Legg Mason ETF Investment Trust II

11/26/2024 | Press release | Distributed by Public on 11/26/2024 07:27

Semi Annual Report by Investment Company Form N CSRS

2024-10-10178774_ClearBridgeFocusValueESGETF_SingleClass_TSRSemiAnnual

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 811-23487

Legg Mason ETF Investment Trust II

(Exact name of registrant as specified in charter)

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

(Address of principal executive offices) (Zip code)

Harris Goldblat

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: March 31

Date of reporting period: September 30, 2024

ITEM 1. REPORT TO STOCKHOLDERS.

The Semi-Annual Report to Stockholders is filed herewith.

ClearBridge Focus Value ESG ETF
CFCV| Cboe BZX Exchange, Inc.
Semi-Annual Shareholder Report | September 30, 2024
This semi-annual shareholder reportcontains important information about ClearBridge Focus Value ESG ETF for the period April 1, 2024, to September 30, 2024.
You can find additional information about the Fund at https://www.franklintempleton.com/regulatory-fund-documents. You can also request this information by contacting us at 1-877-721-1926 or 1-203-703-6002.
WHAT WERE THE FUND COSTS FOR THE LAST SIX MONTHS?  (based on a hypothetical $10,000 investment)
Fund Name
Costs of a $10,000 investment
Costs paid as a percentage of a $10,000 investment†
ClearBridge Focus Value ESG ETF
$24
0.47%
† Annualized.
KEY FUND STATISTICS (as of September 30, 2024)
Total Net Assets
$1,643,331
Total Number of Portfolio Holdings*
40
Portfolio Turnover Rate
15%
* Does not include derivatives, except purchased options, if any.
WHAT DID THE FUND INVEST IN?  (as of September 30, 2024)
Portfolio Composition*(% of Total Investments)
* Does not include derivatives, except purchased options, if any.  
WHERE CAN I FIND ADDITIONAL INFORMATION ABOUT THE FUND?
Additional information is available on https://www.franklintempleton.com/regulatory-fund-documents, including its:
• prospectus • proxy voting information • financial information • holdings • tax information
ClearBridge Focus Value ESG ETF PAGE 1 CFCV-STSR-1124
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.
(a) Please see schedule of investments contained in the Financial Statements and Financial Highlights included under Item 7 of this Form N-CSR.
(b) Not applicable.
ITEM 7. FINANCIAL STATEMENTS AND FINANCIAL HIGLIGHTS FOR OPEN-END MANAGEMENT INVESTMENT COMPANIES.
 
ClearBridge
Focus Value ESG ETF
Financial Statements and Other Important Information
Semi-Annual  | September 30, 2024
 
 
Table of Contents
 
Schedule of Investments
1
Statement of Assets and Liabilities
4
Statement of Operations
5
Statements of Changes in Net Assets
6
Financial Highlights
7
Notes to Financial Statements
8
Changes in and Disagreements with Accountants
15
Results of Meeting(s) of Shareholders
15
Remuneration Paid to Directors, Officers and Others
15
Board Approval of Management and Subadvisory Agreements
16
franklintempleton.com
Financial Statements and Other Important Information - Semi-Annual
Schedule of Investments(unaudited) September 30, 2024
 ClearBridge Focus Value ESG ETF
(Percentages shown based on Fund net assets)  
Security
 
Shares
Value
Common Stocks - 97.7%
Communication Services - 6.6%
Entertainment - 0.8%
Walt Disney Co.
137
$13,178
  
Interactive Media & Services - 2.5%
Alphabet Inc., Class A Shares
117
19,404
  
Meta Platforms Inc., Class A Shares
38
21,753
  
Total Interactive Media & Services
41,157
Media - 3.3%
Comcast Corp., Class A Shares
1,283
53,591
  
Total Communication Services
107,926
Consumer Discretionary - 4.2%
Hotels, Restaurants & Leisure - 0.5%
Starbucks Corp.
93
9,066
  
Specialty Retail - 3.7%
Home Depot Inc.
93
37,684
  
O'Reilly Automotive Inc.
20
23,032
  *
Total Specialty Retail
60,716
Total Consumer Discretionary
69,782
Consumer Staples - 1.8%
Personal Care Products - 1.8%
Haleon PLC, ADR
2,727
28,852
  
