N-CSRS 1 d132573dncsrs.htm WESTERN ASSET TOTAL RETURN ETF Western Asset Total Return ETF

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-23096

 

 

Legg Mason ETF Investment Trust

(Exact name of registrant as specified in charter)

 

 

620 Eighth Avenue, 47th Floor, New York, NY 10018

(Address of principal executive offices) (Zip code)

 

 

Marc A. De Oliveira

Franklin Templeton

100 First Stamford Place

Stamford, CT 06902

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code: 1-877-721-1926

Date of fiscal year end: December 31

Date of reporting period: June 30, 2021

 

 

 


ITEM 1.

REPORT TO STOCKHOLDERS.

The Semi-Annual Report to Stockholders is filed herewith.


LOGO

 

Semi-Annual Report   June 30, 2021

WESTERN ASSET

TOTAL RETURN ETF

WBND

 

 

 

The Fund intends to no longer mail paper copies of the Fund’s shareholder reports like this one, unless you specifically request paper copies of the reports from your financial intermediary (such as a broker-dealer or bank). Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

If you already elected to receive shareholder reports electronically (“e-delivery”), you will not be affected by this change and you need not take any action. If you have not already elected e-delivery, you may elect to receive shareholder reports and other communications from the Fund electronically by contacting your financial intermediary.

You may elect to receive all future reports in paper free of charge by contacting your financial intermediary to request that you continue to receive paper copies of your shareholder reports. Your election to receive reports in paper will apply to all Legg Mason Funds held in your account with your financial intermediary.

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


What’s inside      
Letter from the president     II  
Performance review     III  
Fund at a glance     1  
Fund expenses     2  
Schedule of investments     3  
Statement of assets and liabilities     44  
Statement of operations     45  
Statements of changes in net assets     46  
Financial highlights     47  
Notes to financial statements     48  
Additional shareholder information     70  

 

Fund objective

The Fund seeks to maximize total return, consistent with prudent investment management and liquidity needs.

 

Letter from the president

 

LOGO

 

Dear Shareholder,

We are pleased to provide the semi-annual report of Western Asset Total Return ETF for the six-month reporting period ended June 30, 2021. Please read on for Fund performance information during the Fund’s reporting period.

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

 

 

Fund net asset value and market price,

 

 

Market insights and commentaries from our portfolio managers, and

 

 

A host of educational resources.

We look forward to helping you meet your financial goals.

Sincerely,

 

LOGO

Jane Trust, CFA

President and Chief Executive Officer

July 30, 2021

 

 

II

   Western Asset Total Return ETF


Performance review

 

For the six months ended June 30, 2021, Western Asset Total Return ETF generated a -1.50% return on a net asset value (“NAV”)i basis and -1.28% based on its market priceii per share.

The performance table shows the Fund’s total return for the six months ended June 30, 2021 based on its NAV and market price. The Fund’s broad-based market index, the Bloomberg Barclays U.S. Aggregate Indexiii, returned -1.60% over the same time frame. The Lipper Core Plus Bond Funds Category Averageiv returned -0.86% for the same period. Please note that Lipper performance returns are based on each fund’s NAV.

 

Performance Snapshot as of June 30, 2021
(unaudited)
 
     6 months  
Western Asset Total Return ETF:  

$27.18 (NAV)

     -1.50 %* 

$27.28 (Market Price)

     -1.28 %* 
Bloomberg Barclays U.S. Aggregate Index     -1.60
Lipper Core Plus Bond Funds Category Average     -0.86

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

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

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

As of the Fund’s current prospectus dated May 1, 2021, the gross total annual fund operating expense ratio for the Fund was 0.51%.

The management agreement between Legg Mason ETF Investment Trust (the “Trust”) on behalf of the Fund and Legg Mason Partners Fund Advisor, LLC (the “manager” or “LMPFA”) (the “Management Agreement”) provides that LMPFA will pay all operating expenses of the Fund, other than interest expenses, taxes, brokerage expenses, future 12b-1 fees (if any), acquired fund fees and expenses, extraordinary expenses and the management fee payable to LMPFA under the Management Agreement. LMPFA will also pay all subadvisory fees of the Fund. The manager has agreed to waive and/or reimburse management fees so that the ratio of total annual fund operating expenses will not exceed 0.45% (subject to the same exclusions as the Management Agreement). Total annual fund operating expenses after waiving and/or reimbursing management fees exceed the expense cap as a result of acquired

 

 

 

Western Asset Total Return ETF   III


Performance review (cont’d)

 

fund fees and expenses. This arrangement cannot be terminated prior to May 1, 2022 without the Board of Trustees’ consent.

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

† Total return assumes the reinvestment of all distributions, including returns of capital, if any, at NAV.

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

Looking for additional information?

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

As always, thank you for your confidence in our stewardship of your assets.

Sincerely,

 

LOGO

Jane Trust, CFA

President and Chief Executive Officer

July 30, 2021

RISKS: Fixed income securities involve interest rate, credit, inflation and reinvestment risks. As interest rates rise, the value of fixed income securities falls. High-yield securities include greater price volatility, illiquidity, and possibility of default. International investments are subject to special risks, including currency fluctuations, social, economic, and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. Emerging market countries tend to have economic, political and legal systems that are less developed and are less stable than those of more developed countries Derivatives, such as options and futures, can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. The use of leverage may increase volatility and possibility of loss. Potential active and frequent trading may result in higher transaction costs and increased investor liability. Asset-backed, mortgage-backed, or mortgage-related securities are subject to prepayment and extension risks. Active management and diversification do not ensure gains or protect against market declines. Please see the Fund’s prospectus for a more complete discussion of these and other risks and the Fund’s investment strategies.

 

 

 

  
IV    Western Asset Total Return ETF


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

 

i

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

 

ii

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

 

iii

The Bloomberg Barclays U.S. Aggregate Index is a broad-based bond index comprised of government, corporate, mortgage-and asset-backed issues, rated investment grade or higher, and having at least one year to maturity.

 

iv

Lipper, Inc., a wholly-owned subsidiary of Refinitiv, provides independent insight on global collective investments. Returns are based on the six-month period ended June 30, 2021, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 315 funds in the Fund’s Lipper category.

 

 

 

Western Asset Total Return ETF   V


Fund at a glance (unaudited)

 

Investment breakdown (%) as a percent of total investments

 

 

LOGO

The bar graph above represents the composition of the Fund’s investments as of June 30, 2021 and December 31, 2020 and does not include derivatives, such as written options, futures contracts, forward foreign currency contracts and swap contracts. The composition of the Fund’s investments is subject to change at any time.

 

*

Represents less than 0.1%

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   1


Fund expenses (unaudited)

 

Example

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

This example is based on an investment of $1,000 invested on January 1, 2021 and held for the six months ended June 30, 2021.

Actual expenses

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

Hypothetical example for comparison purposes

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

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

 

Based on actual total return1       Based on hypothetical total return1
Actual
Total
Return2
  Beginning
Account
Value
  Ending
Account
Value
  Annualized
Expense
Ratio
  Expenses
Paid During
the Period3
      Hypothetical
Annualized
Total Return
  Beginning
Account
Value
  Ending
Account
Value
  Annualized
Expense
Ratio
  Expenses
Paid During
the Period3
    -1.50%       $ 1,000.00     $ 985.00       0.45 %     $ 2.21         5.00 %       $1,000.00       $ 1,022.56       0.45 %     $ 2.26

 

1  

For the six months ended June 30, 2021.

 

2 

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

 

3 

Expenses (net of fee waivers and/or expense reimbursements) are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (181), then divided by 365.

 

 

2

   Western Asset Total Return ETF 2021 Semi-Annual Report


Schedule of investments (unaudited)

June 30, 2021

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Corporate Bonds & Notes — 33.5%                                
Communication Services — 4.8%                                

Diversified Telecommunication Services — 1.3%

 

                       

AT&T Inc., Senior Notes

    2.300     6/1/27       90,000     $ 93,087  

AT&T Inc., Senior Notes

    1.650     2/1/28       90,000       89,330  

AT&T Inc., Senior Notes

    2.250     2/1/32       50,000       49,073  

AT&T Inc., Senior Notes

    3.100     2/1/43       130,000       127,381  

AT&T Inc., Senior Notes

    4.350     6/15/45       19,000       21,799  

AT&T Inc., Senior Notes

    3.550     9/15/55       57,000       57,191  (a)  

Verizon Communications Inc., Senior Notes

    3.376     2/15/25       50,000       54,318  

Verizon Communications Inc., Senior Notes

    0.850     11/20/25       20,000       19,781  

Verizon Communications Inc., Senior Notes

    1.450     3/20/26       30,000       30,255  

Verizon Communications Inc., Senior Notes

    3.000     3/22/27       10,000       10,761  

Verizon Communications Inc., Senior Notes

    2.100     3/22/28       40,000       40,837  

Verizon Communications Inc., Senior Notes

    3.150     3/22/30       40,000       43,191  

Verizon Communications Inc., Senior Notes

    1.750     1/20/31       60,000       57,500  

Verizon Communications Inc., Senior Notes

    2.550     3/21/31       140,000       143,097  

Verizon Communications Inc., Senior Notes

    4.500     8/10/33       340,000       406,289  

Verizon Communications Inc., Senior Notes

    5.250     3/16/37       30,000       39,353  

Verizon Communications Inc., Senior Notes

    2.650     11/20/40       150,000       144,348  

Verizon Communications Inc., Senior Notes

    2.875     11/20/50       265,000       251,728  

Total Diversified Telecommunication Services

 

                    1,679,319  

Interactive Media & Services — 0.4%

                               

Alphabet Inc., Senior Notes

    0.450     8/15/25       20,000       19,804  

Alphabet Inc., Senior Notes

    0.800     8/15/27       30,000       29,157  

Alphabet Inc., Senior Notes

    1.100     8/15/30       30,000       28,446  

Tencent Holdings Ltd., Senior Notes

    3.680     4/22/41       400,000       428,125  (a) 

Total Interactive Media & Services

 

                    505,532  

Media — 2.0%

                               

CCO Holdings LLC/CCO Holdings Capital Corp., Senior Notes

    5.125     5/1/27       250,000       262,225  (a)  

CCO Holdings LLC/CCO Holdings Capital Corp., Senior Notes

    4.500     8/15/30       10,000       10,412  (a)  

CCO Holdings LLC/CCO Holdings Capital Corp., Senior Notes

    4.250     2/1/31       98,000       99,838  (a)  

CCO Holdings LLC/CCO Holdings Capital Corp., Senior Notes

    4.500     5/1/32       450,000       466,312  

Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes

    4.908     7/23/25       270,000       305,886  

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   3


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Media — continued

                               

Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes

    5.050     3/30/29       100,000     $ 118,119  

Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes

    2.800     4/1/31       50,000       51,116  

Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes

    5.375     4/1/38       100,000       122,878  

Charter Communications Operating LLC/Charter Communications Operating Capital Corp., Senior Secured Notes

    5.750     4/1/48       60,000       76,364  

Charter Communications Operating LLC/ Charter Communications Operating Capital Corp., Senior Secured Notes

    4.800     3/1/50       20,000       22,971  

Comcast Corp., Senior Notes

    3.150     3/1/26       20,000       21,759  

Comcast Corp., Senior Notes

    3.300     4/1/27       50,000       55,106  

Comcast Corp., Senior Notes

    4.150     10/15/28       45,000       52,090  

Comcast Corp., Senior Notes

    4.250     10/15/30       190,000       223,466  

DISH DBS Corp., Senior Notes

    5.875     11/15/24       510,000       547,612  

DISH DBS Corp., Senior Notes

    5.125     6/1/29       50,000       49,372  (a)  

Total Media

                            2,485,526  

Wireless Telecommunication Services — 1.1%

                               

CSC Holdings LLC, Senior Notes

    5.375     2/1/28       200,000       211,590  (a)  

CSC Holdings LLC, Senior Notes

    4.500     11/15/31       200,000       201,228  (a)  

Sprint Capital Corp., Senior Notes

    8.750     3/15/32       320,000       486,400  

Sprint Corp., Senior Notes

    7.875     9/15/23       20,000       22,722  

T-Mobile USA Inc., Senior Notes

    2.250     2/15/26       10,000       10,075  

T-Mobile USA Inc., Senior Notes

    2.625     2/15/29       40,000       39,500  

T-Mobile USA Inc., Senior Notes

    2.875     2/15/31       30,000       29,775  

T-Mobile USA Inc., Senior Notes

    3.500     4/15/31       40,000       41,382  

T-Mobile USA Inc., Senior Notes

    3.500     4/15/31       40,000       41,382  (a)  

T-Mobile USA Inc., Senior Secured Notes

    3.500     4/15/25       210,000       227,607  

T-Mobile USA Inc., Senior Secured Notes

    3.750     4/15/27       10,000       11,050  

T-Mobile USA Inc., Senior Secured Notes

    2.550     2/15/31       40,000       40,448  

Vodafone Group PLC, Senior Notes

    4.375     5/30/28       80,000       93,062  

Total Wireless Telecommunication Services

 

                    1,456,221  

Total Communication Services

                            6,126,598  

 

See Notes to Financial Statements.

 

 

  
4    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Consumer Discretionary — 2.6%                                

Automobiles — 1.1%

                               

Ford Motor Credit Co. LLC, Senior Notes

    5.875     8/2/21       200,000     $ 201,020  

Ford Motor Credit Co. LLC, Senior Notes

    3.375     11/13/25       500,000       518,475  

General Motors Co., Senior Notes

    5.400     10/2/23       20,000       22,027  

General Motors Co., Senior Notes

    6.125     10/1/25       130,000       153,894  

General Motors Co., Senior Notes

    5.950     4/1/49       10,000       13,613  

Nissan Motor Co. Ltd., Senior Notes

    3.522     9/17/25       200,000       213,565  (a)  

Nissan Motor Co. Ltd., Senior Notes

    4.345     9/17/27       240,000       263,816  (a)  

Total Automobiles

                            1,386,410  

Hotels, Restaurants & Leisure — 0.8%

                               

Las Vegas Sands Corp., Senior Notes

    2.900     6/25/25       160,000       166,625  

McDonald’s Corp., Senior Notes

    3.700     1/30/26       10,000       11,112  

McDonald’s Corp., Senior Notes

    3.500     3/1/27       10,000       11,039  

McDonald’s Corp., Senior Notes

    3.800     4/1/28       50,000       56,573  

McDonald’s Corp., Senior Notes

    4.450     9/1/48       230,000       286,205  

NCL Corp. Ltd., Senior Notes

    5.875     3/15/26       250,000       261,875  (a)  

Sands China Ltd., Senior Notes

    5.125     8/8/25       200,000       223,466  

VOC Escrow Ltd., Senior Secured Notes

    5.000     2/15/28       40,000       40,440  (a)  

Total Hotels, Restaurants & Leisure

                            1,057,335  

Household Durables — 0.0%††

                               

Lennar Corp., Senior Notes

    4.500     4/30/24       40,000       43,750  

MDC Holdings Inc., Senior Notes

    6.000     1/15/43       10,000       12,887  

Total Household Durables

                            56,637  

Internet & Direct Marketing Retail — 0.5%

                               

Amazon.com Inc., Senior Notes

    1.500     6/3/30       10,000       9,775  

Amazon.com Inc., Senior Notes

    2.100     5/12/31       20,000       20,336  

Amazon.com Inc., Senior Notes

    3.875     8/22/37       50,000       59,623  

Amazon.com Inc., Senior Notes

    4.050     8/22/47       90,000       109,786  

Prosus NV, Senior Notes

    3.832     2/8/51       400,000       372,233  (a)  

Total Internet & Direct Marketing Retail

                            571,753  

Specialty Retail — 0.2%

                               

Home Depot Inc., Senior Notes

    2.700     4/15/30       30,000       32,076  

Home Depot Inc., Senior Notes

    3.350     4/15/50       90,000       99,499  

Target Corp., Senior Notes

    2.250     4/15/25       50,000       52,525  

Total Specialty Retail

                            184,100  

Textiles, Apparel & Luxury Goods — 0.0%††

                               

NIKE Inc., Senior Notes

    2.750     3/27/27       50,000       53,890  

Total Consumer Discretionary

                            3,310,125  

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   5


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Consumer Staples — 2.0%                                

Beverages — 0.5%

                               

Anheuser-Busch Cos. LLC/Anheuser-Busch InBev Worldwide Inc., Senior Notes

    3.650     2/1/26       90,000     $ 99,377  

Anheuser-Busch InBev Worldwide Inc., Senior Notes

    4.000     4/13/28       40,000       45,544  

Anheuser-Busch InBev Worldwide Inc., Senior Notes

    4.750     1/23/29       10,000       11,913  

Anheuser-Busch InBev Worldwide Inc., Senior Notes

    3.500     6/1/30       20,000       22,248  

Anheuser-Busch InBev Worldwide Inc., Senior Notes

    4.439     10/6/48       30,000       35,907  

Anheuser-Busch InBev Worldwide Inc., Senior Notes

    4.500     6/1/50       80,000       97,359  

Coca-Cola Co., Senior Notes

    3.375     3/25/27       30,000       33,416  

Coca-Cola Co., Senior Notes

    1.450     6/1/27       50,000       50,488  

Diageo Investment Corp., Senior Notes

    2.875     5/11/22       50,000       51,131  

PepsiCo Inc., Senior Notes

    2.250     3/19/25       10,000       10,509  

PepsiCo Inc., Senior Notes

    2.625     3/19/27       60,000       64,430  

PepsiCo Inc., Senior Notes

    1.625     5/1/30       40,000       39,321  

Total Beverages

                            561,643  

Food & Staples Retailing — 0.1%

                               

Walmart Inc., Senior Notes

    3.400     6/26/23       20,000       21,188  

Walmart Inc., Senior Notes

    3.550     6/26/25       10,000       11,024  

Walmart Inc., Senior Notes

    3.050     7/8/26       10,000       10,949  

Walmart Inc., Senior Notes

    3.700     6/26/28       70,000       79,684  

Total Food & Staples Retailing

                            122,845  

Food Products — 0.7%

                               

Hershey Co., Senior Notes

    0.900     6/1/25       10,000       10,030  

Kraft Heinz Foods Co., Senior Notes

    4.250     3/1/31       10,000       11,360  

Kraft Heinz Foods Co., Senior Notes

    5.000     6/4/42       20,000       24,422  

Kraft Heinz Foods Co., Senior Notes

    5.200     7/15/45       260,000       322,775  

Kraft Heinz Foods Co., Senior Notes

    4.375     6/1/46       50,000       56,660  

Kraft Heinz Foods Co., Senior Notes

    4.875     10/1/49       30,000       36,418  

Kraft Heinz Foods Co., Senior Notes

    5.500     6/1/50       190,000       246,573  

Mars Inc., Senior Notes

    2.700     4/1/25       20,000       21,236  (a) 

Mars Inc., Senior Notes

    3.200     4/1/30       70,000       76,604  (a) 

Mars Inc., Senior Notes

    3.200     4/1/30       10,000       10,943  (b) 

Mondelez International Inc., Senior Notes

    1.500     5/4/25       90,000       91,588  

Total Food Products

                            908,609  

 

See Notes to Financial Statements.

