SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.)
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Franklin TEMPLETON ETF
TRUST
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Franklin Liberty Investment Grade Corporate
etf
A
SERIES OF franklin templeton etf trust
One
Franklin Parkway
San
Mateo, California 94403-1906
IMPORTANT
NOTICE OF INTERNET AVAILABILITY
OF INFORMATION STATEMENT
This notice
provides only an overview of the more complete Information Statement that is
available to you on the Internet relating to the Franklin Liberty Investment
Grade Corporate ETF (the “Fund”), a series of Franklin Templeton ETF Trust (the
“Trust”). We encourage you to access and review all of the important
information contained in the Information Statement, available online at: www.franklintempleton.com/FLCOInfo.
The
Information Statement describes a recent change involving the investment
management of the Fund. Franklin Advisers, Inc. (“Advisers”) currently
serves as the investment manager to the Fund. Under an exemptive order from
the U.S. Securities and Exchange Commission, Advisers is permitted to appoint
and replace both wholly owned and unaffiliated sub-advisors, and enter into,
amend and terminate sub-advisory agreements with such sub-advisors without
obtaining prior shareholder approval, but subject to the approval of the Trust’s
Board of Trustees (the “Board”). Under the exemptive order, Advisers, the
Fund’s investment manager, has the ultimate responsibility, subject to
oversight by the Board, to oversee the Fund’s sub-advisor(s) and recommend
their hiring, termination and replacement. On September 6, 2019, the Board, on
behalf of the Fund, appointed Franklin Templeton Portfolio Advisors, Inc.
(“FTPA”) as an additional sub-advisor to the Fund and approved a new
sub-advisory agreement between Advisers and FTPA, effective October 15, 2019,
pursuant to which FTPA supports Advisers in providing investment advice to the
Fund. In connection with the appointment of FTPA as a sub-advisor to the
Fund, Thomas Runkel, CFA has been added as a portfolio manager to the Fund.
A more
detailed description of FTPA and its investment operations, information about
the new sub-advisory agreement with FTPA, and the reasons the Board appointed
FTPA as a sub-advisor, is included in the Information Statement.
This Notice of
Internet Availability of Information Statement is being mailed beginning on or about
January 13, 2020, to shareholders of record of the Fund as of January 6, 2020. Householding
is an option available to certain Fund investors. Householding is a method of
delivery, based on the preference of the individual investor, in which a single
copy of certain shareholder documents can be delivered
to investors who share the same address, even if their accounts are registered
under different names. Householding for the Fund is available through certain
broker-dealers. If you are interested in enrolling in householding and
receiving a single copy of the Notice of Internet Availability of Information
Statement and other shareholder documents, please contact your broker-dealer.
If you are currently enrolled in householding and wish to change your householding
status, please contact your broker-dealer. The Information Statement will
be available online until at least April 13, 2020. A paper or e-mail copy
of the full Information Statement may be obtained, without charge, by
contacting the Fund at (800) DIAL BEN /(800) 342-5236. If you would
like to receive a paper or e-mail copy of the full Information Statement, you
must request one.
WE ARE NOT
ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
Franklin LIberty INvestment Grade corporate
etf
A
SERIES OF franklin templeton etf Trust
One
Franklin Parkway
San
Mateo, California 94403-1906
INFORMATION
STATEMENT
This
Information Statement describes a recent change involving the investment
management of the Franklin Liberty Investment Grade Corporate ETF (the “Fund”),
a series of Franklin Templeton ETF Trust (the “Trust”). At an in-person
meeting held on September 6, 2019 (the “Meeting”), the Trust’s Board of
Trustees (the “Board” or the “Trustees”), on behalf of the Fund, appointed
Franklin Templeton Portfolio Advisors, Inc. (“FTPA”) as an additional
sub-advisor to the Fund and approved a new sub-advisory agreement between
Franklin Advisers, Inc. (“Advisers”) the Fund’s investment manager, and FTPA,
effective October 15, 2019, pursuant to which FTPA supports Advisers in
providing investment advice to the Fund. Franklin Templeton
Institutional, LLC (“FT Institutional”) currently serves as a sub-advisor to
the Fund. In connection with the appointment of FTPA as a sub-advisor to the
Fund, Thomas Runkel, CFA has been added as a portfolio manager to the Fund.
Advisers has the ultimate responsibility, subject to the oversight by the
Board, to oversee the Fund’s sub-advisors and recommend their hiring,
termination and replacement. Under an exemptive order from the U.S. Securities
and Exchange Commission (the “SEC”), Advisers is permitted to appoint and
replace both wholly owned and unaffiliated sub-advisors, and enter into, amend
and terminate sub-advisory agreements without obtaining prior shareholder
approval, but subject to the approval of the Board (the “Manager of Managers
Order”).
This
Information Statement is being made available via the internet beginning on or
about January 13, 2020 to all shareholders of record of the Fund as of January
6, 2020 (the “Record Date”). The Information Statement will be available
online at www.franklintempleton.com/FLCOInfo
until at least April 13, 2020. A paper or e-mail copy of this Information
Statement may be obtained, without charge, by contacting the Fund at (800) DIAL
BEN/(800) 342-5236.
