Form N-CSR Legg Mason ETF Investmen For: Jul 31

September 28, 2021 6:07 AM EDT

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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: July 31

Date of reporting period: July 31, 2021

 

 

 


Table of Contents
ITEM 1.

REPORT TO STOCKHOLDERS.

The Annual Report to Stockholders is filed herewith.


Table of Contents

LOGO

 

Annual Report   July 31, 2021

WESTERN ASSET

SHORT DURATION

INCOME ETF

WINC

 

 

 

 

 

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.

 

LOGO

 

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


Table of Contents
What’s inside      
Letter from the president     II  
Fund overview     1  
Fund at a glance     7  
Fund expenses     8  
Fund performance     9  
Schedule of investments     11  
Statement of assets and liabilities     24  
Statement of operations     25  
Statements of changes in net assets     26  
Financial highlights     27  
Notes to financial statements     28  
Report of independent registered public accounting firm     40  
Additional shareholder information     41  
Additional information     42  
Important tax information     49  

Fund objective

The Fund seeks current income.

 

Letter from the president

 

LOGO

 

Dear Shareholder,

We are pleased to provide the annual report of Western Asset Short Duration Income ETF for the twelve-month reporting period ended July 31, 2021. Please read on for a detailed look at prevailing economic and market conditions during the Fund’s reporting period and to learn how those conditions have affected Fund performance.

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

Patrick O’Connor

President and Chief Executive Officer - Investment Management

August 31, 2021

 

II    Western Asset Short Duration Income ETF


Table of Contents

Fund overview

 

Q. What is the Fund’s investment strategy?

A. Western Asset Short Duration Income ETF (the “Fund”) seeks current income. Under normal market conditions, the Fund invests at least 80% of its net assets, plus borrowings for investment purposes, in “investment grade” fixed income securities. Corporate debt securities, including notes, bonds, debentures and commercial paper, are fixed income securities usually issued by businesses to finance their operations. These securities may be secured or unsecured, may be issued by U.S. or foreign entities and may carry variable or floating rates of interest. The Fund may invest in Rule 144A securities. The Fund may also invest in other short-duration fixed income securities, such as floating rate loans and structured debt and in cash or cash equivalents such as money market securities. Securities in which the Fund will invest will be U.S. dollar-denominated although they may be issued by a foreign corporation or a U.S. affiliate of a foreign corporation, or a foreign government or its agencies and instrumentalities.

Although the Fund may invest in securities of any maturity, the Fund will normally maintain an effective durationi, of three years or less. Investment grade securities are those rated by a rating agency at the time of purchase in one of the top four ratings categories (e.g., BBB-or higher by S&P Global Ratings (“S&P”) or Baa3 or higher by Moody’s Investors Service, Inc. (“Moody’s”)) or, if unrated, that we judged to be of comparable credit quality. The Fund may also invest up to 15% of its assets in fixed income securities that are below investment grade (e.g., BB+ or lower by S&P or Ba1 or lower by Moody’s). Below investment grade securities are commonly known as “junk bonds” or “high yield securities.”

The Fund may also invest up to 15% of its assets in mortgage-backed securities (“MBS”) and asset-backed securities (“ABS”), including collateralized debt obligations (“CDOs”). The Fund may use derivatives, from time to time, in order to change the investment characteristics of its portfolio (such as shortening or lengthening duration) and/or for other purposes.

At Western Asset Management Company, LLC (“Western Asset”), the Fund’s subadviser, we utilize a fixed income team approach, with decisions derived from interaction among various investment management sectors. The sector teams are comprised of Western Asset’s senior portfolio management personnel, research analysts and an in-house economist. Under this team approach, management of client fixed income portfolios will reflect a consensus of interdisciplinary views within the Western Asset organization.

Q. What were the overall market conditions during the Fund’s reporting period?

A. Fixed income markets experienced periods of volatility and, overall, modestly declined over the twelve-months ended July 31, 2021. Volatility was driven by a number of factors, including the repercussions from the COVID-19 pandemic, sharply falling and then rising global growth, trade conflicts, inflation concerns, and a number of geopolitical events. Most spread sectors (non-Treasuries) outperformed similar duration Treasuries. This was driven by continued monetary policy accommodation from the Federal Reserve Board (“Fed”)ii and the rollout of several COVID-19 vaccines which triggered increased investor risk appetite.

 

Western Asset Short Duration Income ETF 2021 Annual Report       1  


Table of Contents

Fund overview (cont’d)

 

Short-term U.S. Treasury yields moved higher as economic conditions improved. The yield for the two-year Treasury note began the reporting period at 0.11% and ended the period at 0.19%. The low of 0.09% occurred on February 5, 2021 and the high of 0.28% took place on June 25, 2021. Long-term U.S. Treasury yields moved sharply higher, as positive economic data triggered inflationary concerns and fears that the Fed may remove its monetary policy accommodations sooner than previously anticipated. The ten-year Treasury yield began the reporting period at 0.55%. The low of 0.52% occurred on August 4, 2020, and its high of 1.74% took place on March 19 and March 31, 2021. The ten-year Treasury yield then ended the period at 1.24%.

All told, the short duration investment-yield corporate bond market, as measured by the Bloomberg U.S. Corporate 1-5 Year Indexiii (prior to August 24, 2021, known as Bloomberg Barclays U.S. Corporate 1-5 Year Index), returned 1.71% for the twelve-month reporting period ended July 31, 2021.

Q. How did we respond to these changing market conditions?

A. A number of adjustments were made to the Fund’s portfolio during the reporting period. We increased the Fund’s allocation to bank loans, while reducing the Fund’s exposures to high-yield corporate bonds. Within the high-yield corporate bond market, we added to the Fund’s exposures to the Energy and Consumer Cyclical sectors1, while paring its allocations to the Financials and Capital Goods2 sectors. From a quality perspective, we increased the Fund’s allocation to securities rated A, and reduced its exposure to securities rated CCC. Finally, we increased the Fund’s duration during the reporting period.

The Fund employed U.S. Treasury futures to manage its duration and yield curve positioning. All told, they contributed to performance.

Performance review

For the twelve months ended July 31, 2021, Western Asset Short Duration Income ETF generated a 6.06% return on a net asset value (“NAV”)iv basis and 6.22% based on its market pricev per share.

The performance table shows the Fund’s total return for the twelve months ended July 31, 2021 based on its NAV and market price. The Fund’s broad-based market index, the Bloomberg U.S. Corporate 1 – 5 Year Index, returned 1.71% over the same timeframe. The Lipper Short Investment Grade Debt Funds Category Averagevi returned 2.22% for the same period. Please note that Lipper performance returns are based on each fund’s NAV.

 

1 

Consumer Cyclicals consists of the following industries: Automotive, Entertainment, Gaming, Home Construction, Lodging, Retailers, Restaurants, Textiles and other consumer services.