 

 

  
6    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Household Products — 0.0%††

                               

Procter & Gamble Co., Senior Notes

    2.800     3/25/27       10,000     $ 10,839  

Procter & Gamble Co., Senior Notes

    3.000     3/25/30       30,000       33,100  

Total Household Products

                            43,939  

Tobacco — 0.7%

                               

Altria Group Inc., Senior Notes

    2.350     5/6/25       10,000       10,455  

Altria Group Inc., Senior Notes

    5.375     1/31/44       10,000       11,876  

Altria Group Inc., Senior Notes

    3.875     9/16/46       30,000       29,791  

Altria Group Inc., Senior Notes

    5.950     2/14/49       230,000       294,107  

Altria Group Inc., Senior Notes

    6.200     2/14/59       4,000       5,173  

BAT Capital Corp., Senior Notes

    3.557     8/15/27       70,000       74,960  

BAT Capital Corp., Senior Notes

    3.734     9/25/40       80,000       78,169  

BAT Capital Corp., Senior Notes

    4.540     8/15/47       100,000       106,342  

Cargill Inc., Senior Notes

    1.375     7/23/23       40,000       40,741  (a)  

Philip Morris International Inc., Senior Notes

    2.500     11/2/22       140,000       143,747  

Philip Morris International Inc., Senior Notes

    1.125     5/1/23       30,000       30,394  

Philip Morris International Inc., Senior Notes

    2.100     5/1/30       30,000       29,852  

Total Tobacco

                            855,607  

Total Consumer Staples

                            2,492,643  
Energy — 5.3%                                

Energy Equipment & Services — 0.0%††

                               

Halliburton Co., Senior Notes

    3.800     11/15/25       2,000       2,211  

Oil, Gas & Consumable Fuels — 5.3%

                               

BP Capital Markets America Inc., Senior Notes

    3.790     2/6/24       10,000       10,787  

BP Capital Markets America Inc., Senior Notes

    3.410     2/11/26       20,000       21,881  

BP Capital Markets America Inc., Senior Notes

    3.937     9/21/28       100,000       113,993  

BP Capital Markets America Inc., Senior Notes

    3.633     4/6/30       80,000       89,683  

BP Capital Markets PLC, Senior Notes

    3.506     3/17/25       20,000       21,878  

Cameron LNG LLC, Senior Secured Notes

    2.902     7/15/31       100,000       106,567  (a)  

Cheniere Energy Inc., Senior Secured Notes

    4.625     10/15/28       30,000       31,650  (a)  

Chevron Corp., Senior Notes

    1.554     5/11/25       50,000       51,235  

Chevron Corp., Senior Notes

    1.995     5/11/27       10,000       10,317  

Chevron Corp., Senior Notes

    2.236     5/11/30       60,000       61,829  

Chevron USA Inc., Senior Notes

    6.000     3/1/41       30,000       43,887  

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   7


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Oil, Gas & Consumable Fuels — continued

                               

Cimarex Energy Co., Senior Notes

    3.900     5/15/27       110,000     $ 121,246  

Cimarex Energy Co., Senior Notes

    4.375     3/15/29       140,000       159,083  

ConocoPhillips, Senior Notes

    3.750     10/1/27       20,000       22,473  (a) 

ConocoPhillips, Senior Notes

    4.300     8/15/28       120,000       139,305  (a) 

Devon Energy Corp., Senior Notes

    5.850     12/15/25       90,000       105,636  

Devon Energy Corp., Senior Notes

    5.000     6/15/45       330,000       387,652  

Diamondback Energy Inc., Senior Notes

    2.875     12/1/24       70,000       73,934  

Diamondback Energy Inc., Senior Notes

    3.250     12/1/26       30,000       32,157  

Diamondback Energy Inc., Senior Notes

    3.500     12/1/29       10,000       10,705  

Ecopetrol SA, Senior Notes

    5.875     5/28/45       190,000       203,585  

Energy Transfer LP, Junior Subordinated Notes (6.750% to 5/15/25 then 5 year Treasury Constant Maturity Rate + 5.134%)

    6.750     5/15/25       40,000       40,260  (c)(d) 

Energy Transfer LP, Senior Notes

    2.900     5/15/25       70,000       73,674  

Energy Transfer LP, Senior Notes

    4.950     6/15/28       10,000       11,554  

Energy Transfer LP, Senior Notes

    5.250     4/15/29       10,000       11,812  

Energy Transfer LP, Senior Notes

    3.750     5/15/30       100,000       108,629  

Energy Transfer LP, Senior Notes

    6.250     4/15/49       60,000       78,735  

Energy Transfer LP, Senior Notes

    5.000     5/15/50       80,000       92,465  

Enterprise Products Operating LLC, Senior Notes

    4.150     10/16/28       70,000       80,456  

Enterprise Products Operating LLC, Senior Notes

    2.800     1/31/30       80,000       84,513  

Enterprise Products Operating LLC, Senior Notes

    3.700     1/31/51       200,000       214,484  

EOG Resources Inc., Senior Notes

    4.375     4/15/30       100,000       118,381  

EOG Resources Inc., Senior Notes

    3.900     4/1/35       70,000       80,813  

EOG Resources Inc., Senior Notes

    4.950     4/15/50       10,000       13,307  

EQM Midstream Partners LP, Senior Notes

    6.000     7/1/25       130,000       141,37 5 (a) 

EQT Corp., Senior Notes

    3.000     10/1/22       60,000       61,275  

EQT Corp., Senior Notes

    3.900     10/1/27       285,000       305,306  

Exxon Mobil Corp., Senior Notes

    2.992     3/19/25       50,000       53,629  

Exxon Mobil Corp., Senior Notes

    3.482     3/19/30       40,000       44,916  

Exxon Mobil Corp., Senior Notes

    3.452     4/15/51       140,000       152,371  

Kinder Morgan Inc., Senior Notes

    4.300     3/1/28       110,000       125,559  

Kinder Morgan Inc., Senior Notes

    5.550     6/1/45       20,000       25,892  

Kinder Morgan Inc., Senior Notes

    5.050     2/15/46       20,000       24,286  

Kinder Morgan Inc., Senior Notes

    5.200     3/1/48       50,000       62,897  

MPLX LP, Senior Notes

    4.875     6/1/25       90,000       101,595  

MPLX LP, Senior Notes

    4.800     2/15/29       60,000       70,407  

 

See Notes to Financial Statements.

 

 

  
8    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Oil, Gas & Consumable Fuels — continued

                               

MPLX LP, Senior Notes

    4.500     4/15/38       100,000     $ 114,746  

MPLX LP, Senior Notes

    5.500     2/15/49       10,000       12,943  

Occidental Petroleum Corp., Senior Notes

    2.900     8/15/24       150,000       153,375  

Occidental Petroleum Corp., Senior Notes

    3.500     8/15/29       80,000       80,288  

Occidental Petroleum Corp., Senior Notes

    6.600     3/15/46       110,000       130,757  

Occidental Petroleum Corp., Senior Notes

    4.200     3/15/48       60,000       56,100  

Occidental Petroleum Corp., Senior Notes

    4.400     8/15/49       100,000       96,000  

Parsley Energy LLC/Parsley Finance Corp., Senior Notes

    4.125     2/15/28       10,000       10,525  (a) 

Petrobras Global Finance BV, Senior Notes

    5.750     2/1/29       610,000       696,254  

Pioneer Natural Resources Co., Senior Notes

    1.125     1/15/26       10,000       9,902  

Pioneer Natural Resources Co., Senior Notes

    2.150     1/15/31       60,000       58,792  

Qatar Petroleum, Senior Notes

    3.300     7/12/51       200,000       200,000  (a) 

Range Resources Corp., Senior Notes

    4.875     5/15/25       70,000       72,450  

Shell International Finance BV, Senior Notes

    4.375     5/11/45       50,000       61,311  

Shell International Finance BV, Senior Notes

    4.000     5/10/46       30,000       35,080  

Shell International Finance BV, Senior Notes

    3.250     4/6/50       20,000       21,270  

Targa Resources Partners LP/Targa Resources Partners Finance Corp., Senior Notes

    6.875     1/15/29       20,000       22,533  

Targa Resources Partners LP/Targa Resources Partners Finance Corp., Senior Notes

    4.875     2/1/31       40,000       43,300  (a) 

Transcontinental Gas Pipe Line Co. LLC, Senior Notes

    7.850     2/1/26       140,000       177,786  

Transcontinental Gas Pipe Line Co. LLC, Senior Notes

    3.250     5/15/30       100,000       108,194  

Western Midstream Operating LP, Senior Notes

    4.350     2/1/25       40,000       42,264  

Western Midstream Operating LP, Senior Notes

    4.500     3/1/28       10,000       10,675  

Western Midstream Operating LP, Senior Notes

    5.300     2/1/30       120,000       134,401  

Western Midstream Operating LP, Senior Notes

    5.500     8/15/48       80,000       87,071  

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   9


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Oil, Gas & Consumable Fuels — continued

                               

Western Midstream Operating LP, Senior Notes

    6.500     2/1/50       120,000     $ 138,940  

Western Midstream Operating LP, Senior Notes (3 mo. USD LIBOR + 2.100%)

    2.288     1/13/23       10,000       9,950  (d)  

Williams Cos. Inc., Senior Notes

    7.750     6/15/31       80,000       111,127  

Williams Cos. Inc., Senior Notes

    8.750     3/15/32       40,000       61,464  

Total Oil, Gas & Consumable Fuels

                            6,755,572  

Total Energy

                            6,757,783  
Financials — 9.9%                                

Banks — 7.0%

                               

Banco Actinver SA/Grupo GICSA SAB de CV, Senior Secured Notes

    4.800     12/18/32       270,000       218,194  (a)  

Banco Santander SA, Senior Notes

    3.848     4/12/23       200,000       211,642  

Bank of America Corp., Senior Notes

    5.000     1/21/44       100,000       132,962  

Bank of America Corp., Senior Notes (2.687% to 4/22/31 then SOFR + 1.320%)

    2.687     4/22/32       690,000       709,868  (d)  

Bank of America Corp., Senior Notes (3.004% to 12/20/22 then 3 mo. USD LIBOR + 0.790%)

    3.004     12/20/23       50,000       51,817  (d)  

Bank of America Corp., Senior Notes (3.970% to 3/5/28 then 3 mo. USD LIBOR + 1.070%)

    3.970     3/5/29       200,000       225,449  (d)  

Bank of America Corp., Senior Notes (4.330% to 3/15/49 then 3 mo. USD LIBOR + 1.520%)

    4.330     3/15/50       70,000       86,124  (d)  

Bank of America Corp., Subordinated Notes

    4.200     8/26/24       200,000       219,247  

Bank of Montreal, Senior Notes

    1.850     5/1/25       90,000       92,835  

Bank of Nova Scotia, Senior Notes

    1.300     6/11/25       50,000       50,490  

Barclays Bank PLC, Senior Notes

    1.700     5/12/22       200,000       202,294  

BNP Paribas SA, Senior Notes (2.219% to 6/9/25 then SOFR + 2.074%)

    2.219     6/9/26       200,000       206,121  (a)(d) 

BNP Paribas SA, Senior Notes (5.198% to 1/10/29 then 3 mo. USD LIBOR + 2.567%)

    5.198     1/10/30       200,000       240,624  (a)(d) 

Canadian Imperial Bank of Commerce, Senior Notes

    0.950     6/23/23       50,000       50,445  

Citigroup Inc., Senior Notes

    8.125     7/15/39       240,000       414,605  

Citigroup Inc., Senior Notes (1.678% to 5/15/23 then SOFR + 1.667%)

    1.678     5/15/24       50,000       51,057  (d)  

Citigroup Inc., Senior Notes (3.106% to 4/8/25 then SOFR + 2.842%)

    3.106     4/8/26       130,000       139,125  (d)  

 

See Notes to Financial Statements.

 

 

  
10    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Banks — continued

                               

Citigroup Inc., Senior Notes (3.980% to 3/20/29 then 3 mo. USD LIBOR + 1.338%)

    3.980     3/20/30       60,000     $ 67,959  (d) 

Citigroup Inc., Senior Notes (4.412% to 3/31/30 then SOFR + 3.914%)

    4.412     3/31/31       60,000       70,060  (d) 

Citigroup Inc., Subordinated Notes

    4.400     6/10/25       150,000       167,523  

Citigroup Inc., Subordinated Notes

    5.500     9/13/25       150,000       174,718  

Cooperatieve Rabobank UA, Senior Notes (1.339% to 6/24/25 then 1 year Treasury Constant Maturity Rate + 1.000%)

    1.339     6/24/26       250,000       251,030  (a)(d) 

Credit Agricole SA, Senior Notes (1.907% to 6/16/25 then SOFR + 1.676%)

    1.907     6/16/26       250,000       254,885  (a)(d) 

Danske Bank A/S, Senior Notes (3.001% to 9/20/21 then 3 mo. USD LIBOR + 1.249%)

    3.001     9/20/22       400,000       401,957  (a)(d) 

Fifth Third Bancorp, Senior Notes

    3.650     1/25/24       10,000       10,711  

HSBC Holdings PLC, Senior Notes (2.099% to 6/4/25 then SOFR + 1.929%)

    2.099     6/4/26       200,000       205,533  (d) 

Intesa Sanpaolo SpA, Senior Notes

    3.125     7/14/22       200,000       205,197  (a) 

Intesa Sanpaolo SpA, Senior Notes

    3.375     1/12/23       200,000       208,202  (a) 

JPMorgan Chase & Co., Senior Notes (2.083% to 4/22/25 then SOFR + 1.850%)

    2.083     4/22/26       90,000       93,064  (d) 

JPMorgan Chase & Co., Senior Notes (2.580% to 4/22/31 then SOFR + 1.250%)

    2.580     4/22/32       100,000       102,634  (d) 

JPMorgan Chase & Co., Senior Notes (2.739% to 10/15/29 then SOFR + 1.510%)

    2.739     10/15/30       200,000       209,321  (d) 

JPMorgan Chase & Co., Senior Notes (4.023% to 12/5/23 then 3 mo. USD LIBOR + 1.000%)

    4.023     12/5/24       90,000       97,139  (d) 

JPMorgan Chase & Co., Senior Notes (4.452% to 12/5/28 then 3 mo. USD LIBOR + 1.330%)

    4.452     12/5/29       100,000       116,936  (d) 

JPMorgan Chase & Co., Subordinated Notes

    4.950     6/1/45       110,000       145,599  

Lloyds Banking Group PLC, Senior Notes

    3.900     3/12/24       200,000       216,728  

Lloyds Banking Group PLC, Senior Notes

    4.375     3/22/28       200,000       229,689  

Royal Bank of Canada, Senior Notes

    1.600     4/17/23       80,000       81,733  

Royal Bank of Canada, Senior Notes

    1.150     6/10/25       50,000       50,267  

Swedbank AB, Senior Notes

    1.300     6/2/23       200,000       202,951  (a) 

Toronto-Dominion Bank, Senior Notes

    0.750     6/12/23       100,000       100,691  

Toronto-Dominion Bank, Senior Notes

    1.150     6/12/25       40,000       40,288  

US Bancorp, Senior Notes

    1.450     5/12/25       100,000       102,245  

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   11


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Banks — continued

                               

Wells Fargo & Co., Senior Notes

    3.750     1/24/24       20,000     $ 21,509  

Wells Fargo & Co., Senior Notes

    3.000     10/23/26       100,000       107,841  

Wells Fargo & Co., Senior Notes

    4.150     1/24/29       50,000       57,584  

Wells Fargo & Co., Senior Notes (1.654% to 6/2/23 then SOFR + 1.600%)

    1.654     6/2/24       100,000       102,139  (d)  

Wells Fargo & Co., Senior Notes (2.188% to 4/30/25 then SOFR + 2.000%)

    2.188     4/30/26       90,000       93,437  (d)  

Wells Fargo & Co., Senior Notes (2.879% to 10/30/29 then SOFR + 1.432%)

    2.879     10/30/30       310,000       328,280  (d)  

Wells Fargo & Co., Senior Notes (3.584% to 5/22/27 then 3 mo. USD LIBOR + 1.310%)

    3.584     5/22/28       100,000       110,169  (d)  

Wells Fargo & Co., Senior Notes (5.013% to 4/4/50 then SOFR + 4.502%)

    5.013     4/4/51       450,000       616,428  (d)  

Wells Fargo & Co., Subordinated Notes

    4.750     12/7/46       270,000       341,669  

Total Banks

                            8,889,015  

Capital Markets — 1.7%

                               

Bank of New York Mellon Corp., Senior Notes

    1.600     4/24/25       30,000       30,806  

Credit Suisse AG, Senior Notes

    2.950     4/9/25       250,000       267,673  

Credit Suisse Group AG, Senior Notes (2.193% to 6/5/25 then SOFR + 2.044%)

    2.193     6/5/26       250,000       255,978  (a)(d) 

Goldman Sachs Group Inc., Senior Notes

    3.200     2/23/23       10,000       10,433  

Goldman Sachs Group Inc., Senior Notes

    3.850     7/8/24       80,000       86,533  

Goldman Sachs Group Inc., Senior Notes

    3.500     4/1/25       190,000       206,130  

Goldman Sachs Group Inc., Senior Notes

    3.500     11/16/26       50,000       54,370  

Goldman Sachs Group Inc., Senior Notes (4.223% to 5/1/28 then 3 mo. USD LIBOR + 1.301%)

    4.223     5/1/29       90,000       102,645  (d)  

Goldman Sachs Group Inc., Subordinated Notes

    5.150     5/22/45       310,000       414,513  

Morgan Stanley, Senior Notes (2.188% to 4/28/25 then SOFR + 1.990%)

    2.188     4/28/26       130,000       134,979  (d)  

Morgan Stanley, Senior Notes (2.699% to 1/22/30 then SOFR + 1.143%)

    2.699     1/22/31       50,000       52,340  (d)  

Morgan Stanley, Senior Notes (3.622% to 4/1/30 then SOFR + 3.120%)

    3.622     4/1/31       110,000       122,788  (d)  

Morgan Stanley, Senior Notes (4.431% to 1/23/29 then 3 mo. USD LIBOR + 1.628%)

    4.431     1/23/30       50,000       58,544  (d)  

 

See Notes to Financial Statements.

 

 

  
12    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Capital Markets — continued

                               

UBS AG, Senior Notes

    1.750     4/21/22       200,000     $ 202,240  (a)  

UBS Group AG, Junior Subordinated Notes (7.000% to 1/31/24 then USD 5 year ICE Swap Rate + 4.344%)

    7.000     1/31/24       200,000       220,250  (a)(c)(d) 

Total Capital Markets

                            2,220,222  

Consumer Finance — 0.1%

                               

American Express Co., Senior Notes

    3.700     11/5/21       90,000       90,821  

Diversified Financial Services — 0.9%

                               

Allied Universal Holdco LLC/Allied Universal Finance Corp./Atlas Luxco 4 Sarl, Senior Secured Notes

    4.625     6/1/28       360,000       361,300  (a)  

GE Capital International Funding Co. Unlimited Co., Senior Notes

    4.418     11/15/35       200,000       239,696  

International Lease Finance Corp., Senior Notes

    5.875     8/15/22       150,000       158,734  

National Securities Clearing Corp., Senior Notes

    1.500     4/23/25       250,000       254,957  (a)  

Park Aerospace Holdings Ltd., Senior Notes

    5.500     2/15/24       90,000       98,937  (a)  

Total Diversified Financial Services

                            1,113,624  

Insurance — 0.2%

                               

American International Group Inc., Senior Notes

    2.500     6/30/25       30,000       31,658  

American International Group Inc., Senior Notes

    3.750     7/10/25       50,000       55,098  

Berkshire Hathaway Finance Corp., Senior Notes

    4.250     1/15/49       70,000       86,955  

Guardian Life Global Funding, Secured Notes

    1.100     6/23/25       20,000       20,064  (a)  

New York Life Global Funding, Senior Secured Notes

    0.950     6/24/25       40,000       40,036  (a)  

Total Insurance

                            233,811  

Total Financials

                            12,547,493  
Health Care — 2.9%                                

Biotechnology — 0.7%

                               

AbbVie Inc., Senior Notes

    3.750     11/14/23       10,000       10,726  

AbbVie Inc., Senior Notes

    2.600     11/21/24       300,000       316,334  

AbbVie Inc., Senior Notes

    3.200     11/21/29       330,000       358,395  

AbbVie Inc., Senior Notes

    4.750     3/15/45       60,000       75,225  

Gilead Sciences Inc., Senior Notes

    3.650     3/1/26       80,000       88,194  

Total Biotechnology

                            848,874  

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   13


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Health Care Equipment & Supplies — 0.2%

                               

Abbott Laboratories, Senior Notes

    3.750     11/30/26       130,000     $ 146,813  

Becton Dickinson and Co., Senior Notes

    3.363     6/6/24       80,000       85,711  

Total Health Care Equipment & Supplies

                            232,524  

Health Care Providers & Services — 0.9%

                               

Anthem Inc., Senior Notes

    3.650     12/1/27       40,000       44,768  

Centene Corp., Senior Notes

    5.375     6/1/26       10,000       10,450  (a)  

Centene Corp., Senior Notes

    4.625     12/15/29       60,000       65,986  

Centene Corp., Senior Notes

    3.375     2/15/30       20,000       20,906  

Cigna Corp., Senior Notes

    3.750     7/15/23       4,000       4,260  

Cigna Corp., Senior Notes

    4.125     11/15/25       30,000       33,619  

Cigna Corp., Senior Notes

    4.800     8/15/38       160,000       199,269  

CVS Health Corp., Senior Notes

    3.625     4/1/27       10,000       11,082  

CVS Health Corp., Senior Notes

    2.700     8/21/40       100,000       96,932  

CVS Health Corp., Senior Notes

    5.050     3/25/48       110,000       142,876  

HCA Inc., Senior Notes

    5.625     9/1/28       40,000       47,400  

HCA Inc., Senior Notes

    3.500     9/1/30       60,000       63,922  

Humana Inc., Senior Notes

    4.500     4/1/25       10,000       11,197  

Humana Inc., Senior Notes

    3.950     3/15/27       20,000       22,425  

Humana Inc., Senior Notes

    3.125     8/15/29       90,000       96,877  

UnitedHealth Group Inc., Senior Notes

    1.250     1/15/26       10,000       10,092  

UnitedHealth Group Inc., Senior Notes

    3.875     12/15/28       20,000       23,001  

UnitedHealth Group Inc., Senior Notes

    2.875     8/15/29       50,000       53,935  

UnitedHealth Group Inc., Senior Notes

    2.000     5/15/30       140,000       141,042  

UnitedHealth Group Inc., Senior Notes

    5.700     10/15/40       30,000       42,438  

Total Health Care Providers & Services

                            1,142,477  

Pharmaceuticals — 1.1%

                               

Bristol-Myers Squibb Co., Senior Notes

    2.600     5/16/22       20,000       20,428  

Bristol-Myers Squibb Co., Senior Notes

    3.200     6/15/26       20,000       21,954  

Bristol-Myers Squibb Co., Senior Notes

    3.400     7/26/29       140,000       156,896  

Bristol-Myers Squibb Co., Senior Notes

    4.250     10/26/49       40,000       50,473  

Johnson & Johnson, Senior Notes

    0.550     9/1/25       40,000       39,623  

Johnson & Johnson, Senior Notes

    0.950     9/1/27       80,000       78,504  

Johnson & Johnson, Senior Notes

    3.625     3/3/37       30,000       35,003  

Merck & Co. Inc., Senior Notes

    0.750     2/24/26       100,000       99,426  

Merck & Co. Inc., Senior Notes

    1.450     6/24/30       30,000       29,195  

Pfizer Inc., Senior Notes

    0.800     5/28/25       60,000       60,176  

Teva Pharmaceutical Finance Co. BV, Senior Notes

    2.950     12/18/22       280,000       281,400  

 

See Notes to Financial Statements.

