Franklin ETF. Semi-Annual Management Report of Fund Performance. March 31, 2018

Transcription

1 Franklin ETF Semi-Annual Management Report of Fund Performance March 31, 2018 This semi-annual management report of fund performance contains financial highlights but does not contain the complete financial statements of the investment fund. If you have not received a copy of the semi-annual financial statements with this report, you can get a copy of the semi-annual financial statements at your request, and at no cost, by calling , by writing to us at 5000 Yonge Street, Suite 900, Toronto ON M2N 0A7, or by visiting our website at or SEDAR at Securityholders may also contact us using one of these methods to request a copy of the investment fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.

2 Lead Manager Dina Ting, CFA Franklin Advisers, Inc. (Sub-Advisor) Industry Experience: 22 years Location: San Mateo, CA RESULTS OF OPERATIONS As at March 31, 2018, total net asset value of the Fund was $4.9 million. For the truncated performance period starting at the available-for-sale date of January 29, 2018 and ending March 31, 2018, the Fund generated total returns of 2.16% in Canadian-dollar terms. Over the same period, the Fund s benchmark index, the LibertyQ Global Dividend Index, returned 2.11% in Canadian-dollar terms. It is important to note that the Fund s return reflects the effect of fees and expenses for professional management, while an index does not have such costs. The MSCI World Ex REITS Net Return Index, a widely recognized commercial index that represents the parent universe in which the Fund invests, returned 3.03% during the period in Canadian-dollar terms. The Index performance information is provided for reference only. The Fund s benchmark index is rebalanced on a semiannual basis, at the end of May and November of a given year. RECENT DEVELOPMENTS The portfolio manager made no significant changes to the investment strategy of the Fund over the period in review. The Fund continues to seek to deliver results that correspond to the benchmark index, which in turn seeks a lower level of risk and higher risk-adjusted performance than the MSCI EAFE Total Return Index. The Canadian dollar weakened against many major world currencies during the review period. This led to positive absolute returns, in unhedged Canadian-dollar terms, from the global equity markets. Despite strong performance from global equity markets for most of the period under review, volatility surged in the final two months as concerns arose that strong economic growth and rising inflation in some parts of the world, particularly the United States, would lead central banks to increase interest rates sooner than expected. Sentiment was also dampened by fears that a trade war could develop following protectionist moves by the Trump administration. However, strong corporate earnings and continued global economic growth have remained supportive for international equity markets. Index performance comparison information is provided for reference only. It is important to note that the Fund s return reflects the effect of fees and expenses for professional management, while an index does not have such costs. FORWARD-LOOKING STATEMENTS Investors should take note that certain statements in this report about a fund, including its strategy and expected future performance, are forward-looking. Forward-looking statements are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as may, will, should, could, expect, anticipate, intend, plan, believe, or estimate or other similar expressions. Any statement that is made concerning future strategies or performance is also a forward-looking statement. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the forward-looking statements. The forward-looking statements are by their nature based on numerous assumptions, which include, amongst other things, that (i) the Fund can attract and maintain investors and has sufficient capital under management to effect its investment strategies, (ii) the investment strategies will produce the results intended by the portfolio manager, and (iii) the markets will react and perform in a manner consistent with the investment strategies. Although the forward-looking statements contained herein are based upon what the portfolio manager believes to be reasonable assumptions, the portfolio manager cannot assure that actual results will be consistent with these forward-looking statements. Forward-looking statements are not guarantees of future performance. Any number of factors could contribute to differing results, including, among other things, general economic, political and market factors, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings and catastrophic events. This list of factors is not exhaustive. Investors should not place undue reliance on forward-looking information and should be aware that the Fund may not update any forward-looking statements, whether as a result of new information, future events or otherwise. RELATED PARTY TRANSACTIONS The Manager is an indirect wholly-owned subsidiary of Franklin Resources, Inc., a global investment management organization known as. The Manager provides or arranges for the day-to-day Fund operations, including the marketing, promotion and distribution of the Fund and portfolio advisory services. In consideration of these management and portfolio advisory services, the Fund pays the Manager a monthly management fee plus applicable taxes, based on the average net asset value of the series of the Fund, calculated daily, as set out under Management Fees below. During the period ended March 31, 2018, the Fund paid management fees of $4,000. The Manager pays the operating expenses of the Fund, other than certain fund costs which include, but are not limited to, the cost of compliance with new governmental and regulatory requirements, fees and expenses of the Fund s Independent Review Committee (IRC),