WE ARE NOT
ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
Why am I receiving this Information Statement?
This
Information Statement is being furnished to you by the Board to inform
shareholders of a recent change in the investment management of the Fund.
The Board, upon the recommendation of Advisers, has approved a new sub-advisory
agreement between Advisers and FTPA (the “New Sub-Advisory Agreement”).
This Information Statement provides details regarding FTPA, the New
Sub-Advisory Agreement and the reasons the Board appointed FTPA as a new
sub-advisor.
What is the Manager of Managers
Structure?
Following the
appointment of FTPA as a sub-advisor, the Fund currently has two sub-advisors.
FTPA and FT Institutional provide Advisers with investment management advice
(which may include research and analysis). Pursuant to the Manager of Managers
Order, Advisers has the ultimate responsibility, subject to oversight by the
Board, to oversee the Fund’s sub-advisors and recommend their hiring,
termination and replacement. Advisers also, subject to the review and approval
of the Board, sets the Fund’s overall investment strategy; evaluates, selects
and recommends sub-advisor(s) to manage all or a portion of the Fund’s assets;
and implements procedures reasonably designed to ensure that each sub-advisor
complies with the Fund’s investment goal, policies and restrictions. Subject to
review by the Board, Advisers may allocate and, when appropriate, reallocate
the Fund’s assets among sub-advisors, and will monitor and evaluate each
sub-advisor’s performance.
The Fund,
however, must comply with certain conditions when relying on the Manager of
Managers Order. One condition is that the Fund, by providing this
Information Statement, inform shareholders of the hiring of any new wholly
owned or unaffiliated sub-advisor within ninety (90) days after the
hiring.
APPOINTMENT OF FTPA AS A
SUB-ADVISOR TO THE FUND
Why was FTPA appointed as a New
Sub-Advisor?
Advisers
recommended, and the Board approved, the appointment of FTPA as an additional
sub-advisor to the Fund to support Advisers in providing investment advice to
the Fund, with Thomas Runkel, CFA, being added as a portfolio manager to the
Fund.
Has the
addition of FTPA increased the Fund’s fees and expenses?
No. The
addition of FTPA as sub-advisor to the Fund has had no impact on the investment
management fees charged to the Fund or the fees paid by Fund shareholders,
because the fees paid by Advisers to FTPA are deducted from the fees paid by
the Fund to Advisers. The addition of FTPA as sub-advisor to the Fund has
not materially changed the manner in which the Fund seeks to achieve its
investment goal or the level of services that are provided to the Fund.
Information about FTPA
FTPA,
One Franklin Parkway, San Mateo, CA 94403-1906, is a direct, wholly owned
subsidiary of Franklin Resources, Inc. (“FRI”). Together, FTPA and its
affiliates manage, as of November 30, 2019, over $691 billion in assets, and
have been in the investment management business since 1947. FRI is a publicly
owned holding company with its principal offices located at One Franklin
Parkway, San Mateo, California 94403-1906. The principal stockholders of
FRI are Charles B. Johnson and Rupert H. Johnson, Jr., who owned approximately 20.9%
and 21.0%, respectively, of its outstanding shares as of October 31, 2019. The
shares deemed to be beneficially owned by Charles B. Johnson include certain shares
held by three private charitable foundations for which he is a trustee, of
which he disclaims beneficial ownership. The shares deemed to be beneficially
owned by Rupert H. Johnson, Jr. include certain shares held by a private
charitable foundation for which he is a trustee or by his spouse, of which he
disclaims beneficial ownership.
The names and principal occupations
of the principal executive officers and directors of FTPA, as of the Record
Date, are set forth below. The business address of each person is One Franklin
Parkway, San Mateo California 94403.
Name
|
Title
|
Robert M. Geppner
|
Senior Vice President
and Director
|
Philip Portera
|
Director
|
Robert Lim
|
Chief Compliance
Officer
|
Mark L. Constant
|
Treasurer
|
Daniel T. O’Lear
|
President
|
Madison S. Gulley
|
Executive Vice
President
|
Craig S. Tyle
|
Chief Legal Officer
|
Lindsey H. Oshita
|
Chief Financial
Officer
|
Robert Lim and Craig S. Tyle are officers of the Trust and
FTPA.
Exhibit A lists
other U.S. registered investment companies that FTPA manages or subadvises with
investment objectives and strategies similar to the Fund. Exhibit A also sets
forth information about these U.S. registered investment companies, the
investment management or subadvisory fees received by FTPA, the net assets of
each investment company, and whether FTPA has waived, reduced, or otherwise
agreed to reduce its compensation under its applicable investment advisory or
subadvisory contract.
material terms of the NEW sub-advisory agreement
Below is a summary of the
material terms of the New Sub-Advisory Agreement. This summary is qualified in
its entirety by reference to the New Sub-Advisory Agreement, a copy of which is
attached as Exhibit B. The terms of the New Sub-Advisory Agreement are
substantially identical to the terms of the sub-advisory agreement between
Advisers and FT Institutional.