 

2 

Capital Goods consists of the following industries: Aerospace & Defense, Building Materials, Diversified Manufacturing, Construction Machines, Packaging and Environmental.

 

2     Western Asset Short Duration Income ETF 2021 Annual Report


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Performance Snapshot as of July 31, 2021 (unaudited)  
     6 months     12 months  
Western Asset Short Duration Income ETF:    

$26.32 (NAV)

    1.53     6.06 %*† 

$26.38 (Market Price)

    1.48     6.22 %*‡ 
Bloomberg U.S. Corporate 1-5 Year Index     0.51 %*      1.71
Lipper Short Investment Grade Debt Funds Category Average     0.47     2.22

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. 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 November 25, 2020, the gross total annual fund operating expense ratio for the Fund was 0.29%.

 

* 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, at NAV.

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

Q. What were the leading contributors to performance?

A. The largest contributor to the Fund’s relative performance during the reporting period was its security selection. In particular, the Fund’s holdings in the Energy sector, led by an overweight to Occidental Petroleum Corp., added the most value. The company benefited from sharply rising oil process. Within the Information Technology sector, an underweight to Oracle Corp. was beneficial, as the company increased its leverage during the reporting period.

From a sector perspective, overweights to the Energy, Industrials and Financials sectors was the most additive for returns. In terms of the Fund’s ratings biases, an overweight to securities rated BBB contributed to performance, as lower rated securities generally outperformed their higher rated counterparts. Finally, the Fund’s tactical duration and yield curve positioning contributed to performance.

 

Western Asset Short Duration Income ETF 2021 Annual Report       3  


Table of Contents

Fund overview (cont’d)

 

Q. What were the leading detractors from performance?

A. The largest detractor from the Fund’s relative performance during the reporting period was its overweight to the banking industry. While there were no other material detractors from performance, several individual securities were modest headwinds for results.

Looking for additional information?

The Fund’s daily NAV is available online at www.leggmason.com/etf. The Fund is traded under the symbol “WINC” 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.

 

4     Western Asset Short Duration Income ETF 2021 Annual Report


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Thank you for your investment in Western Asset Short Duration Income ETF. As always, we appreciate that you have chosen us to manage your assets and we remain focused on achieving the Fund’s investment goals.

Sincerely,

Western Asset Management Company, LLC

August 31, 2021

RISKS: Fixed income securities involve interest rate, credit, inflation and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed income securities falls. 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.

Portfolio holdings and breakdowns are as of July 31, 2021 and are subject to change and may not be representative of the portfolio managers’ current or future investments. Please refer to pages 10 through 22 for a list and percentage breakdown of the Fund’s holdings.

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.

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

 

Western Asset Short Duration Income ETF 2021 Annual Report       5  


Table of Contents

Fund overview (cont’d)

 

    

 

i 

Effective duration is a duration calculation for bonds with embedded options. Effective duration takes into account that expected cash flows will fluctuate as interest rates change. Please note, duration measures the sensitivity of price (the value of principal) of a fixed income investment to a change in interest rates.

 

ii 

The Federal Reserve Board (the “Fed”) is responsible for the formulation of U.S. policies designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

 

iii 

The Bloomberg U.S. Corporate 1-5 Year Index (prior to August 24, 2021, known as Bloomberg Barclays U.S. Corporate 1-5 Year Index) is an unmanaged index that measures the performance of the investment-grade, fixed-rate, taxable 1-5 year maturity corporate bond market. It includes U.S. dollar-denominated securities publicly issued by U.S. and non-U.S. industrial, utility and financial issuers. Investors cannot invest directly in an index and unmanaged index returns do not reflect any fees, expenses or sales charges.

 

iv 

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

 

v 

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.

 

vi 

Lipper, Inc., a wholly-owned subsidiary of Refinitiv, provides independent insight on global collective investments. Returns are based on the period ended July 31, 2021, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 381 funds for the six-month period and among the 371 funds for the twelve-month period in the Fund’s Lipper category.

 

6     Western Asset Short Duration Income ETF 2021 Annual Report


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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 July 31, 2021 and July 31, 2020 and does not include derivatives, such as futures contracts. The composition of the Fund’s investments is subject to change at any time.

 

Western Asset Short Duration Income ETF 2021 Annual Report       7  


Table of Contents

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 February 1, 2021 and held for the six months ended July 31, 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
    1.53%       $ 1,000.00     $ 1,015.30       0.29 %     $ 1.45         5.00 %       $1,000.00       $ 1,023.36       0.29 %     $ 1.45

 

1  

For the six months ended July 31, 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.

 

8     Western Asset Short Duration Income ETF 2021 Annual Report


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Fund performance (unaudited)

 

Net Asset Value       
Average annual total returns1        
Twelve Months Ended 7/31/21      6.06
Inception* through 7/31/21      5.84  
Cumulative total returns1       
Inception date of 2/7/19 through 7/31/21      15.08

 

Market Price       
Average annual total returns2        
Twelve Months Ended 7/31/21      6.22
Inception* through 7/31/21      5.93  

 

Cumulative total returns2       
Inception date of 2/7/19 through 7/31/21      15.35

All figures represent past performance and are not a guarantee of future results. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. The returns shown do not reflect the deduction of brokerage commissions or taxes that investors would pay on distributions or the sale of shares. 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.

Investors buy and sell shares of the Fund 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 Fund. The Fund’s per share NAV is the value of one share of the Fund and is calculated by dividing the value of total assets less total liabilities by the number of shares outstanding. The NAV return is based on the NAV of the Fund and effective July 1, 2020, market price returns typically are based upon the official closing price of the Fund’s shares. Prior to July 1, 2020, market price returns generally were based upon the mid-point between the bid and ask on the Fund’s principal trading market when the Fund’s NAV was determined, which was typically 4:00 p.m. Eastern time (U.S.). Market price performance reported for periods prior to July 1, 2020 continue to reflect market prices calculated based upon the mid-point between the bid and ask on the Fund’s principal trading market typically as of 4:00 p.m. Eastern time (U.S.). These returns do not represent investors’ returns had they traded shares at other times. NAV and market price returns assume that dividends and capital gain distributions have been reinvested in the Fund at NAV and market price, respectively. As with other exchange-traded funds, NAV returns and market price returns may differ because of factors such as the supply and demand for Fund shares and investors’ assessment of the underlying value of the Fund’s portfolio securities.

 

1 

Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value.

 

2 

Assumes the reinvestment of all distributions, including returns of capital, if any, at market price.

 

*

Inception date of the Fund is February 7, 2019.

