TEMPLETON GLOBAL BALANCED FUND

Transcription

1 Unaudited Quarterly Report 30 June 2018 TEMPLETON GLOBAL BALANCED FUND

2 UNAUDITED QUARTERLY REPORT FOR THE FINANCIAL PERIOD ENDING 30 JUNE 2018 I. GENERAL INFORMATION ABOUT THE FUND II. III. MANAGER S REPORT STATEMENT BY THE MANAGER AND UNAUDITED FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD FROM 1 OCTOBER 2017 TO 30 JUNE 2018

3 I. GENERAL INFORMATION ABOUT THE FUND Launch and Commencement Date The Templeton Global Balanced Fund (the Fund ) was launched on 5 May 2015 and commenced operations on 20 May Fund Name, Category, Type Fund Name Templeton Global Balanced Fund Fund Category Wholesale Feeder Fund (Balanced) Fund Type Growth & Income Investment Objective, Policy and Strategy The Fund is structured as a feeder fund and it is available in two share classes, Class A (MYR) and Class A (USD). The Fund seeks to provide capital appreciation and income by investing in the Franklin Templeton Investment Funds Templeton Global Balanced Fund ( Target Fund ), which aims to invest principally in equity securities and government debt securities issued by entities throughout the world, including emerging markets. The Fund aims to invest a minimum of 95% of the NAV of the Fund in the Target Fund which is denominated in USD and domiciled in Luxembourg; the balance of the NAV of the Fund will be held in cash or invested in liquid assets to defray operating expenses and to provide liquidity. As the primary investment of the Fund, i.e., the Target Fund, is denominated in USD, the Manager intends to employ hedging for the classes of Units denominated in RM to reduce the Fund s exposure to foreign exchange fluctuations. The hedging tools that the Manager may utilise include but are not limited to foreign exchange forwards and total return swap. As the Fund is a feeder fund, it will stay invested in the Target Fund in so far as its investment strategy is consistent with the objective of the Fund. In view of the aforesaid, the Fund will not undertake any temporary defensive position. Accordingly, the Fund s performance will be directly correlated to the performance of the Target Fund subject to the currency hedging strategy mentioned above being successful. The Target Fund seeks capital appreciation and current income, consistent with prudent investment management by investing principally in equity securities and government debt securities issued by entities throughout the world, including Emerging Markets. The Investment Manager of the Target Fund anticipates that the majority of the Target Fund s portfolio is normally invested in equity or equity-linked securities, including debt or preferred stock convertible or exchangeable into equity securities, selected principally on the basis of their capital growth potential. The Target Fund seeks income by investing in fixed or floating-rate debt securities and debt obligations issued by government and government-related issuers or corporate entities worldwide. The Target Fund may also purchase debt obligations issued by supranational entities organised or supported by several national governments, such as the International Bank for Reconstruction and Development or the European Investment Bank. The Target Fund may purchase equities, fixed income securities and debt obligations. Notwithstanding the foregoing, at no time will the Investment Manager of the Target Fund invest more than 40% of the Target Fund s net assets into fixed income securities. The Target Fund may distribute income gross of expenses. Whilst this might allow more income to be distributed, it may also have the effect of reducing capital. The asset allocation of the Fund will be as follows: Minimum 95% of the NAV to be invested in the Target Fund; and Up to 5% of the NAV in cash and/or other liquid assets. Fund Distribution Policy Distribution of income, if any, is subject to the availability of income and shall be in line with the dividend policy of the Target Fund. 1

