 | ||||||||
Sysco Corp. |
16,268 | 877,659 | ||||||||
Tyson Foods Inc. |
6,059 | 426,857 | ||||||||
Wal-Mart Stores Inc. |
13,861 | 1,083,099 | ||||||||
|
|
|||||||||
16,097,570 | ||||||||||
|
|
|||||||||
Energy 1.0% | ||||||||||
Valero Energy Corp. |
14,857 | 1,142,949 | ||||||||
|
|
|||||||||
Financials 3.6% | ||||||||||
AGNC Investment Corp. |
3,237 | 70,178 | ||||||||
American National Insurance Co. |
332 | 39,203 | ||||||||
Aspen Insurance Holdings Ltd. |
2,158 | 87,183 | ||||||||
CBOE Holdings Inc. |
2,988 | 321,598 | ||||||||
Chimera Investment Corp. |
3,818 | 72,237 | ||||||||
CNA Financial Corp. |
498 | 25,024 | ||||||||
Eaton Vance Corp. |
996 | 49,172 | ||||||||
Erie Indemnity Co., A |
581 | 70,051 | ||||||||
FactSet Research Systems Inc. |
664 | 119,593 | ||||||||
Federated Investors Inc., B |
3,320 | 98,604 | ||||||||
FNF Group |
2,158 | 102,419 | ||||||||
Lazard Ltd., A |
3,486 | 157,637 | ||||||||
MarketAxess Holdings Inc. |
664 | 122,515 | ||||||||
Marsh & McLennan Cos. Inc. |
10,043 | 841,704 | ||||||||
Mercury General Corp. |
913 | 51,758 | ||||||||
MFA Financial Inc. |
12,948 | 113,424 | ||||||||
Morningstar Inc. |
332 | 28,217 | ||||||||
MSCI Inc. |
830 | 97,027 | ||||||||
People’s United Financial Inc. |
8,300 | 150,562 | ||||||||
The Progressive Corp. |
4,814 | 233,094 | ||||||||
Realty Income Corp. |
8,466 | 484,171 | ||||||||
S&P Global Inc. |
2,158 | 337,317 | ||||||||
a | Santander Consumer USA Holdings Inc. |
1,494 | 22,963 |
20 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ U.S. Equity ETF (continued)
Shares | Value | |||||||||
Common Stocks (continued) | ||||||||||
Financials (continued) | ||||||||||
Two Harbors Investment Corp. |
2,905 | $ | 29,282 | |||||||
VEREIT Inc. |
27,307 | 226,375 | ||||||||
|
|
|||||||||
3,951,308 | ||||||||||
|
|
|||||||||
Health Care 11.6% | ||||||||||
AbbVie Inc. |
16,517 | 1,467,701 | ||||||||
a | Align Technology Inc. |
1,743 | 324,669 | |||||||
Baxter International Inc. |
18,343 | 1,151,023 | ||||||||
a | Biogen Inc. |
4,233 | 1,325,437 | |||||||
a | Bioverativ Inc. |
2,241 | 127,894 | |||||||
a | Cerner Corp. |
2,407 | 171,667 | |||||||
CR Bard Inc. |
1,411 | 452,226 | ||||||||
Eli Lilly & Co. |
13,695 | 1,171,470 | ||||||||
Gilead Sciences Inc. |
16,766 | 1,358,381 | ||||||||
a | IDEXX Laboratories Inc. |
747 | 116,151 | |||||||
a | Intuitive Surgical Inc. |
332 | 347,232 | |||||||
Johnson & Johnson |
8,466 | 1,100,665 | ||||||||
a | Mettler-Toledo International Inc. |
664 | 415,770 | |||||||
Pfizer Inc. |
33,283 | 1,188,203 | ||||||||
ResMed Inc. |
4,482 | 344,935 | ||||||||
a | United Therapeutics Corp. |
1,577 | 184,809 | |||||||
UnitedHealth Group Inc. |
6,225 | 1,219,166 | ||||||||
a | Varian Medical Systems Inc. |
2,905 | 290,674 | |||||||
West Pharmaceutical Services Inc. |
1,328 | 127,833 | ||||||||
|
|
|||||||||
12,885,906 | ||||||||||
|
|
|||||||||
Industrials 17.5% | ||||||||||
3M Co. |
5,312 | 1,114,989 | ||||||||
Alaska Air Group Inc. |
4,565 | 348,173 | ||||||||
The Boeing Co. |
5,727 | 1,455,861 | ||||||||
BWX Technologies Inc. |
1,826 | 102,293 | ||||||||
C.H. Robinson Worldwide Inc. |
5,229 | 397,927 | ||||||||
Cintas Corp. |
2,407 | 347,282 | ||||||||
Copa Holdings SA |
249 | 31,008 | ||||||||
a | Copart Inc. |
4,067 | 139,783 | |||||||
Cummins Inc. |
3,403 | 571,806 | ||||||||
Delta Air Lines Inc. |
14,359 | 692,391 | ||||||||
Donaldson Co. Inc. |
1,909 | 87,699 | ||||||||
Emerson Electric Co. |
18,260 | 1,147,458 | ||||||||
Expeditors International of Washington Inc. |
4,565 | 273,261 | ||||||||
Fastenal Co. |
9,794 | 446,411 | ||||||||
Graco Inc. |
1,328 | 164,260 | ||||||||
HEICO Corp., A |
747 | 56,921 | ||||||||
Honeywell International Inc. |
8,217 | 1,164,678 | ||||||||
Huntington Ingalls Industries Inc. |
913 | 206,740 | ||||||||
J.B. Hunt Transport Services Inc. |
3,071 | 341,127 | ||||||||
a | JetBlue Airways Corp. |
4,731 | 87,665 | |||||||
Landstar System Inc. |
913 | 90,980 | ||||||||
Lennox International Inc. |
1,079 | 193,109 | ||||||||
Lincoln Electric Holdings Inc. |
830 | 76,094 | ||||||||
Lockheed Martin Corp. |
3,901 | 1,210,441 | ||||||||
MSC Industrial Direct Co. Inc., A |
913 | 68,995 | ||||||||
Northrop Grumman Corp. |
4,233 | 1,217,919 | ||||||||
Old Dominion Freight Line Inc. |
1,411 | 155,365 | ||||||||
Pitney Bowes Inc. |
7,553 | 105,818 | ||||||||
Raytheon Co. |
6,640 | 1,238,891 | ||||||||
Robert Half International Inc. |
4,648 | 233,980 | ||||||||
Rockwell Automation Inc. |
4,067 | 724,780 |
libertyshares.com | Semiannual Report | 21 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ U.S. Equity ETF (continued)
Shares | Value | |||||||||
Common Stocks (continued) | ||||||||||
Industrials (continued) | ||||||||||
Rockwell Collins Inc. |
4,731 | $ | 618,389 | |||||||
Rollins Inc. |
3,486 | 160,844 | ||||||||
Southwest Airlines Co. |
11,620 | 650,488 | ||||||||
a | Spirit Airlines Inc. |
996 | 33,276 | |||||||
Toro Co. |
4,150 | 257,549 | ||||||||
Union Pacific Corp. |
9,877 | 1,145,436 | ||||||||
a | United Continental Holdings Inc. |
7,802 | 474,986 | |||||||
United Parcel Service Inc., B |
10,292 | 1,235,966 | ||||||||
W.W. Grainger Inc. |
1,826 | 328,223 | ||||||||
Watsco Inc. |
415 | 66,844 | ||||||||
|
|
|||||||||
19,466,106 | ||||||||||
|
|
|||||||||
Information Technology 20.9% | ||||||||||
Accenture PLC, A |
8,715 | 1,177,135 | ||||||||
a | Alphabet Inc., A |
653 | 635,839 | |||||||
a | Alphabet Inc., C |
470 | 450,782 | |||||||
Amdocs Ltd. |
4,980 | 320,314 | ||||||||
Analog Devices Inc. |
6,723 | 579,321 | ||||||||
Apple Inc. |
7,138 | 1,100,109 | ||||||||
Applied Materials Inc. |
17,015 | 886,311 | ||||||||
Automatic Data Processing Inc. |
10,624 | 1,161,416 | ||||||||
Broadridge Financial Solutions Inc. |
4,067 | 328,695 | ||||||||
CA Inc. |
9,794 | 326,924 | ||||||||
a | Cadence Design Systems Inc. |
2,324 | 91,728 | |||||||
Cisco Systems Inc. |
34,611 | 1,163,968 | ||||||||
Corning Inc. |
13,861 | 414,721 | ||||||||
Dolby Laboratories Inc., A |
1,743 | 100,257 | ||||||||
a | eBay Inc. |
8,383 | 322,410 | |||||||
a | F5 Networks Inc. |
2,158 | 260,169 | |||||||
FLIR Systems Inc. |
2,573 | 100,116 | ||||||||
HP Inc. |
58,017 | 1,158,019 | ||||||||
Intel Corp. |
30,129 | 1,147,312 | ||||||||
International Business Machines Corp. |
7,138 | 1,035,581 | ||||||||
Intuit Inc. |
7,719 | 1,097,179 | ||||||||
Jack Henry & Associates Inc. |
2,656 | 273,010 | ||||||||
KLA-Tencor Corp. |
1,577 | 167,162 | ||||||||
Lam Research Corp. |
1,328 | 245,733 | ||||||||
Mastercard Inc., A |
8,881 | 1,253,997 | ||||||||
Maxim Integrated Products Inc. |
6,723 | 320,754 | ||||||||
Microchip Technology Inc. |
6,308 | 566,332 | ||||||||
Microsoft Corp. |
15,604 | 1,162,342 | ||||||||
Motorola Solutions Inc. |
3,320 | 281,768 | ||||||||
NetApp Inc. |
4,150 | 181,604 | ||||||||
Paychex Inc. |
11,786 | 706,689 | ||||||||
QUALCOMM Inc. |
18,841 | 976,718 | ||||||||
Skyworks Solutions Inc. |
6,391 | 651,243 | ||||||||
Teradyne Inc. |
1,660 | 61,901 | ||||||||
Texas Instruments Inc. |
13,197 | 1,182,979 | ||||||||
a | VeriSign Inc. |
3,154 | 335,554 | |||||||
Versum Materials Inc. |
1,743 | 67,663 | ||||||||
a | VMware Inc., A |
2,407 | 262,820 | |||||||
Xilinx Inc. |
8,549 | 605,526 | ||||||||
|
|
|||||||||
23,162,101 | ||||||||||
|
|
|||||||||
Materials 2.6% | ||||||||||
Avery Dennison Corp. |
747 | 73,460 | ||||||||
International Flavors & Fragrances Inc. |
2,075 | 296,538 | ||||||||
LyondellBasell Industries NV, A |
11,537 | 1,142,740 |
22 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ U.S. Equity ETF (continued)
Shares | Value | |||||||||
Common Stocks (continued) | ||||||||||
Materials (continued) | ||||||||||
NewMarket Corp. |
332 | $ | 141,349 | |||||||
The Sherwin-Williams Co. |
2,905 | 1,040,106 | ||||||||
Sonoco Products Co. |
2,988 | 150,745 | ||||||||
Valvoline Inc. |
1,909 | 44,766 | ||||||||
|
|
|||||||||
2,889,704 | ||||||||||
|
|
|||||||||
Real Estate 1.9% | ||||||||||
Apple Hospitality REIT Inc. |
3,154 | 59,642 | ||||||||
DDR Corp. |
2,822 | 25,850 | ||||||||
EPR Properties |
1,411 | 98,403 | ||||||||
Gaming and Leisure Properties Inc. |
3,154 | 116,351 | ||||||||
Kimco Realty Corp. |
3,403 | 66,529 | ||||||||
National Retail Properties Inc. |
4,731 | 197,093 | ||||||||
OMEGA Healthcare Investors Inc. |
6,059 | 193,343 | ||||||||
Public Storage |
4,648 | 994,626 | ||||||||
Senior Housing Properties Trust |
7,553 | 147,661 | ||||||||
Spirit Realty Capital Inc. |
12,699 | 108,830 | ||||||||
STORE Capital Corp. |
2,656 | 66,055 | ||||||||
WP Carey Inc. |
913 | 61,527 | ||||||||
|
|
|||||||||
2,135,910 | ||||||||||
|
|
|||||||||
Telecommunication Services 1.0% | ||||||||||
AT&T Inc. |
28,220 | 1,105,378 | ||||||||
|
|
|||||||||
Utilities 7.7% | ||||||||||
Alliant Energy Corp. |
4,233 | 175,966 | ||||||||
American Electric Power Co. Inc. |
13,363 | 938,617 | ||||||||
Atmos Energy Corp. |
2,324 | 194,844 | ||||||||
Consolidated Edison Inc. |
7,304 | 589,287 | ||||||||
DTE Energy Co. |
5,561 | 597,029 | ||||||||
Duke Energy Corp. |
12,699 | 1,065,700 | ||||||||
Eversource Energy |
2,573 | 155,512 | ||||||||
Exelon Corp. |
28,054 | 1,056,794 | ||||||||
Hawaiian Electric Industries Inc. |
2,822 | 94,170 | ||||||||
NextEra Energy Inc. |
3,984 | 583,855 | ||||||||
OGE Energy Corp. |
2,739 | 98,686 | ||||||||
PG&E Corp. |
13,861 | 943,796 | ||||||||
Pinnacle West Capital Corp. |
3,486 | 294,776 | ||||||||
Public Service Enterprise Group Inc. |
17,347 | 802,299 | ||||||||
SCANA Corp. |
3,154 | 152,937 | ||||||||
Vectren Corp. |
2,324 | 152,850 | ||||||||
Xcel Energy Inc. |
13,944 | 659,830 | ||||||||
|
|
|||||||||
8,556,948 | ||||||||||
|
|
|||||||||
Total Investments (Cost $106,608,600) 99.8% |
110,847,179 | |||||||||
Other Assets, less Liabilities 0.2% |
233,713 | |||||||||
|
|
|||||||||
Net Assets 100.0% |
$ | 111,080,892 | ||||||||
|
|
See Abbreviations on page 48.
aNon-income producing.
libertyshares.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 23 |
FRANKLIN TEMPLETON ETF TRUST
Franklin LibertyQ U.S. Mid Cap Equity ETF
Period Ended September 30, 2017 (unaudited)a |
||||
Per share operating performance (for a share outstanding throughout the period) |
||||
Net asset value, beginning of period |
$ | 25.51 | ||
|
|
|||
Income from investment operationsb: | ||||
Net investment incomec |
0.19 | |||
Net realized and unrealized gains (losses) |
0.27 | |||
|
|
|||
Total from investment operations |
0.46 | |||
|
|
|||
Less distributions from net investment income |
(0.14 | ) | ||
|
|
|||
Net asset value, end of period |
$ | 25.83 | ||
|
|
|||
Total returnd |
1.82% | |||
Ratios to average net assetse | ||||
Expenses before waiver and payments by affiliates |
1.88% | |||
Expenses net of waiver and payments by affiliates |
0.30% | |||
Net investment income |
1.78% | |||
Supplemental data | ||||
Net assets, end of period (000’s) |
$5,165 | |||
Portfolio turnover ratef |
21.64% |
aFor the period April 26, 2017 (commencement of operations) to September 30, 2017.
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 of 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 excludes the value of portfolio securities received or delivered as a result of processing capital share transactions in Creation Units, if any.
24 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
Statement of Investments, September 30, 2017 (unaudited)
Franklin LibertyQ U.S. Mid Cap Equity ETF
Shares | Value | |||||||||
Common Stocks 99.8% | ||||||||||
Consumer Discretionary 23.3% | ||||||||||
a | AutoZone Inc. |
80 | $ | 47,609 | ||||||
Bed Bath & Beyond Inc. |
616 | 14,458 | ||||||||
Best Buy Co. Inc. |
868 | 49,441 | ||||||||
a | Burlington Stores Inc. |
212 | 20,238 | |||||||
Carter’s Inc. |
164 | 16,195 | ||||||||
Choice Hotels International Inc. |
120 | 7,668 | ||||||||
Coach Inc. |
1,064 | 42,858 | ||||||||
Delphi Automotive PLC |
416 | 40,934 | ||||||||
Dick’s Sporting Goods Inc. |
324 | 8,751 | ||||||||
Dollar General Corp. |
700 | 56,735 | ||||||||
Dominos Pizza Inc. |
196 | 38,916 | ||||||||
Foot Locker Inc. |
580 | 20,428 | ||||||||
GameStop Corp., A |
448 | 9,256 | ||||||||
The Gap Inc. |
972 | 28,703 | ||||||||
Garmin Ltd. |
396 | 21,372 | ||||||||
Genuine Parts Co. |
556 | 53,181 | ||||||||
H&R Block Inc. |
780 | 20,654 | ||||||||
Hasbro Inc. |
420 | 41,021 | ||||||||
a | Hilton Grand Vacations Inc. |
96 | 3,708 | |||||||
The Interpublic Group of Cos. Inc. |
1,404 | 29,189 | ||||||||
John Wiley & Sons Inc., A |
160 | 8,560 | ||||||||
Kohl’s Corp. |
744 | 33,964 | ||||||||
L Brands Inc. |
832 | 34,620 | ||||||||
Macy’s Inc. |
1,248 | 27,231 | ||||||||
Mattel Inc. |
1,120 | 17,338 | ||||||||
a | Michael Kors Holdings Ltd. |
688 | 32,921 | |||||||
a | The Michaels Cos. Inc. |
428 | 9,189 | |||||||
Nordstrom Inc. |
512 | 24,141 | ||||||||
a | NVR Inc. |
12 | 34,260 | |||||||
a | O’Reilly Automotive Inc. |
212 | 45,658 | |||||||
Pool Corp. |
152 | 16,442 | ||||||||
Ralph Lauren Corp. |
188 | 16,599 | ||||||||
Regal Entertainment Group, A |
396 | 6,336 | ||||||||
Ross Stores Inc. |
804 | 51,914 | ||||||||
a | Sally Beauty Holdings Inc. |
652 | 12,766 | |||||||
Signet Jewelers Ltd. |
108 | 7,187 | ||||||||
Six Flags Entertainment Corp. |
256 | 15,601 | ||||||||
a | Skechers USA. Inc., A |
208 | 5,219 | |||||||
Tiffany & Co. |
368 | 33,775 | ||||||||
Tractor Supply Co. |
556 | 35,189 | ||||||||
Tupperware Brands Corp. |
252 | 15,579 | ||||||||
a | Ulta Beauty Inc. |
168 | 37,978 | |||||||
a | Under Armour Inc., C |
520 | 7,810 | |||||||
a | Urban Outfitters Inc. |
300 | 7,170 | |||||||
VF Corp. |
520 | 33,056 | ||||||||
Williams-Sonoma Inc. |
368 | 18,348 | ||||||||
Wyndham Worldwide Corp. |
180 | 18,974 | ||||||||
a | Yum China Holdings Inc. |
616 | 24,622 | |||||||
|
|
|||||||||
1,203,762 | ||||||||||
|
|
|||||||||
Consumer Staples 8.6% | ||||||||||
a | Blue Buffalo Pet Products Inc. |
272 | 7,711 | |||||||
Brown-Forman Corp., A |
144 | 8,019 | ||||||||
Brown-Forman Corp., B |
728 | 39,530 | ||||||||
Campbell Soup Co. |
612 | 28,654 | ||||||||
Church & Dwight Co. Inc. |
956 | 46,318 | ||||||||
Clorox Co. |
380 | 50,126 | ||||||||
Coty Inc., A |
1,236 | 20,431 |
libertyshares.com | Semiannual Report | 25 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ U.S. Mid Cap Equity ETF (continued)
Shares | Value | |||||||||
Common Stocks (continued) | ||||||||||
Consumer Staples (continued) | ||||||||||
Dr. Pepper Snapple Group Inc. |
556 | $ | 49,189 | |||||||
Flowers Foods Inc. |
792 | 14,898 | ||||||||
a | Herbalife Ltd. |
124 | 8,411 | |||||||
The Hershey Co. |
448 | 48,908 | ||||||||
Kellogg Co. |
692 | 43,160 | ||||||||
Lamb Weston Holdings Inc. |
232 | 10,879 | ||||||||
McCormick & Co. Inc. |
448 | 45,983 | ||||||||
Nu Skin Enterprises Inc., A |
228 | 14,018 | ||||||||
a | Pilgrim’s Pride Corp. |
184 | 5,227 | |||||||
a | Sprouts Farmers Market Inc. |
248 | 4,655 | |||||||
|
|
|||||||||
446,117 | ||||||||||
|
|
|||||||||
Financials 14.3% | ||||||||||
American National Insurance Co. |
32 | 3,779 | ||||||||
Annaly Capital Management Inc. |
1,680 | 20,479 | ||||||||
a | Arch Capital Group Ltd. |
496 | 48,856 | |||||||
Aspen Insurance Holdings Ltd. |
236 | 9,534 | ||||||||
Axis Capital Holdings Ltd. |
336 | 19,256 | ||||||||
CBOE Holdings Inc. |
324 | 34,872 | ||||||||
CNA Financial Corp. |
88 | 4,422 | ||||||||
a | Credit Acceptance Corp. |
36 | 10,086 | |||||||
Discover Financial Services |
660 | 42,557 | ||||||||
Erie Indemnity Co., A |
40 | 4,823 | ||||||||
Everest Re Group Ltd. |
148 | 33,802 | ||||||||
FactSet Research Systems Inc. |
148 | 26,656 | ||||||||
Federated Investors Inc., B |
328 | 9,742 | ||||||||
First American Financial Corp. |
168 | 8,395 | ||||||||
FNF Group |
408 | 19,364 | ||||||||
Lazard Ltd., A |
308 | 13,928 | ||||||||
MarketAxess Holdings Inc. |
108 | 19,927 | ||||||||
Mercury General Corp. |
96 | 5,442 | ||||||||
Moody’s Corp. |
436 | 60,696 | ||||||||
MSCI Inc. |
252 | 29,459 | ||||||||
Nasdaq Inc. |
316 | 24,512 | ||||||||
The Progressive Corp. |
1,208 | 58,491 | ||||||||
Prosperity Bancshares Inc. |
112 | 7,362 | ||||||||
Realty Income Corp. |
760 | 43,464 | ||||||||
a | Santander Consumer USA Holdings Inc. |
244 | 3,750 | |||||||
SEI Investments Co. |
548 | 33,461 | ||||||||
Torchmark Corp. |
404 | 32,356 | ||||||||
Two Harbors Investment Corp. |
604 | 6,088 | ||||||||
Unum Group |
900 | 46,017 | ||||||||
Validus Holdings Ltd. |
252 | 12,401 | ||||||||
Voya Financial Inc. |
544 | 21,700 | ||||||||
W.R. Berkley Corp. |
312 | 20,823 | ||||||||
|
|
|||||||||
736,500 | ||||||||||
|
|
|||||||||
Health Care 10.4% | ||||||||||
a | Acadia Healthcare Co. Inc. |
176 | 8,406 | |||||||
a | Align Technology Inc. |
248 | 46,195 | |||||||
a | Bioverativ Inc. |
208 | 11,871 | |||||||
a | Cerner Corp. |
696 | 49,639 | |||||||
CR Bard Inc. |
168 | 53,844 | ||||||||
a | Edwards Lifesciences Corp. |
328 | 35,854 | |||||||
a | Henry Schein Inc. |
560 | 45,914 | |||||||
a | IDEXX Laboratories Inc. |
304 | 47,269 | |||||||
a | Mednax Inc. |
160 | 6,899 | |||||||
a | Mettler-Toledo International Inc. |
88 | 55,102 |
26 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ U.S. Mid Cap Equity ETF (continued)
Shares | Value | |||||||||
Common Stocks (continued) | ||||||||||
Health Care (continued) | ||||||||||
a | Premier Inc., A |
164 | $ | 5,341 | ||||||
a | United Therapeutics Corp. |
184 | 21,563 | |||||||
Universal Health Services Inc., B |
340 | 37,720 | ||||||||
a | Varian Medical Systems Inc. |
324 | 32,419 | |||||||
a | Waters Corp. |
132 | 23,697 | |||||||
Zoetis Inc. |
828 | 52,793 | ||||||||
|
|
|||||||||
534,526 | ||||||||||
|
|
|||||||||
Industrials 17.7% | ||||||||||
Air Lease Corp. |
232 | 9,888 | ||||||||
Alaska Air Group Inc. |
412 | 31,423 | ||||||||
Allegion PLC |
160 | 13,835 | ||||||||
American Airlines Group Inc. |
1,064 | 50,529 | ||||||||
BWX Technologies Inc. |
144 | 8,067 | ||||||||
C.H. Robinson Worldwide Inc. |
520 | 39,572 | ||||||||
Cintas Corp. |
336 | 48,478 | ||||||||
Copa Holdings SA |
100 | 12,453 | ||||||||
Crane Co. |
164 | 13,118 | ||||||||
Cummins Inc. |
328 | 55,114 | ||||||||
Donaldson Co. Inc. |
448 | 20,581 | ||||||||
Dun & Bradstreet Corp. |
136 | 15,832 | ||||||||
Equifax Inc. |
376 | 39,852 | ||||||||
Expeditors International of Washington Inc. |
572 | 34,240 | ||||||||
Fastenal Co. |
1,116 | 50,867 | ||||||||
Fortive Corp. |
504 | 35,678 | ||||||||
Graco Inc. |
208 | 25,728 | ||||||||
HEICO Corp., A |
108 | 8,230 | ||||||||
Hubbell Inc., B |
84 | 9,746 | ||||||||
a | JetBlue Airways Corp. |
812 | 15,046 | |||||||
Lennox International Inc. |
140 | 25,056 | ||||||||
ManpowerGroup Inc. |
228 | 26,863 | ||||||||
MSC Industrial Direct Co. Inc., A |
192 | 14,510 | ||||||||
Nielsen Holdings PLC |
1,060 | 43,937 | ||||||||
Old Dominion Freight Line Inc. |
240 | 26,426 | ||||||||
Pitney Bowes Inc. |
848 | 11,881 | ||||||||
Robert Half International Inc. |
544 | 27,385 | ||||||||
Rockwell Automation Inc. |
324 | 57,740 | ||||||||
Rollins Inc. |
412 | 19,010 | ||||||||
Toro Co. |
456 | 28,299 | ||||||||
a | United Continental Holdings Inc. |
648 | 39,450 | |||||||
W.W. Grainger Inc. |
212 | 38,107 | ||||||||
Watsco Inc. |
100 | 16,107 | ||||||||
|
|
|||||||||
913,048 | ||||||||||
|
|
|||||||||
Information Technology 14.4% | ||||||||||
Amphenol Corp., A |
692 | 58,571 | ||||||||
Analog Devices Inc. |
552 | 47,566 | ||||||||
Avnet Inc. |
440 | 17,292 | ||||||||
Booz Allen Hamilton Holding Corp. |
552 | 20,639 | ||||||||
CA Inc. |
1,148 | 38,320 | ||||||||
a | Cadence Design Systems Inc. |
960 | 37,891 | |||||||
CDK Global LLC |
228 | 14,384 | ||||||||
CDW Corp. of Delaware |
564 | 37,224 | ||||||||
CSRA Inc. |
264 | 8,519 | ||||||||
Dolby Laboratories Inc., A |
184 | 10,584 | ||||||||
a | F5 Networks Inc. |
276 | 33,275 | |||||||
a | Gartner Inc., A |
300 | 37,323 | |||||||
Genpact Ltd. |
388 | 11,155 |
libertyshares.com | Semiannual Report | 27 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ U.S. Mid Cap Equity ETF (continued)
Shares | Value | |||||||||
Common Stocks (continued) | ||||||||||
Information Technology (continued) | ||||||||||
Jack Henry & Associates Inc. |
276 | $ | 28,370 | |||||||
Juniper Networks Inc. |
624 | 17,366 | ||||||||
a | Keysight Technologies Inc. |
584 | 24,329 | |||||||
KLA-Tencor Corp. |
440 | 46,640 | ||||||||
a | Manhattan Associates Inc. |
236 | 9,811 | |||||||
a | Match Group Inc. |
60 | 1,391 | |||||||
National Instruments Corp. |
292 | 12,314 | ||||||||
NetApp Inc. |
980 | 42,885 | ||||||||
Paychex Inc. |
868 | 52,045 | ||||||||
a | Red Hat Inc. |
444 | 49,222 | |||||||
a | Synopsys Inc. |
472 | 38,010 | |||||||
a | VeriSign Inc. |
140 | 14,895 | |||||||
Western Union Co. |
1,872 | 35,942 | ||||||||
|
|
|||||||||
745,963 | ||||||||||
|
|
|||||||||
Materials 2.1% | ||||||||||
Avery Dennison Corp. |
300 | 29,502 | ||||||||
a | Crown Holdings Inc. |
372 | 22,216 | |||||||
NewMarket Corp. |
24 | 10,218 | ||||||||
RPM International Inc. |
436 | 22,384 | ||||||||
The Scotts Miracle-Gro Co., A |
164 | 15,964 | ||||||||
Valvoline Inc. |
380 | 8,911 | ||||||||
|
|
|||||||||
109,195 | ||||||||||
|
|
|||||||||
Real Estate 6.6% | ||||||||||
Alexandria Real Estate Equities Inc. |
264 | 31,408 | ||||||||
Apple Hospitality REIT Inc. |
656 | 12,405 | ||||||||
Brandywine Realty Trust |
580 | 10,144 | ||||||||
Colony NorthStar Inc., A |
888 | 11,153 | ||||||||
Columbia Property Trust Inc. |
520 | 11,321 | ||||||||
CoreCivic Inc. |
420 | 11,243 | ||||||||
Digital Realty Trust Inc. |
436 | 51,592 | ||||||||
EPR Properties |
208 | 14,506 | ||||||||
a | Equity Commonwealth |
192 | 5,837 | |||||||
Essex Property Trust Inc. |
200 | 50,806 | ||||||||
Federal Realty Investment Trust |
252 | 31,301 | ||||||||
Highwoods Properties Inc. |
280 | 14,585 | ||||||||
Hospitality Properties Trust |
564 | 16,068 | ||||||||
Lamar Advertising Co., A |
276 | 18,914 | ||||||||
National Retail Properties Inc. |
464 | 19,330 | ||||||||
Senior Housing Properties Trust |
1,008 | 19,707 | ||||||||
Tanger Factory Outlet Centers Inc. |
332 | 8,108 | ||||||||
|
|
|||||||||
338,428 | ||||||||||
|
|
|||||||||
Telecommunication Services 0.6% | ||||||||||
CenturyLink Inc. |
1,680 | 31,752 | ||||||||
|
|
|||||||||
Utilities 1.8% | ||||||||||
Edison International |
632 | 48,771 | ||||||||
Entergy Corp. |
588 | 44,900 | ||||||||
|
|
|||||||||
93,671 | ||||||||||
|
|
|||||||||
Total Investments (Cost $5,105,806) 99.8% |
5,152,962 | |||||||||
Other Assets, less Liabilities 0.2% |
12,457 | |||||||||
|
|
|||||||||
Net Assets 100.0% |
$ | 5,165,419 | ||||||||
|
|
See Abbreviations on page 48.
aNon-income producing.