 

Western Asset Short Duration Income ETF 2021 Annual Report       9  


Table of Contents

Fund performance (unaudited) (cont’d)

 

Historical performance

Value of $10,000 invested in

Western Asset Short Duration Income ETF vs. Bloomberg U.S. Corporate 1-5 Year Index† — February 7, 2019 - July 31, 2021

 

LOGO

All figures represent past performance and are not a guarantee of future results. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at NAV. The returns shown do not reflect the deduction of brokerage commissions or taxes that investors would pay on distributions or the sale of shares. 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.

 

Hypothetical illustration of $10,000 invested in the Western Asset Short Duration Income ETF on February 7, 2019 (inception date), assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value through July 31, 2021. The hypothetical illustration also assumes a $10,000 investment in the Bloomberg U.S. Corporate 1-5 Year Index (the “Index”). The Fund’s per share NAV is the value of one share of the Fund and is calculated by dividing the value of total assets less total liabilities by the number of shares outstanding. The NAV return is based on the NAV of the Fund. The Index is an unmanaged index that measures the performance of the investment grade, fixed-rate, taxable 1-5 year maturity corporate bond market. It includes U.S. dollar-denominated securities publicly issued by U.S. and non-U.S. industrial, utility and financial issuers. The Index is not subject to the same management and trading expenses as a fund. An index is a statistical composite that tracks a specified financial market, sector, or rules based investment process. Unlike a fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by a fund. These expenses negatively impact fund performance. Investors cannot invest directly in an index and unmanaged index returns do not reflect any fees, expenses or sales charges.

 

10     Western Asset Short Duration Income ETF 2021 Annual Report


Table of Contents

Schedule of investments

July 31, 2021

 

Western Asset Short Duration Income ETF

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount
    Value  
Corporate Bonds & Notes — 88.5%                                
Communication Services — 8.1%                                

Diversified Telecommunication Services — 2.9%

                               

AT&T Inc., Senior Notes

    0.900     3/25/24     $ 30,000     $ 30,083  

AT&T Inc., Senior Notes

    3.400     5/15/25       80,000       87,274  

AT&T Inc., Senior Notes

    4.250     3/1/27       20,000       22,887  

NTT Finance Corp., Senior Notes

    1.162     4/3/26       200,000       200,643  (a)  

Verizon Communications Inc., Senior Notes

    2.550     3/21/31       170,000       176,750  

Verizon Communications Inc., Senior Notes

    2.650     11/20/40       20,000       19,581  

Verizon Communications Inc., Senior Notes

    3.400     3/22/41       10,000       10,805  

Verizon Communications Inc., Senior Notes

    3.550     3/22/51       10,000       10,880  

Verizon Communications Inc., Senior Notes

    3.700     3/22/61       10,000       11,047  

Total Diversified Telecommunication Services

                            569,950  

Interactive Media & Services — 0.3%

                               

Alphabet Inc., Senior Notes

    1.100     8/15/30       70,000       67,076  

Media — 4.3%

                               

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

    4.464     7/23/22       30,000       30,965  

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

    4.908     7/23/25       220,000       249,724  

Comcast Corp., Senior Notes

    3.400     4/1/30       80,000       89,270  

Comcast Corp., Senior Notes

    3.750     4/1/40       10,000       11,592  

Fox Corp., Senior Notes

    4.030     1/25/24       40,000       43,254  

Time Warner Entertainment Co. LP, Senior Secured Notes

    8.375     3/15/23       380,000       427,234  

Total Media

                            852,039  

Wireless Telecommunication Services — 0.6%

                               

T-Mobile USA Inc., Senior Secured Notes

    2.050     2/15/28       80,000       81,797  

T-Mobile USA Inc., Senior Secured Notes

    2.250     11/15/31       30,000       30,070  

Total Wireless Telecommunication Services

                            111,867  

Total Communication Services

                            1,600,932  
Consumer Discretionary — 8.6%                                

Automobiles — 4.1%

                               

Ford Motor Credit Co. LLC, Senior Notes

    3.350     11/1/22       200,000       204,544  

General Motors Co., Senior Notes

    6.125     10/1/25       130,000       153,880  

General Motors Co., Senior Notes (3 mo. USD LIBOR + 0.900%)

    1.028     9/10/21       10,000       10,006  (b)  

General Motors Financial Co. Inc., Senior Notes

    3.450     4/10/22       40,000       40,625  

 

See Notes to Financial Statements.

 

Western Asset Short Duration Income ETF 2021 Annual Report       11  


Table of Contents

Schedule of investments (cont’d)

July 31, 2021

 

Western Asset Short Duration Income ETF

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount
    Value  

Automobiles — continued

                               

General Motors Financial Co. Inc., Senior Notes

    3.700     5/9/23     $ 80,000     $ 83,702  

General Motors Financial Co. Inc., Senior Notes (3 mo. USD LIBOR + 1.310%)

    1.457     6/30/22       50,000       50,449  (b)  

Hyundai Capital America, Senior Notes

    0.800     1/8/24       60,000       59,756  (a) 

Nissan Motor Co. Ltd., Senior Notes

    3.043     9/15/23       200,000       208,472  (a)  

Total Automobiles

                            811,434  

Hotels, Restaurants & Leisure — 2.5%

                               

Genting New York LLC/GENNY Capital Inc., Senior Notes

    3.300     2/15/26       200,000       201,128  (a)  

Las Vegas Sands Corp., Senior Notes

    2.900     6/25/25       210,000       216,291  

Marriott International Inc., Senior Notes

    3.600     4/15/24       80,000       85,345  

Total Hotels, Restaurants & Leisure

                            502,764  

Household Durables — 0.4%

                               

DR Horton Inc., Senior Notes

    2.500     10/15/24       60,000       62,887  

MDC Holdings Inc., Senior Notes

    2.500     1/15/31       10,000       9,851  

Total Household Durables

                            72,738  

Internet & Direct Marketing Retail — 0.6%

                               

Amazon.com Inc., Senior Notes

    1.000     5/12/26       10,000       10,106  

Amazon.com Inc., Senior Notes

    1.200     6/3/27       80,000       80,770  

Amazon.com Inc., Senior Notes

    2.500     6/3/50       10,000       9,625  

eBay Inc., Senior Notes

    2.600     5/10/31       10,000       10,369  

Total Internet & Direct Marketing Retail

                            110,870  

Multiline Retail — 0.6%

                               

Dollar Tree Inc., Senior Notes

    3.700     5/15/23       40,000       42,173  

Dollar Tree Inc., Senior Notes

    4.000     5/15/25       50,000       55,239  

Nordstrom Inc., Senior Notes

    2.300     4/8/24       20,000       20,074  

Total Multiline Retail

                            117,486  

Specialty Retail — 0.4%

                               

Lowe’s Cos. Inc., Senior Notes

    1.300     4/15/28       90,000       88,821  

Total Consumer Discretionary

                            1,704,113  
Consumer Staples — 2.3%                                

Beverages — 0.5%

                               

Anheuser-Busch InBev Worldwide Inc., Senior Notes

    4.750     1/23/29       10,000       12,028  

Anheuser-Busch InBev Worldwide Inc., Senior Notes (3 mo. USD LIBOR + 0.740%)

    0.859     1/12/24       70,000       70,550  (b)  

Coca-Cola Co., Senior Notes

    2.500     6/1/40       10,000       10,159  

Total Beverages

                            92,737  

 

See Notes to Financial Statements.