 

 

  
14    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Pharmaceuticals — continued

                               

Teva Pharmaceutical Finance Netherlands III BV, Senior Notes

    2.200     7/21/21       100,000     $ 99,960  

Teva Pharmaceutical Finance Netherlands III BV, Senior Notes

    2.800     7/21/23       90,000       89,684  

Teva Pharmaceutical Finance Netherlands III BV, Senior Notes

    3.150     10/1/26       340,000       323,425  

Total Pharmaceuticals

                            1,386,147  

Total Health Care

                            3,610,022  
Industrials — 2.9%                                

Aerospace & Defense — 1.2%

                               

Boeing Co., Senior Notes

    1.433     2/4/24       220,000       220,582  

Boeing Co., Senior Notes

    4.875     5/1/25       90,000       100,842  

Boeing Co., Senior Notes

    2.196     2/4/26       140,000       141,338  

Boeing Co., Senior Notes

    3.200     3/1/29       110,000       115,445  

Boeing Co., Senior Notes

    5.150     5/1/30       90,000       106,574  

Boeing Co., Senior Notes

    3.250     2/1/35       130,000       131,446  

Boeing Co., Senior Notes

    3.550     3/1/38       10,000       10,270  

Boeing Co., Senior Notes

    5.705     5/1/40       70,000       90,152  

Boeing Co., Senior Notes

    5.805     5/1/50       70,000       94,264  

Boeing Co., Senior Notes

    5.930     5/1/60       20,000       27,617  

L3Harris Technologies Inc., Senior Notes

    4.854     4/27/35       50,000       62,624  

Lockheed Martin Corp., Senior Notes

    3.550     1/15/26       50,000       55,252  

Northrop Grumman Corp., Senior Notes

    3.250     1/15/28       130,000       141,992  

Raytheon Technologies Corp., Senior Notes

    2.250     7/1/30       170,000       172,756  

Total Aerospace & Defense

                            1,471,154  

Airlines — 1.2%

                               

Delta Air Lines Inc., Senior Notes

    3.625     3/15/22       20,000       20,281  

Delta Air Lines Inc., Senior Notes

    3.800     4/19/23       30,000       31,137  

Delta Air Lines Inc., Senior Notes

    2.900     10/28/24       60,000       61,045  

Delta Air Lines Inc., Senior Notes

    7.375     1/15/26       490,000       574,934  

Delta Air Lines Inc., Senior Secured Notes

    7.000     5/1/25       370,000       431,786  (a)  

Delta Air Lines Inc./SkyMiles IP Ltd., Senior Secured Notes

    4.500     10/20/25       90,000       96,716  (a)  

Delta Air Lines Inc./SkyMiles IP Ltd., Senior Secured Notes

    4.750     10/20/28       70,000       77,823  (a)  

Mileage Plus Holdings LLC/Mileage Plus Intellectual Property Assets Ltd., Senior Secured Notes

    6.500     6/20/27       60,000       66,060  (a)  

Spirit Loyalty Cayman Ltd./Spirit IP Cayman Ltd., Senior Secured Notes

    8.000     9/20/25       42,000       47,502  (a)  

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   15


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Airlines — continued

                               

United Airlines Inc., Senior Secured Notes

    4.375     4/15/26       10,000     $ 10,352  (a)  

United Airlines Inc., Senior Secured Notes

    4.625     4/15/29       140,000       144,900  (a)  

Total Airlines

                            1,562,536  

Building Products — 0.0%††

                               

Carrier Global Corp., Senior Notes

    2.722     2/15/30       20,000       20,734  

Carrier Global Corp., Senior Notes

    2.700     2/15/31       25,000       25,741  

Total Building Products

                            46,475  

Commercial Services & Supplies — 0.1%

                               

Cintas Corp. No 2, Senior Notes

    2.900     4/1/22       50,000       50,892  

Republic Services Inc., Senior Notes

    2.500     8/15/24       10,000       10,495  

Total Commercial Services & Supplies

                            61,387  

Electrical Equipment — 0.0%††

                               

Eaton Corp., Senior Notes

    2.750     11/2/22       50,000       51,619  

Industrial Conglomerates — 0.2%

                               

3M Co., Senior Notes

    2.375     8/26/29       10,000       10,497  

3M Co., Senior Notes

    3.050     4/15/30       40,000       43,914  

General Electric Co., Senior Notes

    3.450     5/1/27       10,000       10,993  

General Electric Co., Senior Notes

    3.625     5/1/30       20,000       22,302  

General Electric Co., Senior Notes

    6.750     3/15/32       10,000       13,861  

General Electric Co., Senior Notes

    6.875     1/10/39       41,000       61,338  

Honeywell International Inc., Senior Notes

    1.350     6/1/25       30,000       30,553  

Total Industrial Conglomerates

                            193,458  

Machinery — 0.0%††

                               

Otis Worldwide Corp., Senior Notes

    2.056     4/5/25       20,000       20,779  

Road & Rail — 0.2%

                               

Union Pacific Corp., Senior Notes

    2.150     2/5/27       40,000       41,484  

Union Pacific Corp., Senior Notes

    2.891     4/6/36       30,000       31,153  (a)  

Union Pacific Corp., Senior Notes

    3.839     3/20/60       70,000       79,695  

Union Pacific Corp., Senior Notes

    3.750     2/5/70       50,000       55,113  

Total Road & Rail

                            207,445  

Trading Companies & Distributors — 0.0%††

                               

Air Lease Corp., Senior Notes

    3.375     7/1/25       30,000       32,224  

Total Industrials

                            3,647,077  
Information Technology — 1.2%                                

IT Services — 0.3%

                               

International Business Machines Corp., Senior Notes

    3.000     5/15/24       100,000       106,574  

PayPal Holdings Inc., Senior Notes

    1.350     6/1/23       40,000       40,708  

PayPal Holdings Inc., Senior Notes

    1.650     6/1/25       30,000       30,789  

 

See Notes to Financial Statements.

 

 

  
16    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

IT Services — continued

                               

PayPal Holdings Inc., Senior Notes

    2.300     6/1/30       40,000     $ 41,396  

Visa Inc., Senior Notes

    2.700     4/15/40       65,000       67,193  

Visa Inc., Senior Notes

    4.300     12/14/45       40,000       51,336  

Total IT Services

                            337,996  

Semiconductors & Semiconductor Equipment — 0.4%

                               

Broadcom Inc., Senior Notes

    4.700     4/15/25       150,000       168,985  

Broadcom Inc., Senior Notes

    3.150     11/15/25       70,000       75,025  

Intel Corp., Senior Notes

    4.750     3/25/50       60,000       79,705  

Micron Technology Inc., Senior Notes

    2.497     4/24/23       50,000       51,681  

NVIDIA Corp., Senior Notes

    2.850     4/1/30       20,000       21,649  

NXP BV/NXP Funding LLC/NXP USA Inc., Senior Notes

    2.700     5/1/25       40,000       42,185  (a)  

Total Semiconductors & Semiconductor Equipment

                            439,230  

Software — 0.4%

                               

Microsoft Corp., Senior Notes

    3.300     2/6/27       210,000       233,631  

Oracle Corp., Senior Notes

    1.650     3/25/26       120,000       121,639  

Oracle Corp., Senior Notes

    2.875     3/25/31       130,000       135,210  

salesforce.com Inc., Senior Notes

    3.250     4/11/23       50,000       52,455  

Total Software

                            542,935  

Technology Hardware, Storage & Peripherals — 0.1%

                               

Apple Inc., Senior Notes

    1.125     5/11/25       100,000       101,161  

Apple Inc., Senior Notes

    2.450     8/4/26       80,000       85,094  

Total Technology Hardware, Storage & Peripherals

                            186,255  

Total Information Technology

                            1,506,416  
Materials — 1.4%                                

Chemicals — 0.2%

                               

Orbia Advance Corp. SAB de CV, Senior Notes

    2.875     5/11/31       200,000       201,250  (a)  

Metals & Mining — 1.1%

                               

Anglo American Capital PLC, Senior Notes

    4.000     9/11/27       200,000       221,735  (a)  

Barrick North America Finance LLC, Senior Notes

    5.750     5/1/43       50,000       70,490  

BHP Billiton Finance USA Ltd., Senior Notes

    5.000     9/30/43       30,000       40,768  

Freeport-McMoRan Inc., Senior Notes

    4.550     11/14/24       460,000       500,250  

Freeport-McMoRan Inc., Senior Notes

    4.625     8/1/30       20,000       21,900  

Freeport-McMoRan Inc., Senior Notes

    5.450     3/15/43       105,000       128,344  

Glencore Funding LLC, Senior Notes

    4.125     3/12/24       150,000       161,707  (a)  

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   17


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Metals & Mining — continued

                               

Glencore Funding LLC, Senior Notes

    4.000     3/27/27       150,000     $ 166,253  (a)  

Glencore Funding LLC, Senior Notes

    3.875     10/27/27       30,000       32,994  (a)  

Total Metals & Mining

                            1,344,441  

Paper & Forest Products — 0.1%

                               

Suzano Austria GmbH, Senior Notes

    3.750     1/15/31       150,000       157,312  

Suzano Austria GmbH, Senior Notes

    3.125     1/15/32       10,000       9,904  (e)  

Total Paper & Forest Products

                            167,216  

Total Materials

                            1,712,907  
Utilities — 0.5%                                

Electric Utilities — 0.5%

                               

Duke Energy Ohio Inc., Secured Bonds

    3.650     2/1/29       100,000       111,362  

FirstEnergy Corp., Senior Notes

    7.375     11/15/31       290,000       397,158  

Pacific Gas and Electric Co., First Mortgage Bonds

    1.750     6/16/22       70,000       69,961  

Total Utilities

                            578,481  

Total Corporate Bonds & Notes (Cost — $40,193,393)

 

                    42,289,545  
Sovereign Bonds — 15.1%                                

Argentina — 0.0%††

                               

Argentine Republic Government International Bond, Senior Notes

    1.000     7/9/29       4,443       1,682  

Argentine Republic Government International Bond, Senior Notes, Step bond (0.125% to 7/9/21 then 0.500%)

    0.125     7/9/30       145,500       52,120  

Total Argentina

                            53,802  

Brazil — 2.2%

                               

Brazil Letras do Tesouro Nacional

    0.000     1/1/24       8,063,000  BRL       1,327,503  

Brazil Notas do Tesouro Nacional Serie F, Notes

    10.000     1/1/25       272,000  BRL       57,172  

Brazil Notas do Tesouro Nacional Serie F, Notes

    10.000     1/1/27       3,833,000  BRL       809,412  

Brazilian Government International Bond, Senior Notes

    5.000     1/27/45       550,000       555,764  

Total Brazil

                            2,749,851  

Colombia — 0.3%

                               

Colombia Government International Bond, Senior Notes

    5.000     6/15/45       330,000       350,526  

Indonesia — 2.8%

                               

Indonesia Government International Bond, Senior Notes

    4.350     1/11/48       700,000       793,738  

Indonesia Treasury Bond

    7.000     5/15/27       9,787,000,000  IDR      714,856  

 

See Notes to Financial Statements.

 

 

  
18    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

Security   Rate    

Maturity

Date

   

Face

Amount†

    Value  

Indonesia — continued

                               

Indonesia Treasury Bond

    6.500     2/15/31       28,500,000,000  IDR    $ 1,949,400  

Indonesia Treasury Bond

    7.500     6/15/35       330,000,000  IDR      23,499  

Total Indonesia

                            3,481,493  

Italy — 1.3%

                               

Italy Buoni Poliennali Del Tesoro, Senior Notes

    2.300     10/15/21       1,380,000  EUR       1,649,782  (b)  

Kenya — 0.2%

                               

Kenya Government International Bond, Senior Notes

    6.300     1/23/34       200,000       199,500  (a)   

Kuwait — 0.3%

                               

Kuwait International Government Bond, Senior Notes

    3.500     3/20/27       400,000       445,960  (a)   

Mexico — 4.0%

                               

Mexican Bonos, Bonds

    8.000     11/7/47       8,800,000  MXN       465,562  

Mexican Bonos, Senior Notes

    8.500     5/31/29       2,290,000  MXN       126,528  

Mexican Bonos, Senior Notes

    7.750     11/13/42       67,020,000  MXN      3,455,903  

Mexico Government International Bond, Senior Notes

    4.750     3/8/44       870,000       960,219  

Total Mexico

                            5,008,212  

Peru — 0.3%

                               

Peruvian Government International Bond, Senior Notes

    2.783     1/23/31       400,000       407,504  

Qatar — 0.5%

                               

Qatar Government International Bond, Senior Notes

    4.400     4/16/50       540,000       657,260  (a)   

Russia — 2.8%

                               

Russian Federal Bond — OFZ

    6.000     10/6/27       9,460,000  RUB       123,345  

Russian Federal Bond — OFZ

    6.900     5/23/29       105,522,000  RUB      1,438,825  

Russian Federal Bond — OFZ

    7.650     4/10/30       86,870,000  RUB       1,237,367  

Russian Federal Bond — OFZ

    7.250     5/10/34       240,000  RUB       3,330  

Russian Federal Bond — OFZ

    7.700     3/16/39       53,520,000  RUB       775,117  

Total Russia

                            3,577,984  

South Africa — 0.4%

                               

Republic of South Africa Government Bond, Senior Notes

    6.250     3/31/36       9,660,000  ZAR       479,876  

Total Sovereign Bonds (Cost — $19,181,738)

 

            19,061,750  
Mortgage-Backed Securities — 15.0%

 

                       

FHLMC — 3.0%

                               

Federal Home Loan Mortgage Corp. (FHLMC)

    3.500     4/1/33-5/1/50       313,686       336,331  

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   19


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

Security   Rate    

Maturity

Date

   

Face

Amount†

    Value  

FHLMC — continued

                               

Federal Home Loan Mortgage Corp. (FHLMC)

    3.000     1/1/47-7/1/50       1,005,214     $ 1,061,525  

Federal Home Loan Mortgage Corp. (FHLMC)

    4.500     5/1/47-7/1/49       403,140       438,885  

Federal Home Loan Mortgage Corp. (FHLMC)

    4.000     3/1/48       76,912       83,623  

Federal Home Loan Mortgage Corp. (FHLMC)

    5.000     11/1/48-11/1/49       221,579       244,240  

Federal Home Loan Mortgage Corp. (FHLMC)

    2.000     11/1/50-5/1/51       888,772       899,775  

Federal Home Loan Mortgage Corp. (FHLMC)

    2.500     12/1/50-1/1/51       193,832       201,810  

Federal Home Loan Mortgage Corp. (FHLMC)

    1.500     3/1/51       98,542       95,418  

Federal Home Loan Mortgage Corp. (FHLMC) Gold

    3.000     10/1/46-5/1/47       153,994       164,434  

Federal Home Loan Mortgage Corp. (FHLMC) Gold

    4.000     6/1/47       237,224       254,778  

Total FHLMC

                            3,780,819  

FNMA — 8.5%

                               

Federal National Mortgage Association (FNMA)

    3.160     5/1/29       9,732       10,842  

Federal National Mortgage Association (FNMA)

    3.500     12/1/34-8/1/50       1,040,464       1,106,043  

Federal National Mortgage Association (FNMA)

    2.790     1/1/35       49,672       54,695  (d)  

Federal National Mortgage Association (FNMA)

    3.000     7/1/35-11/1/50       1,678,094       1,769,939  

Federal National Mortgage Association (FNMA)

    2.000     7/1/36-7/1/51       1,300,000       1,325,344  (f) 

Federal National Mortgage Association (FNMA)

    2.500     8/1/36-8/1/51       600,000       621,271  (f)  

Federal National Mortgage Association (FNMA)

    2.500     9/1/36-6/1/51       1,483,259       1,543,878  

Federal National Mortgage Association (FNMA)

    2.000     11/1/40-4/1/51       1,042,508       1,054,623  

Federal National Mortgage Association (FNMA)

    6.000     7/1/41       45,485       53,965  

Federal National Mortgage Association (FNMA)

    4.500     6/1/47-1/1/59       648,672       709,545  

 

See Notes to Financial Statements.

 

 

  
20    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

Security   Rate    

Maturity

Date

   

Face

Amount†

    Value  

FNMA — continued

                               

Federal National Mortgage Association (FNMA)

    4.000     7/1/47-10/1/48       1,048,867     $ 1,124,081  

Federal National Mortgage Association (FNMA)

    5.000     11/1/48-9/1/49       422,382       467,450  

Federal National Mortgage Association (FNMA)

    3.500     7/1/51       700,000       736,818  (f)  

Federal National Mortgage Association (FNMA)

    3.000     8/1/51       100,000       104,170  (f)  

Total FNMA

                            10,682,664  

GNMA — 3.5%

                               

Government National Mortgage Association (GNMA)

    3.000     10/15/42       63,634       67,046  

Government National Mortgage Association (GNMA) II

    3.500     2/20/46-1/20/50       721,751       763,091  

Government National Mortgage Association (GNMA) II

    3.000     11/20/46-9/20/50       992,825       1,053,193  

Government National Mortgage Association (GNMA) II

    4.500     4/20/48-4/20/50       831,202       888,378  

Government National Mortgage Association (GNMA) II

    5.000     10/20/48-1/20/49       165,570       178,684  

Government National Mortgage Association (GNMA) II

    4.000     3/20/49-4/20/50       660,493       701,577  

Government National Mortgage Association (GNMA) II

    2.000     12/20/50       390,505       398,193  

Government National Mortgage Association (GNMA) II

    2.500     7/1/51       400,000       413,937  (f)  

Total GNMA

                            4,464,099  

Total Mortgage-Backed Securities (Cost — $18,956,600)

 

            18,927,582  
Collateralized Mortgage Obligations (g) — 11.3%

 

                       

Alternative Loan Trust, 2005-81 A1 (1 mo. USD LIBOR + 0.560%)

    0.652     2/25/37       171,713       150,621  (d)  

BAMLL Commercial Mortgage Securities Trust, 2020-JGDN A (1 mo. USD LIBOR + 2.750%)

    2.823     11/15/30       250,000       253,448  (a)(d)  

BWAY Mortgage Trust, 2015-1740 E

    4.806     1/10/35       500,000       474,897  (a)(d)  

BX Commercial Mortgage Trust, 2018-IND G (1 mo. USD LIBOR + 2.050%)

    2.123     11/15/35       133,000       133,042  (a)(d)  

BX Commercial Mortgage Trust, 2019-IMC F (1 mo. USD LIBOR + 2.900%)

    2.973     4/15/34       300,000       296,990  (a)(d)  

Cold Storage Trust, 2020-ICE5 A (1 mo. USD LIBOR + 0.900%)

    0.973     11/15/37       501,325       503,915  (a)(d)  

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   21


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

Security   Rate    

Maturity

Date

   

Face

Amount†

    Value  
Collateralized Mortgage Obligations (g) — continued

 

                       

CSAIL Commercial Mortgage Trust, 2017-C8 C

    4.458     6/15/50       500,000     $ 520,058  (d) 

CSAIL Commercial Mortgage Trust, 2021- C20 A3

    2.805     3/15/54       240,000       253,836  

CSMC Trust, 2019-RPL9 A1

    2.980     10/27/59       226,849       228,648  (a)(d) 

CSMC Trust, 2019-UVIL A

    3.160     12/15/41       260,000       275,828  (a)  

Federal Home Loan Mortgage Corp. (FHLMC) Multifamily Structured Pass- Through Certificates, K101 A1

    2.190     7/25/29       486,124       514,264  

Federal Home Loan Mortgage Corp. (FHLMC) Multifamily Structured Pass- Through Certificates, K101 X1, IO

    0.948     10/25/29       2,891,910       180,157  (d)  

Federal Home Loan Mortgage Corp. (FHLMC) REMIC, 5010 IK, IO

    2.500     9/25/50       87,338       12,085  

Federal Home Loan Mortgage Corp. (FHLMC) REMIC, 5010 JI, IO

    2.500     9/25/50       94,899       14,415  

Federal Home Loan Mortgage Corp. (FHLMC) REMIC, 5018 MI, IO

    2.000     10/25/50       96,393       12,508  

Federal Home Loan Mortgage Corp. (FHLMC) Seasoned Credit Risk Transfer Trust, 2018-1 M

    4.750     5/25/57       550,000       571,426  (a)(d) 

Federal Home Loan Mortgage Corp. (FHLMC) Seasoned Credit Risk Transfer Trust, 2020-1 M

    4.250     8/25/59       640,000       674,653  (a)(d) 

Federal Home Loan Mortgage Corp. (FHLMC) Structured Agency Credit Risk Debt Notes, 2017-DNA1 M2 (1 mo. USD LIBOR + 3.250%)

    3.342     7/25/29       235,454       243,923  (d)  

Federal Home Loan Mortgage Corp. (FHLMC) Structured Agency Credit Risk Debt Notes, 2017-DNA3 M2 (1 mo. USD LIBOR + 2.500%)

    2.592     3/25/30       980,000       1,001,818  (d) 

Federal Home Loan Mortgage Corp. (FHLMC) Structured Agency Credit Risk Debt Notes, 2020-DNA3 M2 (1 mo. USD LIBOR + 3.000%)

    3.092     6/25/50       187,565       188,682  (a)(d) 

Federal National Mortgage Association (FNMA) — CAS, 2014-C01 M2 (1 mo. USD LIBOR + 4.400%)

    4.492     1/25/24       65,263       67,480  (d)  

Federal National Mortgage Association (FNMA) — CAS, 2014-C02 1M2 (1 mo. USD LIBOR + 2.600%)

    2.692     5/25/24       134,545       135,325  (d)  

 

See Notes to Financial Statements.