4 II. MANAGER S REPORT MARKET REVIEW Global equities delivered lacklustre returns in US dollar terms in the second quarter of 2018, as escalating trade tensions and Italian political drama unnerved investors. The US Federal Reserve raised the federal funds target rate 25 basis points at its 13 June meeting, and market expectations for additional rate hikes in 2018 remained strong. Yields rose in several emerging markets in Latin America, Asia ex Japan and peripheral Europe. REVIEW OF THE TARGET FUND PERFORMANCE DURING THE PERIOD QUARTERLY KEY PERFORMANCE DRIVERS Equity Fixed Income Energy (Overweight, Stock Selection) - Helped Health Care (Stock Selection) - China (Stock Selection) - Hurt Information Technology (Stock Selection, Underweight) United States (Stock Selection, Underweight) Financials (Stock Selection, Overweight) Currency Positions in Latin America Currency Positions in Asia ex Japan Select Duration Exposures in Latin America Within the energy sector, we have continued to manage the commodity cycle by selling into the strength of higher-beta oil services stocks as the price of crude rises. We think oil price upside potential is limited from current levels given mounting pressures on the Organization of the Petroleum Exporting Countries and rising incentives for shale producers to expand supply. While we have continued to find select opportunities in the information technology sector, we have reduced our exposure to the high-flying consumer and internet technology firms commanding premium valuations. While some view the dominance of such companies as a structural phenomenon, we note that many of these firms revenue models depend on advertising and consumer trends. In the fixed income portfolio, currency positions in Latin America (the Brazilian real, Mexican peso and Argentine peso) and Asia ex Japan (the Indian rupee) detracted from absolute results, as emerging-market currencies largely depreciated against a broadly stronger US dollar during the quarter. We expect select currencies to appreciate over the medium term, particularly in countries with economic resilience and relatively higher, maintainable rate differentials. Select duration exposures in Latin America (Brazil and Argentina) detracted from absolute performance, as yields rose across several local markets in Latin America and Asia. We held select duration exposures in specific countries that we believe have attractive risk/return profiles, relatively higher yields and favourable macro conditions for yields to remain relatively stable or shift lower. 2

5 MANAGER S REPORT (CONTINUED) OUTLOOK & STRATEGY Looking ahead, we remain optimistic on the prospects for value and believe that companies whose fundamentals are underappreciated by a market focused on the short term should be well positioned for outperformance over time. At the close of the second quarter, global valuation spreads (the gap between the market s cheapest and most expensive stocks) were the widest they have been in at least 30 years. Though it certainly doesn t feel like it, such signs suggest that now is a great time for opportunistic value investors. And despite our conviction in value s long-term prospects, we are not sitting idly by waiting for the cycle to turn. We have worked hard to continuously refine and improve our process with recent initiatives, including enhanced quantitative capabilities, improved risk management strategies, and the integration of ESG (environmental, social and governance) analysis into our investment framework. From a global fixed income perspective, we continue to have a positive outlook for the global economy in 2018, though we re continuing to watch for potential economic disruptions. At this stage, the risks of a full-scale retaliatory trade war appear contained, but an escalating trade conflict that damages global growth remains a risk. We continue to hold select local-currency duration exposures in countries that we believe have healthy fundamentals and significantly higher yields than those available in developed markets. We also expect currency appreciation across a select subset of emerging markets. Asset Breakdown as at end June 2018 Equity 66.26% Cash & Cash Equivalents 17.35% Fixed Income 16.38% Sector Allocation (Equity) as at end June 2018 Financials 21.13% Health Care 17.77% Information Technology 12.22% Energy 12.03% Industrials 9.08% Consumer Discretionary 8.60% Telecommunication Services 7.30% Materials 5.18% Consumer Staples 3.58% Others 3.11% Sector Allocation (Fixed Income) as at end June 2018 Local Curr. Govt/Agency Bonds: Investment Grade 77.64% Local Curr. Govt/Agency Bonds: Non-Investment Grade 19.52% Supranational 2.38% Derivatives 0.45% US Treasuries/Agencies 0% 3

6 MANAGER S REPORT (CONTINUED) CUMULATIVE RETURNS AS OF 30 JUNE 2018 Templeton Global Balanced Fund Class A Templeton Global Balanced Fund Class A Franklin Templeton Investment Funds Templeton Global Balanced Fund (the Target Fund ) 65% MSCI All Country World Index + 35% JP Morgan Global Government Bond Index Currency 3 Months 1 Year 3 Years Since Commencement (20 May 2015) MYR -2.20% 1.66% 3.20% -2.04% USD -2.31% 1.39% 1.95% -4.25% USD -1.92% 4.15% 12.32% 8.23% USD -0.59% 7.95% 21.78% 18.39% 4

7 III. STATEMENT BY THE MANAGER AND UNAUDITED FINANCIAL STATEMENTS CONTENTS PAGE(S) UNAUDITED STATEMENT OF FINANCIAL POSITION 1 UNAUDITED STATEMENT OF COMPREHENSIVE INCOME 2 UNAUDITED STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 3 UNAUDITED STATEMENT OF CASH FLOWS 4 NOTES TO THE UNAUDITED FINANCIAL STATEMENTS 5-11 STATEMENT BY THE MANAGER 12

