Templeton Global Bond Fund

Transcription

1 Fixed Income Templeton Global Bond Fund TAP INTO A WORLD OF OPPORTUNITY

2 FRANKLIN TEMPLETON INVESTMENTS At Franklin Templeton Investments, we re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe. Focus on Investment Excellence At the core of our firm, you ll find multiple independent investment teams each with a focused area of expertise from traditional to alternative strategies and multi-asset solutions. And because our portfolio groups operate autonomously, their strategies can be combined to deliver true style and asset class diversification. All of our investment teams share a common commitment to excellence grounded in rigorous, fundamental research and robust, disciplined risk management. Decade after decade, our consistent, research-driven processes have helped Franklin Templeton earn an impressive record of strong, long-term results. Global Perspective Shaped by Local Expertise In today s complex and interconnected world, smart investing demands a global perspective. Franklin Templeton pioneered international investing over 60 years ago, and our expertise in emerging markets spans more than a quarter of a century. Today, our investment professionals are on the ground across the globe, spotting investment ideas and potential risks firsthand. These locally based teams bring in-depth understanding of local companies, economies and cultural nuances, and share their best thinking across our global research network. Strength and Experience Franklin Templeton is a global leader in asset management serving clients in over 170 countries.* We run our business with the same prudence we apply to asset management, staying focused on delivering relevant investment solutions, strong long-term results and reliable, personal service. This approach, focused on putting clients first, has helped us to become one of the most trusted names in financial services. * As of 12/31/17. Clients are represented by the total number of shareholder accounts.

3 The Strategy Searching the World for Global Bond, Currency and Interest Rate Opportunities For over 20 years, Templeton Global Bond Fund has scoured the globe for the best bond and currency values in order to meet its goal of providing current income with capital appreciation and growth of income. The fund invests predominantly in bonds of governments and government agencies located around the world, with a focus on investment grade securities. Simply stated, we strive to identify economic imbalances that may lead to opportunities across the three C s curve, currency and credit Global Economic Overview We take a top-down approach, analyzing various countries around the world and their respective economies, geopolitical risks, interest rates and currencies to find investment opportunities for the fund. The fund s flexibility to invest in any country or currency, including emerging markets, allows us to take advantage of prevailing macroeconomic trends. Local Market Research Our quantitative and qualitative analysis is supplemented with on-the-ground research. In addition to our own travels and meetings with foreign government and bank officials, we leverage the resources of our offices around the world to provide us with additional local insight on the countries we are considering investing in. We believe this hands-on research is essential to our process and has enabled us to identify investment opportunities and risks over the years that a solely Canadian-based manager might miss. Portfolio Construction We invest in a country s sovereign debt (credit) where we believe bonds are underpriced and country fundamentals offer the potential for price appreciation. We typically invest in local currencies, though we may hedge our currency exposure depending on valuations. We also take country interest rate (curve) environments into account. If rates are poised to rise, we ll invest in short duration debt. In this way, we actively manage interest rate risk on a countryby-country basis. And lastly, our investment decisions are ultimately driven by valuations and we don t necessarily adhere to the fund s benchmark, as the investment process is benchmark agnostic. To complement my Canadian-focused portfolio, I am looking to invest in a bond fund that strives to capitalize on opportunities in global fixed income markets. Templeton Global Bond Fund 1