28 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin LibertyQ U.S. Small Cap Equity ETF
Period Ended September 30, 2017 (unaudited)a |
||||
Per share operating performance (for a share outstanding throughout the period) |
||||
Net asset value, beginning of period |
$ | 25.36 | ||
|
|
|||
Income from investment operationsb: | ||||
Net investment incomec |
0.18 | |||
Net realized and unrealized gains (losses) |
0.28 | |||
|
|
|||
Total from investment operations |
0.46 | |||
|
|
|||
Less distributions from net investment income |
(0.14 | ) | ||
|
|
|||
Net asset value, end of period |
$ | 25.68 | ||
|
|
|||
Total returnd |
1.83% | |||
Ratios to average net assetse | ||||
Expenses before waiver and payments by affiliates |
2.35% | |||
Expenses net of waiver and payments by affiliates |
0.35% | |||
Net investment income |
1.66% | |||
Supplemental data | ||||
Net assets, end of period (000’s) |
$3,851 | |||
Portfolio turnover ratef |
13.47% |
aFor the period April 26, 2017 (commencement of operations) to September 30, 2017.
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 of 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 excludes the value of portfolio securities received or delivered as a result of processing capital share transactions in Creation Units, if any.
libertyshares.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 29 |
FRANKLIN TEMPLETON ETF TRUST
Statement of Investments, September 30, 2017 (unaudited)
Franklin LibertyQ U.S. Small Cap Equity ETF
Shares | Value | |||||||||
Common Stocks 100.0% | ||||||||||
Consumer Discretionary 24.4% | ||||||||||
a | 1-800-FLOWERS.Com Inc. |
219 | $ | 2,157 | ||||||
Abercrombie & Fitch Co., A |
591 | 8,534 | ||||||||
Adtalem Global Education Inc. |
330 | 11,830 | ||||||||
a | America’s Car-Mart Inc. |
51 | 2,097 | |||||||
American Eagle Outfitters Inc. |
1,341 | 19,176 | ||||||||
a | American Outdoor Brands Corp. |
393 | 5,993 | |||||||
a | American Public Education Inc. |
123 | 2,589 | |||||||
a | Asbury Automotive Group Inc. |
177 | 10,815 | |||||||
a | Ascena Retail Group Inc. |
876 | 2,146 | |||||||
a | At Home Group Inc. |
33 | 754 | |||||||
Barnes & Noble Inc. |
309 | 2,348 | ||||||||
Bassett Furniture Industries Inc. |
78 | 2,941 | ||||||||
a | Belmond Ltd., A |
288 | 3,931 | |||||||
Big 5 Sporting Goods Corp. |
168 | 1,285 | ||||||||
Big Lots Inc. |
435 | 23,303 | ||||||||
a | BJ’s Restaurants Inc. |
159 | 4,842 | |||||||
Bloomin’ Brands Inc. |
816 | 14,362 | ||||||||
Bob Evans Farms Inc. |
183 | 14,184 | ||||||||
Buckle Inc. |
252 | 4,246 | ||||||||
a | Buffalo Wild Wings Inc. |
111 | 11,733 | |||||||
a | Build-A-Bear-Workshop Inc. |
111 | 1,016 | |||||||
Caleres Inc. |
351 | 10,713 | ||||||||
Camping World Holdings Inc., A |
78 | 3,178 | ||||||||
Capella Education Co. |
105 | 7,366 | ||||||||
a | Career Education Corp. |
336 | 3,491 | |||||||
The Cato Corp., A |
216 | 2,858 | ||||||||
The Cheesecake Factory Inc. |
447 | 18,828 | ||||||||
Chico’s FAS Inc. |
1,068 | 9,559 | ||||||||
The Children’s Place Inc. |
147 | 17,368 | ||||||||
a | Chuy’s Holdings Inc. |
126 | 2,652 | |||||||
Citi Trends Inc. |
114 | 2,265 | ||||||||
Collectors Universe Inc. |
69 | 1,654 | ||||||||
Columbia Sportswear Co. |
183 | 11,269 | ||||||||
a | The Container Store Group Inc. |
150 | 632 | |||||||
Cooper Tire & Rubber Co. |
375 | 14,025 | ||||||||
a | Cooper-Standard Holding Inc. |
105 | 12,177 | |||||||
Core-Mark Holding Co. Inc. |
321 | 10,317 | ||||||||
Cracker Barrel Old Country Store Inc. |
180 | 27,292 | ||||||||
CSS Industries Inc. |
75 | 2,161 | ||||||||
Culp Inc. |
69 | 2,260 | ||||||||
a | Dave & Buster’s Entertainment Inc. |
303 | 15,901 | |||||||
a | Deckers Outdoor Corp. |
219 | 14,982 | |||||||
a | Del Frisco’s Restaurant Group Inc. |
86 | 1,251 | |||||||
a | Denny’s Corp. |
546 | 6,798 | |||||||
Dillard’s Inc., A |
51 | 2,860 | ||||||||
DineEquity Inc. |
108 | 4,642 | ||||||||
a | Dorman Products Inc. |
210 | 15,040 | |||||||
DSW Inc., A |
465 | 9,988 | ||||||||
a | Duluth Holdings Inc. |
66 | 1,339 | |||||||
a | El Pollo Loco Holdings Inc. |
165 | 2,005 | |||||||
Escalade Inc. |
75 | 1,020 | ||||||||
Ethan Allen Interiors Inc. |
210 | 6,804 | ||||||||
a | Fiesta Restaurant Group Inc. |
225 | 4,275 | |||||||
The Finish Line Inc., A |
315 | 3,789 | ||||||||
a | Five Below Inc. |
429 | 23,544 | |||||||
Flexsteel Industries Inc. |
54 | 2,738 | ||||||||
a | Fossil Group Inc. |
249 | 2,323 |
30 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ U.S. Small Cap Equity ETF (continued)
Shares | Value | |||||||||
Common Stocks (continued) | ||||||||||
Consumer Discretionary (continued) | ||||||||||
a | Francesca’s Holdings Corp. |
339 | $ | 2,495 | ||||||
Gannett Co. Inc. |
921 | 8,289 | ||||||||
a | Genesco Inc. |
171 | 4,549 | |||||||
a | Grand Canyon Education Inc. |
384 | 34,875 | |||||||
Group 1 Automotive Inc. |
75 | 5,434 | ||||||||
Guess? Inc. |
435 | 7,408 | ||||||||
a | The Habit Restaurants Inc., A |
132 | 1,723 | |||||||
Haverty Furniture Cos. Inc. |
183 | 4,785 | ||||||||
a | Hibbett Sports Inc. |
177 | 2,522 | |||||||
Hooker Furniture Corp. |
84 | 4,011 | ||||||||
HSN Inc. |
294 | 11,481 | ||||||||
ILG Inc. |
696 | 18,604 | ||||||||
a | iRobot Corp. |
138 | 10,634 | |||||||
a | J. Jill Inc. |
44 | 479 | |||||||
Jack in the Box Inc. |
234 | 23,849 | ||||||||
Johnson Outdoors Inc., A |
42 | 3,078 | ||||||||
a | Kirkland’s Inc. |
120 | 1,372 | |||||||
La-Z-Boy Inc. |
372 | 10,007 | ||||||||
LCI Industries |
147 | 17,030 | ||||||||
Libbey Inc. |
132 | 1,222 | ||||||||
Liberty Tax Inc. |
66 | 950 | ||||||||
Lifetime Brands Inc. |
93 | 1,702 | ||||||||
Marcus Corp. |
147 | 4,072 | ||||||||
Marine Products Corp. |
66 | 1,059 | ||||||||
Marriott Vacations Worldwide Corp. |
70 | 8,717 | ||||||||
a | MCBC Holdings Inc. |
61 | 1,243 | |||||||
Meredith Corp. |
303 | 16,816 | ||||||||
Monro Inc. |
207 | 11,602 | ||||||||
Movado Group Inc. |
111 | 3,108 | ||||||||
a | MSG Networks Inc., A |
279 | 5,915 | |||||||
National CineMedia Inc. |
426 | 2,973 | ||||||||
a | Nautilus Inc. |
219 | 3,701 | |||||||
New Media Investment Group Inc. |
459 | 6,789 | ||||||||
The New York Times Co., A |
936 | 18,346 | ||||||||
Nutrisystem Inc. |
201 | 11,236 | ||||||||
Office Depot Inc. |
1,902 | 8,635 | ||||||||
a | Ollie’s Bargain Outlet Holdings Inc. |
225 | 10,440 | |||||||
Oxford Industries Inc. |
123 | 7,815 | ||||||||
Papa John’s International Inc. |
201 | 14,687 | ||||||||
PetMed Express Inc. |
186 | 6,166 | ||||||||
Pier 1 Imports Inc. |
744 | 3,117 | ||||||||
a | Potbelly Corp. |
183 | 2,269 | |||||||
Rent-A-Center Inc. |
369 | 4,236 | ||||||||
Ruth’s Hospitality Group Inc. |
222 | 4,651 | ||||||||
Scholastic Corp. |
231 | 8,593 | ||||||||
a | Select Comfort Corp. |
333 | 10,340 | |||||||
Shoe Carnival Inc. |
105 | 2,350 | ||||||||
Sonic Automotive Inc. |
213 | 4,345 | ||||||||
a | Sportsman’s Warehouse Holdings Inc. |
249 | 1,123 | |||||||
Standard Motor Products Inc. |
159 | 7,672 | ||||||||
a | Steven Madden Ltd. |
414 | 17,926 | |||||||
Strayer Education Inc. |
96 | 8,378 | ||||||||
Sturm Ruger & Co. Inc. |
147 | 7,600 | ||||||||
Superior Uniform Group Inc. |
75 | 1,717 | ||||||||
Tailored Brands Inc. |
183 | 2,643 | ||||||||
Tenneco Inc. |
384 | 23,297 | ||||||||
Texas Roadhouse Inc., A |
591 | 29,042 |
libertyshares.com | Semiannual Report | 31 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ U.S. Small Cap Equity ETF (continued)
Shares | Value | |||||||||
Common Stocks (continued) | ||||||||||
Consumer Discretionary (continued) | ||||||||||
Tile Shop Holdings Inc. |
234 | $ | 2,972 | |||||||
Tilly’s Inc., A |
108 | 1,295 | ||||||||
Time Inc. |
771 | 10,408 | ||||||||
a | Vera Bradley Inc. |
150 | 1,322 | |||||||
a | Vitamin Shoppe Inc. |
177 | 947 | |||||||
Weyco Group Inc. |
54 | 1,533 | ||||||||
Winmark Corp. |
24 | 3,162 | ||||||||
Wolverine World Wide Inc. |
753 | 21,724 | ||||||||
World Wrestling Entertainment Inc. |
210 | 4,945 | ||||||||
a | Zoe’s Kitchen Inc. |
144 | 1,819 | |||||||
a | Zumiez Inc. |
129 | 2,335 | |||||||
|
|
|||||||||
941,226 | ||||||||||
|
|
|||||||||
Consumer Staples 6.3% | ||||||||||
B&G Foods Inc., A |
426 | 13,568 | ||||||||
a | Boston Beer Inc., A |
66 | 10,309 | |||||||
a | Central Garden & Pet Co. |
57 | 2,214 | |||||||
a | Central Garden & Pet Co., A |
177 | 6,583 | |||||||
Coca-Cola Bottling Co. Consolidated |
39 | 8,414 | ||||||||
Dean Foods Co. |
723 | 7,866 | ||||||||
a | Farmer Brothers Co. |
63 | 2,070 | |||||||
a | Hostess Brands Inc., A |
261 | 3,565 | |||||||
Ingles Markets Inc., A |
111 | 2,853 | ||||||||
Inter Parfums Inc. |
114 | 4,702 | ||||||||
J & J Snack Foods Corp. |
123 | 16,150 | ||||||||
John B. Sanfilippo & Son Inc. |
66 | 4,442 | ||||||||
Lancaster Colony Corp. |
138 | 16,577 | ||||||||
Medifast Inc. |
93 | 5,521 | ||||||||
National Beverage Corp. |
102 | 12,653 | ||||||||
a | Natural Grocers by Vitamin Cottage Inc. |
69 | 385 | |||||||
Natures Sunshine Products Inc. |
84 | 853 | ||||||||
a | Performance Food Group Co. |
354 | 10,000 | |||||||
PriceSmart Inc. |
168 | 14,994 | ||||||||
Sanderson Farms Inc. |
150 | 24,228 | ||||||||
a | Smart & Final Stores Inc. |
120 | 942 | |||||||
Snyders-Lance Inc. |
528 | 20,138 | ||||||||
SpartanNash Co. |
246 | 6,487 | ||||||||
Universal Corp. |
165 | 9,454 | ||||||||
a | USANA Health Sciences Inc. |
78 | 4,501 | |||||||
Vector Group Ltd. |
710 | 14,534 | ||||||||
Village Super Market Inc., A |
69 | 1,707 | ||||||||
WD-40 Co. |
111 | 12,421 | ||||||||
Weis Markets Inc. |
84 | 3,654 | ||||||||
|
|
|||||||||
241,785 | ||||||||||
|
|
|||||||||
Energy 0.0%† | ||||||||||
a | Smart Sand Inc. |
45 | 305 | |||||||
|
|
|||||||||
Financials 8.6% | ||||||||||
1st Source Corp. |
65 | 3,302 | ||||||||
Ames National Corp. |
69 | 2,060 | ||||||||
AmTrust Financial Services Inc. |
291 | 3,917 | ||||||||
Anworth Mortgage Asset Corp. |
323 | 1,941 | ||||||||
Apollo Commercial Finance Inc. |
513 | 9,290 | ||||||||
B. Riley Financial Inc. |
77 | 1,313 | ||||||||
Baldwin & Lyons Inc., B |
54 | 1,218 | ||||||||
BancFirst Corp. |
114 | 6,469 | ||||||||
Blue Capital Reinsurance Holdings Ltd. |
23 | 378 |
32 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ U.S. Small Cap Equity ETF (continued)
Shares | Value | |||||||||
Common Stocks (continued) | ||||||||||
Financials (continued) | ||||||||||
Bryn Mawr Bank Corp. |
117 | $ | 5,125 | |||||||
Capstead Mortgage Corp. |
368 | 3,551 | ||||||||
Citizens & Northern Corp. |
81 | 1,989 | ||||||||
a | Citizens Inc., A |
357 | 2,624 | |||||||
Clifton Bancorp Inc. |
132 | 2,207 | ||||||||
CNB Financial Corp. |
87 | 2,377 | ||||||||
Cohen & Steers Inc. |
138 | 5,450 | ||||||||
Community Bank System Inc. |
357 | 19,724 | ||||||||
Crawford & Co., B |
108 | 1,292 | ||||||||
Diamond Hill Investment Group Inc. |
13 | 2,761 | ||||||||
Dynex Capital Inc. |
167 | 1,214 | ||||||||
EMC Insurance Group Inc. |
30 | 844 | ||||||||
a | Essent Group Ltd. |
327 | 13,243 | |||||||
Evercore Inc. |
255 | 20,464 | ||||||||
Farmers Capital Bank Corp. |
54 | 2,271 | ||||||||
FBL Financial Group Inc., A |
37 | 2,756 | ||||||||
Financial Institutions Inc. |
120 | 3,456 | ||||||||
First Bancorp Inc. |
69 | 2,091 | ||||||||
First Citizens Bancorp |
32 | 715 | ||||||||
First Commonwealth Financial Corp. |
651 | 9,199 | ||||||||
First Community Bancshares Inc. |
105 | 3,057 | ||||||||
First Defiance Financial Corp. |
69 | 3,622 | ||||||||
First Financial Corp. |
78 | 3,713 | ||||||||
First Financial Northwest Inc. |
48 | 816 | ||||||||
First Guaranty Bancshares Inc. |
18 | 485 | ||||||||
Greenhill & Co. Inc. |
198 | 3,287 | ||||||||
a | Hallmark Financial Services Inc. |
75 | 871 | |||||||
Heritage Commerce Corp. |
123 | 1,750 | ||||||||
Heritage Financial Corp. |
186 | 5,487 | ||||||||
Horace Mann Educators Corp. |
315 | 12,395 | ||||||||
International Bancshares Corp. |
339 | 13,594 | ||||||||
Invesco Mortgage Capital |
750 | 12,847 | ||||||||
Investors Title Co. |
9 | 1,612 | ||||||||
Kingstone Cos. Inc. |
28 | 456 | ||||||||
Lakeland Financial Corp. |
165 | 8,039 | ||||||||
LCNB Corp. |
57 | 1,194 | ||||||||
Macatawa Bancorp |
156 | 1,601 | ||||||||
Maiden Holdings Ltd. |
513 | 4,078 | ||||||||
MBT Financial Corp. |
99 | 1,084 | ||||||||
MidSouth Bancorp Inc. |
29 | 349 | ||||||||
Midwestone Financial Group Inc. |
63 | 2,127 | ||||||||
National Bankshares Inc. |
54 | 2,427 | ||||||||
National Western Life Group Inc., A |
21 | 7,329 | ||||||||
NBT Bancorp Inc. |
300 | 11,016 | ||||||||
Nelnet Inc., A |
141 | 7,120 | ||||||||
Northfield Bancorp Inc. |
351 | 6,090 | ||||||||
Northwest Bancshares Inc. |
708 | 12,227 | ||||||||
Ohio Valley Banc Corp. |
18 | 655 | ||||||||
Old Point Financial Corp. |
15 | 486 | ||||||||
Penns Woods Bancorp Inc. |
17 | 790 | ||||||||
Premier Financial Bancorp Inc. |
69 | 1,504 | ||||||||
Provident Financial Services Inc. |
489 | 13,042 | ||||||||
Pzena Investment Management Inc., A |
61 | 664 | ||||||||
a | Regional Management Corp. |
96 | 2,324 | |||||||
Shore Bancshares Inc. |
72 | 1,199 | ||||||||
Silvercrest Asset Management Group Inc., A |
66 | 960 | ||||||||
Summit Financial Group Inc. |
60 | 1,540 | ||||||||
Territorial Bancorp Inc. |
54 | 1,705 |
libertyshares.com | Semiannual Report | 33 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ U.S. Small Cap Equity ETF (continued)
Shares | Value | |||||||||
Common Stocks (continued) | ||||||||||
Financials (continued) | ||||||||||
Tompkins Financial Corp. |
50 | $ | 4,307 | |||||||
TrustCo Bank Corp. NY |
648 | 5,767 | ||||||||
United Fire Group Inc. |
75 | 3,436 | ||||||||
United Security Bancshares |
41 | 390 | ||||||||
Universal Insurance Holdings Inc. |
204 | 4,692 | ||||||||
Value Line Inc. |
6 | 106 | ||||||||
Virtu Financial Inc., A |
79 | 1,280 | ||||||||
Waddell & Reed Financial Inc., A |
477 | 9,573 | ||||||||
a | Walker & Dunlop Inc. |
96 | 5,024 | |||||||
Westwood Holdings Group Inc. |
63 | 4,238 | ||||||||
a | World Acceptance Corp. |
54 | 4,476 | |||||||
|
|
|||||||||
330,072 | ||||||||||
|
|
|||||||||
Health Care 11.7% | ||||||||||
a | AAC Holdings Inc. |
72 | 715 | |||||||
a | Acorda Therapeutics Inc. |
285 | 6,740 | |||||||
a | Addus Homecare Corp. |
27 | 953 | |||||||
a | Almost Family Inc. |
78 | 4,189 | |||||||
a | Amedisys Inc. |
219 | 12,255 | |||||||
a | AMN Healthcare Services Inc. |
327 | 14,944 | |||||||
a | AtriCure Inc. |
105 | 2,349 | |||||||
Atrion Corp. |
12 | 8,064 | ||||||||
a | Biospecifics Technologies Corp. |
39 | 1,814 | |||||||
a | BioTelemetry Inc. |
192 | 6,336 | |||||||
Cantel Medical Corp. |
237 | 22,318 | ||||||||
a | Cardiovascular Systems Inc. |
120 | 3,378 | |||||||
Chemed Corp. |
132 | 26,671 | ||||||||
a | Civitas Solutions Inc. |
96 | 1,771 | |||||||
a | Community Health Systems Inc. |
621 | 4,769 | |||||||
Computer Programs and Systems Inc. |
90 | 2,660 | ||||||||
CONMED Corp. |
204 | 10,704 | ||||||||
a | Corcept Therapeutics Inc. |
576 | 11,117 | |||||||
a | CorVel Corp. |
63 | 3,427 | |||||||
a | CryoLife Inc. |
195 | 4,426 | |||||||
a | Cutera Inc. |
69 | 2,853 | |||||||
a | Enzo Biochem Inc. |
249 | 2,607 | |||||||
a | Exactech Inc. |
90 | 2,966 | |||||||
a | Fonar Corp. |
22 | 671 | |||||||
a | Genomic Health Inc. |
156 | 5,006 | |||||||
a | Globus Medical Inc., A |
534 | 15,870 | |||||||
HealthSouth Corp. |
717 | 33,233 | ||||||||
a | Heska Corp. |
36 | 3,171 | |||||||
a | Inogen Inc. |
57 | 5,421 | |||||||
a | Integra LifeSciences Holdings |
402 | 20,293 | |||||||
Kindred Healthcare Inc. |
822 | 5,590 | ||||||||
Landauer Inc. |
57 | 3,836 | ||||||||
LeMaitre Vascular Inc. |
99 | 3,705 | ||||||||
a | LHC Group Inc. |
108 | 7,659 | |||||||
Luminex Corp. |
258 | 5,245 | ||||||||
a | Masimo Corp. |
405 | 35,057 | |||||||
Meridian Bioscience Inc. |
363 | 5,191 | ||||||||
a | Merit Medical Systems Inc. |
156 | 6,607 | |||||||
a | MiMedx Group Inc. |
558 | 6,629 | |||||||
a | Myriad Genetics Inc. |
495 | 17,909 | |||||||
National Healthcare Corp. |
84 | 5,256 | ||||||||
National Research Corp., A |
57 | 2,149 | ||||||||
a | NuVasive Inc. |
162 | 8,985 | |||||||
a | Orthofix International Nv |
126 | 5,953 |
34 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ U.S. Small Cap Equity ETF (continued)
Shares | Value | |||||||||
Common Stocks (continued) | ||||||||||
Health Care (continued) | ||||||||||
Owens & Minor Inc. |
432 | $ | 12,614 | |||||||
a | PDL BioPharma Inc. |
1,404 | 4,760 | |||||||
a | Penumbra Inc. |
180 | 16,254 | |||||||
Phibro Animal Health Corp. |
117 | 4,335 | ||||||||
a | Prestige Brands Holdings Inc. |
181 | 9,066 | |||||||
a | Quality Systems Inc. |
357 | 5,616 | |||||||
a | Reata Pharmaceuticals Inc. |
42 | 1,306 | |||||||
a | SciClone Pharmaceuticals Inc. |
411 | 4,603 | |||||||
Simulations Plus Inc. |
39 | 605 | ||||||||
a | Supernus Pharmaceuticals Inc. |
315 | 12,600 | |||||||
a | Tactile Systems Technology Inc. |
36 | 1,114 | |||||||
U.S. Physical Therapy Inc. |
81 | 4,977 | ||||||||
Utah Medical Products Inc. |
27 | 1,986 | ||||||||
a | Varex Imaging Corp. |
141 | 4,771 | |||||||
a | Vocera Communications Inc. |
99 | 3,106 | |||||||
|
|
|||||||||
449,175 | ||||||||||
|
|
|||||||||
Industrials 17.1% | ||||||||||
ABM Industries Inc. |
408 | 17,018 | ||||||||
Aircastle Ltd. |
330 | 7,356 | ||||||||
Alamo Group Inc. |
63 | 6,764 | ||||||||
Allegiant Travel Co. |
105 | 13,828 | ||||||||
Altra Industrial Motion Corp. |
192 | 9,235 | ||||||||
Applied Industrial Technologies Inc. |
339 | 22,306 | ||||||||
Astec Industries Inc. |
114 | 6,385 | ||||||||
BG Staffing Inc. |
30 | 497 | ||||||||
Brady Corp., A |
342 | 12,979 | ||||||||
Briggs & Stratton Corp. |
243 | 5,711 | ||||||||
The Brink’s Co. |
327 | 27,550 | ||||||||
a | Covenant Transportation Group Inc., A |
72 | 2,087 | |||||||
Deluxe Corp. |
447 | 32,613 | ||||||||
Douglas Dynamics Inc. |
138 | 5,437 | ||||||||
The Eastern Co. |
18 | 517 | ||||||||
Ennis Inc. |
183 | 3,596 | ||||||||
EnPro Industries Inc. |
71 | 5,718 | ||||||||
EnviroStar Inc. |
12 | 332 | ||||||||
ESCO Technologies Inc. |
126 | 7,554 | ||||||||
Essendant Inc. |
267 | 3,516 | ||||||||
Exponent Inc. |
156 | 11,528 | ||||||||
Federal Signal Corp. |
372 | 7,916 | ||||||||
Forward Air Corp. |
222 | 12,705 | ||||||||
a | Franklin Covey Co. |
84 | 1,705 | |||||||
Global Brass & Copper Holdings Inc. |
108 | 3,650 | ||||||||
a | Hawaiian Holdings Inc. |
318 | 11,941 | |||||||
Healthcare Services Group Inc. |
429 | 23,153 | ||||||||
Heartland Express Inc. |
315 | 7,900 | ||||||||
Heidrick & Struggles International Inc. |
156 | 3,299 | ||||||||
Herman Miller Inc. |
477 | 17,124 | ||||||||
Hillenbrand Inc. |
414 | 16,084 | ||||||||
HNI Corp. |
351 | 14,556 | ||||||||
a | Huttig Building Products Inc. |
81 | 572 | |||||||
Hyster-Yale Materials Handling Inc. |
69 | 5,274 | ||||||||
a | ICF International Inc. |
147 | 7,931 | |||||||
Insperity Inc. |
144 | 12,672 | ||||||||
Interface Inc. |
417 | 9,132 | ||||||||
John Bean Technologies Corp. |
204 | 20,624 | ||||||||
Kadant Inc. |
81 | 7,983 |
libertyshares.com | Semiannual Report | 35 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ U.S. Small Cap Equity ETF (continued)
Shares | Value | |||||||||
Common Stocks (continued) | ||||||||||
Industrials (continued) | ||||||||||
Kaman Corp., A |
207 | $ | 11,546 | |||||||
Kelly Services Inc., A |
252 | 6,323 | ||||||||
Kforce Inc. |
222 | 4,484 | ||||||||
Kimball International Inc., B |
258 | 5,101 | ||||||||
a | Knight-Swift transportation Holdings Inc. |
847 | 35,193 | |||||||
Knoll Inc. |
345 | 6,900 | ||||||||
Korn/Ferry International |
435 | 17,152 | ||||||||
a | Lawson Products Inc. |
45 | 1,134 | |||||||
Lindsay Corp. |
72 | 6,617 | ||||||||
LSC Communications Inc. |
111 | 1,833 | ||||||||
McGrath RentCorp |
168 | 7,350 | ||||||||
Mobile Mini Inc. |
324 | 11,162 | ||||||||
a | Moog Inc., A |
105 | 8,760 | |||||||
MSA Safety Inc. |
117 | 9,303 | ||||||||
National Presto Industries Inc. |
33 | 3,513 | ||||||||
Omega Flex Inc. |
24 | 1,724 | ||||||||
Preformed Line Products Co. |
18 | 1,211 | ||||||||
Quad/Graphics Inc. |
104 | 2,351 | ||||||||
Resources Connection Inc. |
279 | 3,878 | ||||||||
a | SAIA Inc. |
213 | 13,344 | |||||||
Schneider National Inc. |
120 | 3,036 | ||||||||
Simpson Manufacturing Co. Inc. |
267 | 13,094 | ||||||||
Standex International Corp. |
90 | 9,558 | ||||||||
Steelcase Inc., A |
747 | 11,504 | ||||||||
Tennant Co. |
153 | 10,129 | ||||||||
a | Trex Co. Inc. |
153 | 13,781 | |||||||
UniFirst Corp. |
102 | 15,453 | ||||||||
Universal Logistics Holdings Inc. |
66 | 1,350 | ||||||||
a | Veritiv Corp. |
69 | 2,243 | |||||||
Watts Water Technologies Inc., A |
180 | 12,456 | ||||||||
Werner Enterprises Inc. |
357 | 13,048 | ||||||||
West Corp. |
303 | 7,111 | ||||||||
a | Willdan Group Inc. |
27 | 876 | |||||||
|
|
|||||||||
659,266 | ||||||||||
|
|
|||||||||
Information Technology 17.5% | ||||||||||
a | Acacia Communications Inc. |
72 | 3,391 | |||||||
a | Advanced Energy Industries Inc. |
133 | 10,741 | |||||||
American Software Inc., A |
186 | 2,113 | ||||||||
a | Aspen Technology Inc. |
600 | 37,686 | |||||||
a | Avid Technology Inc. |
249 | 1,130 | |||||||
Badger Meter Inc. |
162 | 7,938 | ||||||||
a | Barracuda Networks Inc. |
150 | 3,635 | |||||||
Blackbaud Inc. |
156 | 13,697 | ||||||||
Cabot Microelectronics Corp. |
129 | 10,311 | ||||||||
a | Carbonite Inc. |
120 | 2,640 | |||||||
a | Care.com Inc. |
46 | 731 | |||||||
a | CEVA Inc. |
75 | 3,210 | |||||||
a | Cimpress NV |
183 | 17,872 | |||||||
a | Cirrus Logic Inc. |
450 | 23,994 | |||||||
a | Clearfield Inc. |
63 | 857 | |||||||
a | CommerceHub Inc., A |
54 | 1,219 | |||||||
a | CommerceHub Inc., C |
111 | 2,370 | |||||||
a | CommVault Systems Inc. |
306 | 18,605 | |||||||
a | Control4 Corp. |
83 | 2,445 | |||||||
Convergys Corp. |
600 | 15,534 | ||||||||
CSG Systems International Inc. |
273 | 10,947 |
36 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ U.S. Small Cap Equity ETF (continued)
Shares | Value | |||||||||
Common Stocks (continued) | ||||||||||
Information Technology (continued) | ||||||||||
a | CyberOptics Corp. |
24 | $ | 390 | ||||||
Daktronics Inc. |
237 | 2,505 | ||||||||
a | EPAM Systems Inc. |
333 | 29,281 | |||||||
a | ePlus Inc. |
90 | 8,321 | |||||||
EVERTEC Inc. |
408 | 6,467 | ||||||||
a | EXA Corp. |
72 | 1,741 | |||||||
Fair Isaac Corp. |
240 | 33,720 | ||||||||
Forrester Research Inc. |
90 | 3,767 | ||||||||
a | Gigamon Inc. |
168 | 7,081 | |||||||
a | GrubHub Inc. |
273 | 14,376 | |||||||
Hackett Group Inc. |
174 | 2,643 | ||||||||
a | Imperva Inc. |
114 | 4,948 | |||||||
a | Insight Enterprises Inc. |
312 | 14,327 | |||||||
InterDigital Inc. |
270 | 19,912 | ||||||||
a | Iteris Inc. |
84 | 559 | |||||||
J2 Global Inc. |
339 | 25,045 | ||||||||
Littelfuse Inc. |
168 | 32,908 | ||||||||
ManTech International Corp., A |
156 | 6,887 | ||||||||
a | The Meet Group Inc. |
333 | 1,212 | |||||||
Mesa Laboratories Inc. |
21 | 3,136 | ||||||||
a | MicroStrategy Inc. |
66 | 8,429 | |||||||
a | Mitek Systems Inc. |
210 | 1,995 | |||||||
MKS Instruments Inc. |
261 | 24,651 | ||||||||
Monolithic Power Systems |
270 | 28,768 | ||||||||
Monotype Imaging Holdings Inc. |
297 | 5,717 | ||||||||
NIC Inc. |
489 | 8,386 | ||||||||
NVE Corp. |
17 | 1,342 | ||||||||
PC Connection Inc. |
102 | 2,875 | ||||||||
a | PC Mall Inc. |
36 | 504 | |||||||
Pegasystems Inc. |
285 | 16,430 | ||||||||
a | Pixelworks Inc. |
92 | 433 | |||||||
a | Planet Payment Inc. |
258 | 1,107 | |||||||
Plantronics Inc. |
255 | 11,276 | ||||||||
QAD Inc., A |
69 | 2,370 | ||||||||
a | Qualys Inc. |
114 | 5,905 | |||||||
a | Quantum Corp. |
92 | 563 | |||||||
a | RingCentral Inc., A |
201 | 8,392 | |||||||
a | Rudolph Technologies Inc. |
165 | 4,340 | |||||||
a | ScanSource Inc. |
186 | 8,119 | |||||||
Science Applications International Corp. |
207 | 13,838 | ||||||||
a | Silicon Laboratories Inc. |
228 | 18,217 | |||||||
a | Stamps.com Inc. |
58 | 11,754 | |||||||
a | Sykes Enterprises Inc. |
237 | 6,911 | |||||||
Syntel Inc. |
117 | 2,299 | ||||||||
a | Tech Data Corp. |
213 | 18,925 | |||||||
TeleTech Holdings Inc. |
111 | 4,634 | ||||||||