Energy - 3.0%
Oil, Gas & Consumable Fuels - 3.0%
Williams Cos. Inc.
1,088
49,667
  
Financials - 20.0%
Banks - 6.8%
Bank of America Corp.
916
36,347
  
JPMorgan Chase & Co.
361
76,120
  
Total Banks
112,467
Capital Markets - 2.5%
Charles Schwab Corp.
637
41,284
  
Consumer Finance - 5.5%
American Express Co.
200
54,240
  
Capital One Financial Corp.
241
36,085
  
Total Consumer Finance
90,325
Financial Services - 1.4%
Visa Inc., Class A Shares
81
22,271
  
Insurance - 3.8%
Marsh & McLennan Cos. Inc.
160
35,695
  
See Notes to Financial Statements.
ClearBridge Focus Value ESG ETF 2024 Semi-Annual Report
1
Schedule of Investments(unaudited) (cont'd) September 30, 2024
 ClearBridge Focus Value ESG ETF
(Percentages shown based on Fund net assets)
Security
 
Shares
Value
Insurance - continued
Progressive Corp.
108
$27,406
  
Total Insurance
63,101
Total Financials
329,448
Health Care - 18.8%
Health Care Equipment & Supplies - 3.2%
Becton Dickinson & Co.
214
51,596
  
Health Care Providers & Services - 7.5%
CVS Health Corp.
212
13,331
  
McKesson Corp.
146
72,185
  
UnitedHealth Group Inc.
65
38,004
  
Total Health Care Providers & Services
123,520
Life Sciences Tools & Services - 3.8%
Thermo Fisher Scientific Inc.
102
63,094
  
Pharmaceuticals - 4.3%
Johnson & Johnson
434
70,334
  
Total Health Care
308,544
Industrials - 11.7%
Commercial Services & Supplies - 2.2%
Veralto Corp.
323
36,131
  
Ground Transportation - 1.8%
XPO Inc.
281
30,210
  *
Machinery - 7.7%
Deere & Co.
40
16,693
  
Illinois Tool Works Inc.
151
39,573
  
Otis Worldwide Corp.
473
49,164
  
Parker-Hannifin Corp.
32
20,218
  
Total Machinery
125,648
Total Industrials
191,989
Information Technology - 11.5%
Communications Equipment - 2.9%
Motorola Solutions Inc.
107
48,110
  
Semiconductors & Semiconductor Equipment - 7.3%
Broadcom Inc.
172
29,670
  
Intel Corp.
1,137
26,674
  
Microchip Technology Inc.
794
63,750
  
Total Semiconductors & Semiconductor Equipment
120,094
Software - 1.3%
Microsoft Corp.
49
21,085
  
Total Information Technology
189,289
See Notes to Financial Statements.
2
ClearBridge Focus Value ESG ETF 2024 Semi-Annual Report
 ClearBridge Focus Value ESG ETF
(Percentages shown based on Fund net assets)
Security
 
Shares
Value
Materials - 7.5%
Chemicals - 4.3%
Sherwin-Williams Co.
185
$70,609
  
Construction Materials - 3.2%
Martin Marietta Materials Inc.
97
52,210
  
Total Materials
122,819
Utilities - 12.6%
Electric Utilities - 3.1%
Edison International
579
50,425
  
Multi-Utilities - 9.5%
Sempra
990
82,793
  
WEC Energy Group Inc.
765
73,578
  
Total Multi-Utilities
156,371
Total Utilities
206,796
Total Investments before Short-Term Investments (Cost - $1,288,129)
1,605,112
Rate
Short-Term Investments - 2.2%
JPMorgan 100% U.S. Treasury Securities Money Market Fund,
Institutional Class (Cost - $37,307)  
4.855%
37,307
 
37,307
  (a)
Total Investments - 99.9% (Cost - $1,325,436)
1,642,419
Other Assets in Excess of Liabilities - 0.1%
912
Total Net Assets - 100.0%
$1,643,331
 
*
Non-income producing security.
(a)
Rate shown is one-day yield as of the end of the reporting period.
 