4 The Benefits Experienced Management Team Portfolio managers Michael Hasenstab and Sonal Desai have 23 and 24 years of industry experience between them and are backed by a large team of investment professionals from around the world. 1 Foreign Markets Provide Opportunity The world s best-performing bond markets vary from year to year. While the Canadian bond market has performed well over the 15 of the past 17 calendar years, adding global fixed income securities to a portfolio of domestic securities offers Canadian investors greater diversification and the potential for reduced volatility. 2 Please remember, diversification does not assure a profit or protect against a loss. Record of Low Correlation with Major Asset Classes Sir John Templeton said it well: The only investors who shouldn t diversify are those who are right 100% of the time. To build a well-diversified portfolio, an investor should pay close attention to correlation, an indication of the degree of correspondence in the movement between different assets. Over the 3-, 5- and 10-year periods ended December 31, 2017, the correlation of Templeton Global Bond Fund Series A units to Canadian stocks and bonds, and to global equities was less than 0.8, making the fund an excellent source of diversification for Canadian investors. Low Correlation of Returns between Templeton Global Bond Fund A and Major Asset Classes 3 As of December 31, 2017 Asset Class 3-Year Period 5-Year Period 10-Year Period Canadian Fixed Income Canadian Equities Global Equities Correlation 4 : 1 = perfect positive correlation, 0 = no correlation, -1 = perfect negative correlation 1. As of December 31, Source: 2018 Morningstar. Calendar years 2000 through Based on the annual total returns of the FTSE TMX Canada Universe Bond Index and the individual country constituents that make up the JP Morgan Global Government Bond Index and other markets. 3. Source: Morningstar Research, Inc., as of December 31, All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. Asset classes are represented as follows: Canadian Fixed Income = FTSE TMX Canada Universe Bond Index; Canadian Equities = S&P/TSX Composite TR Index; Global Equities = MSCI World Index (CDN$). 4. When two assets have a perfect positive correlation (+1) one asset will move exactly in the same direction, up or down, as the other asset. By contrast, a perfect negative correlation (-1) implies that if one asset moves up or down, the asset that is perfectly negatively correlated will move in exactly the opposite direction. If the correlation is 0, the assets are uncorrelated because the movement of one asset is completely unrelated to the movement of the other asset. In practice, correlations between assets are almost never perfectly positive, perfectly negative, or equal to 0. 2 Templeton Global Bond Fund

5 4 Global Portfolio Diversification As of December 31, 2017, the fund included investments in 14 countries, 12 currencies and 139 securities. 5 Global portfolio diversification may help provide a hedge against interest rate cycles, economic conditions and other domestic risks. Credit Quality Breakdown 5,6 Regional Breakdown 5,7 As of December 31, 2017 As of December 31, 2017 Europe/Africa % EMU % AAA 3.35% Non-EMU Europe % Middle-East/Africa % Asia % Japan % AA Asia, Non-Japan % 9.93% Americas % USA % Non-USA Americas % Supranational % A 9.82% Cash & Other Assets % Currency Breakdown 5,7 As of December 31, 2017 BBB BB B Cash & Equivalents 8.24% 13.31% 28.28% 27.06% 0% 10% 20% 30% Europe/Africa 4.04% Euro 0.00% Periphery Europe/Eastern Europe 0.00% Ghanian Cedi New 2.06% South African Rand 1.98% Asia 26.69% Japanese Yen 0.00% Asia, Non-Japan 26.69% Americas 69.28% U.S. Dollar 22.02% Non-USA Americas 47.25% Fund Data 5,11 (As of December 31, 2017) Distribution Frequency Maturity Duration 12 Total Assets Monthly 3.63 years years $1.91 billion 5. Portfolio holdings include cash and may change. 6. Ratings shown are assigned by one or more Nationally Recognized Statistical Credit Rating Organizations ( NRSRO ), such as Standard & Poor s, Moody s and Fitch. The ratings are an indication of an issuer s creditworthiness and typically range from AAA or Aaa (highest) to D (lowest). When ratings from all three agencies are available, the middle rating is used; when two are available, the lowest rating is used; and when only one is available, that rating is used. Foreign government bonds without a specific rating are assigned the country rating provided by an NRSRO, if available. The NR category consists of ratable securities that have not been rated by an NRSRO. The N/A category consists of nonratable securities (e.g., equities). Cash and equivalents as well as derivatives are excluded from this breakdown. As a result, the chart does not reflect the fund s total net assets. Weightings as percent of total. Due to rounding, the Credit Quality Breakdown may not add up to 100%. Please note that the definition of cash in this document may not match the definition of cash and cash equivalents listed in the fund facts or management reports of fund performance for the fund, which includes bonds that have a remaining term to maturity of 365 days or less that are issued by certain governments, supranational agencies or financial institutions and have a designated rating (as defined in Canadian securities law). As such, the cash amounts listed may differ. 7. Regional and Currency Breakdown figures reflect certain derivatives held in the portfolio (or their underlying reference assets) and may not total 100% or may be negative due to rounding, use of derivatives, unsettled trades or other factors. Weightings as percent of total. 8. EMU countries consist of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain. 9. A supranational is an entity formed by two or more central governments through international treaties to promote economic development for the member countries. 10. Other assets include the net aggregate position of foreign currency forward contracts in effect in the portfolio. 11. Duration and Maturity figures reflect certain derivatives held in the portfolio (or their underlying reference assets). 12. Duration shown is the option-adjusted duration. Duration is an indication of a fund s sensitivity to changes in interest rates. The option-adjusted duration formula takes into account embedded call options and redemption features that impact a bond s expected cash flow, and thus its interest rate sensitivity. Templeton Global Bond Fund 3