 

 

  
22    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Collateralized Mortgage Obligations (g) — continued

 

                       

Federal National Mortgage Association (FNMA) — CAS, 2015-C03 1M2 (1 mo. USD LIBOR + 5.000%)

    5.092     7/25/25       34,647     $ 35,629  (a)(d) 

Federal National Mortgage Association (FNMA) — CAS, 2016-C03 1M2 (1 mo. USD LIBOR + 5.300%)

    5.392     10/25/28       156,261       163,834  (a)(d) 

Federal National Mortgage Association (FNMA) — CAS, 2017-C05 1M2 (1 mo. USD LIBOR + 2.200%)

    2.292     1/25/30       89,345       90,769  (a)(d) 

Federal National Mortgage Association (FNMA) — CAS, 2017-C07 1M2 (1 mo. USD LIBOR + 2.400%)

    2.492     5/25/30       345,975       350,827  (a)(d) 

Federal National Mortgage Association (FNMA) — CAS, 2018-C01 1B1 (1 mo. USD LIBOR + 3.550%)

    3.642     7/25/30       230,000       235,786  (a)(d) 

Federal National Mortgage Association (FNMA) — CAS, 2018-C01 1M2 (1 mo. USD LIBOR + 2.250%)

    2.342     7/25/30       286,543       290,513  (a)(d) 

Federal National Mortgage Association (FNMA) — CAS, 2018-C03 1B1 (1 mo. USD LIBOR + 3.750%)

    3.842     10/25/30       320,000       332,759  (a)(d) 

Federal National Mortgage Association (FNMA) — CAS, 2018-C03 1M2 (1 mo. USD LIBOR + 2.150%)

    2.242     10/25/30       225,323       228,072  (a)(d) 

Federal National Mortgage Association (FNMA) — CAS, 2019-R07 1M2 (1 mo. USD LIBOR + 2.100%)

    2.192     10/25/39       200,169       200,995  (a)(d) 

Federal National Mortgage Association (FNMA) ACES, 2018-M9 APT2

    3.225     4/25/28       97,952       108,692  (d) 

Federal National Mortgage Association (FNMA) ACES, 2019-M4 A2

    3.610     2/25/31       10,000       11,675  

Federal National Mortgage Association (FNMA) ACES, 2019-M23 3A3

    2.720     10/25/31       99,931       109,176  (d) 

Federal National Mortgage Association (FNMA) REMIC, 2020-74 EI, IO

    2.500     10/25/50       93,114       14,302  

Federal National Mortgage Association (FNMA) REMIC, 2020-89 DI, IO

    2.500     12/25/50       278,640       37,914  

Federal National Mortgage Association (FNMA) REMIC, 2021-1 IG, IO

    2.500     2/25/51       196,614       29,845  

Government National Mortgage Association (GNMA), 2013-50 IO, IO

    0.133     10/16/48       13,813,957       106,877  (d) 

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   23


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Collateralized Mortgage Obligations (g) — continued

 

                       

Government National Mortgage Association (GNMA), 2014-17 AM

    3.131     6/16/48       115,021     $ 122,798  (d) 

Government National Mortgage Association (GNMA), 2016-14 H

    2.850     3/16/57       392,547       408,164  

Government National Mortgage Association (GNMA), 2020-123 NI, IO

    2.500     8/20/50       96,938       13,262  

Government National Mortgage Association (GNMA), 2020-160 YI, IO

    2.500     10/20/50       195,191       26,533  

Government National Mortgage Association (GNMA), 2020-181 WI, IO

    2.000     12/20/50       486,868       54,119  

Government National Mortgage Association (GNMA), 2020-H13 FA (1 mo. USD LIBOR + 0.450%)

    0.543     7/20/70       472,251       477,924  (d) 

Government National Mortgage Association (GNMA), 2020-H13 FC (1 mo. USD LIBOR + 0.450%)

    0.543     7/20/70       499,280       504,778  (d) 

Government National Mortgage Association (GNMA), 2020-H13 FM (1 mo. USD LIBOR + 0.400%)

    0.493     8/20/70       258,934       259,957  (d) 

GS Mortgage Securities Corp. II, 2018-SRP5 C (1 mo. USD LIBOR + 3.750%)

    3.832     9/15/31       400,000       128,204  (a)(d) 

GS Mortgage Securities Trust, 2017-GS8 C

    4.480     11/10/50       401,000       436,545  (d) 

GS Mortgage Securities Trust, 2020-DUNE A (1 mo. USD LIBOR + 1.100%)

    1.173     12/15/36       280,000       281,364  (a)(d) 

Impac CMB Trust, 2005-7 A1 (1 mo. USD LIBOR + 0.520%)

    0.612     11/25/35       196,509       184,914  (d) 

IndyMac INDX Mortgage Loan Trust, 2005- AR10 A1 (1 mo. USD LIBOR + 0.520%)

    0.612     6/25/35       212,610       194,446  (d) 

JPMorgan Chase Commercial Mortgage Securities Trust, 2019-BKWD D (1 mo. USD LIBOR + 1.850%)

    1.923     9/15/29       400,000       398,481  (a)(d) 

Legacy Mortgage Asset Trust, 2019-GS7 A1, Step bond

    3.250     11/25/59       220,336       221,616  (a) 

MRA Issuance Trust, 2021-EBO1 A1X (1 mo. USD LIBOR + 1.750%)

    1.842     10/8/21       120,000       119,986  (a)(d) 

MTRO Commercial Mortgage Trust, 2019- TECH D (1 mo. USD LIBOR + 1.800%)

    1.873     12/15/33       100,000       99,661  (a)(d) 

New Residential Mortgage Loan Trust, 2016-3A A1B

    3.250     9/25/56       325,887       344,112  (a)(d) 

Tharaldson Hotel Portfolio Trust, 2018-THL D (1 mo. USD LIBOR + 2.150%)

    2.230     11/11/34       243,024       240,884  (a)(d) 

 

See Notes to Financial Statements.

 

 

  
24    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Collateralized Mortgage Obligations (g) — continued

 

                       

WaMu Mortgage Pass-Through Certificates Trust, 2005-AR8 2A1A (1 mo. USD LIBOR + 0.580%)

    0.672     7/25/45       58,923     $ 57,964  (d)  

Wells Fargo Commercial Mortgage Trust, 2017-C41 B

    4.188     11/15/50       70,000       75,457  (d)  

Wells Fargo Commercial Mortgage Trust, 2018-C44 A5

    4.212     5/15/51       500,000       575,231  

Total Collateralized Mortgage Obligations (Cost — $14,361,384)

 

            14,282,084  
U.S. Government & Agency Obligations — 8.4%                                

U.S. Government Obligations — 8.4%

                               

U.S. Treasury Bonds

    1.125     8/15/40       1,860,000       1,600,181  

U.S. Treasury Bonds

    2.250     5/15/41       10,000       10,405  

U.S. Treasury Bonds

    3.625     2/15/44       84,000       108,573  

U.S. Treasury Bonds

    2.000     2/15/50       1,590,000       1,562,051  

U.S. Treasury Bonds

    1.250     5/15/50       3,640,000       2,972,145  

U.S. Treasury Bonds

    1.375     8/15/50       2,060,000       1,736,596  

U.S. Treasury Bonds

    1.625     11/15/50       300,000       269,438  

U.S. Treasury Bonds

    1.875     2/15/51       710,000       677,606  

U.S. Treasury Bonds

    2.375     5/15/51       570,000       608,564  

U.S. Treasury Notes

    0.250     11/15/23       10,000       9,983  

U.S. Treasury Notes

    0.375     4/30/25       90,000       89,033  

U.S. Treasury Notes

    0.250     6/30/25       100,000       98,227  

U.S. Treasury Notes

    1.250     4/30/28       80,000       80,250  

U.S. Treasury Notes

    1.250     6/30/28       460,000       460,719  

U.S. Treasury Notes

    0.625     5/15/30       260,000       243,029  

U.S. Treasury Notes

    1.625     5/15/31       150,000       152,297  

Total U.S. Government & Agency Obligations (Cost — $11,637,598)

 

            10,679,097  
Asset-Backed Securities — 7.0%                                

AGL CLO 6 Ltd., 2020-6A A1 (3 mo. USD LIBOR + 1.950%)

    2.138     7/20/31       250,000       250,892  (a)(d)  

Allegany Park CLO Ltd., 2019-1A C (3 mo. USD LIBOR + 2.550%)

    2.738     1/20/33       250,000       250,472  (a)(d)  

Applebee’s Funding LLC/IHOP Funding LLC, 2019-1A A2I

    4.194     6/7/49       297,750       305,173  (a)  

ARES XLV CLO Ltd., 2017-45A E (3 mo. USD LIBOR + 6.100%)

    6.284     10/15/30       250,000       245,045  (a)(d)  

Argent Securities Inc. Pass-Through Certificates, 2004-W7 M1 (1 mo. USD LIBOR + 0.825%)

    0.917     5/25/34       56,329       56,087  (d)  

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   25


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Asset-Backed Securities — continued                                

Asset Backed Securities Corp. Home Equity Loan Trust, 2001-HE3 A1 (1 mo. USD LIBOR + 0.540%)

    0.613     11/15/31       357,277     $ 352,718  (d) 

ASSURANT CLO Ltd., 2019-5A E (3 mo. USD LIBOR + 7.340%)

    7.524     1/15/33       250,000       249,364  (a)(d) 

Avis Budget Rental Car Funding AESOP LLC, 2020-2A B

    2.960     2/20/27       200,000       211,755  (a) 

Cedar Funding VIII CLO Ltd., 2017-8A A1 (3 mo. USD LIBOR + 1.250%)

    1.440     10/17/30       250,000       250,210  (a)(d) 

ECMC Group Student Loan Trust, 2020-2A A (1 mo. USD LIBOR + 1.150%)

    1.242     11/25/69       182,465       184,272  (a)(d) 

FNA VI LLC, 2021-1A A

    1.350     1/10/32       148,124       147,975  (a) 

Grippen Park CLO Ltd., 2017-1A E (3 mo. USD LIBOR + 5.700%)

    5.888     1/20/30       250,000       248,114  (a)(d) 

Halsey Point CLO I Ltd., 2019-1A E (3 mo. USD LIBOR + 7.700%)

    7.888     1/20/33       300,000       302,250  (a)(d) 

HalseyPoint CLO 3 Ltd., 2020-3A A1A (3 mo. USD LIBOR + 1.450%)

    1.636     11/30/32       250,000       251,067  (a)(d) 

Hertz Vehicle Financing III LP, 2021-2A A

    1.680     12/27/27       310,000       309,586  (a) 

Hildene Community Funding CDO Ltd., 2015-1A AR

    3.250     11/1/35       380,000       376,200  (a) 

Loanpal Solar Loan Ltd., 2021-2GS A

    2.220     3/20/48       291,077       293,377  (a) 

Marathon CLO 14 Ltd., 2019-2A BA (3 mo. USD LIBOR + 3.300%)

    3.488     1/20/33       250,000       250,288  (a)(d) 

Monroe Capital BSL CLO Ltd., 2015-1A BR (3 mo. USD LIBOR + 1.750%)

    1.900     5/22/27       100,000       100,142  (a)(d) 

Morgan Stanley ABS Capital I Inc. Trust, 2004-NC7 M1 (1 mo. USD LIBOR + 0.855%)

    0.947     7/25/34       76,306       74,772  (d) 

Morgan Stanley ABS Capital I Inc. Trust, 2004-NC8 M1 (1 mo. USD LIBOR + 0.915%)

    1.007     9/25/34       193,696       191,374  (d) 

NADG NNN Operating LP, 2019-1 A

    3.368     12/28/49       148,875       152,966  (a) 

Nelnet Student Loan Trust, 2013-1A A (1 mo. USD LIBOR + 0.600%)

    0.692     6/25/41       62,495       62,265  (a)(d) 

Ocean Trails CLO IX, 2020-9A A1 (3 mo. USD LIBOR + 1.870%)

    2.054     10/15/29       250,000       250,921  (a)(d) 

OHA Loan Funding Ltd., 2015-1A DR2 (3 mo. USD LIBOR + 4.000%)

    4.156     11/15/32       250,000       251,387  (a)(d) 

OZLM XVIII Ltd., 2018-18A D (3 mo. USD LIBOR + 2.850%)

    3.034     4/15/31       250,000       244,862  (a)(d) 

RAMP Trust, 2006-NC3 M1 (1 mo. USD LIBOR + 0.340%)

    0.602     3/25/36       270,000       265,939  (d) 

 

See Notes to Financial Statements.

 

 

  
26    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Asset-Backed Securities — continued                                

Regatta XI Funding Ltd., 2018-1A D (3 mo. USD LIBOR + 2.850%)

    3.040     7/17/31       250,000     $ 249,477  (a)(d) 

SMB Private Education Loan Trust, 2018-C A2A

    3.630     11/15/35       90,632       95,432  (a)  

SMB Private Education Loan Trust, 2018-C A2B (1 mo. USD LIBOR + 0.750%)

    0.851     11/15/35       190,404       189,793  (a)(d) 

SMB Private Education Loan Trust, 2019-B A2B (1 mo. USD LIBOR + 1.000%)

    1.101     6/15/37       90,029       90,958  (a)(d)  

Sound Point CLO XXII Ltd., 2019-1A D (3 mo. USD LIBOR + 3.900%)

    4.088     1/20/32       250,000       251,702  (a)(d) 

Structured Asset Investment Loan Trust, 2005-HE1 M2 (1 mo. USD LIBOR + 0.720%)

    0.812     7/25/35       296,505       294,274  (d)  

Sunrun Atlas Issuer LLC, 2019-2 A

    3.610     2/1/55       96,245       102,445  (a)  

Symphony CLO XIX Ltd., 2018-19A E (3 mo. USD LIBOR + 5.200%)

    5.384     4/16/31       250,000       239,927  (a)(d) 

TICP CLO II-2 Ltd., 2018-IIA C (3 mo. USD LIBOR + 2.950%)

    3.138     4/20/28       250,000       249,906  (a)(d) 

United States Small Business Administration, 2019-20D 1

    2.980     4/1/39       26,714       28,966  

Wellfleet CLO Ltd., 2017-2A C (3 mo. USD LIBOR + 3.400%)

    3.588     10/20/29       250,000       250,538  (a)(d) 

Wellfleet CLO Ltd., 2017-3A C (3 mo. USD LIBOR + 2.750%)

    2.940     1/17/31       250,000       245,302  (a)(d) 

Wingstop Funding LLC, 2020-1A A2

    2.841     12/5/50       408,975       424,152  (a)  

Total Asset-Backed Securities (Cost — $8,719,692)

 

                    8,842,345  
Senior Loans — 6.6%                                
Communication Services — 0.7%                                

Diversified Telecommunication Services — 0.1%

 

                       

Zayo Group Holdings Inc., Initial Dollar Term Loan (1 mo. USD LIBOR + 3.000%)

    3.104     3/9/27       71,621       70,795  (d)(h)(i)  

Interactive Media & Services — 0.1%

                               

Rackspace Technology Global Inc., Term Loan B (the greater of 3 mo. USD LIBOR or 0.750% + 2.750%)

    3.500     2/15/28       170,000       169,044  (d)(h)(i)  

Media — 0.5%

                               

Charter Communications Operating LLC, Term Loan B2 (1 mo. USD LIBOR + 1.750%)

    1.860     2/1/27       39,499       39,183  (d)(h)(i) 

Nexstar Broadcasting Inc., Term Loan B4 (1 mo. USD LIBOR + 2.500%)

    2.592     9/18/26       146,753       146,255  (d)(h)(i) 

Virgin Media Bristol LLC, Term Loan Facility N (1 mo. USD LIBOR + 2.500%)

    2.573     1/31/28       150,000       148,641  (d)(h)(i) 

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   27


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Media — continued

                               

Virgin Media Bristol LLC, Term Loan Facility Q (3 mo. USD LIBOR + 3.250%)

    3.353     1/31/29       20,000     $ 19,953  (d)(h)(i) 

Ziggo Financing Partnership, Term Loan I (1 mo. USD LIBOR + 2.500%)

    2.573     4/30/28       250,000       247,396  (d)(h)(i) 

Total Media

                            601,428  

Total Communication Services

 

                    841,267  
Consumer Discretionary — 1.4%                                

Diversified Consumer Services — 0.1%

 

                       

Prime Security Services Borrower LLC, 2021 Refinancing Term Loan B1

    3.500     9/23/26       89,354       89,242  (d)(h)(i) 

Hotels, Restaurants & Leisure — 0.7%

                               

1011778 BC Unlimited Liability Co., Term Loan B4 (1 mo. USD LIBOR + 1.750%)

    1.854     11/19/26       346,667       341,413  (d)(h)(i) 

Aramark Services Inc., Term Loan B4 (1 mo. USD LIBOR + 1.750%)

    1.854     1/15/27       79,000       77,914  (d)(h)(i) 

Caesars Resort Collection LLC, Term Loan B1 (1 mo. USD LIBOR + 4.500%)

    4.604     7/21/25       248,125       248,745  (d)(h)(i) 

Hilton Worldwide Finance LLC, Refinance Term Loan B2 (1 mo. USD LIBOR + 1.750%)

    1.842     6/22/26       140,000       138,775  (d)(h)(i) 

Scientific Games International Inc., Initial Term Loan B5 (1 mo. USD LIBOR + 2.750%)

    2.854     8/14/24       118,599       117,709  (d)(h)(i) 

Total Hotels, Restaurants & Leisure

 

                    924,556  

Specialty Retail — 0.6%

                               

Gannett Holdings LLC, First Lien Term Loan (the greater of 3 mo. USD LIBOR or 0.750% + 7.000%)

    7.750     1/29/26       171,246       172,531  (d)(h)(i)(j) 

Harbor Freight Tools USA Inc., 2020 Initial Term Loan (the greater of 1 mo. USD LIBOR or 0.750% + 3.000%)

    3.750     10/19/27       248,750       248,580  (d)(h)(i) 

PetsMart LLC, Initial Term Loan (the greater of 3 mo. USD LIBOR or 0.750% + 3.750%)

    4.500     2/11/28       100,000       100,031  (d)(h)(i) 

Whatabrands LLC, 2020 Refinancing Term Loan (1 mo. USD LIBOR + 2.750%)

    2.832     7/31/26       193,564       192,650  (d)(h)(i) 

Total Specialty Retail

                            713,792  

Total Consumer Discretionary

 

                    1,727,590  

 

See Notes to Financial Statements.