Abbreviation(s) used in this schedule:
ADR
-
American Depositary Receipts
See Notes to Financial Statements.
ClearBridge Focus Value ESG ETF 2024 Semi-Annual Report
3
Statement of Assets and Liabilities(unaudited) September 30, 2024
 
Assets:
Investments, at value (Cost - $1,325,436)
$1,642,419
Dividends receivable
1,539
Total Assets
1,643,958
Liabilities:
Investment management fee payable
627
Total Liabilities
627
Total Net Assets
$1,643,331
Net Assets:
Paid-in capital in excess of par value
$861,328
Total distributable earnings (loss)
782,003
Total Net Assets
$1,643,331
Shares Outstanding
44,000
Net Asset Value
$37.35
See Notes to Financial Statements.
4
ClearBridge Focus Value ESG ETF 2024 Semi-Annual Report
Statement of Operations (unaudited) For the Six Months Ended September 30, 2024
 
Investment Income:
Dividends
$22,695
Less: Foreign taxes withheld
(298
)
Total Investment Income
22,397
Expenses:
Investment management fee (Note 2)
5,238
Total Expenses
5,238
Net Investment Income
17,159
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions
(Notes 1 and 3):
Net Realized Gain (Loss) From:
Investment transactions
415,034
Foreign currency transactions
(18
)
Net Realized Gain
415,016
Change in Net Unrealized Appreciation (Depreciation) From:
Investments
(500,973
)
Foreign currencies
(4
)
Change in Net Unrealized Appreciation (Depreciation)
(500,977
)
Net Loss on Investments and Foreign Currency Transactions
(85,961
)
Decrease in Net Assets From Operations
$(68,802
)
See Notes to Financial Statements.
ClearBridge Focus Value ESG ETF 2024 Semi-Annual Report
5
Statements of Changes in Net Assets
 
For the Six Months Ended September 30, 2024 (unaudited)
and the Year Ended March 31, 2024
September 30
March 31
Operations:
Net investment income
$17,159
$46,819
Net realized gain
415,016
102,309
Change in net unrealized appreciation (depreciation)
(500,977
)
567,839
Increase (Decrease) in Net Assets From Operations
(68,802
)
716,967
Distributions to Shareholders From (Note 1):
Total distributable earnings
(20,400
)
(77,088
)
Decrease in Net Assets From Distributions to Shareholders
(20,400
)
(77,088
)
Fund Share Transactions (Note 5):
Cost of shares repurchased (50,000 and 0 shares repurchased, respectively) 
(1,815,383
)
-
Decrease in Net Assets From Fund Share Transactions
(1,815,383
)
-
Increase (Decrease) in Net Assets
(1,904,585
)
639,879
Net Assets:
Beginning of period
3,547,916
2,908,037
End of period
$1,643,331
$3,547,916
See Notes to Financial Statements.
6
ClearBridge Focus Value ESG ETF 2024 Semi-Annual Report
Financial Highlights
 
For a share of beneficial interest outstanding throughout each year ended March 31,
unless otherwise noted:
20241,2
20241
20231
20221,3
20211,4
20201,5
Net asset value, beginning of period
$37.74
$30.94
$34.09
$34.54
$27.09
$24.99
Income (loss) from operations:
Net investment income
0.28
0.50
0.44
0.19
0.38
0.15
Net realized and unrealized gain (loss)
(0.28
)
7.12
(2.72
)
0.91
7.74
2.06
Total income (loss) from operations
0.00
6
7.62
(2.28)
1.10
8.12
2.21
Less distributions from:
Net investment income
(0.39
)
(0.48
)
(0.46
)
(0.19
)
(0.38
)
(0.11
)
Net realized gains
-
(0.34
)
(0.41
)
(1.36
)
(0.29
)
-
Total distributions
(0.39
)
(0.82
)
(0.87
)
(1.55
)
(0.67
)
(0.11
)
Net asset value, end of period
$37.35
$37.74
$30.94
$34.09
$34.54
$27.09
Total return, based on NAV7
0.03
%
24.87
%
(6.56
)%
3.01
%
30.22
%
8.87
%
Net assets, end of period (000s)
$1,643
$3,548
$2,908
$3,886
$3,938
$2,817
Ratios to average net assets:
Gross expenses
0.47
%8
0.49
%9
0.49
%
0.49
%8
0.49
%
0.49
%8
Net expenses
0.47
8
0.49
9
0.49
0.49
8
0.49
0.49
8
Net investment income
1.54
8
1.49
1.44
1.07
8
1.17
1.65
8
Portfolio turnover rate
15
%10
43
%
8
%10
7
%10
21
%10
5
%10
 