8 UNAUDITED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE Jun Sep 2017 Note RM RM CURRENT ASSETS Financial assets at fair value through profit or loss 1 33,470,106 13,370,025 Due from Manager 2 8,896 1,422,704 Due from the Manager of the Target Fund 3-4,219 Cash and cash equivalents 4 526, ,537 TOTAL ASSETS 34,005,464 14,903,485 CURRENT LIABILITIES Due to Manager 2 3,737 - Due to the Manager of the Target Fund 3-639,390 Accrued management fee 5 42,218 15,860 Accrued trustee fee 6 1,480 1,568 Other payables and accruals 20,055 22,333 TOTAL LIABILITIES (EXCLUDING NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS) 67, ,151 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 33,937,974 14,224,334 REPRESENTED BY: NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS RM CLASS 7(a) 28,850,054 12,114,729 USD CLASS 7(b) 5,087,920 2,109,605 33,937,974 14,224,334 NUMBER OF UNITS IN CIRCULATION RM CLASS 7(a) 58,900, ,312, USD CLASS 7(b) 2,614, ,023, NET ASSET VALUE PER UNIT RM CLASS RM RM USD CLASS USD USD The accompanying notes form an integral part of these financial statements. 1

9 UNAUDITED STATEMENT OF COMPREHENSIVE INCOME 1 Oct Oct 2016 to to 30 Jun Jun 2017 Note RM RM INVESTMENT (LOSS)/INCOME Interest income 1, Net (loss)/gain from financial assets at fair value through profit or loss 1 (689,021) 87,034 Net foreign currency exchange (loss)/gain (5,502) 161 (692,780) 87,332 EXPENSES Management fee 5 302,258 9,696 Trustee fee 6 14,183 14,272 Audit fee 6,523 6,284 Professional fee 4,351 2,767 Custodian fee 10,778 1,911 Printing fee 6,698 9,497 Expense reimbursement 2 - (31,210) 344,791 13,217 NET (LOSS)/INCOME BEFORE TAXATION (1,037,571) 74,115 Taxation - - (DECREASE)/INCREASE IN NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS (1,037,571) 74,115 Net (loss)/ income after taxation and total comprehensive (loss)/income comprises the following: Realised amount (102,674) (26,459) Unrealised amount (934,897) 100,574 (1,037,571) 74,115 The accompanying notes form an integral part of these financial statements. 2

10 UNAUDITED STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 1 Oct Oct 2016 to to 30 Jun Jun 2017 RM RM NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS AT THE BEGINNING OF THE FINANCIAL PERIOD 14,224, ,297 Movement due to units created and cancelled during the financial period: Creation of units 24,117,201 3,351,131 Cancellation of units (3,365,990) (167,671) 20,751,211 3,183,460 (Decrease)/increase in net assets attributable to unit holders during the financial period (1,037,571) 74,115 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS AT THE END OF THE FINANCIAL PERIOD 33,937,974 3,972,872 The accompanying notes form an integral part of these financial statements. 3

11 UNAUDITED STATEMENT OF CASH FLOWS 1 Oct Oct 2016 to to 30 Jun Jun 2017 Note RM RM CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from sales of investments 4,146, ,503 Payments for purchase of investments (25,581,422) (2,173,506) Interest income received 1, Management fee paid (275,900) (8,291) Trustee fee paid (14,271) (14,268) Audit fee paid (8,634) (8,395) Professional fee paid (6,063) (4,672) Custodian fee paid (10,778) (1,911) Printing fee paid (5,153) (3,526) Expense reimbursement received 26,272 26,656 Net cash used in from operating activities (21,727,841) (1,882,273) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from creation of units 25,504,737 2,145,744 Payments for cancellation of units (3,362,253) (258,385) Net cash generated from financing activities 22,142,484 1,887,359 NET INCREASE IN CASH AND CASH EQUIVALENTS 414,643 5,086 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL PERIOD 106,537 1,746 EFFECTS OF UNREALISED FOREIGN EXCHANGE 5, CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL PERIOD 4 526,462 6,865 The accompanying notes form an integral part of these financial statements. 4

12 NOTES TO THE UNAUDITED FINANCIAL STATEMENTS 1. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 30 Jun Sep 2017 RM RM Designated at fair value through profit or loss at inception: - Foreign collective investment scheme (Note 1(a)) 33,584,936 13,409,211 - Foreign currency swap (Note 1(b)) (114,830) (39,186) 33,470,106 13,370,025 1 Oct 2017 to 1 Oct 2016 to 30 Jun Jun 2017 RM RM Net (loss)/gain on financial assets at fair value through profit or loss: - Realised gain/(loss) on disposals 251,013 (13,379) - Unrealised fair value (loss)/gain (940,034) 100,413 (689,021) 87,034 (a) Foreign collective investment scheme Name of collective Percentage investment scheme Quantity Value of net asset value 30 Jun 2018 Units RM % Luxembourg Target Fund - Cost 34,257,520 Accumulated unrealised loss on financial assets at fair value through profit or loss (672,584) Quantity/Market Value 813,818 33,584,

13 NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (CONTINUED) 1. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) (a) Foreign collective investment scheme (continued) Name of collective Percentage investment scheme Quantity Value of net asset value 30 Sep 2017 Units RM % Luxembourg Target Fund - Cost 13,217,405 Accumulated unrealised gain on financial assets at fair value through profit or loss 191,806 Quantity/Market Value 310,380 13,409, As at period/year end, the investment portfolio of the Target Fund is made up of the following: 30 Jun Sep 2017 By Country % of portfolio % of portfolio Argentina Brazil Canada China Colombia Denmark 1.23 France Germany Ghana Hong Kong India Ireland Israel Italy Japan Mexico Netherlands Norway Philippines Singapore South Africa South Korea Spain Supranational

14 NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (CONTINUED) 1. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) (a) Foreign collective investment scheme (continued) 30 Jun Sep 2017 By Country (continued) % of portfolio % of portfolio Sweden Switzerland Thailand United Kingdom United States of America By Sector Consumer discretionary Consumer staples Energy Financial services Government and municipal bonds Healthcare Industrial products Information technology Materials Real Estate Telecommunication services Utilities (b) Foreign currency swap At the end of the financial period, there is 1 (30 September 2017: 1) foreign currency swap outstanding. The notional principal amount of the outstanding foreign currency swap amounted to RM 28,102,174 (30 September 2017: RM10,897,993 ). The foreign currency swap entered into during the financial period was for hedging against the currency exposure arising from the investment in the foreign collective investment scheme denominated in US Dollar. The change in the fair value of the foreign currency swap is recognised immediately in the statement of comprehensive income during the financial period. 7

15 NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (CONTINUED) 2. DUE FROM/TO MANAGER 30 Jun Sep 2017 RM RM Expense reimbursement* - 26,272 Creation of units 8,896 1,396,432 Redemption of units 3,737 - * In order to limit the overall level of expenses of the Fund, the Fund Manager has agreed to reimburse the Fund when total expenses, excluding transaction costs such as brokerage commission, exceed 2.50% per annum of the average net asset value of the Fund. This arrangement is at the full discretion of the Fund Manager and may be revoked at anytime without prior notice. The creation and redemption of units balance represents amount receivable from/payable to the Manager for units created/redeemed. The normal settlement period for creation and redemption of units is three business days. 3. DUE FROM/TO THE MANAGER OF THE TARGET FUND 30 Jun Sep 2017 RM RM Amount due from Target Fund Manager - 4,219 Amount due to Target Fund Manager - 639,390 The amount due from/to the Target Fund Manager was for the sale/purchase of investment where settlement was not due. The normal trade settlement period term is three business days. 4. CASH AND CASH EQUIVALENTS 30 Jun Sep 2017 RM RM Bank balances in a licensed financial institution 526, ,537 8