Travelport Worldwide Ltd. |
422 | 6,625 | ||||||||
a | Tucows Inc., A |
29 | 1,698 | |||||||
a | Ubiquiti Networks Inc. |
183 | 10,252 | |||||||
a | Varonis Systems Inc. |
69 | 2,891 | |||||||
Vishay Intertechnology Inc. |
447 | 8,404 | ||||||||
a | XO Group Inc. |
192 | 3,777 | |||||||
a | Yelp Inc. |
256 | 11,085 | |||||||
a | Yext Inc. |
38 | 505 | |||||||
a | Zix Corp. |
447 | 2,186 | |||||||
|
|
|||||||||
675,895 | ||||||||||
|
|
libertyshares.com | Semiannual Report | 37 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ U.S. Small Cap Equity ETF (continued)
Shares | Value | |||||||||
Common Stocks (continued) | ||||||||||
Materials 1.9% | ||||||||||
Chase Corp. |
48 | $ | 5,347 | |||||||
Greif Inc., A |
177 | 10,362 | ||||||||
Greif Inc., B |
36 | 2,313 | ||||||||
a | Handy & Harman Ltd. |
11 | 358 | |||||||
Innophos Holdings Inc. |
123 | 6,050 | ||||||||
Innospec Inc. |
144 | 8,878 | ||||||||
KMG Chemicals Inc. |
60 | 3,293 | ||||||||
Myers Industries Inc. |
156 | 3,268 | ||||||||
Schweitzer-Mauduit International Inc. |
207 | 8,582 | ||||||||
Sensient Technologies Corp. |
300 | 23,076 | ||||||||
|
|
|||||||||
71,527 | ||||||||||
|
|
|||||||||
Real Estate 4.7% | ||||||||||
a | Altisource Portfolio Solutions SA |
72 | 1,863 | |||||||
Chesapeake Lodging Trust |
210 | 5,664 | ||||||||
Franklin Street Properties Corp. |
801 | 8,507 | ||||||||
Government Properties Income Trust |
531 | 9,967 | ||||||||
Healthcare Realty Trust Inc. |
747 | 24,158 | ||||||||
LaSalle Hotel Properties |
843 | 24,464 | ||||||||
Lexington Realty Trust |
1,728 | 17,660 | ||||||||
LTC Properties Inc. |
285 | 13,389 | ||||||||
One Liberty Properties Inc. |
111 | 2,704 | ||||||||
Preferred Apartment Communities Inc., A |
198 | 3,738 | ||||||||
PS Business Parks Inc. |
171 | 22,828 | ||||||||
a | Quality Care Properties Inc. |
375 | 5,813 | |||||||
Ramco-Gershenson Properties Trust |
588 | 7,650 | ||||||||
RE/MAX Holdings Inc., A |
150 | 9,532 | ||||||||
Select Income REIT |
459 | 10,750 | ||||||||
STAG Industrial Inc. |
304 | 8,351 | ||||||||
Urstadt Biddle Properties, A |
189 | 4,101 | ||||||||
|
|
|||||||||
181,139 | ||||||||||
|
|
|||||||||
Telecommunication Services 0.7% | ||||||||||
Cogent Communications Holdings Inc. |
237 | 11,589 | ||||||||
IDT Corp., B |
135 | 1,901 | ||||||||
Spok Holdings Inc. |
135 | 2,072 | ||||||||
a | Vonage Holdings Corp. |
1,314 | 10,696 | |||||||
|
|
|||||||||
26,258 | ||||||||||
|
|
|||||||||
Utilities 7.1% | ||||||||||
ALLETE Inc. |
333 | 25,738 | ||||||||
American States Water Co. |
279 | 13,741 | ||||||||
Artesian Resources Corp., A |
45 | 1,701 | ||||||||
Avista Corp. |
453 | 23,452 | ||||||||
California Water Service Group |
297 | 11,330 | ||||||||
Chesapeake Utilities Corp. |
102 | 7,981 | ||||||||
El Paso Electric Co. |
291 | 16,078 | ||||||||
IDACORP Inc. |
164 | 14,420 | ||||||||
MGE Energy Inc. |
249 | 16,085 | ||||||||
New Jersey Resources Corp. |
555 | 23,393 | ||||||||
Northwest Natural Gas Co. |
189 | 12,172 | ||||||||
NRG Yield Inc., A |
192 | 3,642 | ||||||||
SJW Group |
75 | 4,245 | ||||||||
South Jersey Industries Inc. |
462 | 15,953 | ||||||||
Southwest Gas Holdings Inc. |
327 | 25,382 | ||||||||
Spark Energy Inc., A |
93 | 1,395 | ||||||||
Spire Inc. |
294 | 21,947 |
38 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin LibertyQ U.S. Small Cap Equity ETF (continued)
Shares | Value | |||||||||
Common Stocks (continued) | ||||||||||
Utilities (continued) | ||||||||||
Unitil Corp. |
102 | $ | 5,045 | |||||||
WGL Holdings Inc. |
345 | 29,049 | ||||||||
|
|
|||||||||
272,749 | ||||||||||
|
|
|||||||||
Total Investments (Cost $3,789,665) 100.0% |
3,849,397 | |||||||||
Other Assets, less Liabilities 0.0%† |
1,907 | |||||||||
|
|
|||||||||
Net Assets 100.0% |
$ | 3,851,304 | ||||||||
|
|
See Abbreviations on page 48.
†Rounds to less than 0.1% of net assets.
aNon-income producing.
libertyshares.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 39 |
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
September 30, 2017 (unaudited)
Franklin LibertyQ U.S. Equity ETF |
Franklin LibertyQ U.S. Mid Cap Equity ETF |
Franklin LibertyQ U.S. Small Cap Equity ETF |
||||||||||
Assets: |
||||||||||||
Investments in securities: |
||||||||||||
Cost - Unaffiliated issuers |
$ | 106,608,600 | $ | 5,105,806 | $ | 3,789,665 | ||||||
|
|
|||||||||||
Value - Unaffiliated issuers |
$ | 110,847,179 | $ | 5,152,962 | $ | 3,849,397 | ||||||
Cash |
134,243 | 13,477 | 14,464 | |||||||||
Receivables: |
||||||||||||
Dividends |
127,588 | 5,751 | 4,376 | |||||||||
Affiliates |
— | 10,366 | 10,628 | |||||||||
|
|
|||||||||||
Total assets |
111,109,010 | 5,182,556 | 3,878,865 | |||||||||
|
|
|||||||||||
Liabilities: |
||||||||||||
Payables: |
||||||||||||
Investment securities purchased |
— | — | 10,344 | |||||||||
Management fees |
1,985 | — | — | |||||||||
Transfer agent fees |
5,528 | 5,528 | 5,528 | |||||||||
Trustees’ fees and expenses |
2,339 | 76 | 76 | |||||||||
Professional fees |
7,573 | 6,249 | 6,323 | |||||||||
Reports to shareholders |
1,916 | 1,242 | 1,242 | |||||||||
Registration and filing fees |
7,769 | 2,739 | 2,739 | |||||||||
Accrued expenses and other liabilities |
1,008 | 1,303 | 1,309 | |||||||||
|
|
|||||||||||
Total liabilities |
28,118 | 17,137 | 27,561 | |||||||||
|
|
|||||||||||
Net assets, at value |
$ | 111,080,892 | $ | 5,165,419 | $ | 3,851,304 | ||||||
|
|
|||||||||||
Net assets consist of: |
||||||||||||
Paid-in capital |
$ | 106,590,116 | $ | 5,110,349 | $ | 3,803,994 | ||||||
Undistributed net investment income |
175,022 | 7,899 | 5,560 | |||||||||
Net unrealized appreciation (depreciation) |
4,238,579 | 47,156 | 59,732 | |||||||||
Accumulated net realized gain (loss) |
77,175 | 15 | (17,982 | ) | ||||||||
|
|
|||||||||||
Net assets, at value |
$ | 111,080,892 | $ | 5,165,419 | $ | 3,851,304 | ||||||
|
|
|||||||||||
Shares outstanding |
4,150,000 | 200,000 | 150,000 | |||||||||
|
|
|||||||||||
Net asset value per share |
$ | 26.77 | $ | 25.83 | $ | 25.68 | ||||||
|
|
40 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Operations
for the period ended September 30, 2017a (unaudited)
Franklin LibertyQ U.S. Equity ETF |
Franklin LibertyQ U.S. Mid Cap Equity ETF |
Franklin LibertyQ U.S. Small Cap Equity ETF |
||||||||||
Investment income: |
||||||||||||
Dividends: |
||||||||||||
Unaffiliated issuers |
$ | 956,074 | $ | 42,126 | $ | 32,061 | ||||||
Income from securities loaned (net of fees and rebates) |
54 | — | — | |||||||||
|
|
|||||||||||
Total investment income |
956,128 | 42,126 | 32,061 | |||||||||
|
|
|||||||||||
Expenses: |
||||||||||||
Management fees (Note 3a) |
95,599 | 6,073 | 5,592 | |||||||||
Transfer agent fees |
6,828 | 6,828 | 6,828 | |||||||||
Custodian fees |
807 | 557 | 557 | |||||||||
Reports to shareholders |
2,712 | 2,038 | 2,038 | |||||||||
Registration and filing fees |
7,942 | 2,761 | 2,761 | |||||||||
Professional fees |
21,435 | 17,781 | 17,707 | |||||||||
Trustees’ fees and expenses |
7,286 | 241 | 235 | |||||||||
Other |
1,833 | 1,833 | 1,833 | |||||||||
|
|
|||||||||||
Total expenses |
144,442 | 38,112 | 37,551 | |||||||||
Expenses waived/paid by affiliates (Note 3c) |
(48,843 | ) | (32,039 | ) | (31,959 | ) | ||||||
|
|
|||||||||||
Net expenses |
95,599 | 6,073 | 5,592 | |||||||||
|
|
|||||||||||
Net investment income |
860,529 | 36,053 | 26,469 | |||||||||
|
|
|||||||||||
Realized and unrealized gains (losses): |
||||||||||||
Net realized gain (loss) from: |
||||||||||||
Investments unaffiliated issuers |
(181,410 | ) | 15 | (17,982 | ) | |||||||
In-kind redemptions |
258,585 | — | — | |||||||||
|
|
|||||||||||
Net realized gain (loss) |
77,175 | 15 | (17,982 | ) | ||||||||
|
|
|||||||||||
Net change in unrealized appreciation (depreciation) on: |
||||||||||||
Investments |
4,238,579 | 47,156 | 59,732 | |||||||||
|
|
|||||||||||
Net change in unrealized appreciation (depreciation) |
4,238,579 | 47,156 | 59,732 | |||||||||
|
|
|||||||||||
Net realized and unrealized gain (loss) |
4,315,754 | 47,171 | 41,750 | |||||||||
|
|
|||||||||||
Net increase (decrease) in net assets resulting from operations |
$ | 5,176,283 | $ | 83,224 | $ | 68,219 | ||||||
|
|
aFor the period April 26, 2017 (commencement of operations) to September 30, 2017.
libertyshares.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 41 |
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
Franklin LibertyQ U.S. Equity ETF |
Franklin LibertyQ U.S. Mid Cap Equity ETF |
Franklin LibertyQ U.S. Small Cap Equity ETF |
||||||||||
Period Ended September 30, 2017a (unaudited) | ||||||||||||
Increase (decrease) in net assets: |
||||||||||||
Operations: |
||||||||||||
Net investment income |
$ | 860,529 | $ | 36,053 | $ | 26,469 | ||||||
Net realized gain (loss) |
77,175 | 15 | (17,982 | ) | ||||||||
Net change in unrealized appreciation (depreciation) |
4,238,579 | 47,156 | 59,732 | |||||||||
|
|
|||||||||||
Net increase (decrease) in net assets resulting from operations |
5,176,283 | 83,224 | 68,219 | |||||||||
|
|
|||||||||||
Distributions to shareholders from net investment income |
(685,507 | ) | (28,154 | ) | (20,909 | ) | ||||||
|
|
|||||||||||
Capital share transactions: (Note 2) |
106,590,116 | 5,110,349 | 3,803,994 | |||||||||
|
|
|||||||||||
Net increase (decrease) in net assets |
111,080,892 | 5,165,419 | 3,851,304 | |||||||||
Net assets: |
||||||||||||
Beginning of period |
— | — | — | |||||||||
|
|
|||||||||||
End of period |
$ | 111,080,892 | $ | 5,165,419 | $ | 3,851,304 | ||||||
|
|
|||||||||||
Undistributed net investment income included in net assets, end of period |
$ | 175,022 | $ | 7,899 | $ | 5,560 | ||||||
|
|
aFor the period April 26, 2017 (commencement of operations) to September 30, 2017.
42 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
Notes to Financial Statements (unaudited)
1. Organization and Significant Accounting Policies
Franklin Templeton ETF Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of twelve separate funds, three of which are included in this report (Funds) and the financial statements of the remaining funds are presented separately, and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Effective April 26, 2017, the Trust began offering shares of Franklin LibertyQ U.S. Equity ETF, Franklin LibertyQ U.S. Mid Cap Equity ETF and Franklin LibertyQ U.S. Small Cap Equity ETF. Each of the Funds are an exchange traded fund (ETF) and seek to provide the investment results that closely correspond, before fees and expenses, to the performance of each Fund’s corresponding underlying index.
The following summarizes the Funds’ 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 VC provides administration and oversight of the Funds’ valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Funds to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities 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. 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.
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 VC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.
b. Securities Lending
Certain or all Funds participate in an agency based securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/or third-party vendor, is reported separately in the Statements of Operations. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. At September 30, 2017, the Funds had no securities on loan.
libertyshares.com | Semiannual Report | 43 |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Significant Accounting Policies (continued)
c. Income 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.
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.
d. 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. Estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date. 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. Fund specific expenses are charged directly to the fund that incurred the expense.
e. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
f. 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 in blocks of 50,000 shares or multiples thereof (Creation Units). 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 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 or 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 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 received by the Funds, if any, are included in capital share transactions in the Statements of Changes in Net Assets.
44 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
At September 30, 2017, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:
Franklin LibertyQ U.S. Equity ETF | Franklin LibertyQ U.S. Mid Cap Equity ETF |
|||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||
Period ended September 30, 2017a | ||||||||||||||||||||
Shares sold |
4,450,000 | $ | 114,417,232 | 200,000 | $ | 5,110,349 | ||||||||||||||
Shares redeemed |
(300,000 | ) | (7,827,116 | ) | — | — | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net increase (decrease) |
4,150,000 | $ | 106,590,116 | 200,000 | $ | 5,110,349 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Franklin LibertyQ U.S. Small Cap Equity ETF |
||||||||||||||||||||
Shares | Amount | |||||||||||||||||||
Period ended September 30, 2017a | ||||||||||||||||||||
Shares sold |
150,000 | $ | 3,803,994 | |||||||||||||||||
Shares redeemed |
— | — | ||||||||||||||||||
|
|
|
|
|||||||||||||||||
Net increase (decrease) |
150,000 | $ | 3,803,994 | |||||||||||||||||
|
|
|
|
aFor the period April 26, 2017 (commencement of operations) to September 30, 2017.
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Funds are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation | |
Franklin Advisers, Inc. (Advisers) |
Investment manager | |
Franklin Templeton Services, LLC (FT Services) |
Administrative manager | |
Franklin Templeton Distributors, Inc. (Distributors) |
Principal underwriter |
a. Management Fees
The Funds pay an investment management fee to Advisers based on the average net assets of each of the Funds as follows:
Annualized Fee Rate | ||
Franklin LibertyQ U.S. Equity ETF |
0.25% | |
Franklin LibertyQ U.S. Mid Cap Equity ETF |
0.30% | |
Franklin LibertyQ U.S. Small Cap Equity ETF |
0.35% |
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Funds. The fee is paid by Advisers based on the Funds’ average daily net assets, and is not an additional expense of the Funds.
libertyshares.com | Semiannual Report | 45 |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
3. Transactions with Affiliates (continued)
b. Administrative Fees (continued)
The Franklin LibertyQ Global Equity ETF invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. During the period ended September 30, 2017, the Fund held investments in affiliated management investment companies as follows:
Number of Shares Held at Beginning of Period |
Gross Additions |
Gross Reductions |
Number of Shares Held at End of Period |
Value Held at End of Period |
Dividend Income |
Realized Gain(Loss) |
Change in Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||||||
Franklin LibertyQ U.S. Equity ETF | ||||||||||||||||||||||||||||||||
Non-Controlled Affiliates | ||||||||||||||||||||||||||||||||
Institutional Fiduciary Trust | ||||||||||||||||||||||||||||||||
Money Market Portfolio, 0.67% |
— | 201,614 | (201,614 | ) | — | $ | — | $ | — | $ | — | $ | — |
c. Waiver and Expense Reimbursements
Effective September 1, 2017, Advisers has contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by Franklin LibertyQ U.S. Equity ETF, Franklin LibertyQ U.S. Mid Cap Equity ETF and Franklin LibertyQ U.S. Small Cap Equity ETF so that the expenses (including acquired fund fees and expenses) of the Funds do not exceed 0.25%, 0.30% and 0.35%, 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, 2018. Total expenses waived or paid are not subject to recapture subsequent to the Funds’ fiscal year end.
Prior to September 1, 2017, 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 LibertyQ U.S. Equity ETF, Franklin LibertyQ U.S. Mid Cap Equity ETF and Franklin LibertyQ U.S. Small Cap Equity ETF so that the expenses (excluding acquired fund fees and expenses) of the Funds do not exceed 0.25%, 0.30%, and 0.35%, respectively, based on the average net assets (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations).
d. Other Affiliated Transactions
At September 30, 2017, the shares of the Funds were owned by the following investment entities:
Funds | Shares | Percentage of Outstanding Sharesa |
||||||
Franklin LibertyQ U.S. Equity ETF | ||||||||
Franklin Moderate Allocation Fund |
1,559,000 | 37.6% | ||||||
Franklin Growth Allocation Fund |
1,181,600 | 28.5% | ||||||
Franklin Conservative Allocation Fund |
666,700 | 16.1% | ||||||
Franklin LifeSmart™ 2020 – 2055 Retirement Target Funds |
653,900 | 15.8% | ||||||
|
|
|||||||
Total |
4,061,200 | 98.0% | ||||||
|
|
aInvestment activities of significant shareholders could have a material impact on the Fund.
46 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
4. Income Taxes
At September 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
Franklin LibertyQ U.S. Equity ETF |
Franklin LibertyQ U.S. Mid Cap Equity ETF |
Franklin LibertyQ U.S. Small Cap Equity ETF |
||||||||||
Cost of investments |
$ | 106,608,600 | $ | 5,105,806 | $ | 3,789,665 | ||||||
|
|
|||||||||||
Unrealized appreciation |
$ | 6,678,891 | $ | 276,699 | $ | 277,828 | ||||||
Unrealized depreciation |
(2,440,312 | ) | (229,543 | ) | (218,096 | ) | ||||||
|
|
|||||||||||
Net unrealized appreciation (depreciation) |
$ | 4,238,579 | $ | 47,156 | $ | 59,732 | ||||||
|
|
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of redemptions in-kind.
5. Investment Transactions
Purchases and sales of investments (excluding short term securities and in-kind transactions) for the period ended September 30, 2017, were as follows:
Franklin LibertyQ U.S. Equity ETF |
Franklin LibertyQ U.S. Mid Cap Equity ETF |
Franklin LibertyQ U.S. Small Cap Equity ETF |
||||||||||
Purchases |
$ | 15,293,934 | $ | 1,018,567 | $ | 527,834 | ||||||
Sales |
$ | 14,632,263 | $ | 1,009,835 | $ | 502,298 |
In-kind transactions associated with creation and redemptions for the period ended September 30, 2017, were as follows:
Franklin LibertyQ U.S. Equity ETF |
Franklin LibertyQ U.S. Mid Cap ETF |
Franklin LibertyQ U.S. Small Cap ETF |
||||||||||
Cost of Securities Received |
$ | 113,933,922 | $ | 5,097,150 | $ | 3,796,494 | ||||||
Value of Securities Delivereda |
$ | 7,782,931 | $ | — | $ | — |
aRealized gains and losses from in-kind redemptions, as shown on the Statement of Operations, are not recognized by the Funds for tax purposes.
6. 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.
For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.
At September 30, 2017, all of the Funds’ investments in financial instruments carried at fair value were valued using Level 1 inputs.
libertyshares.com | Semiannual Report | 47 |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
7. Subsequent Events
The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.
Abbreviations
Selected Portfolio | ||
REIT | — Real Estate Investment Trust |
48 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
Board Approval of Investment Management Agreements
FRANKLIN TEMPLETON ETF TRUST
Franklin LibertyQ U.S. Equity ETF
Franklin LibertyQ U.S. Mid Cap Equity ETF
Franklin LibertyQ U.S. Small Cap Equity ETF
(each a “Fund”)
At a meeting held on February 16, 2017 (“Meeting”), the Board of Trustees (“Board”), including a majority of trustees who are not “interested persons” as such term is defined in Section 2(a)(19) of the Investment Company Act of 1940 (“Independent Trustees”), approved with respect to each Fund, an investment management agreement (each an “Investment Management Agreement”) with Franklin Advisers, Inc. (“Investment Manager”).
In considering the approval of each Investment Management Agreement, the Board reviewed and considered information provided by the Manager at the Meeting, at a meeting of the Board held on December 8, 2016 and throughout the year at other meetings of the Board. The Board also considered that the terms of the Investment Management Agreements were explained at the Meeting, noting that the forms of such agreements are substantially the same as the standard form of investment management agreement that includes administration services used for other funds in the Franklin Templeton Investments family of funds (“FTI Complex”). In reaching its decision to approve each Investment Management Agreement, the Board took into account several factors including, but not limited to, the following: (1) the nature and quality of the services to be provided by the Investment Manager to the Funds under the proposed Investment Management Agreements; (2) the Investment Manager’s experience as manager of other funds and accounts, including those within the FTI Complex; (3) the Investment Manager’s strength and reputation within the industry; (4) the fairness of the compensation under the proposed Investment Management Agreements; (5) the comparative pricing structure (including fee waivers and the estimated expense ratio to be borne by shareholders) of the Funds; (6) the personnel, operations, financial condition, and investment management capabilities, methodologies and resources of the Investment Manager; and (7) the Investment Manager’s compliance capabilities, as demonstrated by, among other things, its policies and procedures designed to prevent violations of the Federal securities laws, which had previously been approved by the Board in connection with its oversight of other funds in the FTI Complex. In considering the information and factors noted above, the Independent Trustees received assistance
and advice from and met separately with their Independent Legal Counsel.
In approving each Investment Management Agreement, the Board, including a majority of Independent Trustees, determined that the investment management fee structure is fair and reasonable and that the approval of each Investment Management Agreement is in the interests of each Fund and its shareholders.
The following sets forth some of the primary information and factors relevant to the Board’s decision to approve the Investment Management Agreements. This discussion of the information and factors considered by the Board (including the information and factors discussed above) is not intended to be exhaustive, but rather summarizes certain factors considered by the Board. In view of the wide variety of factors considered, the Board did not, unless otherwise noted, find it practicable to quantify or otherwise assign relative weights to the foregoing factors. In addition, individual Trustees may have assigned different weights to various factors.
NATURE, EXTENT AND QUALITY OF SERVICES. The Trustees reviewed the nature, extent and quality of the services to be provided by the Investment Manager. In this regard, the Trustees reviewed the Funds’ proposed investment goals and the Investment Manager’s proposed investment strategies and ability to implement such investment strategies (including, but not limited to, the Investment Manager’s trading practices and investment decision processes). The Trustees also reviewed the Funds’ portfolio managers, including their background and skills as well as their expertise in managing other funds within the FTI Complex.
Based on their review, the Trustees were satisfied with the nature and quality of the overall services to be provided by the Investment Manager to the Funds and their shareholders and were confident in the Investment Manager’s ability to implement the Funds’ proposed investment strategies and to provide quality services to the Funds and their shareholders.
INVESTMENT PERFORMANCE. The Board noted that, as the Funds had not yet commenced investment operations, there was no investment performance for the Funds. The Board also considered the proposed performance benchmarks for the Funds and how such benchmarks would be utilized to measure performance of the Investment Manager.