1
Per share amounts have been calculated using the average shares method.
2
For the six months ended September 30, 2024 (unaudited).
3
For the period October 1, 2021 through March 31, 2022.
4
For the year ended September 30.
5
For the period May 27, 2020 (inception date) to September 30, 2020.
6
Amount represents less than $0.005 or greater than $(0.005) per share.
7
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.
8
Annualized.
9
Effective March 1, 2024, the Fund's management fee was reduced to 0.47%. Prior to March 1, 2024, the Fund paid
a fee equal to an annual rate of 0.49% of the value of the average daily net assets of the Fund.
10
Portfolio turnover excludes the value of portfolio securities received or delivered as a result of in-kind fund share
transactions.
See Notes to Financial Statements.
ClearBridge Focus Value ESG ETF 2024 Semi-Annual Report
7
Notes to Financial Statements(unaudited)
1. Organization and significant accounting policies
ClearBridge Focus Value ESG ETF (the "Fund") is a separate diversified investment series of Legg Mason ETF Investment Trust II (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 Cboe BZX Exchange, Inc. 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 are created and redeemed principally in-kind (although under some circumstances its shares are created and redeemed partially for cash).
The Fund seeks long-term capital appreciation.
The Fund follows the accounting and reporting guidance in Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 946, Financial Services - Investment Companies("ASC 946"). The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles ("GAAP"), including, but not limited to, ASC 946. 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. 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. 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 risks/spreads, default rates and quoted prices for similar securities.
8
ClearBridge Focus Value ESG ETF 2024 Semi-Annual Report
Investments in open-end funds are valued at the closing net asset value per share of each fund on the day of valuation. 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.
Pursuant to policies adopted by the Board of Trustees, the Fund's manager has been designated as the valuation designee and is responsible for the oversight of the daily valuation process. The Fund's manager is assisted by the Global Fund Valuation Committee (the "Valuation Committee"). The Valuation Committee is responsible for making fair value determinations, evaluating the effectiveness of the Fund's pricing policies, and reporting to the Fund's manager and 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.
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.
ClearBridge Focus Value ESG ETF 2024 Semi-Annual Report
9
Notes to Financial Statements(unaudited) (cont'd)
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 - unadjusted 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.
The following is a summary of the inputs used in valuing the Fund's assets carried at fair value:
 
ASSETS
Description
Quoted Prices
(Level 1)
Other Significant
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Common Stocks†
$1,605,112
-
-
$1,605,112
Short-Term Investments†
37,307
-
-
37,307
Total Investments
$1,642,419
-
-
$1,642,419
 
†
See Schedule of Investments for additional detailed categorizations.
(b) 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.
10
ClearBridge Focus Value ESG ETF 2024 Semi-Annual Report
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.
(c) 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.
(d) 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) is recorded on the accrual basis. Amortization of premiums and accretion of discounts on debt securities are recorded to interest income over the lives of the respective securities, except for premiums on certain callable debt securities, which are amortized to the earliest call date. Dividend income is recorded on the ex-dividend date for dividends received in cash and/or securities. Foreign dividend income is recorded on the ex-dividend date or as soon as practicable after the Fund determines the existence of a dividend declaration after exercising reasonable due diligence. 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.
(e) Distributions to shareholders. Distributions from net investment income of the Fund, if any, are declared and paid on a quarterly 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.
ClearBridge Focus Value ESG ETF 2024 Semi-Annual Report
11
Notes to Financial Statements(unaudited) (cont'd)
(f) 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 March 31, 2024, 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.
(g) 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 agreementand other transactions with affiliates
Franklin Templeton Fund Adviser, LLC ("FTFA") is the Fund's investment manager and ClearBridge Investments, LLC ("ClearBridge") is the Fund's subadviser. Western Asset Management Company, LLC ("Western Asset") manages the portion of the Fund's cash and short-term instruments allocated to it. FTFA, ClearBridge and Western Asset are indirect, wholly-owned subsidiaries of Franklin Resources, Inc. ("Franklin Resources").
The Fund pays an investment management fee, calculated daily and paid monthly, at an annual rate of 0.47% of the Fund's average daily net assets. Pursuant to the Management Agreement, FTFA is responsible for substantially all expenses of the Fund and, subject to the general supervision of the Board, 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 what is essentially an all-in fee or a unitary fee structure. FTFA is not responsible for, and the Fund bears, the investment management fee and certain other fees and expenses, including taxes, any future 12b-1 fees, acquired fund fees and expenses and extraordinary expenses (such as litigation and indemnification expenses), all of which may vary and will affect the total level of expenses paid by the Fund.
FTFA delegates to ClearBridge the day-to-day portfolio management of the Fund, except for any portion of the Fund's cash and short-term instruments that is allocated to Western Asset. As compensation for its subadvisory services, FTFA pays ClearBridge a fee monthly,
12
ClearBridge Focus Value ESG ETF 2024 Semi-Annual Report
at an annual rate equal to 70% of the management fee paid by the Fund to FTFA, net of (i) all fees and expenses incurred by FTFA 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. FTFA pays Western Asset monthly a fee of 0.02% of the portion of the Fund's average daily net assets allocated to Western Asset for the management of cash and other short-term instruments, net of expense waivers, if any, and reimbursements.
Franklin Distributors, LLC ("Franklin Distributors") serves as the distributor of Creation Units for the Fund on an agency basis. Franklin Distributors is an indirect, wholly-owned broker-dealersubsidiary of Franklin Resources.
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.
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 September 30, 2024, the aggregate cost of purchases and proceeds from sales of investments (excluding in-kind transactions and short-term investments) were as follows:
 
Purchases
$327,554
Sales
413,556
During the six months ended September 30, 2024, in-kind transactions (Note 5) were as follows:
 
Contributions
-
Redemptions
$1,768,124
Realized gain (loss)*
418,021
 
*
Net realized gains on redemptions in-kind are not taxable to the remaining shareholders of the Fund.
The in-kind contributions and in-kind redemptions shown in this table may not agree with the Fund Share Transactions on the Statement of Changes in Net Assets. This table represents the accumulation of the Fund's daily net shareholder transactions while the Statement of Changes in Net Assets reflects gross shareholder transactions including any cash component of the transactions.
ClearBridge Focus Value ESG ETF 2024 Semi-Annual Report
13
Notes to Financial Statements(unaudited) (cont'd)
At September 30, 2024, 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
Gross
Unrealized
Appreciation
Gross
Unrealized
Depreciation
Net
Unrealized
Appreciation
Securities
$1,326,311
$349,568
$(33,460)
$316,108
4. Derivative instruments and hedging activities
During the six months ended September 30, 2024, the Fund did not invest in derivative instruments.
5. Fund share transactions
At September 30, 2024, 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 10,000 shares of the Fund constitute a Creation Unit. Such transactions are made principally on an in-kind basis and under some circumstances partially on a cash basis, with a separate cash payment, which is a balancing cash component to equate the transaction to the net asset value per share of the Fund on the transaction date. 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. Such transactions fees are treated as increases in capital and are disclosed in the Funds' Statements of Changes in Net Assets. Creations and redemptions for cash (when cash creations and redemptions are available or specified) may be subject to an additional variable fee.
6. Subsequent event
On September 5, 2024, the Board of Trustees of ClearBridge Focus Value ESG ETF approved a proposal to liquidate the Fund. The Fund's liquidation occurred on November 5, 2024.
14
ClearBridge Focus Value ESG ETF 2024 Semi-Annual Report
Changes in and Disagreements with AccountantsFor the period covered by this report
Not applicable.
Results of Meeting(s) of ShareholdersFor the period covered by this report
Not applicable.
Remuneration Paid to Directors, Officers and OthersFor the period covered by this report
Not applicable. Remuneration paid to directors, officers, and others is included as part of the all-
inclusive management fee and not paid directly by the fund.
ClearBridge Focus Value ESG ETF
15
Board Approval of Management and Subadvisory Agreements (unaudited)
At an in-person meeting held on May 29, 2024 (Meeting), the Board of Trustees (Board) of the Legg Mason ETF Investment Trust II (Trust), including a majority of the trustees who are not "interested persons" as defined in the Investment Company Act of 1940 (Independent Trustees), reviewed and approved the continuance of (i) the investment management agreement between Franklin Templeton Fund Adviser, LLC (FTFA) and the Trust, on behalf of the Fund; (ii) the investment sub-advisory agreement between FTFA and ClearBridge Investments, LLC (ClearBridge), an affiliate of FTFA, on behalf of the Fund; and (iii) the investment sub-advisory agreement between FTFA and Western Asset Management Company, LLC (Western Asset LLC), an affiliate of FTFA, on behalf of the Fund (each a Management Agreement) for an additional one-year period. The Independent Trustees received advice from and met separately with Independent Trustee counsel in considering whether to approve the continuation of each Management Agreement. FTFA, ClearBridge and Western Asset LLC are each referred to herein as a Manager.
In considering the continuation of each Management Agreement, the Board reviewed and considered information provided by the Manager at the Meeting and throughout the year at meetings of the Board and its committees. The Board also reviewed and considered information provided in response to a detailed set of requests for information submitted to the Manager by Independent Trustee counsel on behalf of the Independent Trustees in connection with the annual contract renewal process. In addition, prior to the Meeting, the Independent Trustees held a virtual contract renewal meeting at which the Independent Trustees first conferred amongst themselves and Independent Trustee counsel about contract renewal matters, and then met with management to request additional information that the Independent Trustees reviewed and considered prior to and at the Meeting. The Board reviewed and considered all of the factors it deemed relevant in approving the continuance of each Management Agreement, including, but not limited to: (i) the nature, extent and quality of the services provided by the Manager; (ii) the investment performance of the Fund; (iii) the costs of the services provided and profits realized by the Manager and its affiliates from the relationship with the Fund; (iv) the extent to which economies of scale are realized as the Fund grows; and (v) whether fee levels reflect these economies of scale for the benefit of Fund investors.
In approving the continuance of each Management Agreement, the Board, including a majority of the Independent Trustees, determined, through the exercise of its business judgment, that the terms of each Management Agreement are fair and reasonable and that the continuance of each Management Agreement is in the best interests of the Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board's determination.
16
ClearBridge Focus Value ESG ETF
Nature, Extent and Quality of Services