6 The Results Templeton Global Bond Fund A Strong Record of Success The combination of monthly income and capital growth has rewarded investors over time. For an investor who purchased $100,000 of Series A of this fund on its inception date, reinvesting all of the distributions, the value of the investment would have been $437,472 as of December 31, Combining Monthly Income with Capital Growth 13 July 15, 1988 December 31, 2017 $500,000 Savings and Loan Crisis April 1987 Gulf War January 1991 Asian Economic Crisis October 1997 World Trade Center Attacks September 11, 2001 $400,000 $300,000 $200,000 $100,000 $ Templeton Global Bond Fund Series A Calendar Year Returns (%) % 17.49% 11.14% 11.07% 11.31% -0.69% 11.93% 10.17% -0.88% 5.18% % 4.45% 4.45% 18.40% -1.95% 13. Source: Franklin Templeton Investments, as of December 31, Assume: Lump-sum investment of $100,000 into Templeton Global Bond Fund Series A on July 15, 1988, with all distributions either cashed or reinvested, as indicated. Distributions are not an indication of performance, rate of return, or yield. Mutual fund distributions are not guaranteed and are set and may change at the discretion of Franklin Templeton Investments Corp. All returns shown are net of fees. Templeton Global Bond Fund returns represent the year-over-year change in value of an investment and includes reinvestment of dividends. Performance data is shown rounded to the nearest hundredth. The chart is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values of the mutual fund or returns on investment in the mutual fund. The chart is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values of the mutual fund or returns on investment in the mutual fund. 4 Templeton Global Bond Fund

7 Escalation of the Credit Crisis September 2008 European Debt Crisis October 2009 $437,472 Investment Value (Distributions Reinvested, Net of Fees) % -7.93% 13.38% -6.50% 24.05% 4.00% 8.28% 0.56% 7.74% 2.64% 3.16% 6.62% -1.68% 0.71% Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus or fund facts document before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Templeton Global Bond Fund 5