 

 

  
28    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Consumer Staples — 0.2%                                

Food & Staples Retailing — 0.1%

                               

Froneri U.S. Inc., Term Loan Facility B2 (1 mo. USD LIBOR + 2.250%)

    2.354     1/29/27       49,500     $ 48,727  (d)(h)(i) 

US Foods Inc., Retired Initial Term Loan (3 mo. USD LIBOR + 1.750%)

    1.843     6/27/23       36,751       36,383  (d)(h)(i) 

Total Food & Staples Retailing

                            85,110  

Household Products — 0.1%

                               

Energizer Holdings Inc., Term Loan (the greater of 1 mo. USD LIBOR or 0.500% + 2.250%)

    2.750     12/22/27       169,575       169,080   (d)(h)(i) 

Total Consumer Staples

                            254,190  
Financials — 1.2%                                

Capital Markets — 0.1%

                               

Focus Financial Partners LLC, Term Loan B3 (1 mo. USD LIBOR + 2.000%)

    2.104     7/3/24       207,936       205,748  (d)(h)(i)  

Diversified Financial Services — 0.8%

                               

Allied Universal Holdco LLC, Term Loan (the greater of 3 mo. USD LIBOR or 0.500% +3.750%)

    4.250     5/12/28       227,474       228,043  (d)(h)(i) 

Citadel Securities LP, 2021 Term Loan (1 mo. USD LIBOR + 2.500%)

    2.604     2/2/28       138,253       136,733  (d)(h)(i) 

Deerfield Dakota Holding LLC, First Lien Initial Dollar Term Loan (the greater of 1 mo. USD LIBOR or 1.000% + 3.750%)

    4.750     4/9/27       108,900       109,304  (d)(h)(i) 

Nexus Buyer LLC, Initial Term Loan (1 mo. USD LIBOR + 3.750%)

    3.841     11/9/26       198,489       197,951  (d)(h)(i) 

Trans Union LLC, Term Loan B5 (1 mo. USD LIBOR + 1.750%)

    1.854     11/16/26       34,631       34,382  (d)(h)(i) 

UFC Holdings LLC, Term Loan B3 (the greater of 3 mo. USD LIBOR or 0.750% + 3.000%)

    3.750     4/29/26       284,892       284,357  (d)(h)(i) 

Total Diversified Financial Services

                            990,770  

Insurance — 0.1%

                               

Asurion LLC, Replacement Term Loan B6 (1 mo. USD LIBOR + 3.000%)

    3.104     11/3/23       167,617       166,648   (d)(h)(i) 

Mortgage Real Estate Investment Trusts (REITs) — 0.2%

                               

Apollo Commercial Real Estate Finance Inc., Initial Term Loan (1 mo. USD LIBOR + 2.750%)

    2.841     5/15/26       208,936       205,802   (d)(h)(i)(j) 

Total Financials

                            1,568,968  

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   29


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
Health Care — 1.7%                                

Health Care Providers & Services — 0.8%

                               

Global Medical Response Inc., 2020 Term Loan (the greater of 3 mo. USD LIBOR or 1.000% + 4.750%)

    5.750     10/2/25       89,550     $ 89,886  (d)(h)(i) 

Grifols Worldwide Operations USA Inc., Term Loan B (1 week USD LIBOR + 2.000%)

    2.088     11/15/27       147,750       146,222  (d)(h)(i) 

LifePoint Health Inc., First Lien Term Loan B (1 mo. USD LIBOR + 3.750%)

    3.854     11/17/25       229,255       228,681  (d)(h)(i) 

Radiology Partners Inc., Replacement Term Loan B

   
4.323-
4.327
 
    7/9/25       250,000       249,792  (d)(h)(i) 

Sterigenics-Nordion Holdings LLC, Term Loan (the greater of 3 mo. USD LIBOR or 0.500% + 2.750%)

    3.250     12/11/26       110,000       109,519  (d)(h)(i) 

WP CityMD Bidco LLC, Refinancing Term Loan (the greater of 3 mo. USD LIBOR or 0.750% + 3.750%)

    4.500     8/13/26       228,847       229,215  (d)(h)(i) 

Total Health Care Providers & Services

                            1,053,315  

Health Care Technology — 0.2%

                               

AthenaHealth Inc., Term Loan B1 (3 mo. USD LIBOR + 4.250%)

    4.410     2/11/26       217,936       218,686  (d)(h)(i)  

Life Sciences Tools & Services — 0.3%

                               

Parexel International Corp., Initial Term Loan (1 mo. USD LIBOR + 2.750%)

    2.854     9/27/24       330,652       328,534  (d)(h)(i) 

PPD Inc., Initial Term Loan (the greater of 1 mo. USD LIBOR or 0.500% + 2.250%)

    2.750     1/13/28       119,700       119,475  (d)(h)(i) 

Total Life Sciences Tools & Services

                            448,009  

Pharmaceuticals — 0.4%

                               

Bausch Health Cos. Inc., First Incremental Term Loan (1 mo. USD LIBOR + 2.750%)

    2.843     11/27/25       281,250       279,062  (d)(h)(i) 

Bausch Health Cos. Inc., Initial Term Loan (1 mo. USD LIBOR + 3.000%)

    3.104     6/2/25       207,421       206,514  (d)(h)(i) 

Total Pharmaceuticals

                            485,576  

Total Health Care

                            2,205,586  
Industrials — 0.8%                                

Aerospace & Defense — 0.2%

                               

Avolon TLB Borrower 1 US LLC, Term Loan B5 (the greater of 1 mo. USD LIBOR or 0.750% + 2.500%)

    3.250     12/1/27       208,950       208,819  (d)(h)(i) 

Transdigm Inc., Refinancing Term Loan F (1 mo. USD LIBOR + 2.250%)

    2.354     12/9/25       89,320       87,931  (d)(h)(i) 

Total Aerospace & Defense

                            296,750  

 

See Notes to Financial Statements.

 

 

  
30    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

Security   Rate    

Maturity

Date

    Face
Amount†
    Value  

Airlines — 0.2%

                               

Delta Air Lines Inc., Initial Term Loan (the greater of 3 mo. USD LIBOR or 1.000% + 3.750%)

    4.750     10/20/27       90,000     $ 95,006  (d)(h)(i) 

United Airlines Inc., Term Loan B (the greater of 3 mo. USD LIBOR or 0.750% + 3.750%)

    4.500     4/21/28       80,000       80,972  (d)(h)(i) 

Total Airlines

                            175,978  

Commercial Services & Supplies — 0.2%

                               

APi Group DE Inc., Initial Term Loan (1 mo. USD LIBOR + 2.500%)

    2.604     10/1/26       47,500       47,381  (d)(h)(i) 

Garda World Security Corp., Term Loan B2 (1 mo. USD LIBOR + 4.250%)

    4.350     10/30/26       20,612       20,689  (d)(h)(i) 

GFL Environmental Inc., 2020 Term Loan (the greater of 1 mo. USD LIBOR or 0.500% + 3.000%)

    3.500     5/30/25       145,874       145,929  (d)(h)(i) 

Mister Car Wash Holdings Inc., First Lien Initial Term Loan (1 mo. USD LIBOR + 3.000%)

    3.096     5/14/26       52,060       51,800  (d)(h)(i) 

Total Commercial Services & Supplies

                            265,799  

Electrical Equipment — 0.0%††

                               

Brookfield WEC Holdings Inc., Refinance Term Loan 2 (the greater of 1 mo. USD LIBOR or 0.500% + 2.750%)

    3.250     8/1/25       29,398       29,104  (d)(h)(i)  

Road & Rail — 0.2%

                               

Genesee & Wyoming Inc., Initial Term Loan (3 mo. USD LIBOR + 2.000%)

    2.147     12/30/26       248,296       246,589  (d)(h)(i)  

Total Industrials

                            1,014,220  
Information Technology — 0.3%                                

Software — 0.2%

                               

DCert Buyer Inc., First Lien Initial Term Loan (1 mo. USD LIBOR + 4.000%)

    4.104     10/16/26       227,869       228,012  (d)(h)(i)  

Technology Hardware, Storage & Peripherals — 0.1%

                               

Dell International LLC, Refinancing Term Loan B2 (the greater of 1 mo. USD LIBOR or 0.250% + 1.750%)

    2.000     9/19/25       173,102       173,030  (d)(h)(i)  

Total Information Technology

                            401,042  
Materials — 0.3%                                

Construction Materials — 0.1%

                               

Summit Materials LLC, New Term Loan B (1 mo. USD LIBOR + 2.000%)

    2.093     11/21/24       69,460       69,189  (d)(h)(i)  

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   31


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  

Containers & Packaging — 0.2%

                               

Reynolds Consumer Products LLC, Initial Term Loan (1 mo. USD LIBOR + 1.750%)

    1.854     2/4/27       96,105     $ 95,294  (d)(h)(i) 

Reynolds Group Holdings Inc., Incremental U.S. Term Loan (1 mo. USD LIBOR + 2.750%)

    2.854     2/6/23       160,000       159,622  (d)(h)(i) 

Total Containers & Packaging

                            254,916  

Total Materials

                            324,105  
Real Estate — 0.0%††                                

Equity Real Estate Investment Trusts (REITs) — 0.0%††

                               

VICI Properties 1 LLC, Term Loan B (1 mo. USD LIBOR + 1.750%)

    1.841     12/20/24       60,000       59,460  (d)(h)(i)  

Real Estate Management & Development — 0.0%††

                               

CityCenter Holdings LLC, Refinancing Term Loan (the greater of 1 mo. USD LIBOR or 0.750% + 2.250%)

    3.000     4/18/24       9,796       9,713  (d)(h)(i)  

Total Real Estate

                            69,173  

Total Senior Loans (Cost — $8,366,210)

 

                    8,406,141  
U.S. Treasury Inflation Protected Securities — 0.9%

 

                       

U.S. Treasury Bonds, Inflation Indexed

    2.125     2/15/40       470,000       865,077  

U.S. Treasury Bonds, Inflation Indexed

    2.125     2/15/41       100,000       183,639  

U.S. Treasury Bonds, Inflation Indexed

    0.750     2/15/42       50,000       71,923  

Total U.S. Treasury Inflation Protected Securities (Cost — $1,090,154)

 

    1,120,639  
                   Shares         
Investments in Underlying Funds — 0.2%                                

Invesco Senior Loan ETF (Cost — $313,897)

                    14,600       323,390  
     Expiration
Date
    Contracts     Notional
Amount†
        
Purchased Options — 0.1%                                
Exchange-Traded Purchased Options — 0.1%

 

                       

90-Day Eurodollar Futures, Put @ $99.63

    3/14/22       254       635,000       14,287  

U.S. Treasury 5-Year Notes Futures, Call @ $123.50

    7/2/21       43       43,000       5,039  

U.S. Treasury 5-Year Notes Futures, Call @ $123.75

    7/2/21       86       86,000       3,359  

U.S. Treasury 5-Year Notes Futures, Put @ $122.75

    7/2/21       86       86,000       672  

U.S. Treasury 5-Year Notes Futures, Put @ $123.00

    7/2/21       43       43,000       1,344  

 

See Notes to Financial Statements.

 

 

  
32    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

Security          Expiration
Date
    Contracts     Notional
Amount†
    Value  
Exchange-Traded Purchased Options — continued

 

                       

U.S. Treasury 5-Year Notes Futures, Put @ $123.00

            7/23/21       65       65,000     $ 8,125  

U.S. Treasury 10-Year Notes Futures, Call @ $133.00

            7/2/21       81       81,000       6,328  

U.S. Treasury 10-Year Notes Futures, Call @ $133.00

            7/23/21       58       58,000       18,125  

U.S. Treasury 10-Year Notes Futures, Put @ $131.75

            7/2/21       81       81,000       2,531  

U.S. Treasury 10-Year Notes Futures, Put @ $131.00

            7/23/21       58       58,000       6,344  

U.S. Treasury Long-Term Bonds Futures, Call @ $162.00

            7/2/21       39       39,000       6,703  

U.S. Treasury Long-Term Bonds Futures, Call @ $163.00

            7/23/21       62       62,000       32,938  

U.S. Treasury Long-Term Bonds Futures, Put @ $158.00

            7/2/21       39       39,000       1,219  

U.S. Treasury Long-Term Bonds Futures, Put @ $157.00

            7/23/21       62       62,000       13,563  

Total Exchange-Traded Purchased Options (Cost — $206,253)

 

            120,577  
     Counterparty                              
OTC Purchased Options — 0.0%††

 

                               

Credit default swaption to buy protection on Markit CDX.NA.HY.36 Index, Put @ 109.00bps

    BNP Paribas SA       8/18/21       1,236,000       1,236,000       6,288  

Interest rate swaption, Put @ 200.00bps

   
Goldman Sachs
Group Inc.
 
 
    9/1/21       6,950,000       6,950,000       5,938  

Interest rate swaption, Put @ 255.00bps

   
Goldman Sachs
Group Inc.
 
 
    9/1/21       700,000       700,000       373  

U.S. Dollar/Euro, Put @ $1.19

    BNP Paribas SA       7/6/21       1,170,096       1,170,096       2,415  

U.S. Dollar/Euro, Put @ $1.21

   
Goldman Sachs
Group Inc.
 
 
    7/20/21       590,000       590,000       331  

U.S. Dollar/Euro, Put @ $1.23

    BNP Paribas SA       8/11/21       1,270,000       1,270,000       273  

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   33


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

Security   Counterparty     Expiration
Date
    Contracts     Notional
Amount†
    Value  
OTC Purchased Options — continued

 

                               

U.S. Dollar/Euro, Put @ $1.22

   
Goldman Sachs
Group Inc.
 
 
    8/19/21       1,590,000       1,590,000     $ 1,055  

U.S. Dollar/Indian Rupee, Put @ 75.00 INR

   
Goldman Sachs
Group Inc.
 
 
    7/15/21       400,000       400,000       3,533  

U.S. Dollar/Japanese Yen, Call @ 115.20 JPY

   
Morgan Stanley &
Co. Inc.
 
 
    11/10/21       955,000       955,000       2,774  

U.S. Dollar/Japanese Yen, Put @ 107.45 JPY

    Citibank N.A.       7/8/21       1,220,000       1,220,000       7  

U.S. Dollar/Norwegian Krone, Put @ 8.13 NOK

   
Goldman Sachs
Group Inc.
 
 
    8/5/21       440,000       440,000       180  

U.S. Dollar/Norwegian Krone, Put @ 8.14 NOK

    Citibank N.A.       8/9/21       420,000       420,000       237  

U.S. Dollar/Norwegian Krone, Put @ 8.21 NOK

    Citibank N.A.       8/13/21       420,000       420,000       464  

Total OTC Purchased Options (Cost — $158,813)

 

                    23,868  

Total Purchased Options (Cost — $365,066)

 

                    144,445  

Total Investments before Short-Term Investments (Cost — $123,185,732)

 

            124,077,018  
            Rate            Shares         
Short-Term Investments — 2.3%                                        

BNY Mellon Cash Reserve Fund (Cost — $2,864,059)

 

    0.010%               2,864,059       2,864,059  

Total Investments†† — 100.4% (Cost — $126,049,791)

 

                    126,941,077  

Liabilities in Excess of Other Assets — (0.4)%

 

                            (537,013

Total Net Assets — 100.0%

                                    $126,404,064  

 

See Notes to Financial Statements.

 

 

  
34    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

Face amount/notional amount denominated in U.S. dollars, unless otherwise noted.

 

††

Represents less than 0.1%.

 

(a) 

Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Trustees.

 

(b) 

Security is exempt from registration under Regulation S of the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. This security has been deemed liquid pursuant to guidelines approved by the Board of Trustees.

 

(c) 

Security has no maturity date. The date shown represents the next call date.

 

(d) 

Variable rate security. Interest rate disclosed is as of the most recent information available. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description above.

 

(e) 

Securities traded on a when-issued or delayed delivery basis.

 

(f) 

This security is traded on a to-be-announced (“TBA”) basis. At June 30, 2021, the Fund held TBA securities with a total cost of $3,203,301.

 

(g) 

Collateralized mortgage obligations are secured by an underlying pool of mortgages or mortgage pass-through certificates that are structured to direct payments on underlying collateral to different series or classes of the obligations. The interest rate may change positively or inversely in relation to one or more interest rates, financial indices or other financial indicators and may be subject to an upper and/or lower limit.

 

(h) 

Interest rates disclosed represent the effective rates on senior loans. Ranges in interest rates are attributable to multiple contracts under the same loan.

 

(i) 

Senior loans may be considered restricted in that the Fund ordinarily is contractually obligated to receive approval from the agent bank and/or borrower prior to the disposition of a senior loan.

 

(j) 

Security is valued using significant unobservable inputs (Note 1).

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   35


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

Abbreviation(s) used in this schedule:

ACES   — Alternative Credit Enhancement Securities
bps   — basis point spread (100 basis points = 1.00%)
BRL   — Brazilian Real
CAS   — Connecticut Avenue Securities
CDO   — Collateralized Debt Obligation
CLO   — Collateralized Loan Obligation
ETF   — Exchange-Traded Fund
EUR   — Euro
ICE   — Intercontinental Exchange
IDR   — Indonesian Rupiah
INR   — Indian Rupee
IO   — Interest Only
JPY   — Japanese Yen
LIBOR   — London Interbank Offered Rate
MXN   — Mexican Peso
NOK   — Norwegian Krone
OFZ   — Obligatsyi Federal’novo Zaima (Russian Federal Loan Obligation)
REMIC   — Real Estate Mortgage Investment Conduit
RUB   — Russian Ruble
SOFR   — Secured Overnight Financing Rate
USD   — United States Dollar
ZAR   — South African Rand

 

Schedule of Written Options

 

Exchange-Traded Written Options

 

Security    Expiration
Date
     Strike
Price
     Contracts      Notional
Amount†
     Value  
90-Day Eurodollar Futures, Put      3/14/22      $ 99.38        214        535,000      $ (5,350)  
U.S. Treasury 5-Year Notes Futures, Call      7/2/21        123.25        43        43,000        (11,422)  
U.S. Treasury 5-Year Notes Futures, Put      7/2/21        123.25        43        43,000        (3,695)  
U.S. Treasury 5-Year Notes Futures, Put      8/27/21        121.75        130        130,000        (9,141)  
U.S. Treasury 10-Year Notes Futures, Call      7/2/21        132.25        27        27,000        (10,969)  
U.S. Treasury 10-Year Notes Futures, Call      7/23/21        134.50        28        28,000        (1,312)  
U.S. Treasury 10-Year Notes Futures, Call      8/27/21        133.00        29        29,000        (19,031)  
U.S. Treasury 10-Year Notes Futures, Call      8/27/21        135.50        83        83,000        (9,078)  
U.S. Treasury 10-Year Notes Futures, Put      7/2/21        132.25        27        27,000        (4,219)  
U.S. Treasury 10-Year Notes Futures, Put      7/23/21        127.50        24        24,000        0  (a)  
U.S. Treasury 10-Year Notes Futures, Put      7/23/21        129.00        31        31,000        (484)  
U.S. Treasury 10-Year Notes Futures, Put      8/27/21        131.00        29        29,000        (10,422)  
U.S. Treasury Long-Term Bonds Futures, Call      7/2/21        160.00        13        13,000        (13,203)  
U.S. Treasury Long-Term Bonds Futures, Call      8/27/21        163.00        31        31,000        (38,750)  

 

See Notes to Financial Statements.

 

 

  
36    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

Schedule of Written Options (cont’d)
Security    Expiration
Date
     Strike
Price
     Contracts      Notional
Amount†
     Value  
U.S. Treasury Long-Term Bonds Futures, Put      7/2/21      $ 160.00        13        13,000      $ (3,453)  
U.S. Treasury Long-Term Bonds Futures, Put      8/27/21        157.00        31        31,000        (24,219)  
Total Exchange-Traded Written Options (Premiums received — $222,000)

 

            $ (164,748)  

 

OTC Written Options                                             
      Counterparty                                        
Credit default swaption to sell protection on Markit CDX.NA.HY.36 Index, Put    BNP
Paribas SA
     8/18/21        106.50 bps       2,472,000        2,472,000 ‡     $ (4,759)  
Interest rate swaption, Put    Goldman Sachs
Group Inc.
     9/1/21        250.00 bps       10,420,000        10,420,000        (996)  

U.S. Dollar/Indian Rupee, Put

   Goldman Sachs
Group Inc.
     7/15/21        73.65 INR       400,000        400,000        (262)  

Total OTC Written Options (Premiums received — $49,360)

 

                              $ (6,017)  

Total Written Options (Premiums received — $271,360)

 

                     $ (170,765)  

 

Notional amount denominated in U.S. dollars, unless otherwise noted.

 

In the event an option is exercised and a credit event occurs as defined under the terms of the swap agreement, the notional amount is the maximum potential amount that could be required to be paid as a seller of credit protection or received as a buyer of credit protection.

 

(a)

Value is less than $1.

 

Abbreviation(s) used in this schedule:

bps   — basis point spread (100 basis points = 1.00%)
INR   — Indian Rupee

At June 30, 2021, the Fund had the following open futures contracts:

 

      Number of
Contracts
     Expiration
Date
     Notional
Amount
     Market
Value
     Unrealized
Appreciation
(Depreciation)
 
Contracts to Buy:                                             
90-Day Eurodollar      64        12/23      $ 15,832,534      $ 15,820,000      $ (12,534)  
Australian 10-Year Bonds      14        9/21        1,480,326        1,483,967        3,641  
Euro-OAT      5        9/21        932,075        943,028        10,953  
U.S. Treasury 5-Year Notes      1,115        9/21        137,859,550        137,624,102        (235,448)  
U.S. Treasury Long-Term Bonds      14        9/21        2,221,837        2,250,500        28,663  
U.S. Treasury Ultra Long- Term Bonds      53        9/21        9,820,851        10,212,438        391,587  
                                           186,862  

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   37


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

      Number of
Contracts
     Expiration
Date
     Notional
Amount
     Market
Value
     Unrealized
Appreciation
(Depreciation)
 
Contracts to Sell:                                             
90-Day Eurodollar      147        12/21      $ 36,632,579      $ 36,674,663      $ (42,084)  
Euro-Bund      46        9/21        9,330,430        9,416,122        (85,692)  
Japanese 10-Year Bonds      1        9/21        1,365,313        1,366,700        (1,387)  
U.S. Treasury 2-Year Notes      19        9/21        4,191,858        4,186,086        5,772  
U.S. Treasury 10-Year Notes      438        9/21        57,873,375        58,035,000        (161,625)  
U.S. Treasury Ultra 10-Year Notes      23        9/21        3,311,061        3,385,672        (74,611)  
United Kingdom Long Gilt Bonds      24        9/21        4,200,300        4,247,130        (46,830)  
                                           (406,457)  
Net unrealized depreciation on open futures contracts

 

                     $ (219,595)  

 

Abbreviation(s) used in this table:

OAT   — Obligations Assimilables du Trésor (French Treasury Bonds)

At June 30, 2021, the Fund had the following open forward foreign currency contracts:

 

Currency

Purchased

    Currency Sold     Counterparty   Settlement
Date
    Unrealized
Appreciation
(Depreciation)
 
USD     133,182     IDR     1,934,067,694     Bank of America N.A.     7/19/21     $ 2  
USD     23,852     EUR     20,000     BNP Paribas SA     7/19/21       125  
USD     1,621,950     EUR     1,360,000     BNP Paribas SA     7/19/21       8,469  
USD     1,799,500     EUR     1,506,669     BNP Paribas SA     7/19/21       12,014  
AUD     50,126     USD     38,663     Citibank N.A.     7/19/21       (1,028)  
AUD     2,036,612     USD     1,558,896     Citibank N.A.     7/19/21       (29,759)  
BRL     220,000     USD     39,277     Citibank N.A.     7/19/21       4,479  
CAD     20,000     USD     15,969     Citibank N.A.     7/19/21       182  
CAD     125,723     USD     100,000     Citibank N.A.     7/19/21       1,528  
CAD     160,931     USD     127,547     Citibank N.A.     7/19/21       2,413  
CAD     1,497,345     USD     1,241,714     Citibank N.A.     7/19/21       (32,529)  
CAD     1,900,331     USD     1,517,279     Citibank N.A.     7/19/21       17,338  
CAD     4,600,000     USD     3,675,120     Citibank N.A.     7/19/21       39,622  
EUR     230,000     USD     280,271     Citibank N.A.     7/19/21       (7,403)  
EUR     512,192     USD     617,264     Citibank N.A.     7/19/21       (9,609)  
INR     10,059,711     USD     135,257     Citibank N.A.     7/19/21       (194)  
MXN     25,866,028     USD     1,268,309     Citibank N.A.     7/19/21       27,728  
RUB     3,147,303     USD     40,423     Citibank N.A.     7/19/21       2,536  

 

See Notes to Financial Statements.