 

12     Western Asset Short Duration Income ETF 2021 Annual Report


Table of Contents

Western Asset Short Duration Income ETF

(Percentages shown based on Fund net assets)

 

Security    Rate      Maturity
Date
     Face
Amount
     Value  

Food & Staples Retailing — 0.1%

                                   

Costco Wholesale Corp., Senior Notes

     1.375      6/20/27      $ 10,000      $ 10,132  

Costco Wholesale Corp., Senior Notes

     1.600      4/20/30        10,000        9,966  

Total Food & Staples Retailing

                                20,098  

Food Products — 0.1%

                                   

Hershey Co., Senior Notes

     1.700      6/1/30        10,000        10,080  

Mars Inc., Senior Notes

     2.375      7/16/40        10,000        9,770  (a)  

Mondelez International Inc., Senior Notes

     1.500      2/4/31        10,000        9,612  

Total Food Products

                                29,462  

Household Products — 0.1%

                                   

Clorox Co., Senior Notes

     1.800      5/15/30        10,000        9,999  

Kimberly-Clark Corp., Senior Notes

     1.050      9/15/27        10,000        9,914  

Total Household Products

                                19,913  

Tobacco — 1.5%

                                   

Altria Group Inc., Senior Notes

     2.625      9/16/26        70,000        74,101  

BAT International Finance PLC, Senior Notes

     1.668      3/25/26        80,000        80,813  

Cargill Inc., Senior Notes

     1.375      7/23/23        10,000        10,193  (a)  

Cargill Inc., Senior Notes

     0.750      2/2/26        130,000        129,404  (a) 

Total Tobacco

                                294,511  

Total Consumer Staples

                                456,721  
Energy — 14.4%                                    

Oil, Gas & Consumable Fuels — 14.4%

                                   

Cimarex Energy Co., Senior Notes

     4.375      6/1/24        60,000        65,195  

Cimarex Energy Co., Senior Notes

     3.900      5/15/27        100,000        111,274  

Cimarex Energy Co., Senior Notes

     4.375      3/15/29        30,000        34,349  

Comstock Resources Inc., Senior Notes

     7.500      5/15/25        10,000        10,350  (a)  

Continental Resources Inc., Senior Notes

     4.500      4/15/23        90,000        93,586  

Devon Energy Corp., Senior Notes

     5.850      12/15/25        40,000        46,955  

Devon Energy Corp., Senior Notes

     5.250      10/15/27        46,000        49,130  (a)  

Devon Energy Corp., Senior Notes

     5.875      6/15/28        12,000        13,258  (a)  

Devon Energy Corp., Senior Notes

     4.500      1/15/30        120,000        130,870  (a) 

Devon OEI Operating LLC, Senior Notes

     7.500      9/15/27        20,000        24,870  

Diamondback Energy Inc., Senior Notes

     3.250      12/1/26        110,000        118,777  

Ecopetrol SA, Senior Notes

     5.875      9/18/23        130,000        140,270  

El Paso Natural Gas Co. LLC, Senior Notes

     7.500      11/15/26        50,000        63,999  

Energy Transfer LP, Senior Notes

     4.200      9/15/23        10,000        10,671  

Energy Transfer LP, Senior Notes

     4.050      3/15/25        290,000        315,100  

Energy Transfer LP, Senior Notes

     2.900      5/15/25        70,000        73,837  

Enterprise Products Operating LLC, Senior Notes

     2.800      1/31/30        70,000        75,078  

Enterprise Products Operating LLC, Senior Notes

     3.950      1/31/60        10,000        11,269  

 

See Notes to Financial Statements.

 

Western Asset Short Duration Income ETF 2021 Annual Report       13  


Table of Contents

Schedule of investments (cont’d)

July 31, 2021

 

Western Asset Short Duration Income ETF

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount
    Value  

Oil, Gas & Consumable Fuels — continued

                               

EOG Resources Inc., Senior Notes

    4.375     4/15/30     $ 20,000     $ 23,969  

EQT Corp., Senior Notes

    3.000     10/1/22       30,000       30,412  

EQT Corp., Senior Notes

    3.125     5/15/26       10,000       10,287  (a)  

EQT Corp., Senior Notes

    3.900     10/1/27       10,000       10,838  

Exxon Mobil Corp., Senior Notes

    3.482     3/19/30       60,000       68,192  

Exxon Mobil Corp., Senior Notes

    4.327     3/19/50       10,000       12,648  

MEG Energy Corp., Senior Notes

    7.125     2/1/27       20,000       20,985  (a)  

MPLX LP, Senior Notes

    3.375     3/15/23       10,000       10,441  

MPLX LP, Senior Notes

    1.750     3/1/26       100,000       101,603  

Occidental Petroleum Corp., Senior Notes

    6.950     7/1/24       10,000       11,150  

Parsley Energy LLC/Parsley Finance Corp., Senior Notes

    5.625     10/15/27       10,000       10,775  (a)  

Parsley Energy LLC/Parsley Finance Corp., Senior Notes

    4.125     2/15/28       10,000       10,500  (a)  

Petrobras Global Finance BV, Senior Notes

    5.999     1/27/28       50,000       56,937  

Pioneer Natural Resources Co., Senior Notes

    0.550     5/15/23       60,000       60,073  

Pioneer Natural Resources Co., Senior Notes

    1.125     1/15/26       40,000       39,768  

Qatar Petroleum, Senior Notes

    1.375     9/12/26       200,000       200,548  (a)  

Range Resources Corp., Senior Notes

    5.000     8/15/22       180,000       183,600  

Range Resources Corp., Senior Notes

    9.250     2/1/26       50,000       54,250  

Southern Natural Gas Co. LLC, Senior Notes

    0.625     4/28/23       20,000       19,982  (a)  

Tennessee Gas Pipeline Co. LLC, Senior Notes

    7.000     10/15/28       30,000       39,531  

Tennessee Gas Pipeline Co. LLC, Senior Notes

    2.900     3/1/30       50,000       52,664  (a)  

Transcontinental Gas Pipe Line Co. LLC, Senior Notes

    3.250     5/15/30       10,000       10,905  

Western Midstream Operating LP, Senior Notes

    3.950     6/1/25       30,000       30,937  

Williams Cos. Inc., Senior Notes

    7.875     9/1/21       16,000       16,093  

Williams Cos. Inc., Senior Notes

    3.700     1/15/23       350,000       363,779  

Total Energy

                            2,839,705  
Financials — 30.4%                                

Banks — 17.4%

                               

Bank of America Corp., Senior Notes (0.810% to 10/24/23 then SOFR + 0.740%)

    0.810     10/24/24       20,000       20,073  (b)  

Bank of America Corp., Senior Notes (1.319% to 6/19/25 then SOFR + 1.150%)

    1.319     6/19/26       10,000       10,054  (b)  

Bank of America Corp., Senior Notes (1.734% to 7/22/26 then SOFR + 0.960%)

    1.734     7/22/27       370,000       376,424  (b)  

Bank of America Corp., Senior Notes (2.299% to 7/21/31 then SOFR + 1.220%)

    2.299     7/21/32       40,000       40,399  (b)  

 

See Notes to Financial Statements.

