Franklin Global Growth Fund

Transcription

1 Growth Equity Product Profile Product Details Fund Assets $169,758, Fund Inception Date 01/10/2008 Number of Issuers 40 Base Currency AUD Investment Style Growth Overview We focus on fundamental bottom-up stock analysis to identify and select quality growth companies with sustainable business models and proven management teams that are focused on the creation of shareholder value. We utilise the recommendations from this analysis to build a concentrated, best-ideas portfolio of approximately 40 stocks that is benchmark indifferent, yet diversified, due to the limited overlap of economic exposures between companies. Our in-depth research supports our longer-term perspective, seeking to hold companies for three to five years. Performance Data Average Annual Total Returns (Institutional, AUD %) 1 Since Inception 3 Mths YTD 1 Yr 3 Yrs 5 Yrs (16/10/2008) Growth Fund - Gross of Fees Institutional Growth Fund - Net of Fees Institutional Australia (Net Australia Growth Average Annual Total Returns (Wholesale, AUD %) 3 Mths YTD 1 Yr 3 Yrs 5 Yrs Since Inception (01/10/2008) Growth Fund - Gross of Fees Wholesale Growth Fund - Net of Fees Wholesale Australia (Net Australia Growth % 20% 10% 0% Mths YTD 1 Yr 3 Yrs 5 Yrs Since Inception Growth Fund - Gross of Fees Wholesale Growth Fund - Net of Fees Wholesale Australia (Net Australia Growth 1. Periods of more than one year are annualised. Past performance is not an indicator or a guarantee of future performance.

2 Calendar Year Returns (Wholesale, AUD %) Growth Fund Gross of Fees Wholesale Growth Fund Net of Fees Wholesale Australia (Net Australia Growth Portfolio Manager Insight Market Review In a volatile quarter, global equities ended modestly higher in Australian dollar terms. After a strong start to the year, markets gave up their gains initially on concerns about higher inflation and a resulting rise in interest rates, and later on growing fears about a potential global trade war and a sell-off in the global technology sector. Although the global economic expansion continued, the potential for a faster return to more normalized monetary policy as inflation begins to pick up around the world gave markets pause. Additionally, political fears returned to the forefront following the Trump administration s plans to impose tariffs on steel and aluminum and on Chinese imports. Performance Review During the quarter, the portfolio outperformed its benchmark, the MSCI World ex Australia, as stock selection and sector allocations contributed to relative performance. In particular, security selection in the Information Technology, Health Care and Materials sectors boosted relative returns. Conversely, security selection in the Consumer Staples sector undermined relative performance. In terms of sector allocations, an overweight in Information Technology and an underweight in Consumer Staples contributed to relative returns. An overweight in Materials and an underweight in Consumer Discretionary were modest drags on relative performance. Regionally, emerging markets exposure and stock selection in North America boosted relative performance. An overweight in the United Kingdom hampered relative returns. Outlook & Strategy After a volatile first quarter, we see a number of factors beginning to take shape that indicate to us equity markets may be in for a messy These factors include growing trade tensions between the United States and its major trading partners, rising tensions with Russia, potentially greater uncertainty in the Middle East should the US scrap the Iran nuclear deal, and company-specific challenges facing some of the biggest US technology firms. Despite these challenges, we note that stability in the currency and bond markets over the first quarter suggests to us that stock markets have been undergoing a valuation correction and consolidation, and that we are not witnessing the start of a major risk-off trade that would point to far deeper global economic and political concerns. While we believe markets are likely to remain in a state of correction over the course of 2018, political and economic tensions have the potential to spark bouts of heavy selling. At this stage, we find it difficult to see exactly how these issues will evolve, particularly given the unpredictability of the current US administration. Against a more uncertain backdrop, we believe individual stock selection will become increasingly important in volatile markets. As always, we focus on finding companies with compelling growth opportunities and well defended competitive advantages that can withstand the noise emanating from Washington, DC, and the increased political and economic fears facing the broader global equity markets. Portfolio Characteristics 2 Australia (Net Dividends) Portfolio Market Capitalisation (Millions in AUD) 68, ,739 Number of Issuers 40 - Return on Equity 16.70% 16.72% Price to Earnings Growth Ratio 1.78x 1.32x Historical 3-Year EPS Growth 20.88% 10.01% Estimated 3-5 Yr EPS Growth 18.05% 12.89% Price to Earnings (12 Month Forward) 24.17x 15.80x franklintempleton.com.au 2

3 Portfolio Diversification Geographic Weightings vs. Australia (Net 3 NORTH AMERICA EUROPE UNITED KINGDOM EMERGING MARKETS JAPAN CASH & CASH EQUIVALENTS % 25% 50% 75% Sector Weightings vs. Australia (Net 3 Information Technology Financials Industrials Health Care Consumer Discretionary Materials Energy Real Estate Consumer Staples Utilities 2.99 Telecommunication Services 2.69 Cash & Cash Equivalents % 5% 10% 15% 20% 25% 30% Growth Fund Australia (Net Growth Fund Australia (Net Top Ten Holdings 4 Top Holdings Sector Country % SIGNATURE BANK/NEW YORK NY Banks United States 3.50 DSV A/S Transportation Denmark 3.08 FERGUSON PLC Capital Goods United Kingdom 3.01 ADOBE SYSTEMS INC Software & Services United States 2.97 UMICORE SA Materials Belgium 2.82 KONINKLIJKE DSM NV Materials Netherlands 2.80 EQUINIX INC Real Estate United States 2.70 SYMRISE AG Materials Germany 2.68 TAL EDUCATION GROUP Consumer Services China 2.67 VERISK ANALYTICS INC Commercial & Professional Services United States 2.53 Supplemental Performance Statistics 3 Yrs 5 Yrs Since Inception Standard Deviation (%) Growth Fund Australia (Net Tracking Error (%) Information Ratio Beta Sharpe Ratio Growth Fund Australia (Net Investment Philosophy Research-Driven Portfolio 5. Beta, Information Ratio and Tracking Error information are measured against the Australia (Net. franklintempleton.com.au 3

4 Concentrated portfolio with approximately holdings Benchmark Indifferent Longer-Term Investment Horizon Investment Horizon of 3 to 5 years Typical holding period of 4+ years Seek to Manage Risk by Limiting Economic Overlap among Holdings Select companies whose earnings streams are not highly correlated Has typically resulted in a diversified portfolio across MSCI Global Industry Classification Standard (GICS) sectors and industries Global Opportunity Set Search without borders Average allocation to emerging markets has been less than 10% Investment Process STOCK SELECTION DISCIPLINE Growth Quality Valuation Free cash flow analysis to assess: Sus ainable b sine sm del Long-t r c mpe itiv adv nt ge Va u - ener ting reinv st en r c r Framework to assess: Financial transparency and accounting quality Corporate governance including share, board and management structure and compensation metrics Environmental management, social and labor practices Common discount cash flow/dividend model to assess: Relative attractiveness of company Valuation support under different scenarios Investment Team Portfolio Manager Years with Firm Years Experience Coleen Barbeau, Senior Vice President Don Huber, CFA, Senior Vice President Large Cap Team Number of Members Average Years Experience Research Analysts 8 17 Additional Resources Small Cap Team Global Trading Platform Performance Analysis and Investment Risk Group Research Associates Franklin US Equity Team Global Portfolio Compliance Product Managers Years with Firm Years Experience Amber Saft franklintempleton.com.au 4

5 Important Legal Information Franklin (the firm ) encompasses the equity, fixed income and balanced accounts managed by Franklin Advisers, Inc., and related Franklin affiliates, including, effective 1 January 2007, the equity accounts managed by the institutional investment teams of Franklin Templeton Institutional, LLC under the former firm name of Fiduciary Global Advisors. The combined equity assets of Franklin and Fiduciary Global Advisors form the Franklin Equity Group (formerly Advisers prior to 30 June 2010) unit of Franklin. Effective 1 January 2006, the fixed income assets managed from that date forward by Franklin Templeton Institutional, LLC ( FTI ) or its related affiliates (managed previously by Fiduciary Trust Company International - Institutional Division or FTCI s Institutional Division ) that went through the institutional portfolio review process were combined with the fixed income assets of Franklin to form the Franklin Templeton Fixed Income unit of Franklin. The primary reason for these changes to the firm definition was to consolidate equity and fixed income asset management for Franklin (as previously defined), Fiduciary Global Advisors (institutional equities) and FTCI s Institutional Division (institutional fixed income) under one firm, Franklin. The firm definition for Franklin does not include multistrategy asset allocation portfolios managed by Franklin Templeton Multi-Asset Solutions (FTMAS), which was previously known as Franklin Templeton Solutions as well as Franklin Templeton Multi-Asset Strategies and the wrap-fee and non-wrap-fee accounts managed by Franklin Separately Managed Accounts (formerly Franklin Portfolio Advisors) or Franklin Europe which integrated into the Templeton firm definition effective 1 December Performance figures represent the aggregate total return gross and net of fees for the period indicated for the Growth Fund ( The Fund ), an umbrella fund formed under the laws of Australia, assuming, where relevant, the reinvestment of distributions. This report does not constitute or form part of any offer for shares of the Fund or an invitation to apply for shares. Subscriptions for shares in the Fund can only be made on the basis of the Fund s most recent Product Disclosure Statement document ( PDS ). The price of shares and income from them can go down as well as up and you may not get back the full amount that you invested. Currency fluctuations will affect the value of overseas investments. An investment in this Fund entails risks which are described in the PDS document. Please consult your professional advisor before deciding to invest. Total returns are presented in Australian dollars both gross and net of investment advisory fees, are inclusive of commissions and transaction costs, and assume reinvestment of any dividends, interest income, capital gains, or other earnings. Periods greater than one year are shown as average annual total returns. Performance data is shown rounded to the nearest hundredth. Past performance is not an indicator or a guarantee of future performance. The Australia (Net, the primary benchmark, is a free float-adjusted market capitalisation weighted equity index comprised of securities in MSCI s developed market country-specific indexes, excluding Australia. The benchmark is used for comparative purposes only and is provided to represent the investment environment during the time periods shown. es are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. CFA and Chartered Financial Analyst are trademarks owned by CFA Institute. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted. This report is not prepared or endorsed by MSCI. 2. Price ratio calculations for weighted average use harmonic means. Any exceptions to this are noted. 3. Information is historical and may not reflect current or future portfolio characteristics. Percentage may not equal 100% due to rounding. All holdings are subject to change. 4. Holdings of the same issuers have been combined. Top ten holdings information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change. The information provided is not a recommendation to purchase, sell, or hold any particular security. The securities identified do not represent the fund s entire holdings and in the aggregate may represent only a small percentage of such holdings. There is no assurance that securities purchased will remain in the fund, or that securities sold will not be repurchased. The portfolio manager for the fund reserves the right to withhold release of information with respect to holdings that would otherwise be included. 6. Information Ratio is a way to evaluate a manager s ability to outperform a benchmark in relation to the risk that manager is assuming, with risk defined as deviation from the benchmark. This measure is calculated by dividing the portfolio s excess return (portfolio return less the benchmark return) by the tracking error (derived by taking the standard deviation of the monthly differences between the portfolio return and the benchmark return over time). This document is intended to be of general interest only, and does not constitute legal or tax advice nor is it an offer of any investment fund or service. Nothing in this document should be construed as investment advice. Investments entail risks, the value of investments can go down as well as up and investors should be aware that they might not get back the full value invested. Franklin Templeton Investments shall not be liable to any user of this document or to any other person or entity for the inaccuracy of information contained in this document or for any errors or omissions in its contents, regardless of the cause of such inaccuracy, error or omission. Any research and analysis contained in this document has been procured by Franklin Templeton Investments for its own purposes and is provided to you only incidentally. Issuance of this document may be restricted in certain jurisdictions. This document does not constitute the issuance of any information or the making of any offer or solicitation by anyone in any jurisdiction in which such issuance or offer is not authorised or to any person to whom it is unlawful to issue such a document or make such an offer or solicitation. Australia: Issued by Franklin Templeton Investments Australia Limited (ABN ) (Australian Financial Services License Holder No ) to persons who are wholesale investors within the meaning of the Corporations Act 2001 (Cwlth) and/or to whom this document may otherwise lawfully be communicated to give preliminary information about the investment propositions described herein. This document is a confidential communication to, and solely for the use of, and may only be acted on by, such persons. The document is not addressed to any other persons and may not be used by them for any purpose whatsoever. It expresses no views as to the suitability of the services or other matters described herein to the individual circumstances, objectives, financial situation or needs of any recipient. It is not directed at private individuals and in no way does it constitute investment advice. A disclosure document for any Franklin Templeton funds referred to in this document is available from Franklin Templeton at Level 19, 101 Collins Street, Melbourne, Victoria, 3000 or or by calling Franklin Templeton Investments Australia Limited Level 19 Level 30, Aurora Place 101 Collins Street 88 Phillip Street Melbourne Vic 3000 Sydney NSW franklintempleton.com.au For Wholesale Clients and Sophisticated Investor Use Only. Not for Distribution to Retail Investors Franklin Templeton Investments. All rights reserved.