8 The Power of Dollar-Cost Averaging Regular Investments May Help You Reach Your Long-Term Goals Dollar-cost averaging is a proven investment technique that may help lower the average cost of the shares you purchase. For example, by investing a fixed dollar amount of $1,000 each month, you buy more shares when the price is low and fewer shares when the price is high. As a result, your average share cost may be less than the average price per share. TEMPLETON GLOBAL BOND FUND SERIES A Monthly Investment of $1,000 July 31, 1988 December 31, 2017 $700,000 $600,000 An investor who invests $12,000 annually can take advantage of the fund s performance over time. 14 $698,786 Fund Market Value $500,000 $400,000 $300,000 $354,000 Total Investment Cost $200,000 $100,000 $0 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Total Investment Cost Fund Market Value Year Total Investment Cost Fund Market Value Year Total Investment Cost Fund Market Value 1988 $6,000 $6, $186,000 $279, $18,000 $18, $198,000 $301, $30,000 $35, $210,000 $289, $42,000 $52, $222,000 $340, $54,000 $70, $234,000 $330, $66,000 $91, $246,000 $423, $78,000 $102, $258,000 $452, $90,000 $127, $270,000 $502, $102,000 $153, $282,000 $517, $114,000 $164, $294,000 $569, $126,000 $185, $306,000 $596, $138,000 $177, $318,000 $627, $150,000 $197, $330,000 $681, $162,000 $219, $342,000 $682, $174,000 $272, $354,000 $698,786 Average Unit Cost = $9.46 Average Price Per Unit = $ Source: Franklin Templeton Investments, as of December 31, The illustration represents the performance of a hypothetical investment and is for illustrative purposes only. It does not represent the past or future performance of a Franklin Templeton mutual fund. All contributions are at month-end with the investment beginning on July 31, All information presented net of fees excludes any upfront sales charge; however, the standard fees are reflected in the fund performance. 6 Templeton Global Bond Fund

9 Are You Looking for Income? Look for an Established Track Record of Distributions If you count on your investments to supplement your income, two of your biggest concerns may be capital preservation and reliability. Your standard of living depends on your ability to cover monthly bills and adapt to any unexpected expenses that may arise. Templeton Global Bond Fund has a history of paying income distributions to its investors on a regular basis, while growing the investment capital. In fact, the fund has paid out a distribution every month since making its first payment in August The table below shows a $100,000 investment at the fund s inception in July While the amount has varied from month to month (as shown below), these distributions have been paid out consistently over time. The fund has paid a high level of income without returning initial investor capital. Distribution Summary 15 As of December 31, 2017 DISTRIBUTIONS MARKET VALUE DISTRIBUTIONS Year Average Monthly Annual Cumulative Cashed Reinvested 1988 $683 $4,100 $4,100 $100,600 $104, $866 $10,391 $14,491 $94,800 $109, $1,020 $12,244 $26,735 $98,400 $129, $748 $8,973 $35,708 $99,600 $143, $770 $9,242 $44,950 $101,000 $159, $830 $9,958 $54,907 $102,200 $177, $471 $5,655 $60,562 $95,800 $176, $457 $5,486 $66,048 $101,400 $197, $510 $6,116 $72,164 $105,200 $217, $368 $4,419 $76,583 $99,800 $215, $175 $2,100 $78,683 $102,800 $226, $349 $4,193 $82,876 $88,000 $202, $158 $1,900 $84,776 $89,900 $211, $280 $3,364 $88,140 $90,400 $221, $301 $3,615 $91,754 $103,000 $261, $248 $2,972 $94,726 $98,000 $256, $339 $4,068 $98,794 $97,300 $265, $344 $4,127 $102,921 $85,600 $244, $398 $4,772 $107,693 $91,900 $277, $333 $3,999 $111,691 $82,000 $259, $418 $5,019 $116,711 $96,200 $321, $366 $4,388 $121,098 $95,600 $334, $507 $6,084 $127,183 $97,300 $362, $355 $4,257 $131,440 $93,600 $364, $341 $4,088 $135,527 $96,600 $392, $268 $3,212 $138,739 $95,900 $402, $288 $3,451 $142,190 $95,500 $415, $664 $7,973 $150,163 $93,800 $422, $274 $3,294 $153,457 $88,900 $435, $259 $3,108 $156,565 $86,500 $438,562 TOTAL DISTRIBUTION VALUE OF FUND VALUE OF FUND Total Initial Investment $100,000 Paid Out To You ACCOUNT After Distributions Were Cashed ACCOUNT After Distributions Were Reinvested 15. Source: Franklin Templeton Investments, as of December 31, Funds and indices used: Templeton Global Bond Fund Series A. All distribution data and calculations are excluding capital gains to reflect the payment of income and cash received from underlying securities less any expenses. Amounts shown are net of all applicable fees. Templeton Global Bond Fund 7