 

 

  
38    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

Currency

Purchased

    Currency Sold     Counterparty   Settlement
Date
    Unrealized
Appreciation
(Depreciation)
 
RUB     70,810,000     USD     905,742     Citibank N.A.     7/19/21     $ 60,759  
USD     308,934     CAD     379,850     Citibank N.A.     7/19/21       2,186  
USD     309,286     CAD     379,850     Citibank N.A.     7/19/21       2,538  
USD     3,336,100     CAD     4,040,000     Citibank N.A.     7/19/21       73,587  
USD     85,492     EUR     70,000     Citibank N.A.     7/19/21       2,445  
USD     1,712,837     EUR     1,440,000     Citibank N.A.     7/19/21       4,446  
USD     1,096,365     MXN     21,759,302     Citibank N.A.     7/19/21       6,099  
USD     69,176     RUB     5,000,000     Citibank N.A.     7/19/21       930  
USD     153,411     RUB     11,547,880     Citibank N.A.     7/19/21       (4,208)  
USD     305,995     RUB     23,097,880     Citibank N.A.     7/19/21       (9,273)  
USD     609,216     RUB     45,510,000     Citibank N.A.     7/19/21       (11,959)  
USD     1,014,086     RUB     74,307,877     Citibank N.A.     7/19/21       (158)  
ZAR     1,298,100     USD     88,180     Citibank N.A.     7/19/21       2,510  
RUB     23,810,000     USD     303,932     Goldman Sachs Group Inc.     7/19/21       21,056  
RUB     35,760,526     USD     456,194     Goldman Sachs Group Inc.     7/19/21       31,910  
USD     473,414     BRL     2,430,225     Goldman Sachs Group Inc.     7/19/21       (9,942)  
USD     450,905     CAD     547,732     Goldman Sachs Group Inc.     7/19/21       8,582  
USD     259,080     GBP     188,546     Goldman Sachs Group Inc.     7/19/21       (1,402)  
USD     405,468     MXN     8,184,000     Goldman Sachs Group Inc.     7/19/21       (4,598)  
USD     107,977     RUB     7,800,000     Goldman Sachs Group Inc.     7/19/21       1,513  
USD     153,438     RUB     11,550,000     Goldman Sachs Group Inc.     7/19/21       (4,211)  
IDR     7,619,959,329     USD     519,035     JPMorgan Chase & Co.     7/19/21       5,675  
USD     111,097     IDR     1,612,016,058     JPMorgan Chase & Co.     7/19/21       93  
USD     546,458     IDR     7,825,278,342     JPMorgan Chase & Co.     7/19/21       7,609  
USD     155,852     RUB     11,597,040     JPMorgan Chase & Co.     7/19/21       (2,438)  
BRL     124,026     USD     21,750     Morgan Stanley & Co. Inc.     7/19/21       2,918  
BRL     170,000     USD     29,812     Morgan Stanley & Co. Inc.     7/19/21       4,000  
BRL     330,000     USD     57,870     Morgan Stanley & Co. Inc.     7/19/21       7,765  
COP     508,148,260     USD     139,051     Morgan Stanley & Co. Inc.     7/19/21       (3,093)  
JPY     5,354,025     USD     49,557     Morgan Stanley & Co. Inc.     7/19/21       (1,311)  
JPY     225,389,033     USD     2,051,005     Morgan Stanley & Co. Inc.     7/19/21       (19,961)  
USD     708,802     MXN     14,209,006     Morgan Stanley & Co. Inc.     7/19/21       (3,151)  
Total

 

                          $ 206,830  

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   39


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

Abbreviation(s) used in this table:

AUD   — Australian Dollar
BRL   — Brazilian Real
CAD   — Canadian Dollar
COP   — Colombian Peso
EUR   — Euro
GBP   — British Pound
IDR   — Indonesian Rupiah
INR   — Indian Rupee
JPY   — Japanese Yen
MXN   — Mexican Peso
RUB   — Russian Ruble
USD   — United States Dollar
ZAR   — South African Rand

At June 30, 2021, the Fund had the following open swap contracts:

 

OTC INTEREST RATE SWAPS  
Swap Counterparty   Notional
Amount
    Termination
Date
    Payments
Made by
the Fund
  Payments
Received by
the Fund
    Upfront
Premiums
Paid
(Received)
   

Unrealized

Appreciation
(Depreciation)

 
Citibank N.A.     1,277,000  BRL      1/4/27     BRL-CDI**     7.024 %**    $ 626     $ (257)  
JPMorgan Chase & Co.     300,000  BRL      1/4/27     BRL-CDI**     7.044 %**            142  
Total                               $ 626     $ (115)  

 

CENTRALLY CLEARED INTEREST RATE SWAPS  
     Notional
Amount*
    Termination
Date
   

Payments

Made by

the Fund

  Payments
Received by  the
Fund
  Upfront
Premiums
Paid
(Received)
   

Unrealized
Appreciation

(Depreciation)

 
    $ 4,161,000       6/15/22     3-Month LIBOR quarterly   0.190% semi-annually   $ (19   $ 840  
      6,330,000       7/1/22     3.460%**   CPURNSA**     1,482       (1,757
      11,054,000       6/4/24     3-Month LIBOR quarterly   0.820% semi-annually           (20,761
      7,590,000       12/18/25     3-Month LIBOR quarterly   1.100% semi-annually           (35,329
      6,330,000       7/1/26     CPURNSA**   2.620%**     3,466       (6,974
      3,138,000       5/15/27     0.450% semi-annually   3-Month LIBOR quarterly     (5,080     119,856  
      886,000       5/15/27     0.260% annually   Daily U.S. Federal Funds
Intraday Effective Rate
annually
    (2,975     35,769  

 

See Notes to Financial Statements.

 

 

  
40    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

CENTRALLY CLEARED INTEREST RATE SWAPS (cont’d)  
     Notional
Amount
    Termination
Date
    Payments
Made by
the Fund
    Payments
Received by the
Fund
    Upfront
Premiums
Paid
(Received)
    Unrealized
Appreciation
(Depreciation)
 
    $ 4,609,000       2/15/28       1.250% semi-annually       3-Month LIBOR quarterly     $ 4,527     $ (27,242
      10,348,000       2/15/28       1.350% semi-annually       3-Month LIBOR quarterly       (9,613     (108,336
      570,000       7/20/45       0.560% annually       Daily SOFR annually             110,123  
      3,915,000       11/15/45       0.800% semi-annually       3-Month LIBOR quarterly       16,444       769,394  
      721,000       2/15/47       1.200% semi-annually       3-Month LIBOR quarterly       3,873       85,436  
      342,000       2/15/47       1.600% semi-annually       3-Month LIBOR quarterly       1,977       10,927  
      223,000       2/15/47       2.000% semi-annually       3-Month LIBOR quarterly       3,349       (14,156
      99,000       2/15/47       1.729% annually       Daily SOFR annually             (4,950
      56,000       6/3/51       2.000% semi-annually       3-Month LIBOR quarterly       576       (3,561
      172,000       6/7/51       2.050% semi-annually       3-Month LIBOR quarterly       (22     (11,240
Total $     60,544,000                             $ 17,985     $ 898,039  

 

OTC CREDIT DEFAULT SWAPS ON CORPORATE ISSUES — SELL PROTECTION1  

Swap

Counterparty

(Reference Entity)

  Notional
Amount2
    Termination
Date
    Implied
Credit
Spread at
June 30,
20213
  Periodic
Payments
Received by the
Fund
    Market
Value
    Upfront
Premiums
Paid
(Received)
    Unrealized
Appreciation
 
BNP Paribas SA (Volkswagen International Finance NV, 0.875%, due 1/16/23)     530,000 EUR      12/20/24     0.423%     1.000% quarterly     $ 12,797     $ 6,734     $ 6,063  

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   41


Schedule of investments (unaudited) (cont’d)

June 30, 2021

 

Western Asset Total Return ETF

 

OTC CREDIT DEFAULT SWAPS ON CORPORATE ISSUES — BUY PROTECTION4  

Swap

Counterparty

(Reference Entity)

  Notional
Amount2
    Termination
Date
    Implied
Credit
Spread at
June 30,
20213
  Periodic
Payments Made
by the Fund
    Market
Value
    Upfront
Premiums
Paid
(Received)
    Unrealized
Depreciation
 
BNP Paribas SA (Daimler AG, 1.400%, due 1/12/24)     530,000 EUR      12/20/24     0.321%     1.000% quarterly     $ (15,094)     $ (8,961)     $ (6,133)  

 

CENTRALLY CLEARED CREDIT DEFAULT SWAPS ON CREDIT INDICES — SELL PROTECTION1  
Reference Entity   Notional
Amount2
    Termination
Date
    Periodic
Payments
Received by the
Fund
  Market
Value5
    Upfront
Premiums
Paid
(Received)
    Unrealized
Appreciation
 
Markit CDX.NA.IG.36 Index   $ 6,276,000       6/20/26     1.000% quarterly   $ 159,379     $ 139,440     $ 19,939  
Markit CDX.NA.IG.36 Index     3,950,000       6/20/31     1.000% quarterly     41,594       7,146       34,448  
Total   $ 10,226,000                 $ 200,973     $ 146,586     $ 54,387  

 

CENTRALLY CLEARED CREDIT DEFAULT SWAPS ON CREDIT INDICES — BUY PROTECTION4  
Reference Entity   Notional
Amount2
    Termination
Date
    Periodic
Payments Made
by the Fund
  Market
Value5
    Upfront
Premiums
Paid
(Received)
    Unrealized
Depreciation
 
Markit CDX.NA.HY.36 Index   $ 906,000       6/20/26     5.000% quarterly   $ (92,446)     $ (73,206)     $ (19,240)  

 

See Notes to Financial Statements.

 

 

  
42    Western Asset Total Return ETF 2021 Semi-Annual Report


 

 

Western Asset Total Return ETF

 

1 

If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.

 

2 

The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

 

3 

Implied credit spreads, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end, serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced entity or obligation.

 

4 

If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or the underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or the underlying securities comprising the referenced index.

 

5 

The quoted market prices and resulting values for credit default swap agreements on asset-backed securities and credit indices serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected loss (or profit) for the credit derivative had the notional amount of the swap agreement been closed/sold as of the period end. Decreasing market values (sell protection) or increasing market values (buy protection) when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

 

Percentage shown is an annual percentage rate.

 

**

One time payment made at termination date.

 

Abbreviation(s) used in this table:

BRL   — Brazilian Real
BRL-CDI   — Brazil Cetip InterBank Deposit Rate
CPURNSA   — U.S. CPI Urban Consumers NSA Index
EUR   — Euro
LIBOR   — London Interbank Offered Rate
SOFR   — Secured Overnight Financing Rate

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   43


Statement of assets and liabilities (unaudited)

June 30, 2021

 

Assets:         

Investments, at value (Cost — $126,049,791)

   $ 126,941,077  

Foreign currency, at value (Cost — $590,556)

     630,669  

Receivable for securities sold

     3,246,089  

Interest receivable

     755,290  

Deposits with brokers for centrally cleared swap contracts

     730,790  

Foreign currency collateral for open futures contracts and exchange-traded options, at value (Cost — $516,456)

     552,478  

Unrealized appreciation on forward foreign currency contracts

     363,057  

Deposits with brokers for open futures contracts and exchange-traded options

     290,663  

Receivable from broker — net variation margin on open futures contracts

     24,956  

OTC swaps, at value (premiums paid — $7,360)

     13,308  

Prepaid expenses

     4,131  

Total Assets

     133,552,508  
Liabilities:         

Payable for securities purchased

     6,669,156  

Written options, at value (premiums received — $271,360)

     170,765  

Unrealized depreciation on forward foreign currency contracts

     156,227  

Payable to broker — net variation margin on centrally cleared swap contracts

     63,885  

Investment management fee payable

     50,588  

Due to custodian

     22,729  

OTC swaps, at value (net premiums received — $8,961)

     15,094  

Total Liabilities

     7,148,444  
Total Net Assets    $ 126,404,064  
Net Assets:         

Par value (Note 5)

   $ 47  

Paid-in capital in excess of par value

     125,616,896  

Total distributable earnings (loss)

     787,121  
Total Net Assets      $126,404,064  
Shares Outstanding      4,650,000  
Net Asset Value      $27.18  

 

See Notes to Financial Statements.

 

 

  
44    Western Asset Total Return ETF 2021 Semi-Annual Report


Statement of operations (unaudited)

For the Six Months Ended June 30, 2021

 

Investment Income:         

Dividends

   $ 6,911  

Interest

     1,729,932  

Less: Foreign taxes withheld

     (1,785)  

Total Investment Income

     1,735,058  
Expenses:         

Investment management fee (Note 2)

     312,492  

Interest expense

     9  

Total Expenses

     312,501  

Less: Fee waivers and/or expense reimbursements (Note 2)

     (25,510)  

Net Expenses

     286,991  
Net Investment Income      1,448,067  
Realized and Unrealized Gain (Loss) on Investments, Futures Contracts, Written Options, Swap Contracts, Forward Foreign Currency Contracts and Foreign Currency Transactions (Notes 1, 3 and 4):         

Net Realized Gain (Loss) From:

        

Investment transactions

     (2,600,567)  

Futures contracts

     (1,350,789)  

Written options

     2,114,804  

Swap contracts

     535,794  

Forward foreign currency contracts

     550,283  

Foreign currency transactions

     102,254  

Net Realized Loss

     (648,221)  

Change in Net Unrealized Appreciation (Depreciation) From:

        

Investments

     (2,793,789)  

Futures contracts

     (70,008)  

Written options

     68,613  

Swap contracts

     (113,087)  

Forward foreign currency contracts

     (205,313)  

Foreign currencies

     (112,044)  

Change in Net Unrealized Appreciation (Depreciation)

     (3,225,628)  
Net Loss on Investments, Futures Contracts, Written Options, Swap Contracts, Forward Foreign Currency Contracts and Foreign Currency Transactions      (3,873,849)  
Decrease in Net Assets From Operations    $ (2,425,782)  

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   45


Statements of changes in net assets

 

 

For the Six Months Ended June 30, 2021 (unaudited)
and the Year Ended December 31, 2020
   2021      2020  
Operations:                  

Net investment income

   $ 1,448,067      $ 2,904,364  

Net realized gain (loss)

     (648,221)        5,160,236  

Change in net unrealized appreciation (depreciation)

     (3,225,628)        3,446,064  

Increase (Decrease) in Net Assets From Operations

     (2,425,782)        11,510,664  
Distributions to Shareholders From (Note 1):                  

Total distributable earnings

     (2,710,723)        (6,693,676)  

Decrease in Net Assets From Distributions to Shareholders

     (2,710,723)        (6,693,676)  
Fund Share Transactions (Note 5):                  

Net proceeds from sale of shares (400,000 and 3,250,000 shares issued, respectively)

     10,962,180        90,710,103  

Cost of shares repurchased (750,000 and 2,250,000 shares repurchased, respectively)

     (20,363,812)        (62,110,011)  

Increase (Decrease) in Net Assets From Fund Share Transactions

     (9,401,632)        28,600,092  

Increase (Decrease) in Net Assets

     (14,538,137)        33,417,080  
Net Assets:                  

Beginning of period

     140,942,201        107,525,121  

End of period

   $ 126,404,064      $ 140,942,201  

 

See Notes to Financial Statements.

 

 

  
46    Western Asset Total Return ETF 2021 Semi-Annual Report


Financial highlights

 

 

For a share of beneficial interest outstanding throughout each year ended December 31,
unless otherwise noted:
        
      20211,2      20202      20192      20182,3  
Net asset value, beginning of period    $ 28.19      $ 26.88      $ 25.16      $ 25.00  
Income (loss) from operations:            

Net investment income

     0.31        0.61        0.82        0.20  

Net realized and unrealized gain (loss)

     (0.74)        2.07        2.45        0.10  

Total income (loss) from operations

     (0.43)        2.68        3.27        0.30  
Less distributions from:            

Net investment income

     (0.31)        (0.84)        (0.90)        (0.14)  

Net realized gains

     (0.27)        (0.53)        (0.65)         

Total distributions

     (0.58)        (1.37)        (1.55)        (0.14)  
Net asset value, end of period    $ 27.18      $ 28.19      $ 26.88      $ 25.16  

Total return, based on NAV4

     (1.50)      10.12      13.19      1.19
Net assets, end of period (000s)    $ 126,404      $ 140,942      $ 107,525      $ 25,162  
Ratios to average net assets:            

Gross expenses5

     0.49 %6        0.49      0.49      0.49 %6  

Net expenses5,7

     0.45 6        0.45        0.45        0.45 6  

Net investment income

     2.27 6        2.19        3.09        3.33 6  
Portfolio turnover rate8      37      115      80      18

 

1 

For the six months ended June 30, 2021 (unaudited).

 

2 

Per share amounts have been calculated using the average shares method.

 

3 

For the period October 3, 2018 (inception date) to December 31, 2018.

 

4 

Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower. The total return calculation assumes that distributions are reinvested at NAV. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.

 

5 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest expenses, taxes, brokerage expenses, future 12b-1 fees (if any), acquired fund fees and expenses, extraordinary expenses and the management fee payable to LMPFA under the investment management agreement, to the average net assets did not exceed 0.45%. This expense limitation arrangement cannot be terminated prior to May 1, 2022 without the Board of Trustees’ consent.

 

6 

Annualized.

 

7 

Reflects fee waivers and/or expense reimbursements.

 

8 

Excluding mortgage dollar rolls transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 66% for the six months ended June 30, 2021, 193%, 285% and 97% for the years ended December 31, 2020, 2019 and the period ended December 31, 2018, respectively.

 

See Notes to Financial Statements.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   47


Notes to financial statements (unaudited)

 

1. Organization and significant accounting policies

Western Asset Total Return ETF (the “Fund”) is a separate diversified investment series of Legg Mason ETF Investment Trust (the “Trust”). The Trust, a Maryland statutory trust, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company.

The Fund is an actively managed exchange-traded fund (“ETF”). ETFs are funds that trade like other publicly-traded securities. Unlike shares of a mutual fund, which can be bought from and redeemed by the issuing fund by all shareholders at a price based on net asset value (“NAV”), shares of the Fund may be directly purchased from and redeemed by the Fund at NAV solely by certain large institutional investors who have entered into agreements with the Fund’s distributor (“Authorized Participants”). Also unlike shares of a mutual fund, shares of the Fund are listed on a national securities exchange and trade in the secondary market at market prices that change throughout the day.

Shares of the Fund are listed and traded at market prices on NASDAQ. The market price for the Fund’s shares may be different from the Fund’s NAV. The Fund issues and redeems shares at NAV only in blocks of a specified number of shares or multiples thereof (“Creation Units”). Only Authorized Participants may purchase or redeem Creation Units directly with the Fund at NAV. Creation Units generally are issued and redeemed in cash. However, Creation Units may also be issued and redeemed partially in-kind for a basket of securities and partially in cash. Except when aggregated in Creation Units, shares of the Fund are not redeemable securities. Shareholders who are not Authorized Participants may not redeem shares directly from the Fund at NAV.

The Fund seeks to maximize total return, consistent with prudent investment management and liquidity needs.

The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles (“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. Subsequent events have been evaluated through the date the financial statements were issued.

(a) Investment valuation. The valuations for fixed income securities (which may include, but are not limited to, corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and certain derivative instruments are typically the prices supplied by independent third party pricing services, which may use market prices or broker/dealer quotations or a variety of valuation techniques and methodologies. The independent third party pricing services typically use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit

 

 

  
48    Western Asset Total Return ETF 2021 Semi-Annual Report


risks/spreads, default rates and quoted prices for similar securities. Investments in open-end funds are valued at the closing net asset value per share of each fund on the day of valuation. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded. Equity securities for which market quotations are available are valued at the last reported sales price or official closing price on the primary market or exchange on which they trade. When the Fund holds securities or other assets that are denominated in a foreign currency, the Fund will use the currency exchange rates, generally determined as of 4:00 p.m. (London Time). If independent third party pricing services are unable to supply prices for a portfolio investment, or if the prices supplied are deemed by the manager to be unreliable, the market price may be determined by the manager using quotations from one or more broker/dealers or at the transaction price if the security has recently been purchased and no value has yet been obtained from a pricing service or pricing broker. When reliable prices are not readily available, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund values these securities as determined in accordance with procedures approved by the Fund’s Board of Trustees.