 

14     Western Asset Short Duration Income ETF 2021 Annual Report


Table of Contents

Western Asset Short Duration Income ETF

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount
    Value  

Banks — continued

                               

Bank of America Corp., Senior Notes (2.592% to 4/29/30 then SOFR + 2.150%)

    2.592     4/29/31     $ 110,000     $ 114,009  (b) 

BNP Paribas SA, Senior Notes (1.675% to 6/30/26 then SOFR + 0.912%)

    1.675     6/30/27       200,000       201,528  (a)(b) 

Canadian Imperial Bank of Commerce, Senior Notes

    0.950     6/23/23       10,000       10,102  

Citigroup Inc., Senior Notes (0.981% to 5/1/24 then SOFR + 0.669%)

    0.981     5/1/25       20,000       20,109  (b)  

Citigroup Inc., Senior Notes (1.462% to 6/9/26 then SOFR + 0.770%)

    1.462     6/9/27       200,000       200,221  (b) 

Citigroup Inc., Senior Notes (5.316% to 3/26/40 then SOFR + 4.548%)

    5.316     3/26/41       40,000       54,318  (b)  

Citigroup Inc., Subordinated Notes

    5.500     9/13/25       120,000       140,295  

Danske Bank A/S, Senior Notes (3.244% to 12/20/24 then 3 mo. USD LIBOR + 1.591%)

    3.244     12/20/25       200,000       213,293  (a)(b) 

HSBC Holdings PLC, Senior Notes (0.976% to 5/24/24 then SOFR + 0.708%)

    0.976     5/24/25       200,000       200,528  (b) 

HSBC Holdings PLC, Subordinated Notes

    7.625     5/17/32       10,000       14,254  

Intesa Sanpaolo SpA, Senior Notes

    3.375     1/12/23       210,000       218,164  (a) 

Intesa Sanpaolo SpA, Subordinated Notes

    4.198     6/1/32       200,000       205,817  (a) 

JPMorgan Chase & Co., Senior Notes (0.563% to 2/16/24 then SOFR + 0.420%)

    0.563     2/16/25       10,000       9,964  (b)  

JPMorgan Chase & Co., Senior Notes (1.578% to 4/22/26 then SOFR + 0.885%)

    1.578     4/22/27       280,000       283,290  (b) 

JPMorgan Chase & Co., Senior Notes (2.522% to 4/22/30 then SOFR + 2.040%)

    2.522     4/22/31       10,000       10,400  (b)  

JPMorgan Chase & Co., Subordinated Notes (2.956% to 5/13/30 then SOFR + 2.515%)

    2.956     5/13/31       100,000       106,499  (b) 

Natwest Group PLC, Senior Notes (3 mo. USD LIBOR + 1.470%)

    1.626     5/15/23       260,000       262,536  (b) 

Royal Bank of Canada, Senior Notes

    1.150     7/14/26       80,000       80,102  

Santander UK Group Holdings PLC, Senior Notes (1.673% to 6/14/26 then SOFR + 0.989%)

    1.673     6/14/27       200,000       200,994  (b) 

Truist Financial Corp., Senior Notes (1.267% to 3/2/26 then SOFR + 0.609%)

    1.267     3/2/27       80,000       80,424  (b)  

Wells Fargo & Co., Senior Notes

    3.000     10/23/26       210,000       227,578  

Wells Fargo & Co., Senior Notes (0.805% to 5/19/24 then SOFR + 0.510%)

    0.805     5/19/25       110,000       110,205  (b) 

 

See Notes to Financial Statements.

 

Western Asset Short Duration Income ETF 2021 Annual Report       15  


Table of Contents

Schedule of investments (cont’d)

July 31, 2021

 

Western Asset Short Duration Income ETF

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount
    Value  

Banks — continued

                               

Wells Fargo & Co., Senior Notes (4.478% to 4/4/30 then SOFR + 4.032%)

    4.478     4/4/31     $ 10,000     $ 11,920  (b)  

Westpac Banking Corp., Senior Notes

    1.150     6/3/26       10,000       10,101  

Total Banks

                            3,433,601  

Capital Markets — 8.1%

                               

Charles Schwab Corp., Senior Notes

    0.750     3/18/24       30,000       30,222  

Charles Schwab Corp., Senior Notes

    1.150     5/13/26       160,000       161,452  

CI Financial Corp., Senior Notes

    3.200     12/17/30       100,000       103,916  

Credit Suisse Group AG, Senior Notes (3.091% to 5/14/31 then SOFR + 1.730%)

    3.091     5/14/32       280,000       292,478  (a)(b) 

Daimler Finance North America LLC, Senior Notes

    1.450     3/2/26       150,000       151,850  (a)  

Goldman Sachs Group Inc., Senior Notes

    3.800     3/15/30       30,000       34,058  

Goldman Sachs Group Inc., Senior Notes (0.855% to 2/12/25 then SOFR + 0.609%)

    0.855     2/12/26       40,000       39,790  (b)  

Goldman Sachs Group Inc., Senior Notes (1.093% to 12/9/25 then SOFR + 0.789%)

    1.093     12/9/26       170,000       168,882  (b)  

Goldman Sachs Group Inc., Subordinated Notes

    4.250     10/21/25       30,000       33,672  

Goldman Sachs Group Inc., Subordinated Notes

    5.150     5/22/45       20,000       26,917  

LPL Holdings Inc., Senior Notes

    4.375     5/15/31       10,000       10,237  (a)  

Morgan Stanley, Senior Notes (0.790% to 5/30/24 then SOFR + 0.525%)

    0.790     5/30/25       60,000       59,913  (b)  

Morgan Stanley, Senior Notes (1.512% to 7/20/26 then SOFR + 0.858%)

    1.512     7/20/27       20,000       20,166  (b)  

Morgan Stanley, Senior Notes (1.593% to 5/4/26 then SOFR + 0.879%)

    1.593     5/4/27       190,000       192,852  (b)  

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

    2.188     4/28/26       30,000       31,149  (b)  

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

    2.699     1/22/31       40,000       42,165  (b)  

UBS AG, Senior Notes

    1.250     6/1/26       200,000       200,967  (a)  

Total Capital Markets

                            1,600,686  

Consumer Finance — 1.0%

                               

Air Lease Corp., Senior Notes

    0.700     2/15/24       160,000       159,547  

Synchrony Financial, Senior Notes

    2.850     7/25/22       40,000       40,873  

Total Consumer Finance

                            200,420  

Diversified Financial Services — 1.5%

                               

Element Fleet Management Corp., Senior Notes

    1.600     4/6/24       10,000       10,171  (a)  

 

See Notes to Financial Statements.