Services.
Subject to the overall policies, direction and review of the Board and to the
instructions and supervision of Advisers, FTPA provides certain investment
advisory services with respect to securities, investments and cash equivalents
in the Fund. Advisers will continue to have full responsibility for all
investment advisory services provided to the Fund, including determining the
manner in which any voting rights, right to consent to corporate action and any
other rights pertaining to investment securities within the Fund shall be
exercised. Advisers, FTPA, and FT Institutional may place all purchase and sale
orders on behalf of the Fund.
Management Fees. Advisers
compensates FTPA for providing investment advice and analysis and for managing
the Fund. Advisers pays FTPA for its services from the investment
management fees it receives from the Fund.
Payment
of Expenses. During the term of the New Sub-Advisory Agreement, FTPA
will pay all expenses incurred by it in connection with the services to be
provided by FTPA under the New Sub-Advisory Agreement other than the costs of
securities (including brokerage commissions, if any) purchased for the Fund.
Advisers and the Fund will be responsible for all of their respective expenses.
Brokerage.
In performing the services described above, FTPA shall use its best efforts to
obtain for the Fund the most favorable price and execution available.
Subject to prior authorization of appropriate policies and procedures by the
Board, FTPA may, to the extent authorized by law and in accordance with the
terms of the Fund’s investment management agreement, prospectus and statement
of additional information, cause the Fund to pay a broker who provides
brokerage and research services an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker would have charged for effecting that transaction, in recognition of the
brokerage and research services that such broker provides, viewed in terms of
either the particular transaction or FTPA’s overall responsibilities with
respect to accounts managed by FTPA.
Continuance.
The New Sub-Advisory Agreement will remain in effect for two years after its
effective date of October 15, 2019, unless earlier terminated. As
provided therein, the New Sub-Advisory Agreement is
thereafter renewable annually (i) by a vote of the Board or (ii) by a vote of a
majority of the outstanding voting securities of the Fund, as defined in the
Investment Company Act of 1940 (the “1940 Act”), provided that in either event
the continuance is also approved by a vote of the majority of the Board who are
not parties to the New Sub-Advisory Agreement or “interested persons,” as
defined in the 1940 Act, of any party to the New Sub-Advisory Agreement or the
Fund (“Independent Trustees”), by a vote cast at a meeting called for the
purpose of voting on such approval.
Termination. The New
Sub-Advisory Agreement may be terminated at any time, without payment of any
penalty, (i) by the Board upon written notice to Advisers and FTPA or by vote
of a majority of the outstanding voting securities of the Fund or (ii) by
Advisers or FTPA upon at least sixty (60) days’ written notice to the other
party. The New Sub-Advisory Agreement shall terminate automatically in the
event of any assignment thereof, as defined in the 1940 Act, and upon any
termination or assignment of the investment management agreement between Advisers
and the Fund.
Standard
of Care. Under the New Sub-Advisory Agreement, in the absence of
willful misfeasance, bad faith, gross negligence, or reckless disregard of its
obligations or duties under the New Sub-Advisory Agreement on the part of FTPA,
FTPA and its directors, officers, employees or affiliates shall not be held liable
to Advisers, the Trust or the Fund, or to any shareholder of the Fund other
than as set forth in this paragraph below. To the extent that Advisers is
found by a court of competent jurisdiction, or the SEC or any other regulatory
agency, to be liable to the Fund or any shareholder (a “liability”) for any
acts undertaken by FTPA pursuant to authority delegated to it by Advisers, FTPA
is required to indemnify and hold harmless Advisers and each of its affiliates,
officers, directors and employees (each, a “Franklin Indemnified Party”) for
any losses, damages, costs and expenses incurred by a Franklin Indemnified
Party for such liability, together with all legal and other expenses reasonably
incurred by any such Franklin Indemnified Party, in connection with such
liability.
What factors did the
Board consider when approving the New Sub-Advisory Agreement?
At the Meeting, the Board of the Trust, including a majority of the Independent
Trustees, reviewed and approved the New Sub-Advisory Agreement for an initial
two-year period. The Independent Trustees received advice from and met
separately with Independent Trustee counsel in considering whether to approve
the New Sub-Advisory Agreement. FTPA and Advisers are each referred to herein
as a Manager.
In considering the approval of the New Sub-Advisory Agreement, the Board
reviewed and considered information provided by each Manager at the Meeting and
throughout the year at meetings of the Board and its committees. The Board
reviewed and considered all of the factors it deemed relevant in approving the New
Sub-Advisory Agreement, including, but not limited to: (i) the nature, extent
and quality of the services to be provided by FTPA as a sub-advisor to the
Fund; (ii) the investment performance of the Fund; (ii) the costs of the
services to be provided by FTPA and the profits realized/expected to be
realized by the Managers and their affiliates from the relationship with the
Fund; and (iii) the extent to which economies of scale may be realized as the
Fund grows. The Board also reviewed and considered the form of New Sub-Advisory
Agreement and the terms of the New Sub-Advisory
Agreement which were explained at the Meeting, noting that the terms and
conditions of the New Sub-Advisory Agreement were substantially identical to
the terms and conditions of the sub-advisory agreement previously approved by
the Board for the Fund between Advisers and FT Institutional, the current, sole
investment sub-advisor of the Fund.