The Board of Trustees is responsible for the valuation process and has delegated the supervision of the daily valuation process to the Global Fund Valuation Committee (formerly known as Legg Mason North Atlantic Fund Valuation Committee prior to March 1, 2021) (the “Valuation Committee”). The Valuation Committee, pursuant to the policies adopted by the Board of Trustees, is responsible for making fair value determinations, evaluating the effectiveness of the Fund’s pricing policies, and reporting to the Board of Trustees. When determining the reliability of third party pricing information for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the daily change in prices and reviews transactions among market participants.

The Valuation Committee will consider pricing methodologies it deems relevant and appropriate when making fair value determinations. Examples of possible methodologies include, but are not limited to, multiple of earnings; discount from market of a similar freely traded security; discounted cash-flow analysis; book value or a multiple thereof; risk premium/yield analysis; yield to maturity; and/or fundamental investment analysis. The Valuation Committee will also consider factors it deems relevant and appropriate in light of the facts and circumstances. Examples of possible factors include, but are not limited to, the type of security; the issuer’s financial statements; the purchase price of the security; the discount from market value of unrestricted securities of the same class at the time of purchase; analysts’ research and observations from financial institutions; information regarding any transactions or offers with respect to the security; the existence of merger proposals or tender offers affecting the security; the price and extent of public trading in similar securities of the issuer or comparable companies; and the existence of a shelf registration for restricted securities.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   49


Notes to financial statements (unaudited) (cont’d)

 

For each portfolio security that has been fair valued pursuant to the policies adopted by the Board of Trustees, the fair value price is compared against the last available and next available market quotations. The Valuation Committee reviews the results of such back testing monthly and fair valuation occurrences are reported to the Board of Trustees quarterly.

The Fund uses valuation techniques to measure fair value that are consistent with the market approach and/or income approach, depending on the type of security and the particular circumstance. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable securities. The income approach uses valuation techniques to discount estimated future cash flows to present value.

GAAP establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:

 

 

Level 1 — quoted prices in active markets for identical investments

 

 

Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

 

 

Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

 

  
50    Western Asset Total Return ETF 2021 Semi-Annual Report


The following is a summary of the inputs used in valuing the Fund’s assets and liabilities carried at fair value:

 

ASSETS  
Description   Quoted Prices
(Level 1)
    Other Significant
Observable Inputs
(Level 2)
   

Significant
Unobservable
Inputs

(Level 3)

    Total  
Long-Term Investments†:                                

Corporate Bonds & Notes

        $ 42,289,545           $ 42,289,545  

Sovereign Bonds

          19,061,750             19,061,750  

Mortgage-Backed Securities

          18,927,582             18,927,582  

Collateralized Mortgage Obligations

          14,282,084             14,282,084  

U.S. Government & Agency Obligations

          10,679,097             10,679,097  

Asset-Backed Securities

          8,842,345             8,842,345  

Senior Loans:

                               

Consumer Discretionary

          1,555,059     $ 172,531       1,727,590  

Financials

          1,363,166       205,802       1,568,968  

Other Senior Loans

          5,109,583             5,109,583  

U.S. Treasury Inflation Protected Securities

          1,120,639             1,120,639  

Investments in Underlying Funds

  $ 323,390                   323,390  

Purchased Options:

                               

Exchange-Traded Purchased Options

    120,577                   120,577  

OTC Purchased Options

          23,868             23,868  
Total Long-Term Investments     443,967       123,254,718       378,333       124,077,018  
Short-Term Investments†           2,864,059             2,864,059  
Total Investments   $ 443,967     $ 126,118,777     $ 378,333     $ 126,941,077  

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   51


Notes to financial statements (unaudited) (cont’d)

 

ASSETS (cont’d)  
Description   Quoted Prices
(Level 1)
    Other Significant
Observable Inputs
(Level 2)
   

Significant
Unobservable
Inputs

(Level 3)

    Total  
Other Financial Instruments:                                

Futures Contracts††

  $ 440,616                 $ 440,616  

Forward Foreign Currency Contracts††

        $ 363,057             363,057  

OTC Interest Rate Swaps‡

          511             511  

Centrally Cleared Interest Rate Swaps††

          1,132,345             1,132,345  

OTC Credit Default Swaps on Corporate Issues — Sell Protection‡

          12,797             12,797  

Centrally Cleared Credit Default Swaps on Credit Indices — Sell Protection††

          54,387             54,387  
Total Other Financial Instruments   $ 440,616     $ 1,563,097           $ 2,003,713  
Total   $ 884,583     $ 127,681,874     $ 378,333     $ 128,944,790  
LIABILITIES  
Description   Quoted Prices
(Level 1)
    Other Significant
Observable Inputs
(Level 2)
   

Significant
Unobservable
Inputs

(Level 3)

    Total  
Other Financial Instruments:                                

Written Options:

                               

Exchange-Traded Written Options

  $ 164,748                 $ 164,748  

OTC Written Options

        $ 6,017             6,017  

Futures Contracts††

    660,211                   660,211  

Forward Foreign Currency Contracts††

          156,227             156,227  

OTC Interest Rate Swaps‡

                       

Centrally Cleared Interest Rate Swaps††

          234,306             234,306  

OTC Credit Default Swaps on Corporate Issues — Buy Protection‡

          15,094             15,094  

Centrally Cleared Credit Default Swaps on Credit Indices — Buy Protection††

          19,240             19,240  
Total   $ 824,959     $ 430,884           $ 1,255,843  

 

 

  
52    Western Asset Total Return ETF 2021 Semi-Annual Report


See Schedule of Investments for additional detailed categorizations.

 

††

Reflects the unrealized appreciation (depreciation) of the instruments.

 

Value includes any premium paid or received with respect to swap contracts.

(b) Purchased options. When the Fund purchases an option, an amount equal to the premium paid by the Fund is recorded as an investment on the Statement of Assets and Liabilities, the value of which is marked-to-market to reflect the current market value of the option purchased. If the purchased option expires, the Fund realizes a loss equal to the amount of premium paid. When an instrument is purchased or sold through the exercise of an option, the related premium paid is added to the basis of the instrument acquired or deducted from the proceeds of the instrument sold. The risk associated with purchasing put and call options is limited to the premium paid.

(c) Written options. When the Fund writes an option, an amount equal to the premium received by the Fund is recorded as a liability, the value of which is marked-to-market daily to reflect the current market value of the option written. If the option expires, the premium received is recorded as a realized gain. When a written call option is exercised, the difference between the premium received plus the option exercise price and the Fund’s basis in the underlying security (in the case of a covered written call option), or the cost to purchase the underlying security (in the case of an uncovered written call option), including brokerage commission, is recognized as a realized gain or loss. When a written put option is exercised, the amount of the premium received is subtracted from the cost of the security purchased by the Fund from the exercise of the written put option to form the Fund’s basis in the underlying security purchased. The writer or buyer of an option traded on an exchange can liquidate the position before the exercise of the option by entering into a closing transaction. The cost of a closing transaction is deducted from the original premium received resulting in a realized gain or loss to the Fund.

The risk in writing a covered call option is that the Fund may forego the opportunity of profit if the market price of the underlying security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the underlying security decreases and the option is exercised. The risk in writing an uncovered call option is that the Fund is exposed to the risk of loss if the market price of the underlying security increases. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market.

(d) Options on futures contracts. An option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in the underlying futures contract at the specified option exercise price at any time prior to the expiration date of the option. Upon exercise of an option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer’s futures margin account that represents the amount by which the market price of the futures contract exceeds (in the case of a call) or is less than (in the case of a put) the

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   53


Notes to financial statements (unaudited) (cont’d)

 

exercise price of the option on the futures contract. The potential for loss related to the purchase of an option on a futures contract is limited to the premium paid for the option plus transaction costs. Because the value of the option is fixed at the point of purchase, there are no daily cash payments by the purchaser to reflect changes in the value of the underlying contract; however, the value of the option changes daily and that change would be reflected in the net asset value of the Fund. The potential for loss related to writing call options is unlimited. The potential for loss related to writing put options is limited only by the aggregate strike price of the put option less the premium received.

(e) Futures contracts. The Fund uses futures contracts generally to gain exposure to, or hedge against, changes in interest rates or gain exposure to, or hedge against, changes in certain asset classes or in an attempt to increase the Fund’s return. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.

Upon entering into a futures contract, the Fund is required to deposit cash or securities with a broker in an amount equal to a certain percentage of the contract amount. This is known as the ‘‘initial margin’’ and subsequent payments (‘‘variation margin’’) are made or received by the Fund each day, depending on the daily fluctuation in the value of the contract. For certain futures, including foreign denominated futures, variation margin is not settled daily, but is recorded as a net variation margin payable or receivable. The daily changes in contract value are recorded as unrealized appreciation or depreciation in the Statement of Operations and the Fund recognizes a realized gain or loss when the contract is closed.

Futures contracts involve, to varying degrees, risk of loss in excess of the amounts reflected in the financial statements. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market.

(f) Forward foreign currency contracts. The Fund enters into a forward foreign currency contract to hedge exposure of bond positions or in an attempt to increase the Fund’s return. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price with delivery and settlement at a future date. The contract is marked-to-market daily and the change in value is recorded by the Fund as an unrealized gain or loss. When a forward foreign currency contract is closed, through either delivery or offset by entering into another forward foreign currency contract, the Fund recognizes a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it is closed.

Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency.

Forward foreign currency contracts involve elements of market risk in excess of the amounts reflected on the Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the foreign exchange rate underlying the forward foreign currency

 

 

  
54    Western Asset Total Return ETF 2021 Semi-Annual Report


contract. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.

(g) Swap agreements. The Fund invests in swaps for the purpose of managing its exposure to interest rate, credit or market risk, or for other purposes. The use of swaps involves risks that are different from those associated with other portfolio transactions. Swap agreements are privately negotiated in the over-the-counter market and may be entered into as a bilateral contract (“OTC Swaps”) or centrally cleared (“Centrally Cleared Swaps”). Unlike Centrally Cleared Swaps, the Fund has credit exposure to the counterparties of OTC Swaps.

In a Centrally Cleared Swap, immediately following execution of the swap, the swap agreement is submitted to a clearinghouse or central counterparty (the “CCP”) and the CCP becomes the ultimate counterparty of the swap agreement. The Fund is required to interface with the CCP through a broker, acting in an agency capacity. All payments are settled with the CCP through the broker. Upon entering into a Centrally Cleared Swap, the Fund is required to deposit initial margin with the broker in the form of cash or securities.

Swap contracts are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of Centrally Cleared Swaps, if any, is recorded as a net receivable or payable for variation margin on the Statement of Assets and Liabilities. Gains or losses are realized upon termination of the swap agreement. Collateral, in the form of restricted cash or securities, may be required to be held in segregated accounts with the Fund’s custodian in compliance with the terms of the swap contracts. Securities posted as collateral for swap contracts are identified in the Schedule of Investments and restricted cash, if any, is identified on the Statement of Assets and Liabilities. Risks may exceed amounts recorded in the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts’ terms, and the possible lack of liquidity with respect to the swap agreements.

OTC Swap payments received or made at the beginning of the measurement period are reflected as a premium or deposit, respectively, on the Statement of Assets and Liabilities. These upfront payments are amortized over the life of the swap and are recognized as realized gain or loss in the Statement of Operations. Net periodic payments received or paid by the Fund are recognized as a realized gain or loss in the Statement of Operations.

The Fund’s maximum exposure in the event of a defined credit event on a credit default swap to sell protection is the notional amount. As of June 30, 2021, the total notional value of all credit default swaps to sell protection was EUR 530,000 and $10,226,000. These amounts would be offset by the value of the swap’s reference entity, upfront premiums received on the swap and any amounts received from the settlement of a credit default swap where the Fund bought protection for the same referenced entity.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   55


Notes to financial statements (unaudited) (cont’d)

 

For average notional amounts of swaps held during the six months ended June 30, 2021, see Note 4.

Credit default swaps

The Fund enters into credit default swap (“CDS”) contracts for investment purposes, to manage its credit risk or to add leverage. CDS agreements involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a third party, typically corporate or sovereign issuers, on a specified obligation, or in the event of a write-down, principal shortfall, interest shortfall or default of all or part of the referenced entities comprising a credit index. The Fund may use a CDS to provide protection against defaults of the issuers (i.e., to reduce risk where the Fund has exposure to an issuer) or to take an active long or short position with respect to the likelihood of a particular issuer’s default. As a seller of protection, the Fund generally receives an upfront payment or a stream of payments throughout the term of the swap provided that there is no credit event. If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the maximum potential amount of future payments (undiscounted) that the Fund could be required to make under a credit default swap agreement would be an amount equal to the notional amount of the agreement. These amounts of potential payments will be partially offset by any recovery of values from the respective referenced obligations. As a seller of protection, the Fund effectively adds leverage to its portfolio because, in addition to its total net assets, the Fund is subject to investment exposure on the notional amount of the swap. As a buyer of protection, the Fund generally receives an amount up to the notional value of the swap if a credit event occurs.

Implied spreads are the theoretical prices a lender receives for credit default protection. When spreads rise, market perceived credit risk rises and when spreads fall, market perceived credit risk falls. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to enter into the agreement. Wider credit spreads and decreasing market values, when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. Credit spreads utilized in determining the period end market value of credit default swap agreements on corporate or sovereign issues are disclosed in the Schedule of Investments and serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for credit derivatives. For credit default swap agreements on asset-backed securities and credit indices, the quoted market prices and resulting values, particularly in relation to the notional amount of the contract as well as the annual payment rate, serve as an indication of the current status of the payment/performance risk.

 

 

  
56    Western Asset Total Return ETF 2021 Semi-Annual Report


 

The Fund’s maximum risk of loss from counterparty risk, as the protection buyer, is the fair value of the contract (this risk is mitigated by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty). As the protection seller, the Fund’s maximum risk is the notional amount of the contract. Credit default swaps are considered to have credit risk-related contingent features since they require payment by the protection seller to the protection buyer upon the occurrence of a defined credit event.

Entering into a CDS agreement involves, to varying degrees, elements of credit, market and documentation risk in excess of the related amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreement may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreement, and that there will be unfavorable changes in net interest rates.

Interest rate swaps

The Fund enters into interest rate swap contracts to manage its exposure to interest rate risk. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional principal amount. The Fund may elect to pay a fixed rate and receive a floating rate, or receive a fixed rate and pay a floating rate, on a notional principal amount. Interest rate swaps are marked-to-market daily based upon quotations from market makers and the change, if any, is recorded as an unrealized appreciation or depreciation in the Statement of Operations. When a swap contract is terminated early, the Fund records a realized gain or loss equal to the difference between the original cost and the settlement amount of the closing transaction.

The risks of interest rate swaps include changes in market conditions that will affect the value of the contract or changes in the present value of the future cash flow streams and the possible inability of the counterparty to fulfill its obligations under the agreement. The Fund’s maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from the counterparty over the contract’s remaining life, to the extent that amount is positive. This risk is mitigated by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty.

(h) Swaptions. The Fund may purchase or write swaption contracts to manage exposure to fluctuations in interest rates or to enhance yield. The Fund may also purchase and write swaption contracts to manage exposure to an underlying instrument. Swaption contracts written by the Fund represent an option that gives the purchaser the right, but not the obligation, to enter into a previously agreed upon swap contract at a future date. Swaption contracts purchased by the Fund represent an option that gives the Fund the right, but not the obligation, to enter into a previously agreed upon swap contract at a future date.

When the Fund writes a swaption, an amount equal to the premium received by the Fund is recorded as a liability, the value of which is marked-to-market daily to reflect the current market value of the swaption written. If the swaption expires, the Fund realizes a gain equal to the amount of the premium received.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   57


Notes to financial statements (unaudited) (cont’d)

 

When the Fund purchases a swaption, an amount equal to the premium paid by the Fund is recorded as an investment on the Statement of Assets and Liabilities, the value of which is marked-to-market daily to reflect the current market value of the swaption purchased. If the swaption expires, the Fund realizes a loss equal to the amount of the premium paid.

Swaptions are marked-to-market daily based upon quotations from market makers. Changes in the value of the swaption are reported as unrealized gains or losses in the Statement of Operations.

(i) Loan participations. The Fund may invest in loans arranged through private negotiation between one or more financial institutions. The Fund’s investment in any such loan may be in the form of a participation in or an assignment of the loan. In connection with purchasing participations, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement related to the loan, or any rights of off-set against the borrower and the Fund may not benefit directly from any collateral supporting the loan in which it has purchased the participation.

The Fund assumes the credit risk of the borrower, the lender that is selling the participation and any other persons interpositioned between the Fund and the borrower. In the event of the insolvency of the lender selling the participation, the Fund may be treated as a general creditor of the lender and may not benefit from any off-set between the lender and the borrower.

(j) Unfunded loan commitments. The Fund may enter into certain credit agreements where all or a portion of the total amount committed may be unfunded. The Fund is obligated to fund these commitments at the borrower’s discretion. The commitments are disclosed in the accompanying Schedule of Investments. At June 30, 2021, the Fund had sufficient cash and/or securities to cover these commitments.

(k) Stripped securities. The Fund may invest in ‘‘Stripped Securities,’’ a term used collectively for components, or strips, of fixed income securities. Stripped Securities can be principal only securities (“PO”), which are debt obligations that have been stripped of unmatured interest coupons, or interest only securities (“IO”), which are unmatured interest coupons that have been stripped from debt obligations. The market value of Stripped Securities will fluctuate in response to changes in economic conditions, rates of prepayment, interest rates and the market’s perception of the securities. However, fluctuations in response to interest rates may be greater in Stripped Securities than for debt obligations of comparable maturities that pay interest currently. The amount of fluctuation may increase with a longer period of maturity.

 

 

  
58    Western Asset Total Return ETF 2021 Semi-Annual Report


 

The yield to maturity on IO’s is sensitive to the rate of principal repayments (including prepayments) on the related underlying debt obligation and principal payments may have a material effect on yield to maturity. If the underlying debt obligation experiences greater than anticipated prepayments of principal, the Fund may not fully recoup its initial investment in IO’s.

(l) Securities traded on a when-issued and delayed delivery basis. The Fund may trade securities on a when-issued or delayed delivery basis. In when-issued and delayed delivery transactions, the securities are purchased or sold by the Fund with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price and yield to the Fund at the time of entering into the transaction.

Purchasing such securities involves risk of loss if the value of the securities declines prior to settlement. These securities are subject to market fluctuations and their current value is determined in the same manner as for other securities.

(m) Securities traded on a to-be-announced basis. The Fund may trade securities on a to-be-announced (“TBA”) basis. In a TBA transaction, the Fund commits to purchasing or selling securities which have not yet been issued by the issuer and for which specific information, such as the face amount, maturity date and underlying pool of investments in U.S. government agency mortgage pass-through securities, is not announced. Securities purchased on a TBA basis are not settled until they are delivered to the Fund. Beginning on the date the Fund enters into a TBA transaction, cash, U.S. government securities or other liquid high-grade debt obligations are segregated in an amount equal in value to the purchase price of the TBA security. These securities are subject to market fluctuations and their current value is determined in the same manner as for other securities.

(n) Mortgage dollar rolls. The Fund may enter into mortgage dollar rolls in which the Fund sells mortgage-backed securities for delivery in the current month, realizing a gain or loss, and simultaneously entering into contracts to repurchase substantially similar (same type, coupon and maturity) securities to settle on a specified future date.

The Fund executes its mortgage dollar rolls entirely in the TBA market, whereby the Fund makes a forward commitment to purchase a security and, instead of accepting delivery, the position is offset by a sale of the security with a simultaneous agreement to repurchase at a future date. The Fund accounts for mortgage dollar rolls as purchases and sales.

The risk of entering into mortgage dollar rolls is that the market value of the securities the Fund is obligated to repurchase under the agreement may decline below the repurchase price. In the event the buyer of securities under a mortgage dollar roll files for bankruptcy or becomes insolvent, the Fund’s use of the proceeds of the mortgage dollar roll may be restricted pending a determination by the counterparty, or its trustee or receiver, whether to enforce the Fund’s obligation to repurchase the securities.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   59


Notes to financial statements (unaudited) (cont’d)

 

(o) Inflation-indexed bonds. Inflation-indexed bonds are fixed income securities whose principal value or interest rate is periodically adjusted according to the rate of inflation. As the index measuring inflation changes, the principal value or interest rate of inflation-indexed bonds will be adjusted accordingly. Inflation adjustments to the principal amount of inflation-indexed bonds are reflected as an increase or decrease to investment income on the Statement of Operations. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal.

(p) Foreign currency translation. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such transactions.

The Fund does not isolate that portion of the results of operations resulting from fluctuations in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

Net realized foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, other than investments in securities, on the date of valuation, resulting from changes in exchange rates.

Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.

(q) Credit and market risk. The Fund invests in high-yield and emerging market instruments that are subject to certain credit and market risks. The yields of high-yield and emerging market debt obligations reflect, among other things, perceived credit and market risks. The Fund’s investments in securities rated below investment grade typically involve risks not associated with higher rated securities including, among others, greater risk related to timely and ultimate payment of interest and principal, greater market price

 

 

  
60    Western Asset Total Return ETF 2021 Semi-Annual Report


 

volatility and less liquid secondary market trading. The consequences of political, social, economic or diplomatic changes may have disruptive effects on the market prices of investments held by the Fund. The Fund’s investments in non-U.S. dollar denominated securities may also result in foreign currency losses caused by devaluations and exchange rate fluctuations.