 

16     Western Asset Short Duration Income ETF 2021 Annual Report


Table of Contents

Western Asset Short Duration Income ETF

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount
    Value  

Diversified Financial Services — continued

                               

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

    3.373     11/15/25     $ 260,000     $ 285,333  

Global Aircraft Leasing Co. Ltd., Senior Notes (6.500% Cash or 7.250% PIK)

    6.500     9/15/24       12,228       12,289  (a)(c)  

Total Diversified Financial Services

                            307,793  

Insurance — 2.4%

                               

American International Group Inc., Senior Notes

    2.500     6/30/25       80,000       84,443  

American International Group Inc., Senior Notes

    3.400     6/30/30       10,000       11,047  

AmFam Holdings Inc., Senior Notes

    2.805     3/11/31       100,000       104,287  (a)  

Arthur J Gallagher & Co., Senior Notes

    2.500     5/20/31       40,000       40,572  

GA Global Funding Trust, Secured Notes

    1.000     4/8/24       10,000       10,071  (a)  

New York Life Global Funding, Senior Secured Notes

    0.950     6/24/25       90,000       90,549  (a)  

Prudential Financial Inc., Senior Notes

    1.500     3/10/26       10,000       10,221  

Reliance Standard Life Global Funding II, Secured Notes

    2.500     10/30/24       80,000       83,653  (a)  

Reliance Standard Life Global Funding II, Secured Notes

    2.750     1/21/27       30,000       31,961  (a)  

Total Insurance

                            466,804  

Total Financials

                            6,009,304  
Health Care — 5.6%                                

Biotechnology — 1.2%

                               

AbbVie Inc., Senior Notes

    2.600     11/21/24       30,000       31,738  

AbbVie Inc., Senior Notes

    2.950     11/21/26       190,000       205,937  

Total Biotechnology

                            237,675  

Health Care Equipment & Supplies — 0.7%

                               

Becton Dickinson and Co., Senior Notes

    2.894     6/6/22       71,000       72,412  

Becton Dickinson and Co., Senior Notes

    3.363     6/6/24       70,000       74,984  

Total Health Care Equipment & Supplies

                            147,396  

Health Care Providers & Services — 2.9%

                               

Bon Secours Mercy Health Inc., Secured Notes

    3.464     6/1/30       10,000       11,174  

Centene Corp., Senior Notes

    2.450     7/15/28       20,000       20,275  

Centene Corp., Senior Notes

    4.625     12/15/29       50,000       54,798  

Centene Corp., Senior Notes

    3.375     2/15/30       70,000       73,030  

Centene Corp., Senior Notes

    2.625     8/1/31       10,000       10,075  (d)  

Cigna Corp., Senior Notes

    4.125     11/15/25       10,000       11,250  

Cigna Corp., Senior Notes

    2.400     3/15/30       110,000       114,415  

Cigna Corp., Senior Notes

    3.200     3/15/40       10,000       10,657  

CommonSpirit Health, Senior Secured Notes

    2.782     10/1/30       10,000       10,574  

 

See Notes to Financial Statements.

 

Western Asset Short Duration Income ETF 2021 Annual Report       17  


Table of Contents

Schedule of investments (cont’d)

July 31, 2021

 

Western Asset Short Duration Income ETF

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount
    Value  

Health Care Providers & Services — continued

                               

CVS Health Corp., Senior Notes

    3.700     3/9/23     $ 2,000     $ 2,101  

CVS Health Corp., Senior Notes

    2.625     8/15/24       40,000       42,205  

CVS Health Corp., Senior Notes

    2.875     6/1/26       10,000       10,804  

CVS Health Corp., Senior Notes

    1.300     8/21/27       40,000       39,733  

CVS Health Corp., Senior Notes

    4.250     4/1/50       60,000       73,599  

UnitedHealth Group Inc., Senior Notes

    1.150     5/15/26       80,000       80,708  

Total Health Care Providers & Services

                            565,398  

Life Sciences Tools & Services — 0.1%

                               

Agilent Technologies Inc., Senior Notes

    2.300     3/12/31       20,000       20,412  

Pharmaceuticals — 0.7%

                               

Astrazeneca Finance LLC, Senior Notes

    1.200     5/28/26       70,000       70,589  

Merck & Co. Inc., Senior Notes

    1.450     6/24/30       60,000       59,516  

Total Pharmaceuticals

                            130,105  

Total Health Care

                            1,100,986  
Industrials — 6.7%                                

Aerospace & Defense — 1.9%

                               

Avolon Holdings Funding Ltd., Senior Notes

    3.625     5/1/22       2,000       2,039  (a)  

Avolon Holdings Funding Ltd., Senior Notes

    4.250     4/15/26       30,000       32,797  (a)  

Boeing Co., Senior Notes

    4.875     5/1/25       20,000       22,427  

Boeing Co., Senior Notes

    2.196     2/4/26       220,000       221,994  

Boeing Co., Senior Notes

    3.250     2/1/28       20,000       21,291  

General Dynamics Corp., Senior Notes

    4.250     4/1/50       17,000       22,124  

Lockheed Martin Corp., Senior Notes

    1.850     6/15/30       40,000       40,644  

Raytheon Technologies Corp., Senior Notes

    3.125     7/1/50       20,000       21,109  

Total Aerospace & Defense

                            384,425  

Airlines — 2.0%

                               

American Airlines Inc./AAdvantage Loyalty IP Ltd., Senior Secured Notes

    5.500     4/20/26       30,000       31,388  (a)  

Continental Airlines 2007-1 Class B Pass-Through Trust

    6.903     4/19/22       56,552       57,245  

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

    4.500     10/20/25       110,000       118,250  (a)  

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

    4.750     10/20/28       10,000       11,175  (a)  

United Airlines Holdings Inc., Senior Notes

    4.250     10/1/22       130,000       131,950  

United Airlines Pass-Through Trust

    4.875     1/15/26       37,370       39,201  

Total Airlines

                            389,209  

Commercial Services & Supplies — 0.5%

                               

Republic Services Inc., Senior Notes

    2.500     8/15/24       100,000       105,079  

 

See Notes to Financial Statements.