COMPARATIVE EXPENSES. The Board considered the cost of the services to be provided by the Investment Manager (and its affiliates) from its respective relationships with the
libertyshares.com | Semiannual Report | 49 |
FRANKLIN TEMPLETON ETF TRUST
SHAREHOLDER INFORMATION
Funds. The Board noted that the Investment Manager (and its affiliates) could not report any financial results from their relationships with the Funds because the Funds had not yet commenced investment operations, and thus, the Board could not evaluate the Investment Manager’s (or its affiliates’) profitability with respect to the Funds.
The Board was provided with information relating to proposed expenses for each Fund, including comparative data provided by Morningstar, Inc. (“Morningstar”), an independent organization, which compared the respective Fund’s expenses with those of its “peer group,” which consisted of other funds deemed comparable to the respective Fund as selected by Morningstar (“Comparable Funds”). The Board considered the information provided by Morningstar and noted that, for the Franklin LibertyQ U.S. Equity ETF and Franklin LibertyQ U.S. Small Cap Equity ETF, the Investment Manager’s contractual management fees and net expense ratios are at or below the median of the fees and expenses of Comparable Funds. While the contractual management fee for Franklin LibertyQ U.S. Mid Cap Equity ETF is above the Comparable Fund median, the net total expense ratio is at or below the median of its peers.
The Board noted that the Investment Manager will waive or assume certain expenses so that the total operating expenses for each Fund (excluding acquired fund fees and expenses and certain non-routine expenses) do not exceed (and could be less than) the amounts in the proposed fee table for a period of at least one year from the date of each Fund’s initial prospectus.
ECONOMIES OF SCALE. The Board considered economies of scale that may be realized by the Investment Manager and its affiliates as the Funds grow larger and the extent to which they are shared with shareholders of the Funds. The Board further considered the extent to which the Investment Manager may derive ancillary benefits from fund operations.
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 US 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 US Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q 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 the Funds and the Funds’ net asset value may be found on the Funds’ website at libertyshares.com.
50 | Semiannual Report | libertyshares.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.
Semiannual Report | ||||||
Franklin Templeton ETF Trust | ||||||
Investment Manager Franklin Advisers, Inc. |
Distributor Franklin Templeton Distributors, Inc. (800) DIAL BEN®/342-5236 libertyshares.com |
Investor Services Transfer Agent State Street Bank and 1 Heritage Drive |
© 2017 Franklin Templeton Investments. All rights reserved. | ETF3 S 11/17 |
Franklin Templeton
ETF Trust
Semiannual Report
Franklin Liberty International Opportunities ETF |
Franklin Liberty Investment Grade Corporate ETF |
Franklin Liberty U.S. Low Volatility ETF |
Franklin Templeton Investments
Gain From Our Perspective®
At Franklin Templeton Investments, we’re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we’re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world’s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe.
Visit libertyshares.com for fund
updates and documents.
Not FDIC Insured | | | May Lose Value | | | No Bank Guarantee |
libertyshares.com | Not part of the semiannual report | 1 |
SEMIANNUAL REPORT
Franklin Liberty International Opportunities ETF
We are pleased to bring you Franklin Liberty International Opportunity ETF’s semiannual report for the period ended September 30, 2017.
Your Fund’s Goal and Main Investments
The Fund seeks long-term capital appreciation. Under normal market conditions, the Fund invests predominantly in equity securities in developed, developing and frontier markets outside of the US across the entire market capitalization spectrum, including small- and mid-capitalization companies.
Performance Overview
During the six-month period, the Fund delivered cumulative total returns of +13.02% based on market price and +13.32% based on net asset value (NAV). In comparison, the MSCI All Country World Index (ACWI) ex USA Index, which measures stock performance in global developed and emerging markets excluding the US, generated a +12.62% total return for the same period.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 5.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to libertyshares.com or call (800) 342-5236.
Economic and Market Overview
The global economy generally expanded during the six-month period under review. In this environment, global developed and emerging market stocks rose, as measured by the MSCI ACWI. Global markets were aided by generally upbeat economic data across regions, Emmanuel Macron’s election as France’s president, encouraging corporate earnings reports, and the tax reform plan under the Trump administration toward period-end.
However, investors expressed concerns about political uncertainty in the US and the European Union, geopolitical tensions in the Korean peninsula and other regions, global oil
oversupply despite a pact by major oil-producing countries to
Geographic Composition |
Based on Total Net Assets as of 9/30/17 |
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.
2. Source: Bureau of Labor Statistics.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 21.
extend production cuts, and hawkish comments from key central bankers around the world.
The US economy strengthened in 2017’s second and third quarters, largely due to growth in consumer spending, business investment, exports and federal government spending. The unemployment rate decreased from 4.5% in March 2017 to 4.2% at period-end.2 Annual inflation, as measured by the Consumer Price Index, decreased from 2.4% in March 2017 to 2.2% at period-end.2 At its June meeting, the US Federal Reserve (Fed) raised its target range for the federal funds rate by 0.25% to 1.00%–1.25%, amid signs of a growing US economy, strengthening labor market and improving business spending. At its July and September 2017 meetings, the Fed kept its target range unchanged. However, in September the Fed mentioned that it would begin implementing its balance sheet reduction in October, and most committee members indicated a likelihood of one more rate hike during 2017.
In Europe, the UK’s economy grew faster in 2017’s third quarter over the previous quarter. The Bank of England kept its key policy rate unchanged during the period but indicated in September that it expected a rate hike to be soon so that
2 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTY INTERNATIONAL OPPORTUNITIES ETF
Top 10 Countries | ||||
9/30/17 | ||||
% of Total Net Assets |
||||
Japan |
14.4% | |||
UK |
12.1% | |||
China |
9.4% | |||
France |
8.0% | |||
Italy |
7.9% | |||
Canada |
6.0% | |||
Spain |
5.0% | |||
Switzerland |
3.8% | |||
Australia |
3.5% | |||
Netherlands |
3.1% |
inflation could return to target levels. The eurozone’s growth increased in 2017’s second quarter over the previous quarter. The bloc’s annual inflation rate fluctuated during the reporting period and ended the period where it began. The European Central Bank (ECB) kept its key policy rates unchanged during the period. However, at its September meeting, ECB President Mario Draghi signaled that the bank would reassess its policy stance on quantitative easing in October 2017.
In Asia, Japan’s quarterly gross domestic product (GDP) grew for the sixth consecutive quarter, in 2017’s second quarter, driven by household spending, capital expenditure and government spending. In July 2017, the Bank of Japan marginally raised its GDP forecasts for fiscal years 2017 and 2018, but lowered its inflation forecasts for the same period.
In emerging markets, Brazil’s quarterly GDP grew compared to the previous quarter. The country’s central bank cut its benchmark interest rate four times during the period to spur economic growth. Russia’s GDP grew in 2017’s second quarter compared to the prior-year period amid the Bank of Russia’s continued policy support. China’s economic growth accelerated in 2017’s second and third quarters compared to the prior-year periods, largely driven by higher government spending. The People’s Bank of China left its benchmark interest rate unchanged during the period. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose during the period.
Top 10 Sectors/Industries | ||||
9/30/17 | ||||
% of Total Net Assets |
||||
Banks |
9.2% | |||
Internet Software & Services |
6.9% | |||
Pharmaceuticals |
6.8% | |||
Insurance |
5.5% | |||
Capital Markets |
5.0% | |||
Electrical Equipment |
4.5% | |||
Oil, Gas & Consumable Fuels |
4.4% | |||
Semiconductors & Semiconductor Equipment |
4.0% | |||
Diversified Financial Services |
3.6% | |||
Media |
2.7% |
Investment Strategy
The Fund’s individual country and sector weightings may vary significantly from its benchmark index, and investments will not necessarily be in the securities that comprise its benchmark index. The Fund’s exposure to various regions and markets will vary from time to time according to the investment manager’s opinions as to the prevailing conditions and prospects for these markets. In seeking to outperform the relevant market of each region, the investment manager consults with various local asset managers based in certain regions around the world (Sub-Advisors). Although the Sub-Advisors assist the investment manager in the selection of local securities, the investment manager retains the sole discretion with respect to portfolio security selection. 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.
When choosing equity investments for the Fund, we apply a research-driven, bottom-up, fundamental long-term approach, focusing on the market price of a company’s securities relative to our evaluation of the company’s long-term earnings, asset value and cash flow potential. We seek to invest in companies that we consider to be financially strong with favorable growth potential and sustainable competitive advantages. We may also consider, among other factors, a company’s price/earnings ratio, profit margins and liquidation value.
libertyshares.com | Semiannual Report | 3 |
FRANKLIN LIBERTY INTERNATIONAL OPPORTUNITIES ETF
Top 10 Holdings | ||||
9/30/17 | ||||
Company Sector/Industry |
% of Total Net Assets |
|||
Alibaba Group Holding Ltd., ADR Internet Software & Services, China |
3.8% | |||
Roche Holding AG Pharmaceuticals, Switzerland |
1.9% | |||
Novartis AG Pharmaceuticals, Switzerland |
1.9% | |||
Taiwan Semiconductor Manufacturing Co. Ltd. Semiconductors & Semiconductor Equipment, Taiwan |
1.7% | |||
Sanofi Pharmaceuticals, France |
1.7% | |||
Tencent Holdings Ltd. Internet Software & Services, China |
1.7% | |||
Italgas Reti SpA Gas Utilities, Italy |
1.7% | |||
TGS NOPEC Geophysical Co. ASA Energy Equipment & Services, Norway |
1.6% | |||
ASR Nederland NV Insurance, Netherlands |
1.6% | |||
Ctrip.com International Ltd., ADR Internet & Direct Marketing Retail, China |
1.6% |
Manager’s Discussion
During the period, the Fund’s outperformance relative to the MSCI ACWI ex USA came mainly from our stock selection in Asia, excluding Japanese securities. The primary contributors within Asia were stock selection and an overweighted allocation in China that included positions in China Overseas Land & Investment,3 Alibaba Group Holding, Tencent Holdings, Silergy and China Merchants Bank. Stock selection and an underweighted allocation in Australia also boosted relative performance. The Fund’s underweighted allocation in Commonwealth Bank of Australia and overweighted position in Rio Tinto were major contributors.
Elsewhere, the Fund’s positioning in Canada, Latin America, Europe and the Middle East and Africa had a modestly positive effect on relative performance.
During the period, the portfolio used currency derivatives to hedge a portion of its exposure to the Japanese yen back to the US dollar. Although the currency pair remained range bound during the period, the timing of the Fund’s hedging activity boosted Fund results.
From a sector perspective, the bulk of the Fund’s outperformance during the period came from holdings in the information
technology (IT) and financials sectors. Holdings in the consumer discretionary, materials and energy sectors slightly hampered relative performance.
In contrast, our stock selection in Japan was a major detractor, due mainly to the underperformance of some IT positions such as OMRON3 and FUJIFILM Holdings. An overweighted position in JXTG Holdings also hurt relative performance. South Korea slightly hurt relative results. Our overweighted positions in NAVER and Lotte Chemical detracted from relative performance.
Thank you for your participation in Franklin Liberty International Opportunities ETF. We look forward to serving your future investment needs.
Stephen H. Dover, CFA |
Purav A. Jhaveri, CFA, FRM | ||
Portfolio Management Team |
The foregoing information reflects our analysis, opinions and portfolio holdings as of September 30, 2017, 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.
CFA® is a trademark owned by CFA Institute.
3. No longer held by period-end.
See www.franklintempletondatasources.com for additional data provider information.
4 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTY INTERNATIONAL OPPORTUNITIES ETF
Performance Summary as of September 30, 2017
Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table does not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale 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 (1/27/17), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/171
Cumulative Total Return2 | Average Annual Total Return2 | |||||||||||||||
Based on NAV3 |
Based on market price4 |
Based on NAV3 |
Based on market price4 |
|||||||||||||
6-Month |
+13.32% | +13.02% | +13.32% | +13.02% | ||||||||||||
Since Inception (1/25/17) |
+18.32% | +18.97% | +18.32% | +18.97% |
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 libertyshares.com or call (800) 342-5236.
See page 6 for Performance Summary footnotes.
libertyshares.com | Semiannual Report | 5 |
FRANKLIN LIBERTY INTERNATIONAL OPPORTUNITIES ETF
PERFORMANCE SUMMARY
Distributions (4/1/17–9/30/17)
Net Investment Income |
$0.306257 |
Total Annual Operating Expenses5
With Waiver | Without Waiver | |||
0.60% | 3.60% |
All investments involve risks, including possible loss of principal. The market values of stocks owned by the Fund will go up or down, sometimes rapidly or unpredictably. 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 on 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. Smaller and midsize-company stocks have historically experienced more price volatility than larger company stocks, especially over the short term. 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. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. The Fund has an expense reduction contractually guaranteed through 7/31/18. 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. 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.
6 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTY INTERNATIONAL OPPORTUNITIES 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 4/1/17 |
Ending Account Value 9/30/17 |
Expenses Paid During |
Ending Value 9/30/17 |
Expenses Paid During |
Net Annualized Expense Ratio2 |
|||||||||||||||||
$1,000.00 | $ | 1,133.20 | $ | 3.21 | $ | 1,022.06 | $ | 3.04 | 0.60 | % |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
libertyshares.com | Semiannual Report | 7 |
Franklin Liberty Investment Grade Corporate ETF
This semiannual report for Franklin Liberty Investment Grade Corporate ETF covers the period ended September 30, 2017.
Your Fund’s Goal and Main Investments
The Fund seeks a high level of current income as is consistent with prudent investing, while seeking preservation of capital. Under normal market conditions, the Fund invests at least 80% of its net assets in investment-grade corporate debt securities and investments.
Performance Overview
During the six-month period, the Fund posted cumulative total returns of +3.89% based on market price and +3.77% based on net asset value (NAV). In comparison, the Bloomberg Barclays US Corporate Investment Grade Index produced a +3.91% total return for the same period.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 11.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to libertyshares.com or call (800) 342-5236.
Economic and Market Overview
The US economy strengthened during the six months under review. Key growth drivers in 2017’s second and third quarters included consumer spending, business investment, exports and federal government spending. The manufacturing and services sectors expanded during the period. The unemployment rate decreased from 4.5% in March 2017 to 4.2% at period-end.2 Monthly retail sales were volatile during the period. Annual inflation, as measured by the Consumer Price Index, decreased from 2.4% in March 2017 to 2.2% at period-end.2
At its June meeting, the US Federal Reserve (Fed) raised its target range for the federal funds rate by 0.25% to 1.00%–1.25%, amid signs of a growing US economy, strengthening
Top 10 Sectors/Industries | ||||
9/30/17 | ||||
% of Total Net Assets |
||||
Banks |
17.6% | |||
Oil, Gas & Consumable Fuels |
8.4% | |||
Insurance |
4.9% | |||
Food & Staples Retailing |
4.6% | |||
Capital Markets |
4.4% | |||
Diversified Telecommunication Services |
4.3% | |||
Food Products |
4.0% | |||
Media |
3.9% | |||
Diversified Financial Services |
3.0% | |||
Electric Utilities |
2.8% |
labor market and improving business spending. At its July and September 2017 meetings, the Fed kept its target range unchanged. Furthermore in September, the Fed mentioned that it would begin implementing its balance sheet reduction in October.
The 10-year Treasury yield, which moves inversely to its price, shifted throughout the period.
In June, the yield rose due to renewed optimism for improvement in economic growth, while in July, the yield rose further amid hawkish comments from key central bankers around the world. Easing concerns about Hurricane Irma’s impact, the Fed’s proposed balance sheet normalization in October and the Republican tax reform plan, pushed up yields further toward the period-end. However, geopolitical tensions in the Middle East and the Korean Peninsula, US political turmoil, and uncertainty on whether the Fed would raise rates again in 2017 resulted in a decline in the yield. Overall, the 10-year Treasury yield fell from 2.40% at the beginning of the period to 2.33% at the period-end.
Investment Strategy
The Fund invests primarily in US dollar-denominated corporate debt securities issued by US and foreign companies. The Fund may invest in debt securities of any maturity or duration.
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.
2. Source: Bureau of Labor Statistics.
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 Statement of Investments (SOI). The SOI begins on page 27.
8 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTY INVESTMENT GRADE CORPORATE ETF
Top 10 Holdings | ||||
9/30/17 | ||||
Company Sector/Industry |
% of Total Net Assets |
|||
The Goldman Sachs Group Inc. Capital Markets |
2.4% | |||
Bank of America Corp. Bank |
2.2% | |||
JPMorgan Chase & Co. Bank |
2.2% | |||
BNP Paribas SA Bank |
2.1% | |||
Morgan Stanley Capital Markets |
2.0% | |||
Credit Suisse New York Bank |
1.9% | |||
Verizon Communications Inc. Diversified Telecommunication Services |
1.9% | |||
GE Capital International Funding Co. Diversified Financial Services |
1.9% | |||
Anheuser-Busch InBev Finance Inc. Beverages |
1.8% | |||
Mondelez International Holdings Netherlands BV Food Products |
1.8% |
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 and US Treasury securities, and generally expects to invest a portion of its assets in cash, cash equivalents and high quality money market securities, including 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-US 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 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 bonds performed well during the period, driven by improved corporate earnings and strong investor demand. Economic conditions around the world also remained supportive, while political risk in Europe seemed to abate following elections in France. In addition, investors grew more optimistic about the prospects for corporate tax reform in the US. The new issue market remained busy but bonds were easily absorbed by strong investor demand. Intermediate- and long-term US Treasury yields fell during the period and corporate bond spreads moved tighter.
The Fund modestly underperformed its benchmark during the review period. Security selection was the largest performance detractor, with the biggest negatives in banks. Our exposure within that industry covered many of the major US banks as well as selected banks from the UK, France, Switzerland and Australia.
The Fund’s holdings in the utility, communications, retail and pharmaceutical sectors were strong individual performers. Our holding in Georgia Power recovered as investors became comfortable that the situation surrounding the unfinished Vogtle 3 and 4 nuclear power plants would not have a material negative financial impact on the company.
Our quality allocation also helped returns. The Fund was overweighted in BBB-rated securities relative to the benchmark. We believed that BBB securities were attractively valued based upon our view of economic conditions and the additional yield these securities offered. Duration was not a material performance driver during the period.
What is duration?
Duration is a measure of a bond’s price sensitivity to interest-rate changes. In general, a portfolio of securities with a lower duration can be expected to be less sensitive to interest-rate changes than a portfolio with a higher duration.
Trading activity during the period was driven by share creations and redemptions, as well as relative value decisions. We purchased a number of new issues and sold other securities based on our view of fundamentals or valuations. The Fund held only cash bonds during the period and had no exposure to derivatives.
libertyshares.com | Semiannual Report | 9 |
FRANKLIN LIBERTY INVESTMENT GRADE CORPORATE ETF
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 | ||
Portfolio Management Team |
The foregoing information reflects our analysis, opinions and portfolio holdings as of September 30, 2017, 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.
10 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTY INVESTMENT GRADE CORPORATE ETF
Performance Summary as of September 30, 2017
Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance tables do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares.
Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (10/5/16), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/171
Cumulative Total Return2 | Average Annual Total Return2 | |||||||||||||||
Based on NAV3 |
Based on market price4 |
Based on NAV3 |
Based on market price4 |
|||||||||||||
6-Month |
+3.77% | +3.89% | +3.77% | +3.89% | ||||||||||||
Since Inception (10/3/16) |
+1.88% | +2.12% | +1.88% | +2.12% |
30-Day Standardized Yield6 | ||||||||
Distribution Rate5 | (with waiver) | (without waiver) | ||||||
3.10% |
2.90% | 2.13% |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to libertyshares.com or call (800) 342-5236.
See page 12 for Performance Summary footnotes.
libertyshares.com | Semiannual Report | 11 |
FRANKLIN LIBERTY INVESTMENT GRADE CORPORATE ETF
PERFORMANCE SUMMARY
Distributions (4/1/17–9/30/17)
Net Investment Income |
$0.409351 |
Total Annual Operating Expenses7
With Waiver | Without Waiver | |||
0.35% | 1.04% |
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. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. The Fund has an expense reduction contractually guaranteed through 9/19/18. 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 September dividend and the NAV per share on 9/30/17.
6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
7. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
12 | Semiannual Report | libertyshares.com |
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 4/1/17 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 4/1/17–9/30/171,2 |
Ending Account Value 9/30/17 |
Expenses Paid During |
Net Annualized Expense Ratio2 |
|||||||||||||||||
$1,000.00 | $ | 1,037.70 | $ | 1.99 | $ | 1,023.11 | $ | 1.98 | 0.39 | % |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
Effective September 1, 2017, the expense waiver changed and the new annualized net expense ratio (including expenses of the acquired fund fees and expenses) was 0.35%. Had such expense waiver been in effect for the full period, the expenses paid would have been $1.79 based upon the Fund’ actual performance and $1.78 based upon a hypothetical 5% return.
libertyshares.com | Semiannual Report | 13 |
Franklin Liberty U.S. Low Volatility ETF
This semiannual report for Franklin Liberty U.S. Low Volatility ETF covers the period ended September 30, 2017.
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 as least 80% of its net assets in US investments.
Performance Overview
During the six-month period, the Fund posted cumulative total returns of +5.88% based on market price and +6.29% based on net asset value (NAV). In comparison, the Russell 1000® Index produced a +7.68% total return for the same period.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 17.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to libertyshares.com or call (800) 342-5236.
Economic and Market Overview
The US economy strengthened during the six months under review. Key growth drivers in 2017’s second and third quarters included consumer spending, business investment, exports and federal government spending. The manufacturing and services sectors expanded during the period. The unemployment rate decreased from 4.5% in March 2017 to 4.2% at period-end.2 Monthly retail sales were volatile during the period. Annual inflation, as measured by the Consumer Price Index, decreased from 2.4% in March 2017 to 2.2% at period-end.2
At its June meeting, the US Federal Reserve (Fed) raised its target range for the federal funds rate by 0.25% to 1.00%–1.25%, amid signs of a growing US economy, strengthening labor market and improving business spending. At its July
Top 10 Sectors/Industries | ||||
9/30/17 | ||||
% of Total Net Assets |
||||
Information Technology |
22.9% | |||
Financials |
14.7% | |||
Health Care |
13.8% | |||
Consumer Discretionary |
12.3% | |||
Industrials |
10.5% | |||
Consumer Staples |
7.8% | |||
Energy |
6.0% | |||
Real Estate |
3.7% | |||
Materials |
3.3% | |||
Utilities |
3.1% |
and September 2017 meetings, the Fed kept its target range unchanged. Furthermore in September, the Fed mentioned that it would begin implementing its balance sheet reduction in October.
US equity markets rose during the period, benefiting from mostly upbeat economic data and better US corporate earnings. The markets were also supported by investor optimism arising from pro-growth and pro-business policy plans in the US; Emmanuel Macron’s victory in France’s presidential election, comments from the US Fed chair indicating optimism about the US economy and the likelihood of gradual rate hikes; and the Republican tax reform plan. However, uncertainty about President Trump’s ability to implement reforms and geopolitical tensions in the Middle East and the Korean Peninsula curbed market sentiment. The broad US stock market, as measured by the Standard & Poor’s® 500 Index, generated +7.71% total return for the period.1
Investment Strategy
The Fund invests primarily in equity securities (principally common stocks) of US companies.3 The Fund seeks capital appreciation, while providing a lower level of volatility than
1. Source: Morningstar. Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group.
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.
2. Source: Bureau of Labor Statistics.
3. “US 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 US; (ii) derive 50% or more of their total revenue or profit from either goods or services produced, or sales made, in the US; or (iii) have 50% or more of their assets in the US.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 32.
14 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTY U.S. LOW VOLATILITY ETF
Top 10 Holdings | ||||
9/30/17 | ||||
Company Sector/Industry |
% of Total Net Assets |
|||
Colgate-Palmolive Co. Consumer Staples |
1.6% | |||
The Coca-Cola Co. Consumer Staples |
1.6% | |||
PepsiCo Inc. Consumer Staples |
1.6% | |||
The Procter & Gamble Co. Consumer Staples |
1.5% | |||
Church & Dwight Co. Inc. Consumer Staples |
1.5% | |||
Alphabet Inc. Information Technology |
1.5% | |||
Cisco Systems Inc. Information Technology |
1.5% | |||
Texas Instruments Inc. Information Technology |
1.5% | |||
Fiserv Inc. Information Technology |
1.5% | |||
Intel Corp. Information Technology |
1.5% |
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. The investment manager screens that universe on a quarterly basis in order to identify those securities with the lowest realized volatility relative to their corresponding sectors. 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
Performance for US equities was strong during the period, driven by strong corporate earnings, a supportive and synchronized global growth environment and renewed investor optimism about tax reform.
The Fund’s relative performance was hampered by industry allocation within the health care and information technology (IT) sectors, particularly our underweighting of the historically volatile biotechnology and internet software and services industries. Our industry allocation within the energy sector contributed to performance as our holdings in integrated oil companies generally outperformed the more volatile exploration and production companies.
In the health care sector, Dentsply Sirona detracted from returns as sales growth for its dental equipment tools disappointed investors.4 Although health care was a major sector detractor, several individual Fund holdings in the sector contributed to relative returns. These include contact lens manufacturer The Cooper Companies,4 whose performance benefited from a series of new product launches and manufacturing improvements, and Baxter International, whose share price rose amid stable sales growth combined with gross profit margin improvements.
Stock selection hampered relative performance in the consumer discretionary sector. A slowdown in comparable-store sales and competitive pressures weighed on our position in automotive parts retailer O’Reilly Automotive.4 Furnished goods manufacturer Leggett & Platt was also a detractor in the sector.4
Overall, the IT sector has been buoyed by accelerated earnings growth and expectations for continued economic expansion. However, the lack of exposure to various companies in the internet software and services industry that ended the period with strong gains undermined results. In addition, our position in International Business Machines further dampened returns.4 The Fund, however, did benefit from its holdings in tax software provider Intuit and IT services companies Fidelity National Information Services and Mastercard.
Elsewhere, household products companies Church & Dwight and Kimberly-Clark4 hurt performance in the consumer staples sector.
Relative Fund performance primarily benefited from stock selection in the energy and financials sectors. The energy sector gradually improved over the period as stronger global demand led to a steady recovery in oil prices. The contribution from energy sector holdings was offset somewhat by a position in Schlumberger, which declined and detracted from returns.4
In the financials sector, our capital markets industry holdings CBOE Holdings, S&P Global and BlackRock performed strongly and aided Fund returns. Another top contributor was insurer Progressive, which climbed amid strong growth in premiums and policies in force during the first half of the
4. No longer held by period-end.
See www.franklintempletondatasources.com for additional data provider information.
libertyshares.com | Semiannual Report | 15 |
FRANKLIN LIBERTY U.S. LOW VOLATILITY ETF
year. In contrast, a powerful hurricane season led to underperformance from commercial, personal and reinsurance companies, including our position in W.R. Berkley.
Thank you for your participation in Franklin Liberty U.S. Low Volatility ETF. We look forward to serving your future investment needs.
Todd Brighton, CFA | ||
Portfolio Manager |
The foregoing information reflects our analysis, opinions and portfolio holdings as of September 30, 2017, 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.
16 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTY U.S. LOW VOLATILITY ETF
Performance Summary as of September 30, 2017
Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance table does not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale or redemption of Fund shares.
Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (9/22/16), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/171
Cumulative Total Return2 | Average Annual Total Return2 | |||||||||||||||
Based on NAV3 |
Based on market price4 |
Based on NAV3 |
Based on market price4 |
|||||||||||||
6-Month |
+6.29% | +5.88% | +6.29% | +5.88% | ||||||||||||
Since Inception (9/20/16) |
+15.22% | +14.85% | +15.22% | +14.85% |
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 libertyshares.com or call (800) 342-5236.
See page 18 for Performance Summary footnotes.
libertyshares.com | Semiannual Report | 17 |
FRANKLIN LIBERTY U.S. LOW VOLATILITY ETF
PERFORMANCE SUMMARY
Distributions (4/1/17–9/30/17)
Net Investment Income |
$0.236023 |
Total Annual Operating Expenses5
With Waiver | Without Waiver | |||
0.50% | 2.33% |
All investments involve risks, including possible loss of principal. The market values of stocks owned by the Fund will go up or down, sometimes rapidly or unpredictably. 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. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. The Fund has an expense reduction contractually guaranteed through 9/19/18. 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. 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.
18 | Semiannual Report | libertyshares.com |
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 4/1/17 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 4/1/17–9/30/171,2 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 4/1/17–9/30/171,2 |
Net Annualized Expense Ratio2 |
|||||||||||||||||
$1,000.00 | $ | 1,062.90 | $ | 2.59 | $ | 1,022.59 | $ | 2.54 | 0.50 | % |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements.
libertyshares.com | Semiannual Report | 19 |
FRANKLIN TEMPLETON ETF TRUST
Franklin Liberty International Opportunities ETF
Six Months Ended September 30, 2017 (unaudited) |
Year Ended March 31, 2017a |
|||||||
Per share operating performance (for a share outstanding throughout the period) |
||||||||
Net asset value, beginning of period |
$ | 25.58 | $ | 24.50 | ||||
|
|
|||||||
Income from investment operationsb: | ||||||||
Net investment incomec |
0.30 | 0.09 | ||||||
Net realized and unrealized gains (losses) |
3.09 | 0.99 | ||||||
|
|
|||||||
Total from investment operations |
3.39 | 1.08 | ||||||
|
|
|||||||
Less distributions from net investment income |
(0.31 | ) | — | |||||
|
|
|||||||
Net asset value, end of period |
$ | 28.66 | $ | 25.58 | ||||
|
|
|||||||
Total returnd |
13.32% | 4.41% | ||||||
Ratios to average net assetse | ||||||||
Expenses before waiver and payments by affiliates |
3.89% | 8.50% | ||||||
Expenses net of waiver and payments by affiliates |
0.60% | 0.60% | ||||||
Net investment income |
2.21% | 1.98% | ||||||
Supplemental data | ||||||||
Net assets, end of period (000’s) |
$5,732 | $5,116 | ||||||
Portfolio turnover ratef |
26.11% | 2.32% |
aFor the period January 25, 2017 (commencement of operations) to March 31, 2017.