The Board reviewed and considered information regarding the nature, extent and quality of investment management services provided by the Manager and its affiliates to the Fund and its shareholders. This information included, among other things, the qualifications, background and experience of the senior management and investment personnel of the Manager, as well as information on succession planning where appropriate; the structure of investment personnel compensation; oversight of third-party service providers; investment performance reports and related financial information for the Fund; reports on expenses and shareholder services; legal and compliance matters; risk controls; pricing and other services provided by the Manager and its affiliates; and management fees charged by the Manager and its affiliates to US funds and other accounts, including management's explanation of differences among accounts where relevant. The Board acknowledged the ongoing integration of the Putnam family of funds into the Franklin Templeton (FT) family of funds and management's continued development of strategies to address areas of heightened concern in the registered fund industry, including various regulatory initiatives and continuing geopolitical concerns.
The Board also reviewed and considered the benefits provided to Fund shareholders of investing in a fund that is part of the FT family of funds. The Board noted the financial position of Franklin Resources, Inc. (FRI), the Manager's parent, and its commitment to the registered fund business as evidenced by its continued introduction of new funds, reassessment of the fund offerings in response to FT acquisitions and the market environment, as well as project initiatives and capital investments relating to the services provided to the Fund by the FT organization. The Board specifically noted FT's commitment to technological innovation and advancement, including its initiative to create a new enterprise-wide artificial intelligence platform.
Following consideration of such information, the Board was satisfied with the nature, extent and quality of services provided by the Manager and its affiliates to the Fund and its shareholders.
Fund Performance
The Board reviewed and considered the performance results of the Fund for various time periods ended December 31, 2023, noting the Fund commenced operations on May 27, 2020. The Board considered the performance returns for the Fund in comparison to the performance returns of registered funds deemed comparable to the Fund included in a universe (Performance Universe) selected by Broadridge Financial Solutions, Inc. (Broadridge), an independent provider of investment company data. The Board received a description of the methodology used by Broadridge to select the registered funds included in a Performance Universe. The Board also reviewed and considered Fund performance reports provided and discussions that occurred with portfolio managers at Board meetings
ClearBridge Focus Value ESG ETF
17
Board Approval of Management and Subadvisory Agreements (unaudited) (cont'd)
throughout the year. The Board referenced earlier discussions with management on matters related to, among other things, the expansion and rationalization of the overall product line, including investments in novel asset classes, as well as the growth in assets from internal and external clients. In addition, the Board acknowledged information provided regarding management's strategy to grow market share through the use of innovative data and technology and investments in marketing and distribution. The Board noted management's high level of client engagement and the strength of its internal audit and compliance program. A summary of the Fund's performance results is below.
The Performance Universe for the Fund included the Fund and all retail and institutional large-cap value funds and exchange-traded funds. The Fund commenced operations on May 27, 2020, and thus has been in operation for less than five years. The Board noted that the Fund's annualized total return for the one-year period was above the median and in the first quintile (best) of its Performance Universe, and for the three-year period was equal to the median of its Performance Universe. The Board concluded that the Fund's performance was satisfactory.
Comparative Fees and Expenses
The Board reviewed and considered information regarding the Fund's actual total expense ratio, noting that the Fund pays a Unified Fee (as defined below). The Board considered the actual total expense ratio and, separately, the contractual management fee rate, without the effect of fee waivers, if any (Management Rate), of the Fund in comparison to the median expense ratio and median Management Rate, respectively, of other exchange-tradedfunds deemed comparable to and with a similar expense structure to the Fund selected by Broadridge (Expense Group). Broadridge fee and expense data is based upon information taken from each fund's most recent annual or semi-annual report, which reflects historical asset levels that may be quite different from those currently existing, particularly in a period of market volatility. While recognizing such inherent limitation and the fact that expense ratios and Management Rates generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Broadridge to be an appropriate measure of comparative fees and expenses. The Broadridge Management Rate includes administrative charges. The Board received a description of the methodology used by Broadridge to select the exchange-traded funds included in an Expense Group.
The Expense Group for the Fund was comprised of actively managed exchange-traded funds, which included the Fund, which is currently classified as a large-cap value fund, two multi-cap value funds, four large-cap core funds, one equity income fund and one multi-cap core fund. The Board noted that the Management Rate and actual total expense ratio for the Fund were below the medians of its Expense Group. The Board further noted that the Fund has implemented a unified management fee (Unified Fee) and that pursuant to the Unified Fee arrangement FTFA pays for all operating expenses of the Fund, except interest