 

18     Western Asset Short Duration Income ETF 2021 Annual Report


Table of Contents

 

 

Western Asset Short Duration Income ETF

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount
    Value  

Industrial Conglomerates — 0.4%

                               

3M Co., Senior Notes

    3.700     4/15/50     $ 10,000     $ 11,980  

Honeywell International Inc., Senior Notes

    1.950     6/1/30       60,000       61,796  

Total Industrial Conglomerates

                            73,776  

Trading Companies & Distributors — 1.9%

                               

Air Lease Corp., Senior Notes

    3.000     9/15/23       80,000       83,601  

Aviation Capital Group LLC, Senior Notes

    4.125     8/1/25       270,000       293,610  (a) 

Total Trading Companies & Distributors

                            377,211  

Total Industrials

                            1,329,700  
Information Technology — 8.2%                                

Electronic Equipment, Instruments & Components — 0.6%

 

                       

SYNNEX Corp., Senior Notes

    1.250     8/9/24       70,000       70,017  (a)(d)  

Vontier Corp., Senior Notes

    1.800     4/1/26       40,000       40,147  (a)  

Total Electronic Equipment, Instruments & Components

 

                    110,164  

IT Services — 1.4%

                               

Mastercard Inc., Senior Notes

    3.300     3/26/27       60,000       67,006  

PayPal Holdings Inc., Senior Notes

    1.350     6/1/23       30,000       30,564  

PayPal Holdings Inc., Senior Notes

    2.400     10/1/24       130,000       136,996  

PayPal Holdings Inc., Senior Notes

    2.300     6/1/30       30,000       31,545  

S&P Global Inc., Senior Notes

    1.250     8/15/30       10,000       9,621  

Visa Inc., Senior Notes

    1.100     2/15/31       10,000       9,589  

Total IT Services

                            285,321  

Semiconductors & Semiconductor Equipment — 3.2%

                               

Broadcom Inc., Senior Notes

    5.000     4/15/30       80,000       95,509  

Broadcom Inc., Senior Notes

    4.150     11/15/30       110,000       124,684  

Lam Research corp., Senior Notes

    1.900     6/15/30       40,000       40,710  

Microchip Technology Inc., Senior Secured Notes

    2.670     9/1/23       20,000       20,774  

Microchip Technology Inc., Senior Secured Notes

    0.972     2/15/24       50,000       50,094  (a)  

Microchip Technology Inc., Senior Secured Notes

    0.983     9/1/24       60,000       59,918  (a)  

Micron Technology Inc., Senior Notes

    4.640     2/6/24       150,000       163,401  

NVIDIA Corp., Senior Notes

    3.700     4/1/60       10,000       12,087  

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

    3.400     5/1/30       40,000       44,251  (a)  

Skyworks Solutions Inc., Senior Notes

    1.800     6/1/26       10,000       10,183  

Total Semiconductors & Semiconductor Equipment

 

                    621,611  

Software — 2.2%

                               

Adobe Inc., Senior Notes

    2.150     2/1/27       120,000       126,396  

Adobe Inc., Senior Notes

    2.300     2/1/30       80,000       84,113  

 

See Notes to Financial Statements.

 

Western Asset Short Duration Income ETF 2021 Annual Report       19  


Table of Contents

Schedule of investments (cont’d)

July 31, 2021

 

Western Asset Short Duration Income ETF

(Percentages shown based on Fund net assets)

 

 

Security   Rate     Maturity
Date
    Face
Amount
    Value  

Software — continued

                               

Fortinet Inc., Senior Notes

    1.000     3/15/26     $ 120,000     $ 119,663  

salesforce.com Inc., Senior Notes

    1.500     7/15/28       100,000       101,315  

Total Software

                            431,487  

Technology Hardware, Storage & Peripherals — 0.8%

 

Apple Inc., Senior Notes

    0.700     2/8/26       60,000       59,703  

Apple Inc., Senior Notes

    1.400     8/5/28       100,000       99,933  (d)  

Total Technology Hardware, Storage & Peripherals

 

                    159,636  

Total Information Technology

                            1,608,219  
Materials — 2.0%                                

Chemicals — 0.2%

                               

PPG Industries Inc., Senior Notes

    1.200     3/15/26       30,000       30,134  

Containers & Packaging — 0.0%††

                               

Graphic Packaging International LLC, Senior Secured Notes

    1.512     4/15/26       10,000       10,033  (a)  

Metals & Mining — 1.5%

                               

Freeport-McMoRan Inc., Senior Notes

    4.375     8/1/28       30,000       31,763  

Glencore Finance Canada Ltd., Senior Notes

    4.250     10/25/22       100,000       104,465  (a)  

Glencore Funding LLC, Senior Notes

    1.625     9/1/25       140,000       142,187  (a)  

Yamana Gold Inc., Senior Notes

    4.625     12/15/27       10,000       11,131  

Total Metals & Mining

                            289,546  

Paper & Forest Products — 0.3%

                               

Georgia-Pacific LLC, Senior Notes

    0.625     5/15/24       30,000       30,077  (a)  

Suzano Austria GmbH, Senior Notes

    3.125     1/15/32       30,000       29,730  

Total Paper & Forest Products

                            59,807  

Total Materials

                            389,520  
Real Estate — 0.2%                                

Equity Real Estate Investment Trusts (REITs) — 0.2%

 

Alexandria Real Estate Equities Inc., Senior Notes

    2.000     5/18/32       10,000       9,955  

Diversified Healthcare Trust, Senior Notes

    4.750     5/1/24       10,000       10,325  

Simon Property Group LP, Senior Notes

    3.500     9/1/25       10,000       10,959  

Total Real Estate

                            31,239  
Utilities — 2.0%                                

Electric Utilities — 2.0%

                               

DTE Electric Co., First Mortgage

    2.625     3/1/31       30,000       32,203  

Duke Energy Ohio Inc., First Mortgage

    2.125     6/1/30       10,000       10,199  

Edison International, Senior Notes

    4.950     4/15/25       100,000       111,078  

FirstEnergy Corp., Senior Notes

    3.600     7/15/22       50,000       50,627  

NRG Energy Inc., Senior Secured Notes

    2.450     12/2/27       90,000       91,993  (a)  

Pacific Gas and Electric Co., First Mortgage Bonds

    1.750     6/16/22       50,000       49,932  

 

See Notes to Financial Statements.

 

20     Western Asset Short Duration Income ETF 2021 Annual Report


Table of Contents

 

 

Western Asset Short Duration Income ETF

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount
    Value  

Electric Utilities — continued

                               

Pacific Gas and Electric Co., First Mortgage Bonds

    2.100     8/1/27     $ 40,000     $ 38,912  

Toledo Edison Co.