3 borrowing and interest costs and investor meeting costs (as permitted by Canadian securities regulation). Standing Instructions from the Independent Review Committee The Manager relied on standing instructions from the IRC with respect to the allocation of any operating expenses not covered by the Administration Fee. The Manager relied, or may rely, on standing instructions from the IRC in respect of securities trades amongst mutual funds, investment funds or managed accounts managed by the Manager or an affiliate of the Manager. In both cases, the standing instructions require the Manager to comply with the policies and procedures presented to the IRC with respect to the above matters and to provide periodic reports to the IRC in accordance with NI MANAGEMENT FEES The Franklin ETF pays an aggregate monthly fee for management and investment advisory services to the Manager. The monthly fee is calculated and accrued daily and paid monthly. The Management Fee is calculated on the annual rate of 0.45% applied against the monthly average net assets plus applicable taxes.

4 Summary of Investment Portfolio (MARCH 31, 2018) REGIONAL WEIGHTINGS (%)* North America Europe Australia & New Zealand 8.41 Asia 6.31 Latin America & Caribbean 4.81 Middle East & Africa 4.10 INDUSTRY WEIGHTINGS (%)* Banks Pharmaceuticals Household Products 5.36 Diversified Telecommunication Services 5.14 Hotels, Restaurants & Leisure 4.88 Insurance 4.76 Semiconductors & Semiconductor Equipment 4.61 Personal Products 3.94 Food & Staples Retailing 3.92 Tobacco 3.78 Aerospace & Defense 3.37 Diversified Financial Services 2.70 Machinery 2.38 Beverages 2.28 Wireless Telecommunication Services 2.11 Professional Services 2.03 Chemicals 2.01 Specialty Retail 1.81 Capital Markets 1.69 IT Services 1.63 Real Estate Management & Development 1.61 Electrical Equipment 1.34 Textiles, Apparel & Luxury Goods 1.34 Food Products 1.22 Technology Hardware, Storage & Peripherals 1.04 Household Durables 0.83 Commercial Services & Supplies 0.79 Containers & Packaging 0.79 Leisure Products 0.79 Media 0.59 Electric Utilities 0.43 Industrial Conglomerates 0.41 Auto Components 0.35 Multiline Retail 0.33 Construction & Engineering 0.31 Diversified Consumer Services 0.28 Road & Rail 0.22 Oil, Gas & Consumable Fuels 0.16 Transportation Infrastructure 0.16 ASSET CLASS WEIGHTINGS (%) Common Stocks Short-term securities and all other assets, net 0.53 TOP 25 HOLDINGS (%) Itau Unibanco Holding SA 2.34 Intel Corp Ambev SA 2.28 GlaxoSmithKline PLC 2.21 Zurich Insurance Group AG 2.15 Lockheed Martin Corp LyondellBasell Industries NV, A 2.01 Merck & Co. Inc NTT DOCOMO Inc Unilever NV 1.97 Unilever PLC 1.97 Wesfarmers Ltd Toronto-Dominion Bank 1.95 Canadian Imperial Bank of Commerce 1.93 Royal Bank of Canada 1.93 Novartis AG 1.91 Philip Morris International Inc Kimberly-Clark Corp Altria Group Inc Eli Lilly & Co Johnson & Johnson 1.85 McDonald s Corp Bank of Nova Scotia 1.83 Roche Holding AG 1.83 Commonwealth Bank of Australia 1.81 TOTAL NET ASSET VALUE: $4,922,000 * Excluding short-term securities and all other assets, net. Above is an outline of the investments held in the Fund as a percentage of its net assets. Due to ongoing portfolio transactions, the investments and percentages may have changed by the time you purchase units of the Fund. The Summary of Investment Portfolio is made available quarterly, 60 days after the quarter-end. To obtain a copy, please contact a member of our client services team at or visit

5 (AS AT MARCH 31, 2018) FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the ETF and are intended to help you understand the ETF s financial performance for the period ended March 31, Net assets per unit (1) 2018 Net assets initial offering price* $20.00 Increase (decrease) from operations: Total revenue 0.17 Total expenses (0.02) Realized gains (losses) for the period Unrealized gains (losses) for the period (0.57) Total increase (decrease) from operations (2) (0.42) Distributions: From income (excluding dividends) From dividends (0.09) From capital gains Returns of capital Total annual distributions (3) (0.09) Net assets end of period $19.69 Ratios and supplemental data: 2018 Total net asset value ( 000 s) (1) $4,922 Number of units outstanding 250,000 Management expense ratio (2) 0.51% Management expense ratio before waivers or absorptions 0.51% Trading expense ratio (3) 0.54% Portfolio turnover rate (4) 0.16% Net asset value per unit $19.69 For explanatory notes, please refer to Explanatory Notes to Financial Highlights at the end of the section. Total revenue includes total investment income net of any provision for or recoverable from income taxes. * The Series was launched on September 12, 2017 and was made available for sale on January 29, PAST PERFORMANCE The following information assumes that all distributions made by the Fund in the periods shown were reinvested in additional securities of the Fund and does not take into account sales, redemption, distribution or other optional charges that would have reduced returns. Past performance does not necessarily indicate how the Fund will perform in the future. Year-by-Year Returns The bar chart shows the Fund s performance for the six-month period ended March 31, 2018, and for each of the previous 12-month periods ended September 30. In percentage terms, the bar chart indicates how much an investment made on October 1 would have grown or decreased by the end of the period. 40% * -2.7% 20% 0% -20% -40% * 2018 ETF return: January 29 to March 31

6 EXPLANATORY NOTES TO FINANCIAL HIGHLIGHTS NOTES TO FINANCIAL HIGHLIGHTS Net Assets per Unit: (1) This information is derived from the Fund s unaudited interim financial statements and audited annual financial statements. In the period a fund or series is established, the financial information is provided from the date of inception to the end of the period. In cases where the net assets per share presented in the financial statements differ from the net asset value calculated for Fund pricing purposes, an explanation of these differences can be found in the notes to the financial statements. OTHER FUND INFORMATION Reported year-by-year returns for past years may be revised, based on the results of recalculations, audits and/or other historical review processes. Such revisions are considered immaterial to performance disclosure unless otherwise stated. (2) Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease in net assets from operations is based on the weighted average number of units outstanding over the fiscal period. This table is not intended to be a reconciliation of opening and closing net assets per unit. (3) Dividends were paid in cash or reinvested in additional units of the Fund or both, and exclude distributions of management fee reductions to unitholders. Ratios and Supplemental Data: (1) This information is provided as at the period-end of the year shown. (2) Management expense ratio is based on total expenses for the stated period and is expressed as an annualized percentage of daily average net asset value during the period. (3) The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of net asset value during the period. For funds that invest in multiple Underlying Funds, the trading expense ratio represents the Fund s proportionate share of total commissions and other portfolio costs of the Underlying Fund as an annualized percentage of its daily average net assets during the period. For funds that invest substantially all of its assets in an Underlying Fund, the trading expense ratio shown is that of the Underlying Fund. (4) The Fund s portfolio turnover rate indicates how actively the Fund s portfolio manager manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling each security in its portfolio once in the course of the relevant period. The higher the portfolio turnover rate in the period, the greater the trading costs payable by the Fund and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. Where a fund has invested substantially all its assets in an Underlying Fund for the entire period, the portfolio turnover rate is zero. CFA and Chartered Financial Analyst are trademarks owned by CFA Institute.