18
ClearBridge Focus Value ESG ETF
expenses, taxes, brokerage expenses, future Rule 12b-1 fees (if any), acquired fund fees and expenses, extraordinary expenses and the management fee. The Board also noted that effective March 1, 2024, the Unified Fee was reduced from 0.49% to 0.47%. The Board further noted that each of ClearBridge and Western Asset LLC is paid by FTFA out of the Unified Fee FTFA receives from the Fund and that the allocation of the fee between FTFA and each of ClearBridge and Western Asset LLC reflected the services provided by each to the Fund. After consideration of the above, the Board concluded that the Management Rate charged to the Fund and the sub-advisory fee paid to each of ClearBridge and Western Asset LLC are reasonable.
Profitability
The Board reviewed and considered information regarding the profits realized by the Manager and its affiliates in connection with the operation of each Fund. In this respect, the Board considered the Fund profitability analysis provided by the Manager that addresses the overall profitability of FT's US fund business, as well as its profits in providing investment management and other services to each of the individual Funds during the 12-month period ended September 30, 2023 (the most recent fiscal year-end for FRI). The Board noted that although management continually makes refinements to its methodologies used in calculating profitability in response to organizational and product-relatedchanges, the overall methodology has remained consistent with that used in the Fund's profitability report presentations from prior years. The Board also noted that an independent registered public accounting firm has been engaged by the Manager to periodically review and assess the allocation methodologies to be used solely by the Fund's Board with respect to the profitability analysis.
The Board noted management's belief that costs incurred in establishing the infrastructure necessary for the type of fund operations conducted by the Manager and its affiliates may not be fully reflected in the expenses allocated to the Fund in determining its profitability, as well as the fact that the level of profits, to a certain extent, reflected operational cost savings and efficiencies initiated by management. As part of this evaluation, the Board considered management's outsourcing of certain operations, which effort has required considerable up-front expenditures by the Manager but, over the long run, is expected to result in greater efficiencies. The Board also noted management's expenditures in improving shareholder services provided to the Fund, as well as the need to implement systems and meet additional regulatory and compliance requirements resulting from recent US Securities and Exchange Commission and other regulatory requirements.
The Board also considered the extent to which the Manager and its affiliates might derive ancillary benefits from fund operations, including potential benefits resulting from personnel and systems enhancements necessitated by fund growth, as well as increased leverage with service providers and counterparties. Based upon its consideration of all
ClearBridge Focus Value ESG ETF
19
Board Approval of Management and Subadvisory Agreements (unaudited) (cont'd)
these factors, the Board concluded that the level of profits realized by the Manager and its affiliates from providing services to the Fund was not excessive in view of the nature, extent and quality of services provided to the Fund.
Economies of Scale
The Board reviewed and considered the extent to which the Manager may realize economies of scale, if any, as the Fund grows larger and whether the Fund's management fee structure reflects any economies of scale for the benefit of shareholders. The Board considered that the Fund would likely experience benefits from the Unified Fee at the Fund's projected asset levels because of FTFA's contractual requirement to bear most of the Fund's ordinary operating expenses. The Board noted that, under the Unified Fee, it is not anticipated that the Fund will generate significant, if any, profit for FTFA and/or its affiliates for some time. The Board considered the Manager's view that any analyses of potential economies of scale in managing a particular fund are inherently limited in light of the joint and common costs and investments the Manager incurs across the FT family of funds as a whole. The Board also noted that as of December 31, 2023, the Fund did not have an asset size that would likely enable it to achieve economies of scale. The Board also noted management's representation that for the fiscal year ended September 30, 2023, the Fund did not experience a profit. The Board recognized that there would not likely be any economies of scale for the Fund until its assets grow.
Conclusion
Based on its review, consideration and evaluation of all factors it believed relevant, including the above-described factors and conclusions, the Board unanimously approved the continuation of each Management Agreement for an additional one-year period.
20
ClearBridge Focus Value ESG ETF
ClearBridge
Focus Value ESG ETF
Trustees
Rohit Bhagat
Deborah D. McWhinney
Anantha K. Pradeep
Jennifer M. Johnson
Chair
Investment manager
Franklin Templeton Fund Adviser, LLC
Subadviser
ClearBridge Investments, LLC
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
San Francisco, CA
ClearBridge Focus Value ESG ETF
The Fund is a separate investment series of Legg Mason ETF Investment Trust II, a Maryland statutory trust.
ClearBridge Focus Value ESG 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.franklintempleton.com and (3) on the SEC's website at www.sec.gov.
This report is submitted for the general information of the shareholders of ClearBridge Focus Value ESG 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.franklintempleton.com
© 2024 Franklin Distributors, LLC, Member FINRA/SIPC. All rights reserved.