    2.650     5/1/28       10,000       10,321  (a) 

Total Utilities

                            395,265  

Total Corporate Bonds & Notes (Cost — $17,163,034)

 

                    17,465,704  
Asset-Backed Securities — 3.7%                                

AGL CLO 6 Ltd., 2020-6A AR (3 mo. USD LIBOR + 1.200%)

    1.334     7/20/34       100,000       99,975  (a)(b) 

CIFC Funding Ltd., 2021-4A A (3 mo. USD LIBOR + 1.050%)

    1.144     7/15/33       110,000       109,836  (a)(b)  

Halcyon Loan Advisors Funding Ltd., 2017-2A A2 (3 mo. USD LIBOR + 1.700%)

    1.834     1/17/30       250,000       249,999  (a)(b)  

Navient Private Education Refi Loan Trust, 2020-DA A

    1.690     5/15/69       56,195       56,879  (a)  

Neuberger Berman Loan Advisers CLO 42 Ltd., 2021-42A A (3 mo. USD LIBOR + 1.100%)

    1.241     7/16/35       210,000       209,736  (a)(b)  

Total Asset-Backed Securities (Cost — $724,560)

                            726,425  
Sovereign Bonds — 1.4%                                

Argentina — 0.3%

                               

Argentine Republic Government International Bond, Senior Notes

    1.000     7/9/29       4,718       1,810  

Argentine Republic Government International Bond, Senior Notes, Step bond (0.500% to 7/9/23 then 0.750%)

    0.500     7/9/30       135,800       49,363  

Total Argentina

                            51,173  

Chile — 1.0%

                               

Chile Government International Bond, Senior Notes

    2.550     7/27/33       200,000       203,954  

Peru — 0.1%

                               

Peruvian Government International Bond, Senior Notes

    2.783     1/23/31       20,000       20,078  

Total Sovereign Bonds (Cost — $297,540)

                            275,205  
U.S. Government & Agency Obligations — 0.6%                                

U.S. Government Obligations — 0.6%

                               

U.S. Treasury Bonds

    1.875     2/15/41       10,000       10,113  

U.S. Treasury Bonds

    2.250     5/15/41       10,000       10,742  

U.S. Treasury Bonds

    1.375     8/15/50       20,000       17,566  

U.S. Treasury Bonds

    1.625     11/15/50       10,000       9,349  

U.S. Treasury Notes

    0.750     5/31/26       30,000       30,103  

U.S. Treasury Notes

    1.625     5/15/31       35,000       36,285  

Total U.S. Government & Agency Obligations (Cost — $112,235)

 

            114,158  

 

See Notes to Financial Statements.

 

Western Asset Short Duration Income ETF 2021 Annual Report       21  


Table of Contents

Schedule of investments (cont’d)

July 31, 2021

 

Western Asset Short Duration Income ETF

(Percentages shown based on Fund net assets)

 

 

Security   Rate    

Maturity

Date

   

Face

Amount

    Value  
Senior Loans — 0.1%                                
Industrials — 0.1%                                

Airlines — 0.1%

                               

Delta Air Lines Inc., Initial Term Loan (the greater of 3 mo. USD LIBOR or 1.000% + 3.750%)

    4.750     10/20/27     $ 10,000     $ 10,553  (b)(e)(f)  
Materials — 0.0%††                                

Paper & Forest Products — 0.0%††

                               

Asplundh Tree Expert LLC, 2021 Refinancing Term Loan (1 mo. USD LIBOR + 1.750%)

    1.842     9/7/27       9,925       9,818  (b)(e)(f)  
Real Estate — 0.0%††                                

Equity Real Estate Investment Trusts (REITs) — 0.0%††

 

                       

VICI Properties 1 LLC, Term Loan B

          12/20/24       10,000       9,888  (g)   

Total Senior Loans (Cost — $29,699)

                            30,259  

Total Investments before Short-Term Investments (Cost — $18,327,068)

 

            18,611,751  
                   Shares         
Short-Term Investments — 5.7%                                

BNY Mellon Cash Reserve Fund (Cost — $1,133,423)

    0.010             1,133,423       1,133,423  

Total Investments — 100.0% (Cost — $19,460,491)

 

                    19,745,174  

Liabilities in Excess of Other Assets — (0.0)%††

                            (2,339

Total Net Assets — 100.0%

                          $ 19,742,835  

 

††

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) 

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.

 

(c) 

Payment-in-kind security for which the issuer has the option at each interest payment date of making interest payments in cash or additional securities.

 

(d) 

Securities traded on a when-issued or delayed delivery basis.

 

(e) 

Interest rates disclosed represent the effective rates on senior loans. Ranges in interest rates are attributable to multiple contracts under the same loan.

 

(f) 

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.

 

(g) 

All or a portion of this loan is unfunded as of July 31, 2021. The interest rate for fully unfunded term loans is to be determined.

 

See Notes to Financial Statements.

 

22     Western Asset Short Duration Income ETF 2021 Annual Report


Table of Contents

 

 

Western Asset Short Duration Income ETF

 

Abbreviation(s) used in this schedule:

CLO   — Collateralized Loan Obligation
LIBOR   — London Interbank Offered Rate
PIK   Payment-In-Kind
SOFR   — Secured Overnight Financing Rate
USD   — United States Dollar

At July 31, 2021, the Fund had the following open futures contracts:

 

     

Number of

Contracts

    

Expiration

Date

    

Notional

Amount

    

Market

Value

    

Unrealized

Appreciation

(Depreciation)

 
Contracts to Buy:                                             
U.S. Treasury 2-Year Notes      10        9/21      $ 2,205,814      $ 2,206,562      $ 748  
U.S. Treasury 5-Year Notes      41        9/21        5,086,748        5,102,258        15,510  
                                           16,258  
Contracts to Sell:                                             
U.S. Treasury 10-Year Notes      26        9/21        3,440,432        3,495,781        (55,349)  
U.S. Treasury Long-Term Bonds      7        9/21        1,139,004        1,153,031        (14,027)  
U.S. Treasury Ultra 10-Year Notes      9        9/21        1,339,972        1,352,250        (12,278)  
U.S. Treasury Ultra Long-Term Bonds      1        9/21        186,201        199,531        (13,330)  
                                           (94,984)  
Net unrealized depreciation on open futures contracts

 

   $ (78,726)  

 

See Notes to Financial Statements.

 

Western Asset Short Duration Income ETF 2021 Annual Report       23  


Table of Contents

Statement of assets and liabilities

July 31, 2021

 

Assets:         

Investments, at value (Cost — $19,460,491)

   $ 19,745,174  

Interest receivable

     130,114  

Deposits with brokers for open futures contracts

     70,024  

Receivable for securities sold

     20,164  

Total Assets

     19,965,476  
Liabilities: