Templeton Emerging cuts fees

Templeton Emerging cuts fees – Templeton Emerging Markets has published its accounts for the year ended 31 March 2018. Over this period, the fund made an NAV total return of 12.4$%, ahead of the MSCI Emerging Markets Index, which returned 11.8%. Shareholders did better than this though as the discount narrowed from 13.3% to 12.2%, they had a return of 13.7%. The dividend has increased substantially, from 8.25p to 15p. This reflects the growth in revenue over the period and the change in the policy of allocating management fees and the cost of borrowing between the income and capital account (now 70% to the capital account).

Fee cut

The current annual management fee is 1% of net assets up to GBP2 billion and 0.85% of net assets above that level. They have agreed with Franklin Templeton that, with effect from 1 July 2018, the annual fee will be reduced to 1% of net assets up to GBP1 billion and 0.85% of net assets above GBP1 billion.

Extract from the manager’s report

 

Top contributors

Country

Sector

Share price total return

Relative contribution to portfolio

Brilliance
China Automotive

China/HongKong

Consumer
Discretionary

12.0

1.0

Ping An Insurance Group

China/HongKong

Financials

81.2

0.5

Yandex(b)

Russia

Information
Technology

60.7

0.4

Mail.Ru, GDR(b)

Russia

Information
Technology

41.4

0.3

Steinhoff
International Holdings(c)

South
Africa

Consumer
Discretionary

(94.8)

0.3

Banco
Bradesco, ADR

Brazil

Financials

17.6

0.3

China
Mobile

China/HongKong

Telecommunication
Services

(18.8)

0.3

Bank Danamon Indonesia

Indonesia

Financials

32.3

0.3

NagaCorp

Cambodia

Consumer
Discretionary

68.8

0.3

Samsung
Electronics

South
Korea

Information
Technology

16.3

0.3

Brilliance China Automotive manufactures and sells automobiles for the Chinese market, predominantly through its joint venture with German luxury car maker BMW. It reported strong volume and profit growth over the first half of its financial year, supported by generally robust demand. We expect the rise of China’s upper middle class to continue driving the luxury car market in the country, and we are optimistic about the company’s ability to capture that growth through new vehicle launches. 

Ping An Insurance Group is a China-based personal financial service provider with three core businesses-insurance, banking and investment. It is one of the largest life, property and casualty (coverage against loss of property, damage or other liabilities) insurers in China by premiums. The company’s full-year net profit beat market expectations, supported by strength in its life and health insurance business. We expect further growth from the company’s core insurance operations as, well as their financial technology businesses. 

Yandex is a technology company. Its core product is its search engine. In its home market, Russia, it has more than 50% of all search traffic. It also owns the leading online taxi services provider in the country, as well as e-commerce and classified advertising businesses. Yandex reported double-digit revenue growth in 2017, largely driven by strength in its core search and taxi operations. The merger between Yandex.Taxi and Uber Russia provided investors with additional good news. We expect to see continued growth in Yandex’s search engine and taxi businesses. Further, the online advertising market should continue to take market share from traditional media outlets, benefitting the company.”

Top detractors

Country

Sector

Share price total return

Relative contribution to portfolio

Astra
International

Indonesia

Consumer
Discretionary

(25.2)

(0.9)

IMAX

United
States

Consumer
Discretionary

(49.6)

(0.7)

Banco
Santander Mexico, ADR

Mexico

Financials

(25.5)

(0.5)

Glenmark
Pharmaceuticals

India

Health
Care

(44.6)

(0.4)

MCB
Bank

Pakistan

Financials

(14.7)

(0.4)

Tencent

China/HongKong

Information
Technology

62.9

(0.4)

Largan Precision

Taiwan

Information
Technology

(33.0)

(0.3)

Thai
Beverages

Thailand

Consumer
Staples

(18.2)

(0.3)

Celltrion

South
Korea

Health
Care

227.7

(0.3)

Wiz Soluçõese Corretagem

Brazil

Financials

(45.1)

(0.3)

Astra International is an Indonesia-based conglomerate with businesses in the automotive, financial services, heavy equipment, infrastructure, IT and property industries. Its largest business, the automotive division, distributes motorcycles, cars and trucks under brands such as Honda and Toyota. It also provides after-sales services and auto components. Astra’s full-year net profit missed market expectations as car sales weakened in the face of increased competition. Nevertheless, we remain positive about long-term automotive demand in Indonesia as the economy continues to grow. 

IMAX is an entertainment technology company specialising in motion-picture technologies. It designs and manufactures premium theatre systems and has installed these systems around the world, of which a substantial number are in emerging markets. Weaker-than-expected box office results weighed on IMAX and it embarked on a cost-cutting exercise. However, we expect demand for premium cinematic experiences to grow in emerging markets and the company, we believe, is well-positioned to increase its market share. We are also positive about its share buy back programme. 

Banco Santander Mexico is one of the leading financial groups in its home market. It offers a wide range of services, including retail and commercial banking. Mexican equities generally underperformed their emerging markets peers over the year on concerns surrounding the ongoing NAFTA renegotiation and the 2018 presidential election. Disappointing earnings over the last two quarters of 2017 further pressured returns from the stock. However, we believe that the company is well positioned to benefit from the growth in the banking sector, where penetration currently remains low.”

TEM : Templeton Emerging cuts fees

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