In approving the New Sub-Advisory Agreement, the Board, including a
majority of the Independent Trustees, determined that the terms of the New Sub-Advisory
Agreement are fair and reasonable and that such New Sub-Advisory 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.
Nature,
Extent and Quality of Services
The Board reviewed and considered information regarding the nature,
extent and quality of investment sub-advisory services to be provided by FTPA
to the Fund and its shareholders. This information included, among other
things, management’s representation that it was proposing FTPA to serve as an
additional sub-advisor to the Fund to support Advisers in providing investment
advice to the Fund, with Thomas Runkel being added as a portfolio manager to
the Fund. Following consideration of such information, the Board was satisfied
with the nature, extent and quality of services to be provided by FTPA to the
Fund and its shareholders under the New Sub-Advisory Agreement.
Fund
Performance
The Board noted that the Fund commenced investment operations on October
3, 2016. The Board further noted that it reviewed detailed performance
information about the Fund at its prior Board meeting in connection with the
May 2019 annual contract renewal. In light of the Fund’s shorter operating
history and the recent annual contract renewal, the Board determined that the
conclusions reached regarding the Fund’s performance in connection with the
annual contract renewal had not changed.
Comparative
Fees and Expenses
The Board reviewed and considered information regarding the proposed
investment sub-advisory fee. In particular, the Board considered the fact that
Advisers would compensate FTPA out of the fee paid to Adviser under the
investment management agreement between Advisers and the Trust, on behalf of
the Fund, and that the investment sub-advisory fee would not be an additional
fee borne by the Fund. The Board noted that, in connection with the
appointment of FTPA as an investment sub-advisor to the Fund, management was
also proposing that FT Institutional’s current investment sub-advisory fee be
reduced correspondingly. The Board further noted management’s representation
that, in light of the above, the addition of FTPA as a sub-advisor to the Fund
will have no impact on the investment management fees paid by the Fund. The
Board concluded that the proposed investment sub-advisory fee for the Fund is
reasonable.
Management Profitability and Economies of Scale
The Board reviewed profitability information for Advisers and determined
that its conclusions regarding profitability and economies of scale reached in
connection with the May 2019 annual contract renewal had not changed as a
result of the addition of FTPA to serve as an investment sub-advisor of the
Fund because Advisers’ retained portion of the management fee will not change,
and, therefore, the addition of FTPA as a new sub-advisor is not expected to
have an impact on Advisers’ profitability.
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 New Sub-Advisory Agreement for the Fund for an
initial two-year period.
ADDITIONAL
INFORMATION ABOUT THE TRUST
The
Investment Manager and FT Institutional
Advisers
currently serves as the Fund’s investment manager pursuant to an investment
management agreement dated April 18, 2016, between the Trust, on behalf of the
Fund, and Advisers (the “Management Agreement”). The Management Agreement
was initially approved by the Board, including the Independent Trustees, on
April 18, 2016. The Management Agreement was most recently renewed by the
Board, including the Independent Trustees, on May 29, 2019. Advisers’
principal offices are located at One Franklin Parkway, San Mateo, California
94403-1906. Advisers is an indirect, wholly owned subsidiary of FRI. Further
information about FRI and its principal shareholders can be found above under
“INFORMATION ABOUT FTPA.”
The Trustees who are interested persons
of Advisers or its affiliates and certain officers of the Trust who are
shareholders of FRI are not compensated by the Trust or the Fund for their
services, but may receive indirect remuneration due to their participation in
management, advisory and other fees received by Advisers and its affiliates
from the Fund.
The Trust
employs Advisers to manage the investment and reinvestment of the Fund’s
assets, to administer its affairs and to provide or procure, as applicable,
administrative and other services, subject to the oversight of the Board.
Under the Management Agreement, Advisers has the authority to make all
determinations with respect to the investment of the Fund’s assets and the
purchase and sale of its investment securities. Advisers also may place orders
for the execution of the Fund’s securities transactions. In addition, Advisers
has the authority and discretion to delegate its investment management
responsibilities through the appointment of one or more sub-advisors. In
allocating the Fund’s assets, Advisers has discretion to not allocate any
assets to one or more sub-advisors at any time.