 
92192-SFSOI 11/24
© 2024 Franklin Templeton. All rights reserved.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS FOR OPEN-END MANAGEMENT INVESTMENT COMPANIES.

The information is disclosed as part of the Financial Statements included in Item 7 of this Form N-CSR.

ITEM 9. PROXY DISCLOSURES FOR OPEN-END MANAGEMENT INVESTMENT COMPANIES.

The information is disclosed as part of the Financial Statements included in Item 7 of this Form N-CSR.

ITEM 10. REMUNERATION PAID TO DIRECTORS, OFFICERS, AND OTHERS OF OPEN-END MANAGEMENT INVESTMENT COMPANIES.

The information is disclosed as part of the Financial Statements included in Item 7 of this Form N-CSR.

ITEM 11. STATEMENT REGARDING BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACT.

The information is disclosed as part of the Financial Statements included in Item 7 of this Form N-CSR, as applicable.

ITEM 12. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 13. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 14. PURCHASES OF SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

Not applicable.

ITEM 15. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

ITEM 16. 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 period covered by this report that have materially affected, or are likely to materially affect the registrant's internal control over financial reporting.
ITEM 17. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 18. RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION.
(a) Not applicable.
(b) Not applicable.
ITEM 19. 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 II
By: /s/ Christopher Kings
Christopher Kings
Chief Executive Officer - Finance and Administration
Date: November 22, 2024

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/ Christopher Kings
Christopher Kings
Chief Executive Officer - Finance and Administration
Date: November 22, 2024
By: /s/ Vivek Pai
Vivek Pai
Chief Financial Officer, Chief Accounting Officer and Treasurer
Date: November 22, 2024