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 of 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 excludes the value of portfolio securities received or delivered as a result of processing capital share transactions in Creation Units, if any.
20 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
Statement of Investments, September 30, 2017 (unaudited)
Franklin Liberty International Opportunities ETF
Industry | Shares | Value | ||||||||||||
Common Stocks 96.3% | ||||||||||||||
Australia 3.5% | ||||||||||||||
Amcor Ltd. |
Containers & Packaging | 2,965 | $ | 35,386 | ||||||||||
BHP Billiton Ltd. | Metals & Mining | 1,629 | 32,952 | |||||||||||
Commonwealth Bank of Australia |
Banks | 222 | 13,108 | |||||||||||
CSL Ltd. |
Biotechnology | 633 | 66,536 | |||||||||||
Ramsay Health Care Ltd. |
Health Care Providers & Services | 396 | 19,352 | |||||||||||
Rio Tinto Ltd. |
Metals & Mining | 594 | 31,008 | |||||||||||
|
|
|||||||||||||
198,342 | ||||||||||||||
|
|
|||||||||||||
Brazil 0.9% | ||||||||||||||
Ambev SA |
Beverages | 2,200 | 14,634 | |||||||||||
B3 SA - Brasil Bolsa Balcao |
Capital Markets | 900 | 6,814 | |||||||||||
Energisa SA |
Electric Utilities | 1,200 | 9,719 | |||||||||||
Lojas Americanas SA |
Multiline Retail | 1,500 | 7,450 | |||||||||||
Vale SA |
Metals & Mining | 1,300 | 13,098 | |||||||||||
|
|
|||||||||||||
51,715 | ||||||||||||||
|
|
|||||||||||||
Canada 6.0% | ||||||||||||||
Alimentation Couche-Tard Inc., B |
Food & Staples Retailing | 500 | 22,748 | |||||||||||
Brookfield Asset Management Inc., A |
Capital Markets | 1,300 | 53,553 | |||||||||||
Canadian Imperial Bank of Commerce |
Banks | 400 | 34,916 | |||||||||||
Canadian National Railway Co. |
Road & Rail | 700 | 57,863 | |||||||||||
Enbridge Inc. |
Oil, Gas & Consumable Fuels | 1,100 | 45,842 | |||||||||||
Peyto Exploration & Development Corp. |
Oil, Gas & Consumable Fuels | 900 | 14,680 | |||||||||||
Restaurant Brands International Inc. |
Hotels, Restaurants & Leisure | 400 | 25,497 | |||||||||||
Royal Bank of Canada |
Banks | 600 | 46,315 | |||||||||||
The Toronto-Dominion Bank |
Banks | 800 | 44,937 | |||||||||||
|
|
|||||||||||||
346,351 | ||||||||||||||
|
|
|||||||||||||
China 9.4% | ||||||||||||||
a | Alibaba Group Holding Ltd., ADR |
Internet Software & Services | 1,260 | 217,615 | ||||||||||
China Merchants Bank Co. Ltd., H |
Banks | 8,000 | 28,115 | |||||||||||
a | Ctrip.com International Ltd., ADR |
Internet & Direct Marketing Retail | 1,740 | 91,768 | ||||||||||
Ping An Insurance (Group) Co. of China Ltd. |
Insurance | 7,500 | 57,565 | |||||||||||
Silergy Corp. |
Semiconductors & Semiconductor Equipment | 2,000 | 45,838 | |||||||||||
Tencent Holdings Ltd. |
Internet Software & Services | 2,300 | 99,000 | |||||||||||
|
|
|||||||||||||
539,901 | ||||||||||||||
|
|
|||||||||||||
Egypt 0.4% | ||||||||||||||
a | Six of October Development & Investment Co. |
Real Estate Management & Development | 29,699 | 24,483 | ||||||||||
|
|
|||||||||||||
Finland 0.8% | ||||||||||||||
Tieto OYJ |
IT Services | 1,545 | 47,105 | |||||||||||
|
|
|||||||||||||
France 8.0% | ||||||||||||||
Capgemini SE |
IT Services | 485 | 56,855 | |||||||||||
Maisons du Monde SA |
Specialty Retail | 1,085 | 47,710 | |||||||||||
Sanofi |
Pharmaceuticals | 1,006 | 99,912 | |||||||||||
a | Schneider Electric SE |
Electrical Equipment | 695 | 60,496 | ||||||||||
SEB SA |
Household Durables | 303 | 55,594 | |||||||||||
SPIE SA |
Commercial Services & Supplies | 2,617 | 72,024 | |||||||||||
Vinci SA |
Construction & Engineering | 719 | 68,340 | |||||||||||
|
|
|||||||||||||
460,931 | ||||||||||||||
|
|
|||||||||||||
Hong Kong 2.7% | ||||||||||||||
AIA Group Ltd. |
Insurance | 11,600 | 85,544 | |||||||||||
a | IMAX China Holding Inc. |
Media | 4,600 | 13,899 | ||||||||||
Samsonite International SA |
Textiles, Apparel & Luxury Goods | 13,200 | 56,615 | |||||||||||
|
|
|||||||||||||
156,058 | ||||||||||||||
|
|
libertyshares.com | Semiannual Report | 21 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Liberty International Opportunities ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks (continued) | ||||||||||||||
Indonesia 1.2% | ||||||||||||||
Bank Central Asia Tbk PT |
Banks | 19,900 | $ | 29,992 | ||||||||||
Surya Citra Media Tbk PT |
Media | 247,200 | 40,194 | |||||||||||
|
|
|||||||||||||
70,186 | ||||||||||||||
|
|
|||||||||||||
Italy 7.9% | ||||||||||||||
Banca Generali SpA |
Capital Markets | 2,332 | 80,915 | |||||||||||
Cerved Information Solutions SpA |
Diversified Financial Services | 6,890 | 81,454 | |||||||||||
FinecoBank Banca Fineco SpA |
Banks | 9,212 | 81,678 | |||||||||||
Italgas Reti SpA |
Gas Utilities | 16,959 | 95,232 | |||||||||||
Prysmian SpA |
Electrical Equipment | 2,254 | 76,156 | |||||||||||
Snam SpA |
Oil, Gas & Consumable Fuels | 7,523 | 36,251 | |||||||||||
|
|
|||||||||||||
451,686 | ||||||||||||||
|
|
|||||||||||||
Japan 14.4% | ||||||||||||||
Astellas Pharma Inc. |
Pharmaceuticals | 1,300 | 16,532 | |||||||||||
Bridgestone Corp. |
Auto Components | 500 | 22,680 | |||||||||||
The Dai-ichi Life Holdings Inc. |
Insurance | 2,800 | 50,222 | |||||||||||
Daikin Industries Ltd. |
Building Products | 500 | 50,615 | |||||||||||
Denso Corp. |
Auto Components | 1,300 | 65,748 | |||||||||||
FUJIFILM Holdings Corp. |
Technology Hardware, Storage & Peripherals | 500 | 19,398 | |||||||||||
Honda Motor Co. Ltd. |
Automobiles | 2,200 | 65,121 | |||||||||||
JXTG Holdings Inc. |
Oil, Gas & Consumable Fuels | 11,500 | 59,142 | |||||||||||
Mitsubishi Electric Corp. |
Electrical Equipment | 4,000 | 62,471 | |||||||||||
Mitsubishi UFJ Financial Group Inc. |
Banks | 8,000 | 51,931 | |||||||||||
Murata Manufacturing Co. Ltd. |
Electronic Equipment, Instruments & Components | 200 | 29,387 | |||||||||||
Nidec Corp. |
Electrical Equipment | 500 | 61,387 | |||||||||||
Otsuka Holdings Co. Ltd. |
Pharmaceuticals | 500 | 19,860 | |||||||||||
Panasonic Corp. |
Household Durables | 800 | 11,588 | |||||||||||
Pigeon Corp. |
Household Products | 600 | 20,495 | |||||||||||
SCSK Corp. |
IT Services | 500 | 21,210 | |||||||||||
SoftBank Group Corp. |
Wireless Telecommunication Services | 700 | 56,490 | |||||||||||
Sony Corp. |
Household Durables | 600 | 22,312 | |||||||||||
Sumitomo Chemical Co. Ltd. |
Chemicals | 9,000 | 56,208 | |||||||||||
Sumitomo Electric Industries Ltd. |
Auto Components | 1,800 | 29,391 | |||||||||||
Suntory Beverage & Food Ltd. |
Beverages | 300 | 13,352 | |||||||||||
Toyota Motor Corp. |
Automobiles | 300 | 17,883 | |||||||||||
|
|
|||||||||||||
823,423 | ||||||||||||||
|
|
|||||||||||||
Mexico 1.3% | ||||||||||||||
America Movil SAB de CV, L |
Wireless Telecommunication Services | 40,000 | 35,596 | |||||||||||
Fomento Economico Mexicano SAB de CV |
Beverages | 3,800 | 36,420 | |||||||||||
|
|
|||||||||||||
72,016 | ||||||||||||||
|
|
|||||||||||||
Netherlands 3.1% | ||||||||||||||
ASML Holding NV |
Semiconductors & Semiconductor Equipment | 506 | 86,169 | |||||||||||
ASR Nederland NV |
Insurance | 2,314 | 92,587 | |||||||||||
|
|
|||||||||||||
178,756 | ||||||||||||||
|
|
|||||||||||||
Norway 3.1% | ||||||||||||||
b | SKANDIABANKEN ASA, 144A |
Banks | 7,440 | 82,248 | ||||||||||
TGS NOPEC Geophysical Co. ASA |
Energy Equipment & Services | 3,917 | 93,247 | |||||||||||
|
|
|||||||||||||
175,495 | ||||||||||||||
|
|
|||||||||||||
Philippines 0.8% | ||||||||||||||
Security Bank Corp. |
Banks | 4,960 | 23,746 | |||||||||||
Universal Robina Corp. |
Food Products | 6,490 | 19,521 | |||||||||||
|
|
|||||||||||||
43,267 | ||||||||||||||
|
|
22 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Liberty International Opportunities ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks (continued) | ||||||||||||||
Russia 1.0% | ||||||||||||||
Gazprom PJSC |
Oil, Gas & Consumable Fuels | 11,840 | $ | 25,070 | ||||||||||
a,c | Mail.Ru Group Ltd., GDR, Reg S |
Internet Software & Services | 1,050 | 34,608 | ||||||||||
|
|
|||||||||||||
59,678 | ||||||||||||||
|
|
|||||||||||||
Singapore 0.8% | ||||||||||||||
DBS Group Holdings Ltd. |
Banks | 2,800 | 42,929 | |||||||||||
|
|
|||||||||||||
South Africa 1.4% | ||||||||||||||
Naspers Ltd., N |
Media | 320 | 69,202 | |||||||||||
Novus Holdings Ltd. |
Commercial Services & Supplies | 110 | 53 | |||||||||||
Redefine Properties Ltd. |
Equity Real Estate Investment Trusts (REITs | ) | 12,176 | 9,640 | ||||||||||
|
|
|||||||||||||
78,895 | ||||||||||||||
|
|
|||||||||||||
South Korea 3.0% | ||||||||||||||
Lotte Chemical Corp. |
Chemicals | 170 | 56,105 | |||||||||||
Naver Corp. |
Internet Software & Services | 66 | 42,930 | |||||||||||
Samsung Electronics Co. Ltd. |
Technology Hardware, Storage & Peripherals | 32 | 71,636 | |||||||||||
|
|
|||||||||||||
170,671 | ||||||||||||||
|
|
|||||||||||||
Spain 5.0% | ||||||||||||||
Applus Services SA |
Professional Services | 5,528 | 69,273 | |||||||||||
Cia de Distribucion Integral Logista Holdings SA |
Air Freight & Logistics | 2,835 | 68,187 | |||||||||||
Mediaset Espana Comunicacion SA |
Media | 2,910 | 32,865 | |||||||||||
Merlin Properties Socimi SA |
Equity Real Estate Investment Trusts (REITs | ) | 5,303 | 73,475 | ||||||||||
Tecnicas Reunidas SA |
Energy Equipment & Services | 1,413 | 44,676 | |||||||||||
|
|
|||||||||||||
288,476 | ||||||||||||||
|
|
|||||||||||||
Sweden 1.3% | ||||||||||||||
Byggmax Group AB |
Specialty Retail | 8,679 | 72,836 | |||||||||||
|
|
|||||||||||||
Switzerland 3.8% | ||||||||||||||
Novartis AG |
Pharmaceuticals | 1,258 | 107,780 | |||||||||||
Roche Holding AG |
Pharmaceuticals | 431 | 110,111 | |||||||||||
|
|
|||||||||||||
217,891 | ||||||||||||||
|
|
|||||||||||||
Taiwan 2.2% | ||||||||||||||
Ennoconn Corp. |
Technology Hardware, Storage & Peripherals | 2,000 | 28,690 | |||||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. |
Semiconductors & Semiconductor Equipment | 14,000 | 99,954 | |||||||||||
|
|
|||||||||||||
128,644 | ||||||||||||||
|
|
|||||||||||||
Thailand 1.5% | ||||||||||||||
Kasikornbank PCL, fgn |
Banks | 4,700 | 30,159 | |||||||||||
Minor International PCL, fgn |
Hotels, Restaurants & Leisure | 22,000 | 26,881 | |||||||||||
The Siam Cement PCL, fgn |
Construction Materials | 1,900 | 28,600 | |||||||||||
|
|
|||||||||||||
85,640 | ||||||||||||||
|
|
|||||||||||||
United Arab Emirates 0.7% | ||||||||||||||
Amanat Holdings PJSC |
Capital Markets | 129,403 | 40,167 | |||||||||||
|
|
|||||||||||||
United Kingdom 12.1% | ||||||||||||||
AstraZeneca PLC |
Pharmaceuticals | 520 | 34,569 | |||||||||||
Bodycote PLC |
Machinery | 3,272 | 40,233 | |||||||||||
BP PLC |
Oil, Gas & Consumable Fuels | 7,718 | 49,424 | |||||||||||
British American Tobacco PLC |
Tobacco | 678 | 42,498 | |||||||||||
Bunzl PLC |
Trading Companies & Distributors | 1,130 | 34,369 | |||||||||||
Close Brothers Group PLC |
Capital Markets | 1,720 | 34,038 | |||||||||||
DS Smith PLC |
Containers & Packaging | 3,488 | 23,066 | |||||||||||
Ferguson PLC |
Trading Companies & Distributors | 480 | 31,530 | |||||||||||
Ibstock PLC |
Construction Materials | 10,484 | 32,028 | |||||||||||
IG Group Holdings PLC |
Capital Markets | 4,511 | 38,794 |
libertyshares.com | Semiannual Report | 23 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Liberty International Opportunities ETF (continued)
Industry | Shares | Value | ||||||||||||
Common Stocks (continued) | ||||||||||||||
United Kingdom (continued) | ||||||||||||||
Imperial Brands PLC |
Tobacco | 1,017 | $ | 43,444 | ||||||||||
National Grid PLC |
Multi-Utilities | 2,341 | 29,040 | |||||||||||
Prudential PLC |
Insurance | 1,340 | 32,118 | |||||||||||
Rathbone Brothers PLC |
Capital Markets | 993 | 34,559 | |||||||||||
Reckitt Benckiser Group PLC |
Household Products | 320 | 29,250 | |||||||||||
RELX PLC |
Professional Services | 1,530 | 33,603 | |||||||||||
Restore PLC |
Commercial Services & Supplies | 6,400 | 44,951 | |||||||||||
Shire PLC |
Biotechnology | 410 | 20,837 | |||||||||||
Smith & Nephew PLC |
Health Care Equipment & Supplies | 1,720 | 31,107 | |||||||||||
Unite Group PLC |
Equity Real Estate Investment Trusts (REITs | ) | 3,700 | 34,128 | ||||||||||
|
|
|||||||||||||
693,586 | ||||||||||||||
|
|
|||||||||||||
Total Common Stocks |
5,519,128 | |||||||||||||
|
|
|||||||||||||
Management Investment Companies 2.2% | ||||||||||||||
India 2.2% | ||||||||||||||
iShares MSCI India ETF |
Diversified Financial Services | 1,900 | 62,415 | |||||||||||
WisdomTree India Earnings ETF |
Diversified Financial Services | 2,500 | 62,925 | |||||||||||
|
|
|||||||||||||
Total Management Investment Companies |
125,340 | |||||||||||||
|
|
|||||||||||||
Preferred Stocks 0.8% | ||||||||||||||
Brazil 0.8% | ||||||||||||||
d | Banco Bradesco SA, 3.518%, pfd. |
Banks | 1,500 | 16,621 | ||||||||||
a | Petroleo Brasileiro SA, pfd. |
Oil, Gas & Consumable Fuels | 4,200 | 20,315 | ||||||||||
a | Usinas Siderurgicas de Minas Gerais SA, A, pfd. |
Metals & Mining | 3,900 | 9,592 | ||||||||||
|
|
|||||||||||||
Total Preferred Stocks (Cost $40,080) |
46,528 | |||||||||||||
|
|
|||||||||||||
Total Investments |
5,690,996 | |||||||||||||
Other Assets, less Liabilities 0.7% |
40,706 | |||||||||||||
|
|
|||||||||||||
Net Assets 100.0% |
$ | 5,731,702 | ||||||||||||
|
|
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. This security has been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At September 30, 2017, the value of this security was $82,248, representing 1.4% 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 registration. This security has been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At September 30, 2017, the value of this security was $34,608, representing 0.6% of net assets.
dVariable rate security. The rate shown represents the yield at period end.
24 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Liberty International Opportunities ETF (continued)
At September 30, 2017 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 | ||||||||||||||||||||||||||||
Japanese Yen |
BOFA | Buy | 5,525,000 | $ | 50,443 | 2/20/18 | $ | — | $ | (1,000 | ) | |||||||||||||||||
Japanese Yen |
BOFA | Sell | 60,110,077 | 551,000 | 2/20/18 | 13,076 | — | |||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Total Forward Exchange Contracts |
|
$ | 13,076 | $ | (1,000 | ) | ||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) |
|
$ | 12,076 | |||||||||||||||||||||||||
|
|
aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.
See Note 7 regarding other derivative information.
See Abbreviations on page 48.
libertyshares.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 25 |
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin Liberty Investment Grade Corporate ETF
Six Months Ended September 30, 2017 (unaudited) |
Year Ended March 31, 2017a |
|||||||
Per share operating performance (for a share outstanding throughout the period) |
||||||||
Net asset value, beginning of period |
$ | 24.21 | $ | 25.00 | ||||
|
|
|||||||
Income from investment operationsb: | ||||||||
Net investment incomec |
0.37 | 0.32 | ||||||
Net realized and unrealized gains (losses) |
0.54 | (0.78 | ) | |||||
|
|
|||||||
Total from investment operations |
0.91 | (0.46 | ) | |||||
|
|
|||||||
Less distributions from net investment income |
(0.41 | ) | (0.33 | ) | ||||
|
|
|||||||
Net asset value, end of period |
$ | 24.71 | $ | 24.21 | ||||
|
|
|||||||
Total returnd |
3.77% | (1.83)% | ||||||
Ratios to average net assetse | ||||||||
Expenses before waiver and payments by affiliates |
0.99% | 1.06% | ||||||
Expenses net of waiver and payments by affiliates |
0.39% | 0.40% | ||||||
Net investment income |
3.01% | 2.76% | ||||||
Supplemental data | ||||||||
Net assets, end of period (000’s) |
$39,542 | $53,268 | ||||||
Portfolio turnover ratef |
27.40% | 17.85% |
aFor the period October 3, 2016 (commencement of operations) to March 31, 2017.
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 of 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 excludes the value of portfolio securities received or delivered as a result of processing capital share transactions in Creation Units, if any.
26 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
Statement of Investments, September 30, 2017 (unaudited)
Franklin Liberty Investment Grade Corporate ETF
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds 94.1% | ||||||||||||||
Air Freight & Logistics 1.2% | ||||||||||||||
FedEx Corp., senior bond, 4.75%, 11/15/45 |
United States | 415,000 | $ | 453,755 | ||||||||||
|
|
|||||||||||||
Automobiles 1.7% | ||||||||||||||
Ford Motor Credit Co. LLC, senior note, 2.875%, 10/01/18 |
United States | 645,000 | 651,650 | |||||||||||
|
|
|||||||||||||
Banks 17.6% | ||||||||||||||
a | ANZ New Zealand International Ltd. of London, senior note, 144A, 2.87%, 1/25/22 |
New Zealand | 600,000 | 606,344 | ||||||||||
Bank of America Corp., senior sub. bond, 4.25%, 10/22/26 |
United States | 840,000 | 879,786 | |||||||||||
BNP Paribas SA, senior note, 2.375%, 5/21/20 |
France | 810,000 | 818,280 | |||||||||||
a | BPCE SA, sub. note, 144A, 5.15%, 7/21/24 |
France | 200,000 | 215,913 | ||||||||||
Citigroup Inc., sub. note, 4.05%, 7/30/22 |
United States | 620,000 | 649,733 | |||||||||||
a | Commonwealth Bank of Australia, sub. note, 144A, 4.50%, 12/09/25 |
Australia | 590,000 | 618,343 | ||||||||||
Credit Suisse New York, senior note, 2.30%, 5/28/19 |
Switzerland | 760,000 | 765,143 | |||||||||||
HSBC USA Inc., sub. note, 5.00%, 9/27/20 |
United States | 519,000 | 558,475 | |||||||||||
JPMorgan Chase & Co., sub. note, 3.375%, 5/01/23 |
United States | 855,000 | 873,919 | |||||||||||
Santander UK Group Holdings PLC, senior note, 2.875%, 8/05/21 |
United Kingdom | 430,000 | 432,457 | |||||||||||
U.S. Bancorp, senior note, 3.15%, 4/27/27 |
United States | 540,000 | 543,816 | |||||||||||
|
|
|||||||||||||
6,962,209 | ||||||||||||||
|
|
|||||||||||||
Beverages 1.8% | ||||||||||||||
Anheuser-Busch InBev Finance Inc., senior bond, 4.70%, 2/01/36 |
Belgium | 660,000 | 729,918 | |||||||||||
|
|
|||||||||||||
Biotechnology 2.2% | ||||||||||||||
Baxalta Inc., senior bond, 5.25%, 6/23/45 |
United States | 365,000 | 421,625 | |||||||||||
Biogen Inc., senior bond, 5.20%, 9/15/45 |
United States | 400,000 | 464,048 | |||||||||||
|
|
|||||||||||||
885,673 | ||||||||||||||
|
|
|||||||||||||
Capital Markets 4.4% | ||||||||||||||
The Goldman Sachs Group Inc., sub. note, 4.25%, 10/21/25 |
United States | 930,000 | 971,218 | |||||||||||
Morgan Stanley, sub. bond, 3.95%, 4/23/27 |
United States | 765,000 | 779,762 | |||||||||||
|
|
|||||||||||||
1,750,980 | ||||||||||||||
|
|
|||||||||||||
Communications Equipment 1.5% | ||||||||||||||
Cisco Systems Inc., senior note, 2.20%, 2/28/21 |
United States | 585,000 | 588,680 | |||||||||||
|
|
|||||||||||||
Construction Materials 0.9% | ||||||||||||||
a | LafargeHolcim Finance U.S. LLC, senior note, 144A, 3.50%, 9/22/26 |
Switzerland | 365,000 | 362,194 | ||||||||||
|
|
|||||||||||||
Consumer Finance 1.4% | ||||||||||||||
Capital One Bank USA NA, senior note, 2.25%, 2/13/19 |
United States | 550,000 | 551,757 | |||||||||||
|
|
|||||||||||||
Diversified Financial Services 3.0% | ||||||||||||||
AerCap Ireland Capital Ltd./AerCap Global Aviation Trust, senior note, 5.00%, 10/01/21 |
Ireland | 415,000 | 448,209 | |||||||||||
GE Capital International Funding Co., senior bond, 4.418%, 11/15/35 |
United States | 675,000 | 735,390 | |||||||||||
|
|
|||||||||||||
1,183,599 | ||||||||||||||
|
|
|||||||||||||
Diversified Telecommunication Services 4.3% | ||||||||||||||
AT&T Inc., senior note, 5.35%, 9/01/40 |
United States | 500,000 | 527,216 | |||||||||||
Telefonica Emisiones S.A.U., senior bond, 7.045%, 6/20/36 |
Spain | 325,000 | 431,737 | |||||||||||
Verizon Communications Inc., senior bond, 5.50%, 3/16/47 |
United States | 675,000 | 752,225 | |||||||||||
|
|
|||||||||||||
1,711,178 | ||||||||||||||
|
|
|||||||||||||
Electric Utilities 2.8% | ||||||||||||||
Duke Energy Corp., senior bond, 4.80%, 12/15/45 |
United States | 365,000 | 408,024 | |||||||||||
Georgia Power Co., senior bond, 4.30%, 3/15/42 |
United States | 680,000 | 712,126 | |||||||||||
|
|
|||||||||||||
1,120,150 | ||||||||||||||
|
|
libertyshares.com | Semiannual Report | 27 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Liberty Investment Grade Corporate ETF (continued)
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds (continued) | ||||||||||||||
Energy Equipment & Services 2.4% | ||||||||||||||
Nabors Industries Inc., senior note, 5.50%, 1/15/23 |
United States | 325,000 | $ | 320,125 | ||||||||||
a | Sinopec Capital 2013 Ltd., senior note, 144A, 1.87%, 4/24/18 |
China | 620,000 | 619,577 | ||||||||||
|
|
|||||||||||||
939,702 | ||||||||||||||
|
|
|||||||||||||
Equity Real Estate Investment Trusts (REITs) 2.4% | ||||||||||||||
American Tower Corp., senior note, 3.40%, 2/15/19 |
United States | 363,000 | 369,745 | |||||||||||
Realty Income Corp., senior bond, 3.00%, 1/15/27 |
United States | 590,000 | 563,050 | |||||||||||
|
|
|||||||||||||
932,795 | ||||||||||||||
|
|
|||||||||||||
Food & Staples Retailing 4.6% | ||||||||||||||
a | CK Hutchison International 16 Ltd., senior note, 144A, 1.875%, 10/03/21 |
Hong Kong | 400,000 | 389,288 | ||||||||||
The Kroger Co., senior note, 4.00%, 2/01/24 |
United States | 455,000 | 472,448 | |||||||||||
Wal-Mart Stores Inc., senior bond, 6.20%, 4/15/38 |
United States | 420,000 | 571,804 | |||||||||||
Walgreens Boots Alliance Inc., senior bond, 4.80%, 11/18/44 |
United States | 350,000 | 373,284 | |||||||||||
|
|
|||||||||||||
1,806,824 | ||||||||||||||
|
|
|||||||||||||
Food Products 4.0% | ||||||||||||||
a | Danone SA, senior note, 144A, 2.947%, 11/02/26 |
France | 475,000 | 461,890 | ||||||||||
Kraft Heinz Foods Co., senior bond, 5.20%, 7/15/45 |
United States | 345,000 | 379,345 | |||||||||||
a | Mondelez International Holdings Netherlands BV, senior note, 144A, 2.00%, 10/28/21 |
United States | 735,000 | 722,404 | ||||||||||
|
|
|||||||||||||
1,563,639 | ||||||||||||||
|
|
|||||||||||||
Health Care Equipment & Supplies 1.4% | ||||||||||||||
Medtronic Inc., senior note, 2.50%, 3/15/20 |
United States | 550,000 | 558,286 | |||||||||||
|
|
|||||||||||||
Health Care Providers & Services 2.3% | ||||||||||||||
Anthem Inc., senior bond, 3.30%, 1/15/23 |
United States | 500,000 | 515,619 | |||||||||||
HCA Inc., senior secured note, 6.50%, 2/15/20 |
United States | 365,000 | 398,306 | |||||||||||
|
|
|||||||||||||
913,925 | ||||||||||||||
|
|
|||||||||||||
Industrial Conglomerates 1.4% | ||||||||||||||
a | Siemens Financieringsmaatschappij NV, senior note, 144A, 2.70%, 3/16/22 |
Netherlands | 550,000 | 557,564 | ||||||||||
|
|
|||||||||||||
Insurance 4.9% | ||||||||||||||
a | AIA Group Ltd., senior note, 144A, 2.25%, 3/11/19 |
Hong Kong | 400,000 | 399,617 | ||||||||||
a | Liberty Mutual Group Inc., senior note, 144A, 6.50%, 5/01/42 |
United States | 349,000 | 456,555 | ||||||||||
MetLife Inc., junior sub. bond, 6.40%, 12/15/36, FRN thereafter, 12/15/66 |
United States | 475,000 | 548,625 | |||||||||||
Prudential Financial Inc., junior sub. bond, 5.20%, 3/15/24, FRN thereafter, 3/15/44 |
United States | 515,000 | 548,153 | |||||||||||
|
|
|||||||||||||
1,952,950 | ||||||||||||||
|
|
|||||||||||||
Internet Software & Services 1.6% | ||||||||||||||
Alibaba Group Holding Ltd., senior note, 2.50%, 11/28/19 |
China | 615,000 | 620,402 | |||||||||||
|
|
|||||||||||||
Media 3.9% | ||||||||||||||
21st Century Fox America Inc., senior bond, 6.40%, 12/15/35 |
United States | 450,000 | 572,896 | |||||||||||
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., senior secured note, first lien, 4.464%, 7/23/22 |
United States | 405,000 | 428,950 | |||||||||||
NBCUniversal Media LLC, senior note, 4.375%, 4/01/21 |
United States | 505,000 | 543,728 | |||||||||||
|
|
|||||||||||||
1,545,574 | ||||||||||||||
|
|
|||||||||||||
Metals & Mining 2.0% | ||||||||||||||
Freeport-McMoRan Inc., senior note, 2.30%, 11/14/17 |
United States | 420,000 | 420,137 | |||||||||||
a | Glencore Funding LLC, senior note, 144A, 4.125%, 5/30/23 |
Switzerland | 350,000 | 364,826 | ||||||||||
|
|
|||||||||||||
784,963 | ||||||||||||||
|
|
|||||||||||||
Multiline Retail 0.8% | ||||||||||||||
Dollar General Corp., senior bond, 3.25%, 4/15/23 |
United States | 300,000 | 306,971 | |||||||||||
|
|
28 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Liberty Investment Grade Corporate ETF (continued)
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds (continued) | ||||||||||||||
Oil, Gas & Consumable Fuels 8.4% | ||||||||||||||
Anadarko Petroleum Corp., senior note, 6.20%, 3/15/40 |
United States | 315,000 | $ | 367,172 | ||||||||||
Canadian Natural Resources Ltd., senior bond, 4.95%, 6/01/47 |
Canada | 340,000 | 357,895 | |||||||||||
Chevron Corp., senior note, 2.954%, 5/16/26 |
United States | 545,000 | 544,738 | |||||||||||
Ecopetrol SA, senior bond, 5.875%, 5/28/45 |
Colombia | 205,000 | 201,156 | |||||||||||
Enterprise Products Operating LLC, senior bond, 5.10%, 2/15/45 |
United States | 470,000 | 525,700 | |||||||||||
MPLX LP, senior bond, 4.125%, 3/01/27 |
United States | 350,000 | 357,039 | |||||||||||
Sabine Pass Liquefaction LLC, senior secured bond, 4.20%, 3/15/28 |
United States | 325,000 | 328,282 | |||||||||||
Shell International Finance BV, 4.30%, 9/22/19 |
Netherlands | 600,000 | 629,566 | |||||||||||
|
|
|||||||||||||
3,311,548 | ||||||||||||||
|
|
|||||||||||||
Road & Rail 2.3% | ||||||||||||||
Burlington Northern Santa Fe LLC, senior bond, 3.25%, 6/15/27 |
United States | 535,000 | 549,332 | |||||||||||
CSX Corp., senior bond, 3.25%, 6/01/27 |
United States | 360,000 | 361,716 | |||||||||||
|
|
|||||||||||||
911,048 | ||||||||||||||
|
|
|||||||||||||
Semiconductors & Semiconductor Equipment 1.0% | ||||||||||||||
a | Broadcom Corp./Broadcom Cayman Finance Ltd., senior note, 144A, 3.875%, 1/15/27 |
United States | 400,000 | 412,772 | ||||||||||
|
|
|||||||||||||
Software 1.4% | ||||||||||||||
Microsoft Corp., senior bond, 4.45%, 11/03/45 |
United States | 500,000 | 564,505 | |||||||||||
|
|
|||||||||||||
Specialty Retail 1.5% | ||||||||||||||
The Home Depot Inc., senior bond, 3.00%, 4/01/26 |
United States | 585,000 | 587,680 | |||||||||||
|
|
|||||||||||||
Technology Hardware, Storage & Peripherals 1.4% | ||||||||||||||
a | Dell International LLC/EMC Corp., senior secured note, first lien, 144A, 4.42%, 6/15/21 |
United States | 345,000 | 362,523 | ||||||||||
a | Western Digital Corp., senior secured note, 144A, 7.375%, 4/01/23 |
United States | 165,000 | 181,170 | ||||||||||
|
|
|||||||||||||
543,693 | ||||||||||||||
|
|
|||||||||||||
Textiles, Apparel & Luxury Goods 0.9% | ||||||||||||||
Coach Inc., senior note, 3.00%, 7/15/22 |
United States | 365,000 | 364,975 | |||||||||||
|
|
|||||||||||||
Tobacco 0.9% | ||||||||||||||
Reynolds American Inc., senior bond, 5.85%, 8/15/45 |
United States | 300,000 | 368,451 | |||||||||||
|
|
|||||||||||||
Transportation Infrastructure 1.8% | ||||||||||||||
a | DP World Ltd., senior bond, 144A, 6.85%, 7/02/37 |
United Arab Emirates | 300,000 | 371,513 | ||||||||||
a | Mexico City Airport Trust, senior bond, 144A, 5.50%, 7/31/47 |
Mexico | 335,000 | 340,829 | ||||||||||
|
|
|||||||||||||
712,342 | ||||||||||||||
|
|
|||||||||||||
Total Corporate Bonds (Cost $36,180,354) |
37,212,352 | |||||||||||||
|
|
|||||||||||||
U.S. Government & Agency Securities 2.5% | ||||||||||||||
U.S. Treasury Bond, 3.00%, 5/15/47 |
United States | 400,000 | 411,680 | |||||||||||
U.S. Treasury Note, 1.625%, 8/15/22 |
United States | 600,000 | 592,441 | |||||||||||
|
|
|||||||||||||
Total U.S. Government & Agency Securities |
1,004,121 | |||||||||||||
|
|
|||||||||||||
Total Investments before Short Term Investments |
38,216,473 | |||||||||||||
|
|
|||||||||||||
Short-Term Investments 1.7% | ||||||||||||||
U.S. Government & Agency Securities (Cost $664,987) 1.7% |
|
|||||||||||||
b | FHLB, 10/02/17 |
United States | 665,000 | 664,987 | ||||||||||
|
|
|||||||||||||
Total Investments (Cost $37,849,481) 98.3% |
38,881,460 | |||||||||||||
Other Assets, less Liabilities 1.7% |
660,808 | |||||||||||||
|
|
|||||||||||||
Net Assets 100.0% |
$ | 39,542,268 | ||||||||||||
|
|
libertyshares.com | Semiannual Report | 29 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Liberty Investment Grade Corporate ETF (continued)
See Abbreviations on page 48.