The Fund pays
Advisers a fee equal to the following annual rate of the average daily net
assets of the Fund for managing the Fund’s assets, including investment
advisory services and Fund administration services:
·
0.6250% of the value of net assets up to and including $100
million;
·
0.500% of the value of net assets over $100 million and not over
$250 million;
·
0.450% of the value of net assets over $250 million and not over
$7.5 billion;
·
0.440% of the value of net assets over $7.5 billion and not over
$10 billion;
·
0.430% of the value of net assets over $10 billion and not over
$12.5 billion;
·
0.420% of the value of net assets over $12.5 billion and not over
$15 billion;
·
0.400% of the value of net assets over $15 billion and not over
$17.5 billion;
·
0.380% of the value of net assets over $17.5 billion and not over
$20 billion;
·
0.360% of the value of net assets over $20 billion and not over
$35 billion;
·
0.355% of the value of net assets over $35 billion and not over
$50 billion; and
·
0.350% of the value of net assets over $50 billion.
The fee is
calculated daily and paid monthly according to the terms of the Management
Agreement. Advisers has agreed to waive or limit its fees and to assume as its
own certain expenses otherwise payable by the Fund so that expenses (including
acquired fund fees and expenses (such as those associated with the Fund’s
investment in a Franklin Templeton money fund), but excluding certain
non-routine expenses) do not exceed 0.35% until July 31, 2020.
The Fund
commenced operations on October 3, 2016. The investment management fees, as a
percentage of the Fund’s net assets, before and after such waiver for the
fiscal year ended March 31, 2019, were 0.63% and 0.00%, respectively. For
the fiscal year ended March 31, 2019, the aggregate amount of the investment
management fees paid by the Fund to Advisers was $0 (after fee waivers).
Investment management fees before waivers totaled $168,616.
FTPA began
serving as a sub-advisor to the Fund effective October 15, 2019. Prior to the
appointment of FTPA as a sub-advisor, FT Institutional served as the Fund’s
only sub-advisor. Advisers compensates FTPA and FT Institutional for providing
investment management advice (which may include research and analysis) from the
investment management fees it receives from the Fund. The sub-advisory fees, as a percentage of the
Fund’s net assets, for the fiscal year ended March 31, 2019, were 0.00%. For
the fiscal year ended March 31, 2019, Advisers paid FT Institutional a sub-advisory
fee of $0.
The
Administrator
The administrator for the Fund is
Franklin Templeton Services, LLC (“FT Services”), with offices at One Franklin
Parkway, San Mateo, California 94403-1906. FT Services is an indirect,
wholly owned subsidiary of FRI and an affiliate of Advisers and FTPA. Advisers
pays FT Services a monthly fee equal to 105% of the internal costs incurred by
FT Services for providing administrative services to
the Fund. State Street Bank and Trust Company, One Lincoln Street, Boston, MA
02111, has an agreement with FT Services to provide certain sub-administrative
services for the Fund.
The
Principal Underwriter
The principal
underwriter for the Fund is Franklin Templeton Distributors, Inc., One Franklin
Parkway, San Mateo, California 944031906. The Board has adopted a plan
pursuant to Rule 12b-1 for the Fund. However, no Rule 12b-1 plan fee is
currently charged to the Fund.
The
Transfer Agent
The transfer agent
and dividend-paying agent for the Fund is State Street Bank and Trust Company,
located at 1 Heritage Drive, Mail Stop OHD0100, North Quincy, MA 02171.
Other
Matters
The Fund’s
audited financial statements and annual report for its last completed fiscal
year, and any subsequent semi-annual report to shareholders, are available free
of charge. To obtain a copy, please call (800) DIAL BEN/(800) 342-5236 or
send a written request to Franklin Templeton Investor Services, LLC, P.O. Box
33030, St. Petersburg, Florida 33733-8030.
Principal
Shareholders
The
outstanding shares of the Fund as of January 6, 2020, are 22,600,000.
Although the
Trust does not have information concerning the beneficial ownership of shares
held in the names of the Depository Trust Company (DTC) participants as of January
6, 2020, the name, address and percentage ownership of the DTC participants of
the Fund are listed on Exhibit C.
In addition,
to the knowledge of the Trust’s management, as of January 6, 2020, no Trustee
of the Trust owned 1% or more of the outstanding shares of the Fund. The Trustees and officers, as a group, of the Trust
owned less than 1% of the outstanding shares of the Fund.
Contacting the Board
If a shareholder wishes to send a communication to the Board, such correspondence
should be in writing and addressed to the Board at the Trust’s offices, One
Franklin Parkway, San Mateo, California 94403-1906, Attention:
Secretary. The correspondence will be given to the Board for review and
consideration.
EXHIBIT A
Comparable Funds
Advised or Sub-Advised by FTPA
Name of
Comparable Fund
|
Net Assets of
Fund (in millions) (as of November 29, 2019)
|
Investment
Management/Subadvisory Fee (annually, as a % of average daily net assets)
|
Investment
Management/Subadvisory Fee Waived, Reduced or Compensation Otherwise Reduced?
(Yes/No)
|
Franklin Payout 2019 Fund
|
4,107.6
|
The Fund pays the
investment manager a fee equal to an annual rate of 0.30% of the average
daily net assets of a Fund.
Advisers shall pay to
FTPA a monthly fee in U.S. dollars equal to 20% of the net investment
advisory fee payable by the Fund to Advisers (the “Net Investment Advisory
Fee”), calculated daily, as compensation for the services rendered and
obligations assumed by FTPA during the preceding month.