16 NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (CONTINUED) 5. ACCRUED MANAGEMENT FEE Expense Accrual 1 Oct 2017 to 1 Oct 2016 to 30 Jun Jun Jun Sep 2017 RM RM RM RM Management fee 302,258 9,696 42,218 15,860 For the current and prior comparative periods, the Manager is entitled to receive a fee of 1.50% per annum of the net asset value of the fund. Management fees are billed and payable monthly in arrears. 6. ACCRUED TRUSTEE FEE Expense Accrual 1 Oct 2017 to 1 Oct 2016 to 30 Jun Jun Jun Sep 2017 RM RM RM RM Trustee fee 14,183 14,272 1,480 1,568 For the current and prior comparative periods, the Trustee is entitled to receive a fee of 0.05% per annum of the net asset value of the Fund, subject to a minimum fee of RM18,000 per annum. Trustee fees are billed and payable monthly in arrears. 7. NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS (a) RM CLASS 30 Jun Sep 2017 Number of Number of units RM units RM Beginning balance 24,312, ,114,729 1,603, ,604 Creation 39,504, ,072,597 25,252, ,331,176 Cancellation (4,916,051.64) (2,503,239) (2,543,610.57) (1,240,678) (Decrease)/increase in net assets attributable to unit holders - (834,033) - 326,627 Closing balance 58,900, ,850,054 24,312, ,114,729 9

17 NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (CONTINUED) 7. NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS (CONTINUED) (b) USD CLASS 30 Jun Sep 2017 Number of Number of units RM units RM Beginning balance 1,023, ,109,605 10, ,693 Creation 2,014, ,044,604 1,013, ,067,803 Cancellation (423,108.33) (862,751) - - (Decrease)/ increase in net assets attributable to unit holders - (203,538) - 24,109 Closing balance 2,614, ,087,920 1,023, ,109,605 TOTAL 33,937,974 14,224, UNITS HELD BY RELATED PARTY 30 Jun Sep 2017 Number of Number of units RM units RM Holding company of the Manager - Franklin Templeton Capital Holdings Pte. Ltd. - RM class 358, , , ,541 - USD class 10, ,457 10, ,618 As at 30 June 2018 and 30 September 2017, the above units are legally held and were transacted at the prevailing market price. 9. DISTRIBUTION No distribution was declared by the Fund for the financial periods ended 30 June 2018 and 30 June

18 NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (CONTINUED) 10. MANAGEMENT EXPENSE RATIO ( MER ) 1 Oct 2017 to 1 Oct 2016 to 30 Jun Jun 2017 % p.a. % p.a. MER The MER of the Fund is the ratio of the sum of annualised fees and expenses incurred by the Fund to the average net asset value of the Fund calculated on a daily basis. 11. PORTFOLIO TURNOVER RATIO ( PTR ) The PTR of the Fund, which is the ratio of average total acquisitions and disposals of investment to the average net asset value of the Fund calculated on a daily basis, is 0.56 times (30 June 2017: 1.77 times). 12. TRANSACTIONS WITH THE TARGET FUND MANAGER Details of transactions with the Target Fund Manager for the financial periods are as follows: Target Fund Manager 1 Oct 2017 to 30 Jun Oct 2016 to 30 Jun 2017 RM % RM % Franklin Templeton Investment Management Limited and Franklin Advisers, Inc. 28,803, ,880, The above transaction values are in respect of transactions in foreign collective investment scheme. Transactions in this investment do not involve any commission or brokerage and all the above transactions have been established under terms that are no less favorable than those arranged with independent third parties. The Fund is a feeder fund which invests primarily into the Target Fund, hence all transactions were made with the Target Fund Manager. 11

19 STATEMENT BY THE MANAGER I, Avinash Deepak Satwalekar, being Director of the Manager, Franklin Templeton Asset Management (Malaysia) Sdn Bhd, for Templeton Global Balanced Fund do hereby state that in the opinion of the Manager, the accompanying unaudited statement of financial position, unaudited statement of comprehensive income, unaudited statement of changes in net assets attributable to unit holders and unaudited statement of cash flows are drawn up so as to give a true and fair view of the financial position of the Fund as at 30 June 2018 and the comprehensive income, the changes in net assets attributable to unit holders and cash flows of the Fund for the financial period from 1 October 2017 to 30 June Avinash Deepak Satwalekar For and on behalf of the Manager Franklin Templeton Asset Management (Malaysia) Sdn Bhd Kuala Lumpur, Malaysia 20 August

20 Franklin Templeton Asset Management (Malaysia) Sdn. Bhd. Suite 31-02, 31st Floor, Menara Keck Seng 203, Jalan Bukit Bintang Kuala Lumpur, Malaysia tel +60 (3) fax +60 (3) Franklin Templeton Investments. All rights reserved. FTIFMY TGBAR 07/18