*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. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At September 30, 2017, the aggregate value of these securities was $7,443,322, representing 18.8% of net assets.
bThe security was issued on a discount basis with no stated coupon rate.
30 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin Liberty U.S. Low Volatility ETF
Six Months Ended September 30, 2017 (unaudited) |
Year Ended March 31, 2017a |
|||||||
Per share operating performance (for a share outstanding throughout the period) |
||||||||
Net asset value, beginning of period |
$ | 26.97 | $ | 25.05 | ||||
|
|
|||||||
Income from investment operationsb: | ||||||||
Net investment incomec |
0.22 | 0.23 | ||||||
Net realized and unrealized gains (losses) |
1.48 | 1.87 | ||||||
|
|
|||||||
Total from investment operations |
1.70 | 2.10 | ||||||
|
|
|||||||
Less distributions from net investment income |
(0.24 | ) | (0.18 | ) | ||||
|
|
|||||||
Net asset value, end of period |
$ | 28.43 | $ | 26.97 | ||||
|
|
|||||||
Total returnd |
6.29% | 8.40% | ||||||
Ratios to average net assetse | ||||||||
Expenses before waiver and payments by affiliates |
1.88% | 2.96% | ||||||
Expenses net of waiver and payments by affiliates |
0.50% | 0.50% | ||||||
Net investment income |
1.58% | 1.69% | ||||||
Supplemental data | ||||||||
Net assets, end of period (000’s) |
$5,686 | $5,393 | ||||||
Portfolio turnover ratef |
36.22% | 12.55% |
aFor the period September 20, 2016 (commencement of operations) to March 31, 2017.
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 of 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 excludes the value of portfolio securities received or delivered as a result of processing capital share transactions in Creation Units, if any.
libertyshares.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 31 |
FRANKLIN TEMPLETON ETF TRUST
Statement of Investments, September 30, 2017 (unaudited)
Franklin Liberty U.S. Low Volatility ETF
Shares | Value | |||||||||
Common Stocks 100.1% | ||||||||||
Consumer Discretionary 12.3% | ||||||||||
Comcast Corp., A |
1,864 | $ | 71,727 | |||||||
The Home Depot Inc. |
441 | 72,130 | ||||||||
Lowe’s Cos. Inc. |
897 | 71,706 | ||||||||
Marriott International Inc., A |
647 | 71,338 | ||||||||
McDonald’s Corp. |
441 | 69,096 | ||||||||
Newell Brands Inc. |
1,629 | 69,510 | ||||||||
Starbucks Corp. |
1,273 | 68,373 | ||||||||
The TJX Cos. Inc. |
954 | 70,338 | ||||||||
The Walt Disney Co. |
706 | 69,590 | ||||||||
Yum! Brands Inc. |
917 | 67,500 | ||||||||
|
|
|||||||||
701,308 | ||||||||||
|
|
|||||||||
Consumer Staples 7.8% | ||||||||||
Church & Dwight Co. Inc. |
1,792 | 86,822 | ||||||||
The Coca-Cola Co. |
1,971 | 88,715 | ||||||||
Colgate-Palmolive Co. |
1,244 | 90,625 | ||||||||
PepsiCo Inc. |
791 | 88,141 | ||||||||
The Procter & Gamble Co. |
962 | 87,523 | ||||||||
|
|
|||||||||
441,826 | ||||||||||
|
|
|||||||||
Energy 6.0% | ||||||||||
Chevron Corp. |
563 | 66,152 | ||||||||
EOG Resources Inc. |
703 | 68,008 | ||||||||
Exxon Mobil Corp. |
817 | 66,978 | ||||||||
Halliburton Co. |
1,531 | 70,472 | ||||||||
Royal Dutch Shell PLC, A, ADR |
1,127 | 68,274 | ||||||||
|
|
|||||||||
339,884 | ||||||||||
|
|
|||||||||
Financials 14.7% | ||||||||||
The Allstate Corp. |
819 | 75,274 | ||||||||
Arthur J. Gallagher & Co. |
1,236 | 76,076 | ||||||||
BlackRock Inc. |
173 | 77,347 | ||||||||
CBOE Holdings Inc. |
708 | 76,202 | ||||||||
Chubb Ltd. |
520 | 74,126 | ||||||||
Intercontinental Exchange Inc. |
1,123 | 77,150 | ||||||||
The Progressive Corp. |
1,567 | 75,874 | ||||||||
S&P Global Inc. |
479 | 74,873 | ||||||||
U.S. Bancorp |
1,404 | 75,240 | ||||||||
W.R. Berkley Corp. |
1,149 | 76,684 | ||||||||
Wells Fargo & Co. |
1,399 | 77,155 | ||||||||
|
|
|||||||||
836,001 | ||||||||||
|
|
|||||||||
Health Care 13.8% | ||||||||||
Abbott Laboratories |
1,408 | 75,131 | ||||||||
Baxter International Inc. |
1,130 | 70,908 | ||||||||
Becton Dickinson and Co. |
375 | 73,481 | ||||||||
Danaher Corp. |
833 | 71,455 | ||||||||
Johnson & Johnson |
535 | 69,555 | ||||||||
a | Laboratory Corp. of America Holdings |
473 | 71,409 | |||||||
Merck & Co. Inc. |
1,097 | 70,241 | ||||||||
Pfizer Inc. |
2,042 | 72,900 | ||||||||
Quest Diagnostics Inc. |
710 | 66,484 | ||||||||
Stryker Corp. |
506 | 71,862 | ||||||||
UnitedHealth Group Inc. |
371 | 72,660 | ||||||||
|
|
|||||||||
786,086 | ||||||||||
|
|
32 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Liberty U.S. Low Volatility ETF (continued)
Shares | Value | |||||||||
Common Stocks (continued) | ||||||||||
Industrials 10.5% | ||||||||||
3M Co. |
229 | $ | 48,067 | |||||||
General Dynamics Corp. |
242 | 49,750 | ||||||||
General Electric Co. |
2,025 | 48,964 | ||||||||
Honeywell International Inc. |
355 | 50,318 | ||||||||
Illinois Tool Works Inc. |
331 | 48,975 | ||||||||
Northrop Grumman Corp. |
176 | 50,639 | ||||||||
Raytheon Co. |
267 | 49,817 | ||||||||
Republic Services Inc. |
733 | 48,422 | ||||||||
Roper Technologies Inc. |
207 | 50,384 | ||||||||
United Parcel Service Inc., B |
419 | 50,318 | ||||||||
United Technologies Corp. |
431 | 50,030 | ||||||||
a | Verisk Analytics Inc. |
599 | 49,831 | |||||||
|
|
|||||||||
595,515 | ||||||||||
|
|
|||||||||
Information Technology 22.9% | ||||||||||
Accenture PLC, A |
592 | 79,961 | ||||||||
a | Alphabet Inc., A |
86 | 83,740 | |||||||
a | ANSYS Inc. |
655 | 80,388 | |||||||
Apple Inc. |
509 | 78,447 | ||||||||
Automatic Data Processing Inc. |
753 | 82,318 | ||||||||
Cisco Systems Inc. |
2,490 | 83,739 | ||||||||
Fidelity National Information Services Inc. |
872 | 81,436 | ||||||||
a | Fiserv Inc. |
646 | 83,308 | |||||||
Intel Corp. |
2,174 | 82,786 | ||||||||
Intuit Inc. |
556 | 79,030 | ||||||||
Mastercard Inc., A |
568 | 80,202 | ||||||||
Microsoft Corp. |
1,075 | 80,077 | ||||||||
Motorola Solutions Inc. |
942 | 79,948 | ||||||||
Oracle Corp. |
1,684 | 81,421 | ||||||||
Texas Instruments Inc. |
932 | 83,544 | ||||||||
Visa Inc., A |
767 | 80,719 | ||||||||
|
|
|||||||||
1,301,064 | ||||||||||
|
|
|||||||||
Materials 3.3% | ||||||||||
Air Products and Chemicals Inc. |
314 | 47,483 | ||||||||
DowDuPont Inc. |
675 | 46,731 | ||||||||
Ecolab Inc. |
361 | 46,428 | ||||||||
Praxair Inc. |
346 | 48,350 | ||||||||
|
|
|||||||||
188,992 | ||||||||||
|
|
|||||||||
Real Estate 3.7% | ||||||||||
Alexandria Real Estate Equities Inc. |
451 | 53,656 | ||||||||
American Tower Corp. |
384 | 52,485 | ||||||||
Mid-America Apartment Communities Inc. |
502 | 53,654 | ||||||||
UDR Inc. |
1,407 | 53,508 | ||||||||
|
|
|||||||||
213,303 | ||||||||||
|
|
|||||||||
Telecommunication Services 2.0% | ||||||||||
a | T-Mobile U.S. Inc. |
888 | 54,754 | |||||||
Verizon Communications Inc. |
1,178 | 58,299 | ||||||||
|
|
|||||||||
113,053 | ||||||||||
|
|
libertyshares.com | Semiannual Report | 33 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Liberty U.S. Low Volatility ETF (continued)
Shares | Value | |||||||||
Common Stocks (continued) | ||||||||||
Utilities 3.1% | ||||||||||
DTE Energy Co. |
414 | $ | 44,447 | |||||||
Duke Energy Corp. |
521 | 43,722 | ||||||||
Eversource Energy |
728 | 44,000 | ||||||||
Xcel Energy Inc. |
942 | 44,576 | ||||||||
|
|
|||||||||
176,745 | ||||||||||
|
|
|||||||||
Total Investments (Cost $5,043,386) 100.1% |
5,693,777 | |||||||||
Other Assets, less Liabilities (0.1)% |
(8,195 | ) | ||||||||
|
|
|||||||||
Net Assets 100.0% |
$ | 5,685,582 | ||||||||
|
|
See Abbreviations on page 48.
aNon-income producing.
34 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
September 30, 2017 (unaudited)
Franklin Liberty International Opportunities ETF |
Franklin Liberty Investment Grade Corporate ETF |
Franklin Liberty U.S. Low Volatility ETF |
||||||||||
Assets: |
| |||||||||||
Investments in securities: |
| |||||||||||
Cost – Unaffiliated issuers |
$ | 4,982,095 | $ | 37,849,481 | $ | 5,043,386 | ||||||
|
|
|||||||||||
Value – Unaffiliated issuers |
$ | 5,690,996 | $ | 38,881,460 | $ | 5,693,777 | ||||||
Cash |
31,339 | 543,994 | 9,566 | |||||||||
Foreign currency, at value (cost $2,421, $– and $–, respectively) |
2,421 | — | — | |||||||||
Receivables: |
| |||||||||||
Investment securities sold |
— | 1,291,077 | — | |||||||||
Dividends and interest |
10,208 | 376,826 | 9,317 | |||||||||
Affiliates |
29,357 | 21,524 | 5,440 | |||||||||
Unrealized appreciation on OTC forward exchange contracts |
13,076 | — | — | |||||||||
|
|
|||||||||||
Total assets |
5,777,397 | 41,114,881 | 5,718,100 | |||||||||
|
|
|||||||||||
Liabilities: |
| |||||||||||
Payables: |
| |||||||||||
Investment securities purchased |
— | 1,420,310 | — | |||||||||
Transfer agent fees |
5,854 | 6,480 | 6,665 | |||||||||
Distributions to shareholders |
— | 102,090 | — | |||||||||
Custody fees |
14,349 | 14,128 | 518 | |||||||||
Professional fees |
11,944 | 14,518 | 15,336 | |||||||||
Reports to shareholders |
3,130 | 9,261 | 3,332 | |||||||||
Registration and filing fees |
517 | 659 | 3,808 | |||||||||
Pricing fee |
7,343 | 4,000 | 1,664 | |||||||||
Unrealized depreciation on OTC forward exchange contracts |
1,000 | — | — | |||||||||
Accrued expenses and other liabilities |
1,558 | 1,167 | 1,195 | |||||||||
|
|
|||||||||||
Total liabilities |
45,695 | 1,572,613 | 32,518 | |||||||||
|
|
|||||||||||
Net assets, at value |
$ | 5,731,702 | $ | 39,542,268 | $ | 5,685,582 | ||||||
|
|
|||||||||||
Net assets consist of: |
| |||||||||||
Paid-in capital |
$ | 4,902,706 | $ | 38,618,043 | $ | 5,010,550 | ||||||
Undistributed net investment income |
17,728 | — | 7,223 | |||||||||
Distributions in excess of net investment income |
— | (70,201 | ) | — | ||||||||
Net unrealized appreciation (depreciation) |
721,058 | 1,031,979 | 650,391 | |||||||||
Accumulated net realized gain (loss) |
90,210 | (37,553 | ) | 17,418 | ||||||||
|
|
|||||||||||
Net assets, at value |
$ | 5,731,702 | $ | 39,542,268 | $ | 5,685,582 | ||||||
|
|
|||||||||||
Shares outstanding |
200,000 | 1,600,000 | 200,000 | |||||||||
|
|
|||||||||||
Net asset value per share |
$ | 28.66 | $ | 24.71 | $ | 28.43 | ||||||
|
|
libertyshares.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 35 |
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Operations
for the period ended September 30, 2017 (unaudited)
Franklin Liberty International Opportunities ETF |
Franklin Liberty Investment Grade Corporate ETF |
Franklin Liberty U.S. Low Volatility ETF |
||||||||||
Investment income: |
| |||||||||||
Dividends:a (net of foreign taxes) |
||||||||||||
Unaffiliated issuers |
$ | 76,755 | $ | — | $ | 58,057 | ||||||
Interest: |
||||||||||||
Unaffiliated issuers |
— | 854,961 | — | |||||||||
|
|
|||||||||||
Total investment income |
76,755 | 854,961 | 58,057 | |||||||||
|
|
|||||||||||
Expenses: |
| |||||||||||
Management fees (Note 3a) |
16,380 | 157,149 | 13,930 | |||||||||
Transfer agent fees |
7,154 | 7,780 | 7,749 | |||||||||
Custodian fees |
17,732 | 17,195 | 620 | |||||||||
Reports to shareholders |
2,639 | 5,134 | 2,635 | |||||||||
Registration and filing fees |
4,717 | 6,961 | 4,389 | |||||||||
Professional fees |
43,823 | 37,735 | 18,321 | |||||||||
Trustees’ fees and expenses |
632 | 8,024 | 709 | |||||||||
Pricing Fee |
11,231 | 6,000 | 2,496 | |||||||||
Other |
1,901 | 1,752 | 1,638 | |||||||||
|
|
|||||||||||
Total expenses |
106,209 | 247,730 | 52,487 | |||||||||
Expenses waived/paid by affiliates (Note 3c) |
(89,924 | ) | (148,688 | ) | (38,557 | ) | ||||||
|
|
|||||||||||
Net expenses |
16,285 | 99,042 | 13,930 | |||||||||
|
|
|||||||||||
Net investment income |
60,470 | 755,919 | 44,127 | |||||||||
|
|
|||||||||||
Realized and unrealized gains (losses): |
| |||||||||||
Net realized gain (loss) from: |
| |||||||||||
Investments: |
||||||||||||
Unaffiliated Issuers |
90,667 | 144,927 | 20,587 | |||||||||
Foreign currency transactions |
(457 | ) | — | — | ||||||||
|
|
|||||||||||
Net realized gain (loss) |
90,210 | 144,927 | 20,587 | |||||||||
|
|
|||||||||||
Net change in unrealized appreciation (depreciation) on: |
| |||||||||||
Investments: |
||||||||||||
Unaffiliated issuers |
514,298 | 1,111,362 | 274,775 | |||||||||
Translation of other assets and liabilities denominated in foreign currencies |
119 | — | — | |||||||||
Forward exchange contracts |
12,076 | — | — | |||||||||
|
|
|||||||||||
Net change in unrealized appreciation (depreciation) |
526,493 | 1,111,362 | 274,775 | |||||||||
|
|
|||||||||||
Net realized and unrealized gain (loss) |
616,703 | 1,256,289 | 295,362 | |||||||||
|
|
|||||||||||
Net increase (decrease) in net assets resulting from operations |
$ | 677,173 | $ | 2,012,208 | $ | 339,489 | ||||||
|
|
|||||||||||
aForeign taxes withheld on dividends |
$ | 8,750 | — | — |
36 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
Franklin Liberty International Opportunities ETF |
Franklin Liberty Investment Grade Corporate ETF |
|||||||||||||||
Six Months Ended September 30, 2017 (unaudited) |
Year Ended |
Six Months Ended September 30, 2017 (unaudited) |
Year Ended |
|||||||||||||
Increase (decrease) in net assets: |
||||||||||||||||
Operations: |
||||||||||||||||
Net investment income |
$ | 60,470 | $ | 17,681 | $ | 755,919 | $ | 538,300 | ||||||||
Net realized gain (loss) |
90,210 | 828 | 144,927 | (91,008 | ) | |||||||||||
Net change in unrealized appreciation (depreciation) |
526,493 | 194,565 | 1,111,362 | (79,383 | ) | |||||||||||
|
|
|||||||||||||||
Net increase (decrease) in net assets resulting from operations |
677,173 | 213,074 | 2,012,208 | 367,909 | ||||||||||||
|
|
|||||||||||||||
Distributions to shareholders from net investment income |
(61,251 | ) | — | (831,814 | ) | (624,659 | ) | |||||||||
|
|
|||||||||||||||
Capital share transactions: (Note 2) |
— | 4,902,706 | (14,906,365 | ) | 53,524,989 | |||||||||||
|
|
|||||||||||||||
Net increase (decrease) in net assets |
615,922 | 5,115,780 | (13,725,971 | ) | 53,268,239 | |||||||||||
Net assets: |
||||||||||||||||
Beginning of period |
5,115,780 | — | 53,268,239 | — | ||||||||||||
|
|
|||||||||||||||
End of period |
$ | 5,731,702 | $ | 5,115,780 | $ | 39,542,268 | $ | 53,268,239 | ||||||||
|
|
|||||||||||||||
Undistributed net investment income included in net assets, end of period |
$ | 17,728 | $ | 18,509 | $ | — | $ | 5,694 | ||||||||
Distributions in excess of net investment income included in net assets, end of period |
— | — | (70,201 | ) | — | |||||||||||
|
|
aFor the period January 25, 2017 (commencement of operations) to March 31, 2017.
bFor the period October 3, 2016 (commencement of operations) to March 31, 2017.
libertyshares.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 37 |
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
Franklin Liberty U.S. Low Volatility ETF |
||||||||
Six Months Ended September 30, 2017 (unaudited) |
Year Ended March 31, 2017a |
|||||||
Increase (decrease) in net assets: |
||||||||
Operations: |
||||||||
Net investment income |
$ | 44,127 | $ | 45,921 | ||||
Net realized gain (loss) |
20,587 | (3,169 | ) | |||||
Net change in unrealized appreciation (depreciation) |
274,775 | 375,616 | ||||||
|
|
|||||||
Net increase (decrease) in net assets resulting from operations |
339,489 | 418,368 | ||||||
|
|
|||||||
Distributions to shareholders from net investment income |
(47,205 | ) | (35,620 | ) | ||||
|
|
|||||||
Capital share transactions: (Note 2) |
— | 5,010,550 | ||||||
|
|
|||||||
Net increase (decrease) in net assets |
292,284 | 5,393,298 | ||||||
Net assets: |
||||||||
Beginning of period |
5,393,298 | — | ||||||
|
|
|||||||
End of period |
$ | 5,685,582 | $ | 5,393,298 | ||||
|
|
|||||||
Undistributed net investment income included in net assets, end of period |
$ | 7,223 | $ | 10,301 | ||||
|
|
aFor the period September 20, 2016 (commencement of operations) to March 31, 2017.
38 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
Notes to Financial Statements (unaudited)
1. Organization and Significant Accounting Policies
Franklin Templeton ETF Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of twelve separate funds, three 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.
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 VC provides administration and oversight of the Funds’ valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Funds to 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, for all funds except Franklin Liberty Investment Grade Corporate ETF which uses the foreign exchange rate in effect at 4 p.m. Eastern time. 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 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.
Certain derivative financial instruments (derivatives) trade in the OTC market. The Funds’ pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Funds’ net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.
The 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 VC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.
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FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Significant Accounting Policies (continued)
a. Financial Instrument Valuation (continued)
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, 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 Funds. 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 derivatives 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
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FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Funds include failure of the Funds to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent 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. 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.
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 the 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 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 OTC forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.
See Note 7 regarding other derivative information.
d. Income and Deferred Taxes
It is each Funds’ 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 September 30, 2017, 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 Funds invest.
e. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income and realized 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.
libertyshares.com | Semiannual Report | 41 |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Significant Accounting Policies (continued)
e. Security Transactions, Investment Income, Expenses and Distributions (continued)
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. Fund specific expenses are charged directly to the fund that incurred the expense.
f. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
g. Guarantees and Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Funds, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
Shares of the Funds are issued and redeemed at their respective NAV in blocks of 100,000 shares or multiples thereof (Creation Units). 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). For the period ended September 30, 2017, all Creation Unit transactions were made in cash.
Authorized Participants pay a 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 or 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 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 received by the Funds, if any, are included in capital share transactions in the Statements of Changes in Net Assets.
At September 30, 2017, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:
Franklin Liberty International Opportunities ETF | ||||||||||||||||
Six Months Ended September 30, 2017 |
Year Ended March 31, 2017a |
|||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold |
— | $ | — | 200,000 | $ | 4,902,706 | ||||||||||
|
|
Franklin Liberty Investment Grade Corporate ETF | ||||||||||||||||
Six Months Ended September 30, 2017 |
Year Ended March 31, 2017b |
|||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold |
200,000 | $ | 4,927,176 | 2,200,000 | $ | 53,524,989 | ||||||||||
Shares redeemed |
(800,000 | ) | (19,833,541 | ) | — | — | ||||||||||
|
|
|||||||||||||||
Net increase (decrease) |
(600,000 | ) | $ | (14,906,365 | ) | 2,200,000 | $ | 53,524,989 | ||||||||
|
|
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FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin Liberty U.S. Low Volatility ETF | ||||||||||||||||
Six Months Ended September 30, 2017 |
Year Ended March 31, 2017c |
|||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold |
— | $ | — | 200,000 | $ | 5,010,550 | ||||||||||
|
|
aFor the period January 25, 2017 (commencement of operations) to March 31, 2017.
bFor the period October 3, 2016 (commencement of operations) to March 31, 2017.
cFor the period September 20, 2016 (commencement of operations) to March 31, 2017.
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. 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 | |
Templeton Asset Management Ltd. (TAML) |
Investment manager | |
Franklin Templeton Services, LLC (FT Services) |
Administrative manager | |
Franklin Templeton Distributors, Inc. (Distributors) |
Principal underwriter |
a. Management Fees
Franklin Liberty International Opportunities ETF and Franklin Liberty U.S. Low Volatility ETF pay an investment management fee to Advisers of 0.600% and 0.500%, respectively, per year of the average daily net assets of each of the Funds.
Franklin Liberty Investment Grade Corporate ETF pays an investment management fee to Advisers based on the average daily net assets of the fund 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 |
libertyshares.com | Semiannual Report | 43 |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
3. Transactions with Affiliates (continued)
a. Management Fees (continued)
For the period ended March 31, 2017, the annualized effective investment management fee rate was 0.625% of the Franklin Liberty Investment Grade Corporate ETF’s average daily net assets.