Investments in securities that are collateralized by real estate mortgages are subject to certain credit and liquidity risks. When market conditions result in an increase in default rates of the underlying mortgages and the foreclosure values of underlying real estate properties are materially below the outstanding amount of these underlying mortgages, collection of the full amount of accrued interest and principal on these investments may be doubtful. Such market conditions may significantly impair the value and liquidity of these investments and may result in a lack of correlation between their credit ratings and values.

(r) Foreign investment risks. The Fund’s investments in foreign securities may involve risks not present in domestic investments. Since securities may be denominated in foreign currencies, may require settlement in foreign currencies or may pay interest or dividends in foreign currencies, changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Fund. Foreign investments may also subject the Fund to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, all of which affect the market and/or credit risk of the investments.

(s) Counterparty risk and credit-risk-related contingent features of derivative instruments. The Fund may invest in certain securities or engage in other transactions where the Fund is exposed to counterparty credit risk in addition to broader market risks. The Fund may invest in securities of issuers, which may also be considered counterparties as trading partners in other transactions. This may increase the risk of loss in the event of default or bankruptcy by the counterparty or if the counterparty otherwise fails to meet its contractual obligations. The Fund’s subadviser attempts to mitigate counterparty risk by (i) periodically assessing the creditworthiness of its trading partners, (ii) monitoring and/or limiting the amount of its net exposure to each individual counterparty based on its assessment and (iii) requiring collateral from the counterparty for certain transactions. Market events and changes in overall economic conditions may impact the assessment of such counterparty risk by the subadviser. In addition, declines in the values of underlying collateral received may expose the Fund to increased risk of loss.

With exchange traded and centrally cleared derivatives, there is less counterparty risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, the credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default of the clearing broker or clearinghouse.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   61


Notes to financial statements (unaudited) (cont’d)

 

The Fund has entered into master agreements, such as an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement, with certain of its derivative counterparties that govern over-the-counter (“OTC”) derivatives and provide for general obligations, representations, agreements, collateral posting terms, netting provisions in the event of default or termination and credit related contingent features. The credit related contingent features include, but are not limited to, a percentage decrease in the Fund’s net assets or net asset value per share over a specified period of time. If these credit related contingent features were triggered, the derivatives counterparty could terminate the positions and demand payment or require additional collateral.

Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. However, absent an event of default by the counterparty or a termination of the agreement, the terms of the ISDA Master Agreements do not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the Fund and the applicable counterparty. The enforceability of the right to offset may vary by jurisdiction.

Collateral requirements differ by type of derivative. Collateral or margin requirements are set by the broker or exchange clearinghouse for exchange traded derivatives while collateral terms are contract specific for OTC traded derivatives. Cash collateral that has been pledged to cover obligations of the Fund under derivative contracts, if any, will be reported separately in the Statement of Assets and Liabilities. Securities pledged as collateral, if any, for the same purpose are noted in the Schedule of Investments.

As of June 30, 2021, the Fund held OTC written options, OTC swap contracts and forward foreign currency contracts with credit related contingent features which had a net liability-position of $177,338. If a contingent feature would have been triggered, the Fund would-have been required to pay this amount to its derivatives counterparties.

At June 30, 2021, the Fund held non-cash collateral from BNP Paribas SA and Goldman Sachs Group Inc. in the amounts of $10,000 and $67,000, respectively. These amounts could be used to reduce the Fund’s exposure to the counterparty in the event of default.

(t) Security transactions and investment income. Security transactions are accounted for on a trade date basis. Interest income (including interest income from payment-in-kind securities), adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Paydown gains and losses on mortgage- and asset-backed securities are recorded as adjustments to interest income. Dividend income is recorded on the ex-dividend

 

 

  
62    Western Asset Total Return ETF 2021 Semi-Annual Report


 

date for dividends received in cash and/or securities. The cost of investments sold is determined by use of the specific identification method. To the extent any issuer defaults or a credit event occurs that impacts the issuer, the Fund may halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default or credit event.

(u) Distributions to shareholders. Distributions from net investment income of the Fund, if any, are declared and paid on a monthly basis. Distributions of net realized gains, if any, are declared at least annually. Distributions to shareholders of the Fund are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.

(v) Federal and other taxes. It is the Fund’s policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986 (the “Code”), as amended, applicable to regulated investment companies. Accordingly, the Fund intends to distribute its taxable income and net realized gains, if any, to shareholders in accordance with timing requirements imposed by the Code. Therefore, no federal or state income tax provision is required in the Fund’s financial statements.

Management has analyzed the Fund’s tax positions taken on income tax returns for all open tax years and has concluded that as of December 31, 2020, no provision for income tax is required in the Fund’s financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.

Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates.

(w) Reclassification. GAAP requires that certain components of net assets be reclassified to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share.

2. Investment management agreement and other transactions with affiliates

Legg Mason Partners Fund Advisor, LLC (“LMPFA”) is the Fund’s investment manager. Western Asset Management Company, LLC (“Western Asset”), is the Fund’s subadviser and Western Asset Management Company Pte. Ltd. in Singapore (“Western Singapore”), Western Asset Management Company Ltd in Japan (“Western Japan”) and Western Asset Management Company Limited in London (“Western Asset London”) are the Fund’s sub-subadvisers. LMPFA, Western Asset, Western Singapore, Western Japan and Western Asset London are indirect, wholly-owned subsidiaries of Franklin Resources, Inc. (“Franklin Resources”).

 

 

 

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Notes to financial statements (unaudited) (cont’d)

 

LMPFA provides administrative and certain oversight services to the Fund. LMPFA delegates to the subadviser the day-to-day portfolio management of the Fund. The Fund is responsible for paying interest expenses, taxes, brokerage expenses, future 12b-1 fees (if any), acquired fund fees and expenses, extraordinary expenses and the management fee payable to LMPFA under the investment management agreement.

Under the investment management agreement and subject to the general supervision of the Fund’s Board of Trustees, LMPFA provides or causes to be furnished all investment management, supervisory, administrative and other services reasonably necessary for the operation of the Fund, including certain distribution services (provided pursuant to a separate distribution agreement) and investment advisory services (provided pursuant to separate subadvisory agreements) under a unitary fee structure. The Fund pays an investment management fee, calculated daily and paid monthly, at an annual rate of 0.49% of the Fund’s average daily net assets.

LMPFA has agreed to waive fees and/or reimburse investment manager fees, so that the ratio of total annual fund operating expenses will not exceed 0.45% of the Fund’s average daily net assets (subject to the same exclusions as the investment management agreement). This arrangement cannot be terminated prior to May 1, 2022 without the Board of Trustees consent.

During the six months ended June 30, 2021, fees waived and/or expenses reimbursed amounted to $25,510.

As compensation for its subadvisory services, LMPFA pays Western Asset monthly 70% of the management fee paid by the Fund to LMPFA, net of (i) all fees and expenses incurred by LMPFA under the investment management agreement (including without limitation any subadvisory fee paid to another subadviser to the Fund) and (ii) expense waivers, if any, and reimbursements. Western Asset pays Western Asset Singapore, Western Asset Japan and Western Asset London a monthly subadvisory fee in an amount equal to 100% of the management fee paid to Western Asset on the assets that Western Asset allocates to each such non-U.S. subadviser to manage.

Legg Mason Investor Services, LLC (“LMIS”) serves as the distributor of Creation Units for the Fund on an agency basis. LMIS is an indirect, wholly-owned broker-dealer subsidiary of Franklin Resources. As of July 7, 2021, LMIS was renamed Franklin Distributors LLC.

The Fund’s Board of Trustees has adopted a Rule 12b-1 shareholder services and distribution plan and under that plan, the Fund is authorized to pay service and/or distribution fees calculated at an annual rate of up to 0.25% of its average daily net assets. No service and/or distribution fees are currently paid by the Fund, and there are no current plans to impose these fees.

 

 

  
64    Western Asset Total Return ETF 2021 Semi-Annual Report


 

All officers and one Trustee of the Trust are employees of Franklin Resources or its affiliates and do not receive compensation from the Trust.

3. Investments

During the six months ended June 30, 2021, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) and U.S. Government & Agency Obligations were as follows:

 

        Investments        U.S. Government &
Agency Obligations
 
Purchases      $ 28,631,927        $ 57,164,709  
Sales        27,987,451          71,789,276  

At June 30, 2021, the aggregate cost of investments and the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:

 

      Cost/Premiums
Paid (Received)
     Gross
Unrealized
Appreciation
     Gross
Unrealized
Depreciation
     Net
Unrealized
Appreciation
(Depreciation)
 
Securities    $ 126,049,791      $ 3,380,674      $ (2,489,388)      $ 891,286  
Written options      (271,360)        106,398        (5,803)        100,595  
Futures contracts             440,616        (660,211)        (219,595)  
Forward foreign currency contracts             363,057        (156,227)        206,830  
Swap contracts      89,764        1,192,937        (259,936)        933,001  

4. Derivative instruments and hedging activities

Below is a table, grouped by derivative type, that provides information about the fair value and the location of derivatives within the Statement of Assets and Liabilities at June 30, 2021.

 

ASSET DERIVATIVES1  
      Interest
Rate Risk
     Foreign
Exchange Risk
     Credit
Risk
     Total  
Purchased options2    $ 126,888      $ 11,269      $ 6,288      $ 144,445  
Futures contracts3      440,616                      440,616  
Forward foreign currency contracts             363,057               363,057  
OTC swap contracts4      511               12,797        13,308  
Centrally cleared swap contracts5      1,132,345               54,387        1,186,732  
Total    $ 1,700,360      $ 374,326      $ 73,472      $ 2,148,158  

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   65


Notes to financial statements (unaudited) (cont’d)

 

LIABILITY DERIVATIVES1  
      Interest
Rate Risk
     Foreign
Exchange Risk
     Credit
Risk
     Total  
Written options    $ 165,744      $ 262      $ 4,759      $ 170,765  
Futures contracts3      660,211                      660,211  
Forward foreign currency contracts             156,227               156,227  
OTC swap contracts4                    15,094        15,094  
Centrally cleared swap contracts5      234,306               19,240        253,546  
Total    $ 1,060,261      $ 156,489      $ 39,093      $ 1,255,843  

 

1  

Generally, the balance sheet location for asset derivatives is receivables/net unrealized appreciation and for liability derivatives is payables/net unrealized depreciation.

 

2 

Market value of purchased options is reported in Investments at value in the Statement of Assets and Liabilities.

 

3 

Includes cumulative unrealized appreciation (depreciation) of futures contracts as reported in the Schedule of Investments. Only net variation margin is reported within the receivables and/or payables on the Statement of Assets and Liabilities.

 

4 

Values include premiums paid (received) on swap contracts which are shown separately in the Statement of Assets and Liabilities.

 

5 

Includes cumulative unrealized appreciation (depreciation) of centrally cleared swap contracts as reported in the Schedule of Investments. Only net variation margin is reported within the receivables and/or payables on the Statement of Assets and Liabilities.

The following tables provide information about the effect of derivatives and hedging activities on the Fund’s Statement of Operations for the six months ended June 30, 2021. The first table provides additional detail about the amounts and sources of gains (losses) realized on derivatives during the period. The second table provides additional information about the change in unrealized appreciation (depreciation) resulting from the Fund’s derivatives and hedging activities during the period.

 

AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED  
      Interest
Rate Risk
     Foreign
Exchange Risk
     Credit
Risk
     Total  
Purchased options1    $ (1,432,701)      $ (191,726)      $ (76,256)      $ (1,700,683)  
Futures contracts      (1,350,789)                      (1,350,789)  
Written options      1,875,639        129,536        109,629        2,114,804  
Swap contracts      298,754               237,040        535,794  
Forward foreign currency contracts             550,283               550,283  
Total    $ (609,097)      $ 488,093      $ 270,413      $ 149,409  

 

1 

Net realized gain (loss) from purchased options is reported in Net Realized Gain (Loss) From Investment transactions in the Statement of Operations.

 

 

  
66    Western Asset Total Return ETF 2021 Semi-Annual Report


 

CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED  
      Interest
Rate Risk
     Foreign
Exchange Risk
     Credit
Risk
     Total  
Purchased options1    $ (138,670)      $ (64,520)      $ (6,820)      $ (210,010)  
Futures contracts      (70,008)                      (70,008)  
Written options      (27,947)        15,027        81,533        68,613  
Swap contracts      147,557               (260,644)        (113,087)  
Forward foreign currency contracts             (205,313)               (205,313)  
Total    $ (89,068)      $ (254,806)      $ (185,931)      $ (529,805)  

 

1  

The change in unrealized appreciation (depreciation) from purchased options is reported in the Change in Net Unrealized Appreciation (Depreciation) From Investments in the Statement of Operations.

During the six months ended June 30, 2021, the volume of derivative activity for the Fund was as follows:

 

        Average Market
Value
 
Purchased options      $ 299,348  
Written options        379,332  
Futures contracts (to buy)        159,106,907  
Futures contracts (to sell)        140,229,047  
Forward foreign currency contracts (to buy)        11,988,632,978  
Forward foreign currency contracts (to sell)        2,180,996,162  
        Average
Notional Balance
 
Interest rate swap contracts      $ 50,119,052  
Credit default swap contracts (buy protection)        1,522,109  
Credit default swap contracts (sell protection)        13,900,394  

The following table presents the Fund’s OTC derivative assets and liabilities by counterparty net of amounts available for offset under an ISDA Master Agreement and net of the related collateral pledged (received) by the Fund as of June 30, 2021.

 

Counterparty   Gross
Assets
Subject to
Master
Agreements1
    

Gross
Liabilities
Subject to
Master

Agreements1

     Net Assets
(Liabilities)
Subject to
Master
Agreements
     Collateral
Pledged
(Received)2
     Net
Amount3,4
 
Bank of America N.A.   $ 2             $ 2             $ 2  
BNP Paribas SA     42,381      $ (19,853)        22,528      $ (10,000)        12,528  
Citibank N.A.     252,403        (106,120)        146,283               146,283  
Goldman Sachs Group Inc.     74,471        (21,411)        53,060        (67,000)        (13,940)  
JPMorgan Chase & Co.     13,519        (2,438)        11,081               11,081  
Morgan Stanley & Co. Inc.     17,457        (27,516)        (10,059)               (10,059)  
Total   $ 400,233      $ (177,338)      $ 222,895      $ (77,000)      $ 145,895  

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   67


Notes to financial statements (unaudited) (cont’d)

 

1 

Absent an event of default or early termination, derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities.

 

2 

Gross amounts are not offset in the Statement of Assets and Liabilities.

 

3 

Net amount may also include forward foreign currency exchange contracts that are not required to be collateralized.

 

4 

Represents the net amount receivable (payable) from (to) the counterparty in the event of default.

5. Fund share transactions

At June 30, 2021, the Trust had an unlimited number of shares of beneficial interest authorized with a par value of $0.00001 per share. Fund shares are issued and redeemed by the Fund only in Creation Units or Creation Unit aggregations, where 50,000 shares of the Fund constitute a Creation Unit. Such transactions are generally on a cash basis. However, Creation Units may also be issued and redeemed partially in-kind for a basket of securities and partially in cash. Transactions in capital shares of the Fund are disclosed in detail in the Statement of Changes in Net Assets. Authorized Participants are subject to standard creation and redemption transaction fees to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units. Creations and redemptions for cash (when cash creations and redemptions are available or specified) may be subject to an additional variable fee.

6. Recent accounting pronouncement

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (the “ASU”). The amendments in the ASU provide optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

7. Other matters

The outbreak of the respiratory illness COVID-19 (commonly referred to as “coronavirus”) has continued to rapidly spread around the world, causing considerable uncertainty for the global economy and financial markets. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers, are not known. The COVID-19 pandemic could adversely affect the value and liquidity of the Fund’s investments, impair the Fund’s ability to satisfy redemption requests, and negatively impact the Fund’s performance. In addition, the outbreak of COVID-19, and measures taken to mitigate its effects, could result in disruptions to the services provided to the Fund by its service providers.

 

 

  
68    Western Asset Total Return ETF 2021 Semi-Annual Report


***

The Fund’s investments, payment obligations, and financing terms may be based on floating rates, such as the London Interbank Offered Rate, or “LIBOR,” which is the offered rate for short-term Eurodollar deposits between major international banks. On March 5, 2021, the ICE Benchmark Administration, the administrator of LIBOR, stated that it will cease the publication of (i) the overnight and one-, three-, six- and twelve-month USD LIBOR settings immediately following the LIBOR publication on Friday, June 30, 2023 and (ii) all other LIBOR settings, including the one-week and two-month USD LIBOR settings, immediately following the LIBOR publication on Friday, December 31, 2021. There remains uncertainty regarding the nature of any replacement rate and the impact of the transition from LIBOR on the Fund’s transactions and the financial markets generally. As such, the potential effect of a transition away from LIBOR on the Fund or the Fund’s investments cannot yet be determined.

 

 

 

Western Asset Total Return ETF 2021 Semi-Annual Report   69


Additional shareholder information (unaudited)

 

Results of special meeting of shareholders

A special meeting of shareholders was held on June 15, 2021 for shareholders of record as of March 1, 2021 (the “Record Date”) to elect the Board of Trustees of the Trust.

Shareholders of the Fund and each other series of the Trust voted together as a single class to elect the Board.

Shareholders of the Trust voted as indicated below (vote totals are rounded to the nearest whole number). Effective July 1, 2021, the Board is composed of the following Trustees:

 

Trustees    For      Withheld  
Rohit Bhagat      941,735,402        14,088,498  
Deborah D. McWhinney      943,565,325        12,258,574  
Anantha K. Pradeep      942,060,249        13,763,651  
Jennifer M. Johnson      943,888,843        11,935,057  

The above Trustees have also been elected to serve as board members of other funds within the Franklin Templeton fund complex.

 

70    Western Asset Total Return ETF


Western

Asset Total Return ETF

 

Trustees*

Rohit Bhagat

Deborah D. McWhinney

Anantha K. Pradeep

Jennifer M. Johnson**

Chair

Investment manager

Legg Mason Partners Fund Advisor, LLC

Subadviser

Western Asset Management Company, LLC

Western Asset Management Company Limited

Western Asset Management Company Ltd

Western Asset Management Company Pte. Ltd.

Custodian

The Bank of New York Mellon

Transfer agent

The Bank of New York Mellon

240 Greenwich Street

New York, NY 10286

Independent registered public accounting firm

PricewaterhouseCoopers LLP

Baltimore, MD

 

  *

During a June 15, 2021 special meeting of shareholders, a new group of Trustees were elected to oversee the funds of Legg Mason ETF Investment Trust, effective July 1, 2021.

 

  **

Effective July 1, 2021, Ms. Johnson became Chair.

Western Asset Total Return ETF

The Fund is a separate investment series of Legg Mason ETF Investment Trust, a Maryland statutory trust.

Western Asset Total Return ETF

Legg Mason Funds

620 Eighth Avenue, 47th Floor

New York, NY 10018

 

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov. To obtain information on Form N-PORT, shareholders can call the Fund at

1-877-721-1926.

Information on how the Fund voted proxies relating to portfolio securities during the prior 12-month period ended June 30th of each year and a description of the policies and procedures that the Fund uses to determine how to vote proxies related to portfolio transactions are available (1) without charge, upon request, by calling the Fund at 1-877-721-1926, (2) at www.leggmason.com/etf and (3) on the SEC’s website at www.sec.gov.

 

This report is submitted for the general information of the shareholders of Western Asset Total Return ETF. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by a current prospectus.

Investors should consider the Fund’s investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information about the Fund. Please read the prospectus carefully before investing.

www.leggmason.com

© 2021 Franklin Distributors, LLC,

Member FINRA/SIPC. All rights reserved.


www.leggmason.com

© 2021 Franklin Distributors, LLC, Member FINRA/SIPC. All rights reserved.

ETFF531459 8/21 SR21-4220


ITEM 2.

CODE OF ETHICS.

Not applicable.

 

ITEM 3.

AUDIT COMMITTEE FINANCIAL EXPERT.

Not applicable.

 

ITEM 4.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not applicable.

 

ITEM 5.

AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable.

 

ITEM 6.

SCHEDULE OF INVESTMENTS.

Included herein under Item 1.

 

ITEM 7.

DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

 

ITEM 8.

PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

 

ITEM 9.

PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

Not applicable.

 

ITEM 10.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

 

ITEM 11.

CONTROLS AND PROCEDURES.

 

  (a)

The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a- 3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934.

 

  (b)

There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting.


ITEM 12.

DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable

 

ITEM 13.

EXHIBITS.

(a) (1) Not applicable.

Exhibit  99.CODE ETH

(a) (2)  Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 attached hereto.

Exhibit 99.CERT

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto.

Exhibit 99.906CERT


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, there unto duly authorized.

Legg Mason ETF Investment Trust

 

By:  

/s/ Jane Trust

  Jane Trust
  Chief Executive Officer
Date:   August 23, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:  

/s/ Jane Trust

  Jane Trust
  Chief Executive Officer
Date:   August 23, 2021

 

By:  

/s/ Christopher Berarducci

  Christopher Berarducci
  Principal Financial Officer
Date:   August 23, 2021