For
purposes of this Agreement, the Net Investment Advisory Fee payable by the Fund
to Advisers shall equal (i) 96% of an amount equal to the total investment
management fees payable to Advisers, minus any Fund fees and/or expenses
waived or reimbursed by Advisers, minus (ii) any fees payable by Advisers to
Franklin Templeton Services, LLC for fund administrative services.
|
Yes
|
Franklin Payout 2020 Fund
|
4,127.0
|
The Fund pays the
investment manager a fee equal to an annual rate of 0.30% of the average
daily net assets of a Fund.
Advisers shall pay to
FTPA a monthly fee in U.S. dollars equal to 20% of the net investment
advisory fee payable by the Fund to Advisers (the “Net Investment Advisory
Fee”), calculated daily, as compensation for the services rendered and
obligations assumed by FTPA during the preceding month.
For
purposes of this Agreement, the Net Investment Advisory Fee payable by the
Fund to Advisers shall equal (i) 96% of an amount equal to the total
investment management fees payable to Advisers, minus any Fund fees and/or
expenses waived or reimbursed by Advisers, minus (ii) any fees payable by Advisers
to Franklin Templeton Services, LLC for fund administrative services.
|
Yes
|
Franklin Payout 2021 Fund
|
4,184.5
|
The Fund pays the
investment manager a fee equal to an annual rate of 0.30% of the average
daily net assets of a Fund.
Advisers shall pay to
FTPA a monthly fee in U.S. dollars equal to 20% of the net investment
advisory fee payable by the Fund to Advisers (the “Net Investment Advisory
Fee”), calculated daily, as compensation for the services rendered and
obligations assumed by FTPA during the preceding month.
For purposes of this Agreement, the Net Investment
Advisory Fee payable by the Fund to Advisers shall equal (i) 96% of an amount
equal to the total investment management fees payable to Advisers, minus any
Fund fees and/or expenses waived or reimbursed by Advisers, minus (ii) any
fees payable by Advisers to Franklin Templeton Services, LLC for fund
administrative services.
|
Yes
|
Franklin Payout 2022 Fund
|
3,665.8
|
The Fund pays the
investment manager a fee equal to an annual rate of 0.30% of the average
daily net assets of a Fund.
Advisers shall pay to
FTPA a monthly fee in U.S. dollars equal to 20% of the net investment
advisory fee payable by the Fund to Advisers (the “Net Investment Advisory
Fee”), calculated daily, as compensation for the services rendered and
obligations assumed by FTPA during the preceding month.
For
purposes of this Agreement, the Net Investment Advisory Fee payable by the
Fund to Advisers shall equal (i) 96% of an amount equal to the total
investment management fees payable to Advisers, minus any Fund fees and/or
expenses waived or reimbursed by Advisers, minus (ii) any fees payable by Advisers
to Franklin Templeton Services, LLC for fund administrative services.
|
Yes
|
EXHIBIT
B
SUB-ADVISORY AGREEMENT
FRANKLIN Templeton ETF Trust
On behalf of
Franklin Liberty Investment Grade Corporate
ETF
THIS SUB-ADVISORY AGREEMENT (the “Agreement”), effective as of October
15, 2019, is made between FRANKLIN ADVISERS, INC., a California
corporation (“FAV”), and FRANKLIN TEMPLETON PORTFOLIO ADVISORS, INC., a
California corporation (“FTPA”).
WITNESSETH
WHEREAS, FAV and FTPA are each registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and are engaged in the
business of supplying investment management services, as an independent
contractor;
WHEREAS, FAV, pursuant to an investment management agreement (“Investment
Management Agreement”), has been retained to render investment management services
to Franklin Liberty Investment Grade Corporate ETF (the “Fund”), a
series of Franklin Templeton ETF Trust (the “Trust”), an investment management
company registered with the U.S. Securities and Exchange Commission (the “SEC”)
pursuant to the Investment Company Act of 1940, as amended (the “1940 Act”);
and
WHEREAS, FAV desires to retain FTPA to render investment advisory,
research and related services to the Fund pursuant to the terms and provisions
of this Agreement, and FTPA is interested in furnishing said services.
NOW, THEREFORE, in consideration of the covenants and the mutual promises
hereinafter set forth, the parties hereto, intending to be legally bound
hereby, mutually agree as follows:
FAV hereby retains FTPA, and FTPA hereby accepts such engagement, to
furnish certain investment advisory services with respect to the assets of the
Fund, as more fully set forth herein.
Subject to the overall policies, direction and review
of the Trust’s Board of Trustees (the “Board” or “Trustees”) and to the instructions
and supervision of FAV, FTPA agrees to provide certain investment advisory
services with respect to securities and investments and cash equivalents in the
Fund. FAV will continue to have full responsibility for all investment
advisory services provided to the Fund, including determining the manner in
which any voting rights, rights to consent to corporate action and any other
rights pertaining to the investment securities within the Fund shall be exercised.