Under a subadvisory agreement, FTI Brasil, FTIML, FT Korea, FTIME, FTIC and TAML, affiliates of Advisers, provide subadvisory services to Franklin Liberty International Opportunities ETF and FT Institutional, an affiliate of Advisers, provides subadvisory services to Franklin Liberty Investment Grade Corporate ETF. The subadvisory fee is paid by Advisers based on each Fund’s average daily net assets, and is not an additional expense of the Funds.
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Funds. The fee is paid by Advisers based on the Funds’ average daily net assets, and is not an additional expense of the Funds.
c. Waiver and Expense Reimbursements
Effective September 1, 2017, Advisers has 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 Opportunities ETF, Franklin Liberty Investment Grade Corporate ETF, and Franklin Liberty U.S. Low Volatility ETF so that the expenses (including acquired fund fees and expenses) of the Funds do not exceed 0.60%, 0.35%, and 0.50%, 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, 2018, September 19, 2018, and September 19, 2018, respectively. Total expenses waived or paid are not subject to recapture subsequent to the Funds’ fiscal year end.
Prior to September 1, 2017, Advisers has 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 Opportunities ETF, Franklin Liberty Investment Grade Corporate ETF, and Franklin Liberty U.S. Low Volatility ETF so that the expenses (excluding acquired fund fees and expenses) of the Funds do not exceed 0.60%, 0.40%, and 0.50%, respectively, based on the average net assets (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations).
d. Other Affiliated Transactions
At September 30, 2017, the shares of Franklin Liberty Investment Grade Corporate ETF were owned by the following investment companies:
Shares | Percentage of Outstanding Sharesa |
|||||||
Franklin Balanced Fund |
750,000 | 25.0% | ||||||
Franklin Total Return Fund |
400,000 | 46.9% | ||||||
|
|
|||||||
Total |
1,150,000 | 71.9% | ||||||
|
|
aInvestment activities of significant shareholders could have a material impact on the Funds.
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FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
4. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains, if any. At March 31, 2017, the capital loss carryforwards were as follows:
Franklin Liberty Investment Grade Corporate ETF |
Franklin Liberty U.S. Low Volatility ETF |
|||||||
Capital loss carryforwards: | ||||||||
Short term |
$ | 110,191 | $ | 3,169 | ||||
Long term |
— | — | ||||||
|
|
|||||||
Total capital loss carryforwards |
$ | 110,191 | $ | 3,169 | ||||
|
|
At September 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
Franklin Liberty International Opportunities ETF |
Franklin Liberty Investment Grade Corporate ETF |
Franklin Liberty U.S. Low Volatility ETF |
||||||||||
Cost of investments |
$ | 4,988,936 | $ | 37,922,665 | $ | 5,043,386 | ||||||
|
|
|||||||||||
Unrealized appreciation |
$ | 791,085 | $ | 974,714 | $ | 677,889 | ||||||
Unrealized depreciation |
(76,949 | ) | (15,919 | ) | (27,498 | ) | ||||||
|
|
|||||||||||
Net unrealized appreciation (depreciation) |
$ | 714,136 | $ | 958,795 | $ | 650,391 | ||||||
|
|
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of foreign currency transactions, passive foreign investment company shares and bond discounts and premiums.
5. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the period ended September 30, 2017, were as follows:
Franklin Liberty International Opportunities ETF |
Franklin Liberty Investment Grade Corporate ETF |
Franklin Liberty U.S. Low Volatility ETF |
||||||||||
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
$ | 1,429,626 | $ | 13,525,603 | $ | 2,022,674 | ||||||
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
$ | 1,409,334 | $ | 28,296,553 | $ | 2,014,212 |
6. 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 and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities.
libertyshares.com | Semiannual Report | 45 |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
7. Other Derivative Information
At September 30, 2017, the Funds’ investments in derivative contracts are reflected in the Statements of Assets and Liabilities as follows:
Asset Derivatives |
Liability Derivatives |
|||||||||||
Derivative Contracts Not Accounted for as Hedging Instruments |
Statements of Assets and Liabilities Location |
Fair Value | Statements of Assets and Liabilities Location |
Fair Value | ||||||||
Franklin Liberty International Opportunities ETF | ||||||||||||
Foreign exchange contracts |
Unrealized appreciation on OTC forward exchange contracts |
$ | 13,076 | Unrealized depreciation on OTC forward exchange contracts |
$ | 1,000 |
For the period ended September 30, 2017, the effect of derivative contracts in the Funds’ Statements of Operations was as follows:
Asset Derivatives |
Liability Derivatives |
|||||||||||
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 Opportunities ETF | ||||||||||||
Net realized gain (loss) from: |
Net change in unrealized appreciation (depreciation) on: |
|||||||||||
Foreign exchange contracts |
Forward exchange contracts |
$ | — | Forward exchange contracts |
$ | 12,076 |
For the period ended September 30, 2017, the average month end contract value of forward exchange contracts was $199,342.
See note 1(c) regarding derivative financial instruments.
8. 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.
For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.
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FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
A summary of inputs used as of September 30, 2017, in valuing the Funds’ assets and liabilities carried at fair value, is as follows:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Franklin Liberty International Opportunities ETF | ||||||||||||||||
Assets: | ||||||||||||||||
Investments in Securities: |
| |||||||||||||||
Equity Investments:a,b |
$ | 5,690,996 | $ | — | $ | — | $ | 5,690,996 | ||||||||
|
|
|||||||||||||||
Other Financial Instruments: |
||||||||||||||||
Forward Exchange Contracts |
$ | — | $ | 13,076 | $ | — | $ | 13,076 | ||||||||
|
|
|||||||||||||||
Liabilities: | ||||||||||||||||
Other Financial Instruments: |
||||||||||||||||
Forward Exchange Contracts |
$ | — | $ | 1,000 | $ | — | $ | 1,000 | ||||||||
|
|
|||||||||||||||
Franklin Liberty Investment Grade Corporate ETF | ||||||||||||||||
Assets: | ||||||||||||||||
Investments in Securities: |
| |||||||||||||||
Corporate Bonds |
$ | — | $ | 37,212,352 | $ | — | $ | 37,212,352 | ||||||||
U.S. Government & Agency Securities |
— | 1,004,121 | — | 1,004,121 | ||||||||||||
Short Term Investments |
— | 664,987 | — | 664,987 | ||||||||||||
|
|
|||||||||||||||
Total Investments in Securities |
$ | — | $ | 38,881,460 | $ | — | $ | 38,881,460 | ||||||||
|
|
|||||||||||||||
Franklin Liberty U.S. Low Volatility ETF | ||||||||||||||||
Assets: | ||||||||||||||||
Investments in Securities: |
||||||||||||||||
Equity Investmentsb |
$ | 5,693,777 | $ | — | $ | — | $ | 5,693,777 | ||||||||
|
|
aIncludes common and preferred stocks as well as other equity investments.
bFor detailed categories, see the accompanying Statement of Investments.
9. New Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities, held at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities held at a discount; which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.
10. Subsequent Events
The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.
Abbreviations
Counterparty | Selected Portfolio | |||||
BOFA | Bank of America | ADR | American Depository Receipt | |||
ETF |
Exchange Traded Fund | |||||
FHLB |
Federal Home Loan Bank | |||||
GDR |
Global Depositary Receipt | |||||
REIT |
Real Estate Investment Trust |
libertyshares.com | Semiannual Report | 47 |
FRANKLIN TEMPLETON ETF TRUST
At March 31, 2017, more than 50% of Franklin Liberty International Opportunities ETF total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. As shown in the table below, the Fund hereby reports to shareholders the foreign source income and foreign taxes paid, pursuant to Section 853 of the Internal Revenue Code (Code). This written statement will allow shareholders of record on June 22, 2017, to treat their proportionate share of foreign taxes paid by the Fund as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.
The following table provides a detailed analysis of foreign tax paid, foreign source income, and foreign source qualified dividends as reported by the Fund to shareholders of record.
Fund | Foreign Tax Paid Per Share |
Foreign Source Income Per Share |
Foreign Source Qualified Dividends Per Share |
|||||||||
Franklin Liberty International Opportunities ETF |
$0.0109 | $0.1044 | $0.0942 |
Foreign Tax Paid Per Share (Column 1) is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the 31-day period beginning 15 days before the ex-dividend date of the Fund’s distribution to which the foreign taxes relate), or, as a tax deduction.
Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the Fund, plus any foreign taxes withheld on these dividends. The amounts reported include foreign source qualified dividends that have not been adjusted for the rate differential applicable to such dividend income.1
Foreign Source Qualified Dividends Per Share (Column 3) is the amount per share of foreign source qualified dividends, plus any foreign taxes withheld on these dividends. These amounts represent the portion of the Foreign Source Income reported to you in column 2 that were derived from qualified foreign securities held by the Fund.1
By mid-February 2018, shareholders will receive Form 1099-DIV which will include their share of taxes paid and foreign source income distributed during the calendar year 2017. The Foreign Source Income reported on Form 1099-DIV has not been adjusted for the rate differential on foreign source qualified dividend income. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their 2017 individual income tax returns.
1. Qualified dividends are taxed at reduced long term capital gains tax rates. In determining the amount of foreign tax credit that may be applied against the U.S. tax liability of individuals receiving foreign source qualified dividends, adjustments may be required to the foreign tax credit limitation calculation to reflect the rate differential applicable to such dividend income. The rules however permit certain individuals to elect not to apply the rate differential adjustments for capital gains and/or dividends for any taxable year. Please consult your tax advisor and the instructions to Form 1116 for more information.
48 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
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 libertyshares.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 on Form N-Q. Shareholders may view the filed Form N-Q 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 the Fund and the Fund’s net asset value may be found on the Fund’s website at libertyshares.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.
Semiannual Report | ||||||
Franklin Templeton ETF Trust | ||||||
Investment Manager Franklin Advisers, Inc. |
Distributor Franklin Templeton Distributors, Inc. (800) DIAL BEN®/342-5236 libertyshares.com |
Investor Services Transfer Agent State Street Bank and 1 Heritage Drive |
© 2017 Franklin Templeton Investments. All rights reserved. | ETF2 S 11/17 |
Franklin Templeton
ETF Trust
Semiannual Report
Franklin Liberty Intermediate Municipal Opportunities ETF |
Franklin Liberty Municipal Bond ETF |
FRANKLIN TEMPLETON INVESTMENTS
Gain From Our Perspective®
At Franklin Templeton Investments, we’re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we’re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world’s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe.
Visit libertyshares.com for fund updates and documents.
Not FDIC Insured | | | May Lose Value | | | No Bank Guarantee |
libertyshares.com | Not part of the semiannual report | 1 |
SEMIANNUAL REPORT
Municipal Bond Market Overview
The municipal bond market performed better than the US Treasury market, but underperformed US stock markets during the one-month period ending September 30, 2017. Investment-grade municipal bonds, as measured by the Bloomberg Barclays Municipal Bond Index, had a -0.51% total return for the period, while US Treasuries, as measured by the Bloomberg Barclays US Treasury Index, had a -0.86% total return.1 US equities, as represented by the Standard & Poor’s® 500 Index, outperformed both municipals and US Treasuries with a +2.06% total return for the reporting period.1
In its most recent Federal Open Market Committee statement released on September 20, 2017, the Federal Reserve indicated that the labor market has continued to strengthen and that economic activity has been rising moderately so far during the year. The Committee also stated that on a 12-month basis, overall inflation excluding food and energy prices has declined. The Committee mentioned that it would begin
implementing its balance sheet normalization program in October.
The foregoing information reflects our analysis, opinions and portfolio holdings as of September 30, 2017, 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 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.
1. Source: Morningstar. Treasuries, if held to maturity, offer a fixed rate of return and a fixed principal value; their interest payments and principal are guaranteed.
See www.franklintempletondatasources.com for additional data provider information.
2 | Semiannual Report | libertyshares.com |
Franklin Liberty Intermediate Municipal Opportunities ETF
This semiannual report for Franklin Liberty Intermediate Municipal Opportunities ETF covers the period since the Fund’s inception on August 31, 2017, through September 30, 2017.
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 by 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.
Performance Overview
For the period since inception on August 31, 2017, through September 30, 2017, the Fund had cumulative total returns of -0.08% based on market price and -0.44% based on net asset value (NAV).2 In comparison, the Bloomberg Barclays Municipal 1-15 Year Index had a -0.46% total return for the same period.3 You can find more of the Fund’s performance data in the Performance Summary beginning on page 5.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to libertyshares.com or call (800) 342-5236.
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. The Fund is an actively managed exchange-traded fund (ETF) that does not seek to replicate the performance of a specified index.
Credit Quality Composition* | ||||
9/30/17 | ||||
Ratings | % of Total Investments |
|||
AAA |
16.19% | |||
AA |
60.66% | |||
A |
6.48% | |||
BBB |
7.81% | |||
Not Rated |
8.86% |
*Securities, except for those labeled Not Rated, are assigned ratings by one or more Nationally Recognized Statistical Credit Rating Organizations (NRSROs), such as Standard & Poor’s, Moody’s and Fitch, that can be considered by the investment manager as part of its independent securities analysis. When ratings from multiple agencies are available, the highest is used, consistent with the portfolio investment process. Ratings reflect an NRSRO’s opinion of an issuer’s creditworthiness and typically range from AAA (highest) to D (lowest). The Below Investment Grade category consists of bonds rated below BBB-. The Refunded category generally consists of refunded bonds secured by US government or other high-quality securities and not rerated by an NRSRO. The Not Rated category consists of ratable securities that have not been rated by an NRSRO. Cash and equivalents are excluded from this composition.
Manager’s Discussion
During the short reporting period, we began investing in municipal securities. The low supply environment, especially evident in the high yield segment of the market, resulted in a slow deployment of capital. The Fund ended the period with a significant amount in cash. Due to the positive sloping municipal yield curve, we found value in higher quality securities in the eight- to 15-year maturity range, which we believe may ultimately allow us to achieve our objective of maximizing income for our investors. Under current market conditions, the Fund seeks to be fully invested in municipal securities as supply in the market becomes available. The Fund also anticipates transitioning from higher investment grade positions in favor of higher yielding ones if and when opportunities arise. We believe our consistent, disciplined strategy can help our investors achieve high, tax-free income over the long term.
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, US investors must be properly certified on Form W-9 and non-US investors on Form W-8BEN.
2. 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.
3. 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 Statement of Investments (SOI). The SOI begins on page 14.
libertyshares.com | Semiannual Report | 3 |
FRANKLIN LIBERTY INTERMEDIATE MUNICIPAL OPPORTUNITIES ETF
Portfolio Composition | ||||
9/30/17 | ||||
% of Total Investments* |
||||
General Obligation |
38.1% | |||
Utilities |
22.1% | |||
Higher Education |
19.4% | |||
Hospital & Health Care |
8.0% | |||
Tax-Supported |
6.1% | |||
Transportation |
3.5% | |||
Subject to Government Appropriations |
2.8% |
* Does not include cash and cash equivalents.
Thank you for your participation in Franklin Liberty Intermediate Municipal Opportunities ETF. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of September 30, 2017, 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.
4 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTY INTERMEDIATE MUNICIPAL OPPORTUNITIES ETF
Performance Summary as of September 30, 2017
Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance tables do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares.
Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (9/5/17), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/171
Cumulative Total Return2 | Average Annual Total Return2 | |||||||||||||||
Based on NAV3 |
Based on market price4 |
Based on NAV3 |
Based on market price4 |
|||||||||||||
Since Inception (8/31/17) |
-0.44% | -0.08% | -0.44% | -0.08% |
30-Day Standardized Yield5 | ||||||
(with waiver) | (without waiver) | |||||
0.03% | -1.55% |
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 libertyshares.com or call (800) 342-5236.
See page 6 for Performance Summary footnotes.
libertyshares.com | Semiannual Report | 5 |
FRANKLIN LIBERTY INTERMEDIATE MUNICIPAL OPPORTUNITIES ETF
PERFORMANCE SUMMARY
Total Annual Operating Expenses6
With Waiver | Without Waiver | |||
0.30% |
0.82% |
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’s investments in lower rated bonds include higher risk of default and loss of principal. 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. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. The Fund has an expense reduction contractually guaranteed through 8/29/18. 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 period 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. 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. 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.
6 | Semiannual Report | libertyshares.com| |
FRANKLIN LIBERTY INTERMEDIATE MUNICIPAL OPPORTUNITIES 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 Value1 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 8/31/17–9/30/172,3 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 4/1/17–9/30/172,3 |
Net Annualized Expense Ratio3 |
|||||||||||||||||
$1,000.00 | $ | 995.60 | $ | 0.25 | $ | 1,023.56 | $ | 1.52 | 0.30 | % |
1. 8/31/17 for Actual; 4/1/17 for Hypothetical.
2. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period for Hypothetical expenses. For Actual expenses, the multiplier is 30/365 to reflect the number of days since commencement of operations.
3. Reflects expenses after fee waivers and expense reimbursements.
libertyshares.com | Semiannual Report | 7 |
Franklin Liberty Municipal Bond ETF
This semiannual report for Franklin Liberty Municipal Bond ETF covers the period since the Fund’s inception on August 31, 2017, through September 30, 2017.
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 by 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 US nationally recognized rating services (or comparable unrated or short-term rated securities).
Performance Overview
For the period since inception on August 31, 2017, through September 30, 2017, the Fund had cumulative total returns of -0.32% based on market price and -0.52% based on net asset value (NAV).2 In comparison, the Bloomberg Barclays Municipal Bond Index had a -0.51% total return for the same period.3 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 libertyshares.com or call (800) 342-5236.
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. The Fund is an actively managed exchange-traded fund (ETF) that does not seek to replicate the performance of a specified index.
Credit Quality Composition* | ||||
9/30/17 | ||||
Ratings |
% of Total Investments |
|||
AAA |
15.99% | |||
AA |
74.69% | |||
A |
7.09% | |||
Not Rated |
2.23% |
*Securities, except for those labeled Not Rated, are assigned ratings by one or more Nationally Recognized Statistical Credit Rating Organizations (NRSROs), such as Standard & Poor’s, Moody’s and Fitch, that can be considered by the investment manager as part of its independent securities analysis. When ratings from multiple agencies are available, the highest is used, consistent with the portfolio investment process. Ratings reflect an NRSRO’s opinion of an issuer’s creditworthiness and typically range from AAA (highest) to D (lowest). The Below Investment Grade category consists of bonds rated below BBB-. The Refunded category generally consists of refunded bonds secured by US government or other high-quality securities and not rerated by an NRSRO. The Not Rated category consists of ratable securities that have not been rated by an NRSRO. Cash and equivalents are excluded from this composition.
Manager’s Discussion
During the short reporting period, we began investing in municipal securities. The low supply environment resulted in a slow deployment of capital. The Fund ended the period with a significant amount in cash. Due to the positive sloping municipal yield curve, we found value in higher quality securities in the 10- to 20-year maturity range, which we believe may ultimately allow us to achieve our objective of maximizing income for our investors. The Fund seeks to be fully invested as supply in the market becomes available. We believe our consistent, disciplined strategy can help our investors achieve high, tax-free income over the long term.
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, US investors must be properly certified on Form W-9 and non-US investors on Form W-8BEN.
2. 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.
3. 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 Statement of Investments (SOI). The SOI begins on page 17.
8 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTY MUNICIPAL BOND ETF
Portfolio Composition | ||||
9/30/17 | ||||
% of Total Investments* |
||||
General Obligation |
40.7% | |||
Utilities |
24.8% | |||
Higher Education |
13.8% | |||
Transportation |
9.7% | |||
Tax-Supported |
4.6% | |||
Other Revenue |
2.4% | |||
Subject to Government Appropriations |
2.0% | |||
Housing |
2.0% |
*Does not include cash and cash equivalents.
Thank you for your participation in Franklin Liberty Municipal Bond ETF. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of September 30, 2017, 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.
libertyshares.com | Semiannual Report | 9 |
FRANKLIN LIBERTY MUNICIPAL BOND ETF
Performance Summary as of September 30, 2017
Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not include brokerage commissions that may be payable on secondary market transactions. The performance tables do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares.
Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary trading (9/5/17), the NAV of the Fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV.
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/171
Cumulative Total Return2 | Average Annual Total Return2 | |||||||||||||||
Based on NAV3 |
Based on market price4 |
Based on NAV3 |
Based on market price4 |
|||||||||||||
Since Inception (8/31/17) |
-0.52% | -0.32% | -0.52% | -0.32% |
30-Day Standardized Yield6 | ||||||||
Distribution Rate5 | (with waiver) | (without waiver) | ||||||
0.06% |
0.15% | -1.44% |
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 libertyshares.com or call (800) 342-5236.
See page 11 for Performance Summary footnotes.
10 | Semiannual Report | libertyshares.com |
FRANKLIN LIBERTY MUNICIPAL BOND ETF
PERFORMANCE SUMMARY
Distributions (8/31/17-9/30/17)
Net Investment Income |
$0.001262 |
Total Annual Operating Expenses7
With Waiver | Without Waiver | |||
0.30% | 0.82% |
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. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.
1. The Fund has an expense reduction contractually guaranteed through at least 8/29/18. 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 period indicated. Return for less than one year, if any, has not been annualized.
3. Assumes reinvestment of distributions based on net asset value.
4. Assumes reinvestment of distributions based on market price.
5. Distribution rate is based on an annualization of the September dividend and the NAV per share on 9/30/17.
6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
7. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
libertyshares.com | Semiannual Report | 11 |
FRANKLIN LIBERTY 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 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 Value1 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 8/31/17–9/30/172,3 |
Ending Account Value 9/30/17 |
Expenses Paid During Period 4/1/17–9/30/172,3 |
Net Annualized Expense Ratio3 |
|||||||||||||||||
$1,000.00 | $ | 994.80 | $ | 0.25 | $ | 1,023.56 | $ | 1.52 | 0.30 | % |
1. 8/31/17 for Actual; 4/1/17 for Hypothetical.
2. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period for Hypothetical expenses. For Actual expenses, the multiplier is 30/365 to reflect the number of days since commencement of operations.
3. Reflects expenses after fee waivers and expense reimbursements.
12 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
Franklin Liberty Intermediate Municipal Opportunities ETF
Period Ended (unaudited) |
||||
Per share operating performance (for a share outstanding throughout the period) |
||||
Net asset value, beginning of period |
$ | 25.00 | ||
|
|
|||
Income from investment operations:b | ||||
Net investment incomec |
— | d | ||
Net realized and unrealized gains (losses) |
(0.11 | ) | ||
|
|
|||
Total from investment operations |
(0.11 | ) | ||
|
|
|||
Net asset value, end of period |
$ | 24.89 | ||
|
|
|||
Total returne |
(0.44)% | |||
Ratios to average net assetsf | ||||
Expenses before waiver and payments by affiliates |
1.65% | |||
Expenses net of waiver and payments by affiliates |
0.30% | |||
Net investment income |
0.02% | |||
Supplemental data | ||||
Net assets, end of period (000’s) |
$7,468 | |||
Portfolio turnover rateg |
—% |
aFor the period August 31, 2017 (commencement of operations) to September 30, 2017.
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 of 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 excludes the value of portfolio securities received or delivered as a result of processing capital share transactions in Creation Units, if any.
libertyshares.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 13 |
FRANKLIN TEMPLETON ETF TRUST
Statement of Investments, September 30, 2017 (unaudited)
Franklin Liberty Intermediate Municipal Opportunities ETF
Principal Amount | Value | |||||||||
Municipal Bonds 48.5% | ||||||||||
Arkansas 1.4% | ||||||||||
Little Rock School District GO, Pulaski County, Construction, 3.00%, 2/01/25 |
$ | 100,000 | $ | 103,876 | ||||||
|
|
|||||||||
California 2.9% | ||||||||||
California Statewide CDA Revenue, Baptist University, Refunding, Series A, 3.00%, 11/01/22 |
100,000 | 100,391 | ||||||||
Perris Joint Powers Authority Local Agency Revenue, Refunding, Series B, 5.00%, 9/01/25 |
100,000 | 116,360 | ||||||||
|
|
|||||||||
216,751 | ||||||||||
|
|
|||||||||
Colorado 3.2% | ||||||||||
Colorado Springs Utilities Revenue, Refunding, Series A-2, 5.00%, 11/15/20 |
100,000 | 111,752 | ||||||||
a | Colorado State Board of Governors University Enterprise System Revenue, Refunding, Series A, 5.00%, 3/01/28 |
100,000 | 124,709 | |||||||
|
|
|||||||||
236,461 | ||||||||||
|
|
|||||||||
Florida 3.9% | ||||||||||
a | Jacksonville Health Care Facilities Revenue, Brooks Rehabilitation, Genesis Health Inc Obligated Group, Refunding, 5.00%, 11/01/27 |
100,000 | 119,394 | |||||||
Miami Health Facilities Authority Revenue, Miami Jewish Health Systems Inc. Project, Refunding, 5.00%, 7/01/28 |
150,000 | 168,830 | ||||||||
|
|
|||||||||
288,224 | ||||||||||
|
|
|||||||||
Kansas 1.4% | ||||||||||
Douglas County USD No. 497 GO, Series A, 3.50%, 9/01/32 |
100,000 | 105,134 | ||||||||
|
|
|||||||||
Maryland 1.7% | ||||||||||
Maryland State GO, State and Local Facilities Loan of 2017, Refunding, Second Series B, 5.00%, 8/01/25 |
100,000 | 123,182 | ||||||||
|
|
|||||||||
Michigan 1.7% | ||||||||||
Michigan State GO, Environmental Program, Refunding, Series A, 5.00%, 5/01/27 |
100,000 | 125,534 | ||||||||
|
|
|||||||||
Minnesota 4.7% | ||||||||||
Farmington ISD No. 192 GO, School Building, Refunding, Series C, 5.00%, 2/01/21 |
100,000 | 112,115 | ||||||||
a | Northern Muni Power Agency Electric Systems Revenue, Refunding, 5.00%, 1/01/36 |
100,000 | 115,253 | |||||||
University of Minnesota Revenue, Refunding, Series B, 5.00%, 12/01/29 |
100,000 | 124,646 | ||||||||
|
|
|||||||||
352,014 | ||||||||||
|
|
|||||||||
Nevada 4.5% | ||||||||||
Clark County School District GO, Building, Refunding, Series A, 5.00%, 6/15/26 |
100,000 | 121,704 | ||||||||
Las Vegas Special ID No. 812 Special Assessment, Local Improvement, Summerlin Village 24, 4.00%, 12/01/22 |
100,000 | 104,307 | ||||||||
Lyon County School District GO, Refunding, Series A, PSF Guarantee, 4.00%, 6/01/28 |
100,000 | 113,168 | ||||||||
|
|
|||||||||
339,179 | ||||||||||
|
|
|||||||||
New Jersey 1.4% | ||||||||||
Pinelands Regional School District GO, Refunding, AGMC Insured, 3.00%, 8/01/27 |
100,000 | 105,313 | ||||||||
|
|
|||||||||
New Mexico 1.6% | ||||||||||
New Mexico State GO, Capital Projects, Series A, 5.00%, 3/01/25 |
100,000 | 121,952 | ||||||||
|
|
|||||||||
New York 3.3% | ||||||||||
MTA Revenue, Transportation Green Bonds Climate Bond Certified, Refunding, Series B, 5.00%, 11/15/28 |
100,000 | 125,568 | ||||||||
a | New York City GO, Fiscal 2018, Series 1, 5.00%, 8/01/26 |
100,000 | 123,344 | |||||||
|
|
|||||||||
248,912 | ||||||||||
|
|
|||||||||
North Carolina 1.7% | ||||||||||
a | University of North Carolina at Charlotte Revenue, Board of Governors, Refunding, 5.00%, 10/01/26 |
100,000 | 123,503 | |||||||
|
|
14 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Liberty Intermediate Municipal Opportunities ETF (continued)
Principal Amount | Value | |||||||||
Municipal Bonds (continued) | ||||||||||
Ohio 3.2% | ||||||||||
a | Cleveland Water Revenue, Second Lien, Refunding, Series B, 5.00%, 1/01/27 |
$ | 100,000 | $ | 123,919 | |||||
Ohio State Water Development Authority Revenue, Community Assistance, Refunding, 4.00%, 12/01/25 |
100,000 | 115,314 | ||||||||
|
|
|||||||||
239,233 | ||||||||||
|
|
|||||||||
Pennsylvania 1.5% | ||||||||||
Allegheny County Higher Education Building Authority University Revenue, Robert Morris University UPMC Events Centers Project, 5.00%, 10/15/26 |
100,000 | 114,192 | ||||||||
|
|
|||||||||
Texas 4.5% | ||||||||||
Round Rock Utility Revenue, Refunding, 2.75%, 8/01/29 |
100,000 | 100,154 | ||||||||
a | Texas State Water Development Board Revenue, Series A, 5.00%, 4/15/23 |
100,000 | 117,916 | |||||||
University of Texas Revenue, Financing System, Refunding, Series A, 5.00%, 8/15/22 |
100,000 | 116,621 | ||||||||
|
|
|||||||||
334,691 | ||||||||||
|
|
|||||||||
Utah 1.3% | ||||||||||
Utah State Building Ownership Authority Lease Revenue, State Facilities Master Lease Program, 2.50%, 5/15/27 |
100,000 | 100,761 | ||||||||
|
|
|||||||||
Washington 3.2% | ||||||||||
Seattle Municipal Light and Power Revenue, Refunding and Improvement, Series C, 5.00%, 9/01/22 |
100,000 | 116,975 | ||||||||
a | Washington State GO, Various Purpose, Series A, 5.00%, 8/01/26 |
100,000 | 123,835 | |||||||
|
|
|||||||||
240,810 | ||||||||||
|
|
|||||||||
Wisconsin 1.4% | ||||||||||
Fond Du Lac GO, Refunding, Series B, 2.00%, 4/01/22 |
100,000 | 101,946 | ||||||||
|
|
|||||||||
Total Investments (Cost $3,654,192) 48.5% |
3,621,668 | |||||||||
Other Assets, less Liabilities 51.5% |
3,845,900 | |||||||||
|
|
|||||||||
Net Assets 100.0% |
$ | 7,467,568 | ||||||||
|
|
See Abbreviations on page 26.
aSecurity purchased on a when-issued basis. See Note 1(b).
libertyshares.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 15 |
FRANKLIN TEMPLETON ETF TRUST
Financial Highlights
Franklin Liberty Municipal Bond ETF
Period Ended (unaudited) |
||||
Per share operating performance (for a share outstanding throughout the period) |
||||
Net asset value, beginning of period |
$ | 25.00 | ||
|
|
|||
Income from investment operations:b | ||||
Net investment incomec |
— | d | ||
Net realized and unrealized gains (losses) |
(0.13 | ) | ||
|
|
|||
Total from investment operations |
(0.13 | ) | ||
|
|
|||
Less distributions from net investment income |
(— | )d | ||
|
|
|||
Net asset value, end of period |
$ | 24.87 | ||
|
|
|||
Total returne |
(0.52)% | |||
Ratios to average net assetsf | ||||
Expenses before waiver and payments by affiliates |
1.65% | |||
Expenses net of waiver and payments by affiliates |
0.30% | |||
Net investment income |
0.17% | |||
Supplemental data | ||||
Net assets, end of period (000’s) |
$7,461 | |||
Portfolio turnover rateg |
—% |
aFor the period August 31, 2017 (commencement of operations) to September 30, 2017.