Both FAV and FTPA may place all purchase and sale orders on behalf of
the Fund.
Unless otherwise instructed by FAV or the
Board, and subject to the provisions of this Agreement and to any guidelines or
limitations specified from time to time by FAV or by the Board, FTPA shall
report daily all transactions effected by FTPA on behalf of the Fund to FAV and
to other entities as reasonably directed by FAV or the Board.
For the term of this Agreement, FTPA shall provide the Board at least
quarterly, in advance of the regular meetings of the Board, a report of its
activities hereunder on behalf of the Fund and its proposed strategy for the
next quarter, all in such form and detail as requested by the Board. Any team
members shall also be available to attend such meetings of the Board as the
Board may reasonably request.
In performing its services under this Agreement, FTPA shall adhere to
the Fund’s investment objective, policies and restrictions as contained in the
Fund’s Prospectus and Statement of Additional Information, and in the Trust’s
Agreement and Declaration of Trust, and to the investment guidelines most
recently established by FAV and shall comply with the provisions of the 1940
Act and the rules and regulations of the SEC thereunder in all material
respects and with the applicable provisions of the United States Internal
Revenue Code of 1986, as amended.
In carrying out its duties hereunder, FTPA shall comply with all
reasonable instructions of the Fund or FAV in connection therewith.
In performing the services described above, FTPA shall use its best
efforts to obtain for the Fund the most favorable price and execution
available. Subject to prior authorization of appropriate policies and
procedures by the Board, FTPA may, to the extent authorized by law and in
accordance with the terms of the Fund’s Investment Management Agreement,
Prospectus and Statement of Additional Information, cause the Fund to pay a
broker who provides brokerage and research services an amount of commission for
effecting a portfolio investment transaction in excess of the amount of
commission another broker would have charged for effecting that transaction, in
recognition of the brokerage and research services that such broker provides,
viewed in terms of either the particular transaction or FTPA’s overall
responsibilities with respect to accounts managed by FTPA. FTPA may use for
the benefit of its other clients any such brokerage and research services that
FTPA obtains from brokers or dealers. To the extent authorized by applicable
law, FTPA shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of such action.
o FAV shall pay to FTPA a monthly fee in U.S. dollars equal to
20% of the net investment advisory fee payable by the Fund to FAV (the “Net
Investment Advisory Fee”), calculated daily, as compensation for the services
rendered and obligations assumed by FTPA during the preceding month.
For purposes of this Agreement, the Net
Investment Advisory Fee payable by the Fund to FAV shall equal (i) 96% of an
amount equal to the total investment management fees payable to FAV, minus any
Fund fees and/or expenses waived or reimbursed by FAV, minus (ii) any fees
payable by FAV to Franklin Templeton Services, LLC for fund administrative
services.
The sub-advisory
fee under this Agreement shall be payable on the first business day of the
first month following the effective day of this Agreement and shall be reduced
by the amount of any advance payments made by FAV relating to the previous
month.
If this Agreement is terminated prior to the end of any month, the
monthly fee shall be prorated for the portion of any month in which this
Agreement is in effect which is not a complete month according to the
proportion which the number of calendar days in the month during which the
Agreement is in effect bears to the total number of calendar days in the month,
and shall be payable within 10 days after the date of termination.
It is understood that the services provided by FTPA are not to be deemed
exclusive. FAV acknowledges that FTPA may have investment responsibilities,
render investment advice to, or perform other investment advisory services to
other investment companies and clients, which may invest in the same type of securities
as the Fund (collectively, “Clients”). FAV agrees that FTPA may give advice or
exercise investment responsibility and take such other action with respect to
such Clients which may differ from advice given or the timing or nature of
action taken with respect to the Fund. In providing services, FTPA may use
information furnished by others to FAV and FTPA in providing services to other
such Clients.
FTPA agrees to use its best efforts in performing the services to be
provided by it pursuant to this Agreement.
During the term of this Agreement, FTPA will pay all expenses incurred by
it in connection with the services to be provided by it under this Agreement other
than the cost of securities (including brokerage commissions, if any) purchased
for the Fund. The Fund and FAV will be responsible for all of their respective
expenses and liabilities.
FTPA shall, unless otherwise expressly provided and authorized, have no
authority to act for or represent FAV or the Fund in any way, or in any way be
deemed an agent for FAV or the Fund.
FTPA will treat confidentially and as proprietary information of the Fund
all records and other information relative to the Fund and prior, present or
potential shareholders, and will not use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Fund, which
approval shall not be unreasonably withheld and may not be withheld where FTPA
may be exposed to civil or criminal contempt proceedings for failure to comply
when requested to divulge such information by duly constituted authorities, or
when so requested by the Fund.
This Agreement shall become effective as of the date first written above
and shall continue in effect for two years. If not sooner terminated, this
Agreement shall continue in effect for successive periods not exceeding 12
months each thereafter, provided that each such continuance shall be
specifically approved at least annually by the vote of a majority of the
Trustees who are not parties to this Agreement or “interested persons” (as
defined in the 1940 Act) of any such party, cast at a meeting called for the
purpose of voting on such approval, and either the vote of (a) a majority of
the outstanding voting securities of the Fund, as defined in the 1940 Act, or
(b) a majority of the Trustees as a whole.
o Notwithstanding the foregoing, this
Agreement may be terminated (i) at any time, without the payment of any
penalty, by the Board upon written notice to FAV and FTPA, or by vote of a
majority of the outstanding voting securities of the Fund, as defined in the
1940 Act, or (ii) by FAV or FTPA upon not less than sixty (60) days’ written notice
to the other party.
This Agreement shall terminate automatically in the event of any
assignment thereof, as defined in the 1940 Act, and in the event of any
termination or assignment of the Investment Management Agreement between FAV
and the Fund. (“Assignment” has the meaning set forth in the 1940 Act.)
o In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of its obligations or duties hereunder on the
part of FTPA, neither FTPA nor any of its directors, officers, employees or affiliates
shall be subject to liability to FAV, the Trust or the Fund or to any
shareholder of the Fund for any error of judgment or mistake of law or any
other act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security by the Fund.
Notwithstanding paragraph 11(a), to the extent that FAV is found by a
court of competent jurisdiction, or the SEC or any other regulatory agency, to
be liable to the Fund or any shareholder (a “liability”) for any acts
undertaken by FTPA pursuant to authority delegated as described in Paragraph
1(a), FTPA shall indemnify FAV and each of its affiliates, officers, directors
and employees (each a “Franklin Indemnified Party”) harmless from, against, for
and in respect of all losses, damages, costs and expenses incurred by a
Franklin Indemnified Party with respect to such liability, together with all
legal and other expenses reasonably incurred by any such Franklin Indemnified
Party, in connection with such liability.
No provision of this Agreement shall be construed to protect any
director or officer of FAV or FTPA from liability in violation of Sections
17(h) or (i), respectively, of the 1940 Act.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, FTPA
hereby agrees that all records which it maintains for the Fund are the property
of the Fund and further agrees to surrender promptly to the Fund, or to any
third party at the Fund’s direction, any of such records upon the Fund’s
request. FTPA further agrees to preserve for periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under
the 1940 Act.
Upon termination of FTPA’s engagement under this Agreement or at the
Fund’s direction, FTPA shall forthwith deliver to the Fund, or to any third
party at the Fund’s direction, all records, documents and books of accounts
which are in the possession or control of FTPA and relate directly and
exclusively to the performance by FTPA of its obligations under this Agreement;
provided, however, that FTPA shall be permitted to keep such records or copies
thereof for such periods of time as are necessary to comply with applicable
laws, in which case FTPA shall provide the Fund or a designated third party
with copies of such retained documents unless providing such copies would
contravene such rules, regulations and laws.
Termination of this Agreement or FTPA’s
engagement hereunder shall be without prejudice to the rights and liabilities
created hereunder prior to such termination.
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, in whole or in part, the other
provisions hereof shall remain in full force and effect. Invalid provisions
shall, in accordance with the intent and purpose of this Agreement, be replaced
by such valid provisions which in their economic effect come as closely as
legally possible to such invalid provisions.
Any notice or other communication required to be given pursuant to this
Agreement shall be in writing and given by personal delivery, pre-paid
registered mail or nationally-recognized overnight delivery service, or by
facsimile transmission and shall be effective upon receipt. Notices and communications
shall be given:
to FAV:
One Franklin Parkway
San Mateo, CA 94403-1906
Facsimile: (650) 525-7141
to FTPA:
One Franklin Parkway
San Mateo, CA 94403-1906
Facsimile: (650) 525-7141
This Agreement shall be interpreted in accordance with and governed by
the laws of the State of California.
FTPA acknowledges that it has received notice of and accepts the
limitations of the Trust’s liability as set forth in its Agreement and
Declaration of Trust. FTPA agrees that the Trust’s obligations hereunder shall
be limited to the assets of the Fund; that no other series of the Trust shall
be liable with respect to this Agreement or in connection with the matters
contemplated herein; and that FTPA shall not seek satisfaction of any such
obligation from any shareholders of the Trust, the Fund nor from any trustee,
officer, employee or agent of the Trust, or from any other series of the Trust.
IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed by their duly
authorized officers on October 15, 2019.
FRANKLIN ADVISERS, INC.
By:/s/Patrick
O’Connor
Name:
Patrick O’Connor
Title:
Senior Vice President
FRANKLIN TEMPLETON
PORTFOLIO ADVISORS, INC.
By:/s/Dan O’Lear
Name: Dan O’Lear
Title: President
EXHIBIT
C
Depository
Trust Company participants of Franklin Liberty Investment Grade Corporate ETF
as of January 6, 2020
|
Name and Address of
Account
|
Percentage of Fund (%)
|
|
Bank of New York Mellon*
111 Sanders Creek Parkway
East Syracuse, New York, NY13057
|
91.50
|
|
|
|
|
|
|
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* For the benefit of its customer(s)
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