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 of 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 excludes the value of portfolio securities received or delivered as a result of processing capital share transactions in Creation Units, if any.
16 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
Statement of Investments, September 30, 2017 (unaudited)
Franklin Liberty Municipal Bond ETF
Principal Amount | Value | |||||||||
Municipal Bonds 69.7% | ||||||||||
Arkansas 1.4% | ||||||||||
Little Rock School District GO, Pulaski County, Construction, 3.00%, 2/01/25 |
$ | 100,000 | $ | 103,876 | ||||||
|
|
|||||||||
California 6.0% | ||||||||||
a | Burbank Redevelopment Agency Successor Agency Tax Allocation Revenue, Refunding, 3.00%, 12/01/32 |
100,000 | 98,327 | |||||||
Perris Joint Powers Authority Local Agency Revenue, Refunding, Series B, 5.00%, 9/01/37 |
100,000 | 111,757 | ||||||||
South Tahoe Joint Powers Financing Authority Lease Revenue, Redevelopment Project Area No. 1, Series A, BAM Insured, 5.00%, 10/01/30 |
100,000 | 118,680 | ||||||||
University of California Revenue, Limited Project, Series M, 5.00%, 5/15/34 |
100,000 | 119,737 | ||||||||
|
|
|||||||||
448,501 | ||||||||||
|
|
|||||||||
Colorado 6.1% | ||||||||||
Adams and Weld Counties School District No. 27J Brighton GO, 5.00%, 12/01/42 |
100,000 | 117,401 | ||||||||
a | Cherry Creek Co. School District No. 5 GO, Refunding, Series C, 5.00%, 12/15/35 |
100,000 | 120,775 | |||||||
Colorado Springs Utilities Revenue, Refunding, Series A, 4.00%, 11/15/33 |
100,000 | 109,124 | ||||||||
a | Colorado State Board of Governors University Enterprise System Revenue, Refunding, Series A, 4.00%, 3/01/35 |
100,000 | 107,716 | |||||||
|
|
|||||||||
455,016 | ||||||||||
|
|
|||||||||
Connecticut 1.5% | ||||||||||
Connecticut State Special Tax Obligation Revenue, Series A, 5.00%, 8/01/31 |
100,000 | 114,910 | ||||||||
|
|
|||||||||
Hawaii 1.5% | ||||||||||
Hawaii State GO, Refunding, Series FH, 4.00%, 10/01/30 |
100,000 | 111,334 | ||||||||
|
|
|||||||||
Kansas 3.1% | ||||||||||
Douglas County USD No. 497 GO, Series A, 3.50%, 9/01/32 |
100,000 | 105,134 | ||||||||
a | Kansas State Department of Transportation Highway Revenue, Series A, 5.00%, 9/01/31 |
100,000 | 122,869 | |||||||
|
|
|||||||||
228,003 | ||||||||||
|
|
|||||||||
Louisiana 1.4% | ||||||||||
Louisiana GO, Series B, 4.00%, 10/01/34 |
100,000 | 106,532 | ||||||||
|
|
|||||||||
Maryland 3.0% | ||||||||||
Maryland State GO, State and Local Facilities Loan of 2017, Refunding, Second Series B, 5.00%, 8/01/25 |
100,000 | 123,182 | ||||||||
Prince George’s County GO, Consolidated Public Improvement, Series A, 3.00%, 9/15/32 |
100,000 | 99,640 | ||||||||
|
|
|||||||||
222,822 | ||||||||||
|
|
|||||||||
Massachusetts 1.6% | ||||||||||
a | Massachusetts State Bay Transportation Authority Sales Tax Revenue, Green Bond, Subordinate, Series A-1, 5.00%, 7/01/33 |
100,000 | 119,921 | |||||||
|
|
|||||||||
Michigan 1.7% | ||||||||||
Michigan State GO, Environmental Program, Refunding, Series A, 5.00%, 5/01/27 |
100,000 | 125,534 | ||||||||
|
|
|||||||||
Minnesota 6.3% | ||||||||||
Farmington ISD No. 192 GO, School Building, Refunding, Series C, 5.00%, 2/01/21 |
100,000 | 112,115 | ||||||||
a | Northern Muni Power Agency Electric Systems Revenue, Refunding, 5.00%, 1/01/36 |
100,000 | 115,253 | |||||||
a | Southern State Municipal Power Agency Power Supply System Revenue, Series A, 5.00%, 1/01/31 |
100,000 | 121,019 | |||||||
University of Minnesota Revenue, Series A, 5.00%, 9/01/42 |
100,000 | 118,448 | ||||||||
|
|
|||||||||
466,835 | ||||||||||
|
|
|||||||||
Missouri 1.3% | ||||||||||
a | Platte County School District Park Hill GO, Direct Deposit program, 3.00%, 3/01/33 |
100,000 | 98,300 | |||||||
|
|
|||||||||
Nevada 3.1% | ||||||||||
Clark County School District GO, Building, Refunding, Series A, 5.00%, 6/15/26 |
100,000 | 121,704 | ||||||||
Lyon County School District GO, Refunding, Series A, PSF Guarantee, 4.00%, 6/01/28 |
100,000 | 113,168 | ||||||||
|
|
|||||||||
234,872 | ||||||||||
|
|
libertyshares.com | Semiannual Report | 17 |
FRANKLIN TEMPLETON ETF TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Liberty Municipal Bond ETF (continued)
Principal Amount | Value | |||||||||
Municipal Bonds (continued) | ||||||||||
New Jersey 1.4% | ||||||||||
Pinelands Regional School District GO, Refunding, AGMC Insured, 3.00%, 8/01/27 |
$ | 100,000 | $ | 105,313 | ||||||
|
|
|||||||||
New Mexico 1.6% | ||||||||||
New Mexico State GO, Capital Projects, Series A, 5.00%, 3/01/25 |
100,000 | 121,952 | ||||||||
|
|
|||||||||
New York 4.8% | ||||||||||
MTA Revenue, Transportation Green Bonds Climate Bond Certified, Refunding, Series B, 5.00%, 11/15/28 |
100,000 | 125,568 | ||||||||
a | New York City Municipal Water Finance Authority Water and Sewer System Revenue, Second General Resolution, Fiscal 2018, Refunding, Series BB, Subseries BB-2, 5.00%, 6/15/32 |
100,000 | 121,076 | |||||||
a | New York City GO, Refunding, Series B, 4.00%, 10/01/36 |
100,000 | 107,863 | |||||||
|
|
|||||||||
354,507 | ||||||||||
|
|
|||||||||
North Carolina 1.4% | ||||||||||
a | University of North Carolina at Charlotte Revenue, Board of Governors, Refunding, 4.00%, 10/01/34 |
100,000 | 107,667 | |||||||
|
|
|||||||||
Ohio 6.3% | ||||||||||
a | Cleveland Water Revenue, Second Lien, Refunding, Series B, 5.00%, 1/01/27 |
100,000 | 123,919 | |||||||
Licking Heights Local School District GO, School Facilities Construction and Improvement, Series B, 5.00%, 10/01/30 |
100,000 | 118,489 | ||||||||
a | Northeast Regional Sewer District Revenue, Refunding, 4.00%, 11/15/34 |
100,000 | 109,475 | |||||||
Ohio State Water Development Authority Revenue, Community Assistance, Refunding, 4.00%, 12/01/30 |
100,000 | 114,795 | ||||||||
|
|
|||||||||
466,678 | ||||||||||
|
|
|||||||||
Oregon 2.9% | ||||||||||
Metro Dedicated Tax Revenue, Oregon Convention Center Hotel Project, 5.00%, 6/15/29 |
100,000 | 121,124 | ||||||||
a | Oregon Housing and Community Services Department Mortgage Revenue, Series D, 3.15%, 7/01/32 |
100,000 | 98,887 | |||||||
|
|
|||||||||
220,011 | ||||||||||
|
|
|||||||||
Tennessee 1.6% | ||||||||||
Tennessee State School Bond Authority Revenue, Higher Educational Program, Series A, 5.00%, 11/01/37 |
100,000 | 119,199 | ||||||||
|
|
|||||||||
Texas 5.8% | ||||||||||
a | El Paso Water and Sewer Revenue, Refunding and Improvement, 4.00%, 3/01/33 |
100,000 | 108,230 | |||||||
Round Rock Utility Revenue, Refunding, 2.75%, 8/01/29 |
100,000 | 100,154 | ||||||||
a | Texas State Water Development Board Revenue, Series A, 4.00%, 10/15/33 |
100,000 | 109,496 | |||||||
University of Texas Revenue, Financing System, Refunding, Series A, 5.00%, 8/15/22 |
100,000 | 116,621 | ||||||||
|
|
|||||||||
434,501 | ||||||||||
|
|
|||||||||
Utah 1.4% | ||||||||||
Utah State Building Ownership Authority Lease Revenue, State Facilities Master Lease Program, 2.50%, 5/15/27 |
100,000 | 100,761 | ||||||||
|
|
|||||||||
Washington 3.1% | ||||||||||
Seattle Municipal Light and Power Revenue, Refunding and Improvement, Series C, 4.00%, 9/01/35 |
100,000 | 108,427 | ||||||||
a | Washington State GO, Various Purpose, Series A, 5.00%, 8/01/30 |
100,000 | 122,202 | |||||||
|
|
|||||||||
230,629 | ||||||||||
|
|
|||||||||
Wisconsin 1.4% | ||||||||||
Fond Du Lac GO, Refunding, Series B, 2.00%, 4/01/22 |
100,000 | 101,946 | ||||||||
|
|
|||||||||
Total Investments (Cost $5,238,786) 69.7% |
5,199,620 | |||||||||
Other Assets, less Liabilities 30.3% |
2,261,855 | |||||||||
|
|
|||||||||
Net Assets 100.0% |
$ | 7,461,475 | ||||||||
|
|
See Abbreviations on page 26.
aSecurity purchased on a when-issued basis. See Note 1(b).
18 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
September 30, 2017 (unaudited)
Franklin Liberty Intermediate Municipal Opportunities ETF |
Franklin Liberty Municipal Bond ETF |
|||||||
Assets: |
| |||||||
Investments in securities: |
| |||||||
Cost – Unaffiliated issuers |
$ | 3,654,192 | $ | 5,238,786 | ||||
|
|
|||||||
Value – Unaffiliated issuers |
$ | 3,621,668 | $ | 5,199,620 | ||||
Cash |
4,916,016 | 4,172,478 | ||||||
Receivables: |
| |||||||
Interest |
10,322 | 11,447 | ||||||
Affiliates |
4,446 | 4,447 | ||||||
|
|
|||||||
Total assets |
8,552,452 | 9,387,992 | ||||||
|
|
|||||||
Liabilities: |
| |||||||
Payables: |
| |||||||
Investment securities purchased |
1,078,590 | 1,919,844 | ||||||
Transfer agent fees |
1,288 | 1,288 | ||||||
Trustees’ fees and expenses |
57 | 57 | ||||||
Distributions to shareholders |
— | 379 | ||||||
Accrued expenses and other liabilities |
4,949 | 4,949 | ||||||
|
|
|||||||
Total liabilities |
1,084,884 | 1,926,517 | ||||||
|
|
|||||||
Net assets, at value |
$ | 7,467,568 | $ | 7,461,475 | ||||
|
|
|||||||
Net assets consist of: |
| |||||||
Paid-in capital |
$ | 7,500,000 | $ | 7,500,000 | ||||
Undistributed net investment income |
92 | 641 | ||||||
Net unrealized appreciation (depreciation) |
(32,524 | ) | (39,166 | ) | ||||
|
|
|||||||
Net assets, at value |
$ | 7,467,568 | $ | 7,461,475 | ||||
|
|
|||||||
Shares outstanding |
300,000 | 300,000 | ||||||
|
|
|||||||
Net asset value per share |
$ | 24.89 | $ | 24.87 | ||||
|
|
libertyshares.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 19 |
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Operations
for the period ended September 30, 2017a (unaudited)
Franklin Liberty Intermediate Municipal Opportunities ETF |
Franklin Liberty Municipal Bond ETF |
|||||||
Investment income: |
| |||||||
Interest: |
||||||||
Unaffiliated issuers |
$ | 1,939 | $ | 2,866 | ||||
|
|
|||||||
Expenses: |
| |||||||
Management fees (Note 3a) |
3,848 | 3,848 | ||||||
Transfer agent fees |
1,288 | 1,288 | ||||||
Custodian fees |
104 | 104 | ||||||
Reports to shareholders |
467 | 467 | ||||||
Registration and filing fees |
80 | 80 | ||||||
Professional fees |
3,464 | 3,464 | ||||||
Trustees’ fees and expenses |
57 | 57 | ||||||
Other |
833 | 833 | ||||||
|
|
|||||||
Total expenses |
10,141 | 10,141 | ||||||
Expenses waived/paid by affiliates (Note 3c) |
(8,294 | ) | (8,295 | ) | ||||
|
|
|||||||
Net expenses |
1,847 | 1,846 | ||||||
|
|
|||||||
Net investment income |
92 | 1,020 | ||||||
|
|
|||||||
Net change in unrealized appreciation (depreciation) on: |
| |||||||
Investments: |
||||||||
Unaffiliated issuers |
(32,524 | ) | (39,166 | ) | ||||
|
|
|||||||
Net change in unrealized appreciation (depreciation) |
(32,524 | ) | (39,166 | ) | ||||
|
|
|||||||
Net realized and unrealized gain (loss) |
(32,524 | ) | (39,166 | ) | ||||
|
|
|||||||
Net increase (decrease) in net assets resulting from operations |
$ | (32,432 | ) | $ | (38,146 | ) | ||
|
|
aFor the period August 31, 2017 (commencement of operations) to September 30, 2017.
20 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
Franklin Liberty Intermediate Municipal Opportunities ETF |
Franklin Liberty Municipal Bond ETF |
|||||||
Six Months Ended (unaudited) |
||||||||
Increase (decrease) in net assets: |
| |||||||
Operations: |
| |||||||
Net investment income |
$ | 92 | $ | 1,020 | ||||
Net change in unrealized appreciation (depreciation) |
(32,524 | ) | (39,166 | ) | ||||
|
|
|||||||
Net increase (decrease) in net assets resulting from operations |
(32,432 | ) | (38,146 | ) | ||||
|
|
|||||||
Distributions to shareholders from net investment income |
— | (379 | ) | |||||
|
|
|||||||
Capital share transactions: (Note 2) |
7,500,000 | 7,500,000 | ||||||
|
|
|||||||
Net increase (decrease) in net assets |
7,467,568 | 7,461,475 | ||||||
Net assets: |
| |||||||
Beginning of period |
— | — | ||||||
|
|
|||||||
End of period |
$ | 7,467,568 | $ | 7,461,475 | ||||
|
|
|||||||
Undistributed net investment income included in net assets, end of period |
$ | 92 | $ | 641 | ||||
|
|
aFor the period August 31, 2017 (commencement of operations) to September 30, 2017.
libertyshares.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 21 |
FRANKLIN TEMPLETON ETF TRUST
Notes to Financial Statements (unaudited)
1. Organization and Significant Accounting Policies
Franklin Templeton ETF Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of twelve separate funds, two of which are included in this report (Funds) and the financial statements of the remaining funds are presented separately, and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Effective August 31, 2017, the Trust began offering shares of Franklin Intermediate Municipal Opportunities ETF and Franklin Municipal Bond ETF. Each of the Funds are an exchange traded fund (ETF) and are actively managed, thus they are not designed to track an index.
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 VC provides administration and oversight of the Funds’ valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Funds to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
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.
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 VC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.
b. Securities Purchased on a When-Issued Basis
Certain or all Funds purchase securities on a when-issued 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. Sufficient assets have been segregated for these securities.
c. Income
It is each Funds’ 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.
Each Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain
22 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 September 30, 2017, 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).
d. 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. 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. Fund specific expenses are charged directly to the fund that incurred the expense.
e. 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.
f. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
g. Guarantees and Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Funds, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
Shares of the Funds are issued and redeemed at their respective NAV in blocks of 100,000 shares or multiples thereof (Creation Units). 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). For the period ended September 30, 2017, all Creations Unit transactions were made in cash.
Authorized Participants pay a 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 or 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 and redemption transactions may be charged to the Authorized Participant to cover certain brokerage, tax,
libertyshares.com | Semiannual Report | 23 |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
2. Shares of Beneficial Interest (continued)
foreign exchange, execution, market impact and other costs and expenses related to the execution of trades. Variable fees received by the Funds, if any, are included in capital
share transactions in the Statements of Changes in Net Assets.
At September 30, 2017, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:
Franklin Liberty Intermediate Municipal Opportunities ETF |
Franklin Liberty Municipal Bond ETF |
|||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||
Six Months ended September 30, 2017a | ||||||||||||||||||||
Shares sold |
300,000 | $ | 7,500,000 | 300,000 | $ | 7,500,000 | ||||||||||||||
|
|
aFor the period August 31,2017 (commencement of operations) to September 30, 2017.
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Funds are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation | |
Franklin Advisers, Inc. (Advisers) |
Investment manager | |
Franklin Templeton Services, LLC (FT Services) |
Administrative manager | |
Franklin Templeton Distributors, Inc. (Distributors) |
Principal underwriter |
a. Management Fees
The Funds pay an investment management fee to Advisers based on the average 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 $20 billion |
For the period ended September 31, 2017, each Fund’s annualized effective investment management fee rate based on average daily net assets was as follows:
Annualized Fee Rate | ||
Franklin Liberty Intermediate Municipal Opportunities ETF |
0.625% | |
Franklin Liberty Municipal Bond ETF |
0.625% |
24 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
3. Transactions with Affiliates (continued)
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Funds. The fee is paid by Advisers based on the Funds’ average daily net assets, and is not an additional expense of the Funds.
c. Waiver and Expense Reimbursements
Advisers has contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by the Funds so that the expenses (including acquired fund fees and expenses) for each of the Funds does not exceed 0.30%, based on the average net assets (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until August 29, 2018. Total expenses waived or paid are not subject to recapture subsequent to the Funds’ fiscal year end.
4. Income Taxes
At September 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
Franklin Liberty Intermediate Municipal Opportunities ETF |
Franklin Liberty Municipal Bond ETF |
|||||||
Cost of investments |
$ | 3,654,192 | $ | 5,238,786 | ||||
|
|
|||||||
Unrealized appreciation |
$ | 493 | $ | 519 | ||||
Unrealized depreciation |
(33,017 | ) | (39,685 | ) | ||||
|
|
|||||||
Net unrealized appreciation (depreciation) |
$ | (32,524 | ) | $ | (39,166 | ) | ||
|
|
5. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the period ended September 30, 2017, were as follows:
Franklin Liberty Intermediate Municipal Opportunities ETF |
Franklin Liberty Municipal Bond ETF |
|||||||
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
$ | 3,655,727 | $ | 5,240,358 | ||||
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
$ | — | $ | — |
6. Credit Risk
At September 30, 2017, Franklin Intermediate Municipal Opportunities ETF had 5.7% 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.
7. 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.) |
libertyshares.com | Semiannual Report | 25 |
FRANKLIN TEMPLETON ETF TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
7. Fair Value Measurements (continued)
• | 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.
For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.
At September 30, 2017, all of the Fund’s investments in financial instruments carried at fair value were valued using Level 2 inputs.
8. New Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities, held at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities held at a discount; which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.
9. Subsequent Events
The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.
Selected Portfolio | ||
AGMC | Assured Guaranty Municipal Corp. | |
BAM | Build America Mutual Assurance Co. | |
CDA | Community Development Authority/Agency | |
GO | General Obligation | |
ID | Improvement District | |
ISD | Independent School District | |
PSF | Permanent School Fund | |
MTA | Metropolitan Transit Authority | |
USD | Unified/Union School District |
26 | Semiannual Report | libertyshares.com |
FRANKLIN TEMPLETON ETF TRUST
Board Approval of Investment Management Agreements
FRANKLIN TEMPLETON ETF TRUST
Franklin Liberty Municipal Bond ETF
Franklin Liberty Intermediate Municipal Opportunities ETF
(each a “Fund”)
At a meeting held on February 16, 2017 (“Meeting”), the Board of Trustees (“Board”), including a majority of trustees who are not “interested persons” as such term is defined in Section 2(a)(19) of the Investment Company Act of 1940 (“Independent Trustees”), approved with respect to each Fund, an investment management agreement (each an “Investment Management Agreement”) with Franklin Advisers, Inc. (“Investment Manager”).
In considering the approval of each Investment Management Agreement, the Board reviewed and considered information provided by the Manager at the Meeting, at a meeting of the Board held on December 8, 2016 and throughout the year at other meetings of the Board. The Board also considered that the terms of the Investment Management Agreements were explained at the Meeting, noting that the forms of such agreements are substantially the same as the standard form of investment management agreement that includes administration services used for other funds in the Franklin Templeton Investments family of funds (“FTI Complex”). In reaching its decision to approve each Investment Management Agreement, the Board took into account several factors including, but not limited to, the following: (1) the nature and quality of the services to be provided by the Investment Manager to the Funds under the proposed Investment Management Agreements; (2) the Investment Manager’s experience as manager of other funds and accounts, including those within the FTI Complex; (3) the Investment Manager’s strength and reputation within the industry; (4) the fairness of the compensation under the proposed Investment Management Agreements; (5) the comparative pricing structure (including fee waivers and the estimated expense ratio to be borne by shareholders) of the Funds; (6) the personnel, operations, financial condition, and investment management capabilities, methodologies and resources of the Investment Manager; and (7) the Investment Manager’s compliance capabilities, as demonstrated by, among other things, its policies and procedures designed to prevent violations of the Federal securities laws, which had previously been approved by the Board in connection with its oversight of other funds in the FTI Complex. In considering the information and factors
noted above, the Independent Trustees received assistance and advice from and met separately with their Independent Legal Counsel.
In approving each Investment Management Agreement, the Board, including a majority of Independent Trustees, determined that the investment management fee structure is fair and reasonable and that the approval of each Investment Management Agreement is in the interests of each Fund and its shareholders.
The following sets forth some of the primary information and factors relevant to the Board’s decision to approve the Investment Management Agreements. This discussion of the information and factors considered by the Board (including the information and factors discussed above) is not intended to be exhaustive, but rather summarizes certain factors considered by the Board. In view of the wide variety of factors considered, the Board did not, unless otherwise noted, find it practicable to quantify or otherwise assign relative weights to the foregoing factors. In addition, individual Trustees may have assigned different weights to various factors.
NATURE, EXTENT AND QUALITY OF SERVICES. The Trustees reviewed the nature, extent and quality of the services to be provided by the Investment Manager. In this regard, the Trustees reviewed the Funds’ proposed investment goals and the Investment Manager’s proposed investment strategies and ability to implement such investment strategies (including, but not limited to, the Investment Manager’s trading practices and investment decision processes). The Trustees also reviewed the Funds’ portfolio managers, including their background and skills as well as their expertise in managing other funds within the FTI Complex.
Based on their review, the Trustees were satisfied with the nature and quality of the overall services to be provided by the Investment Manager to the Funds and their shareholders and were confident in the Investment Manager’s ability to implement the Funds’ proposed investment strategies and to provide quality services to the Funds and their shareholders.
INVESTMENT PERFORMANCE. The Board noted that, as the Funds had not yet commenced investment operations, there was no investment performance for the Funds. The Board also considered the proposed performance benchmarks for the Funds and how such benchmarks would be utilized to measure performance of the Investment Manager.
COMPARATIVE EXPENSES. The Board considered the cost of the services to be provided by the Investment
libertyshares.com | Semiannual Report | 27 |
FRANKLIN TEMPLETON ETF TRUST
SHAREHOLDER INFORMATION
Manager (and its affiliates) from its respective relationships with the Funds. The Board noted that the Investment Manager (and its affiliates) could not report any financial results from their relationships with the Funds because the Funds had not yet commenced investment operations, and thus, the Board could not evaluate the Investment Manager’s (or its affiliates’) profitability with respect to the Funds.
The Board was provided with information relating to proposed expenses for each Fund, including comparative data provided by Morningstar, Inc. (“Morningstar”), an independent organization, which compared the respective Fund’s expenses with those of its “peer group,” which consisted of other funds deemed comparable to the respective Fund as selected by Morningstar (“Comparable Funds”). The Board considered the information provided by Morningstar and noted that the contractual management fee for each of the Franklin Liberty Municipal Bond Fund ETF and Franklin Liberty Intermediate Municipal Opportunities ETF is above the Comparable Fund median, the net total expense ratio for each Fund is at or below the median of its peers.
The Board noted that the Investment Manager will waive or assume certain expenses so that the total operating expenses for each Fund (excluding acquired fund fees and expenses and certain non-routine expenses) do not exceed (and could be less than) the amounts in the proposed fee table for a period of at least one year from the date of each Fund’s initial prospectus.
ECONOMIES OF SCALE. The Board considered economies of scale that may be realized by the Investment Manager and its affiliates as the Funds grow larger and the extent to which they are shared with shareholders of the Funds. The Board noted that the contractual management fee schedule for each of the Franklin Liberty Municipal Bond Fund ETF and Franklin Liberty Intermediate Municipal Opportunities ETF includes breakpoints that provide for such sharing, though it is not anticipated that any of the Funds will generate significant, if any, profit for the Investment Manager and/or its affiliates for some time. The Board further considered the extent to which the Investment Manager may derive ancillary benefits from fund operations.
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 libertyshares.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 on Form N-Q. Shareholders may view the filed Form N-Q 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 the Fund and the Fund’s net asset value may be found on the Fund’s website at libertyshares.com.
28 | Semiannual Report | libertyshares.com |
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.
Semiannual Report | ||||||
Franklin Templeton ETF Trust | ||||||
Investment Manager Franklin Advisers, Inc. |
Distributor Franklin Templeton Distributors, Inc. (800) DIAL BEN®/342-5236 libertyshares.com |
Investor Services Transfer Agent State Street Bank and 1 Heritage Drive |
© 2017 Franklin Templeton Investments. All rights reserved. | ETF4 S 11/17 |
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 12(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 John B. Wilson and he is “independent” as defined under the relevant Securities and Exchange Commission Rules and Releases.
Item 4. | Principal Accountant Fees and Services. N/A |
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 ensure that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934 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 controls or in other factors that could materially affect the internal controls over financial reporting subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR.
Item 12. | Exhibits. |
(a) (1) Code of Ethics
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle , Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle , Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
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 | ||
Matthew T. Hinkle | ||
Chief Executive Officer – Finance and Administration |
Date November 27, 2017
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 | ||
Matthew T. Hinkle | ||
Chief Executive Officer – Finance and Administration |
Date November 27, 2017
By | /s/ Gaston Gardey | |
Gaston Gardey | ||
Chief Financial Officer and Chief Accounting Officer |
Date November 27, 2017
This ‘N-CSRS’ Filing | Date | Other Filings | ||
---|---|---|---|---|
12/15/18 | ||||
9/19/18 | ||||
8/29/18 | ||||
7/31/18 | ||||
Filed on / Effective on: | 12/1/17 | 497 | ||
11/27/17 | ||||
For Period End: | 9/30/17 | NSAR-A | ||
9/20/17 | 497 | |||
9/1/17 | 497, 497J, 497K | |||
8/31/17 | 497K | |||
6/22/17 | ||||
4/26/17 | ||||
3/31/17 | 24F-2NT, N-CSR, NSAR-B | |||
2/16/17 | ||||
1/25/17 | ||||
12/8/16 | ||||
10/3/16 | ||||
9/20/16 | ||||
6/1/16 | 485APOS, 497 | |||
List all Filings |