10 Performance Worthy of Recognition «««MORNINGSTAR RATINGTM 16 Over multiple time periods, the fund s Series A performance relative to its peer group has resulted in an overall 3-star Morningstar Rating. Despite some of the most challenging markets in recent memory, the fund s Series A has generated a positive return in 22 of the last 29 calendar years. Compounded Returns 17 Periods Ended December 31, 2017 Inception Date 1-Year 3-Year 5-Year 10-Year Since Inception Templeton Global Bond Fund Series A 7/15/ % 1.82% 2.25% 5.40% 5.15% Templeton Global Bond Fund Series F 6/18/ % 2.45% 2.97% 6.05% 5.43% We allocate the fund s assets based upon our assessment of changing market, political and economic conditions as well as our evaluation of interest rates, exchange rates, yield spreads and credit risks. We also selectively invest in emerging markets after extensive analysis and consideration of each country s economic prospects and political risks. MICHAEL HASENSTAB, PH.D., SONAL DESAI, PH.D. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus or fund facts document before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. 16. As of as of December 31, The Morningstar Rating TM for funds, or star rating, is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five- and 10-year (if applicable) Morningstar Ratings metrics. The weights are 100% three-year rating for months of total returns, 60% five-year rating/40% three-year rating for months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. Templeton Global Bond Fund is rated within the Morningstar Canadian Global Fixed Income category. All performance data refers to Series A units. Please refer to for more details on the calculation of Morningstar Risk-Adjusted Ratings and the one-year information. For each of the three-, five- and 10-year performance periods, there were in total 227, 136 and 50 funds, respectively, in the Morningstar Canadian Global Fixed Income category. 17. Source: Franklin Templeton Investments, as of December 31, Series F is available to investors participating in programs that do not require Franklin Templeton to incur distribution costs in the form of trailing commissions to dealers. As a consequence, the management fee on Series F is lower than on Series A. 8 Templeton Global Bond Fund

11 Templeton Global Bond Fund Reasons to Invest The Strategy Taking a top-down approach, the portfolio management team searches around the globe to find investment opportunities for the fund. Leverage the resources of our offices around the world that provide additional local insight on various countries and economies. Invest in countries where the investment team believes bonds are underpriced and country fundamentals offer the potential for price appreciations. The Benefits An experienced management team, Dr. Michael Hasenstab and Dr. Sonal Desai are backed by a large team of investment professionals from around the world. A record of low correlation relative to major asset classes.3 A well-diversified portfolio with investments in 14 countries, 12 currencies and 139 securities.18 The Results A record of success for long-term investors with 5.15% compounded total return since inception as of December 31, 2017, based on Series A returns. Positive returns in 22 of the last 29 calendar years. Performance worthy of a 3-star overall Morningstar Rating.16 Templeton Global Bond Fund Codes Templeton Global Bond Fund (Hedged) SERIES A, F, I, O, PF CDN$ US$ SERIES A, F, I, O, PF CDN$ Series A Front End Series A Front End 3712 Series A DSC Series A DSC 3714 Series A Low Load Series A Low Load 3713 Series F Series F 3715 Series I (Closed to New Investors)* Series I (Closed to New Investors)* 3716 Series O Series O 3717 Series PF Series PF 3808 *Series I closed to new investors as of November 22, As of December 31, Templeton Global Bond Fund 9

12 Franklin Templeton Investments Canada 200 King Street West, Suite 1500 Toronto, ON M5H 3T4 fax (866) (800) For more information on Templeton Global Bond Fund or Franklin Templeton Solutions, please call (800) , speak to your investment advisor, or visit Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. The information presented herein is considered reliable at the present time. However, we do not represent that it is accurate or complete, or that it should be relied upon as such. The information presented herein is not a recommendation or solicitation to buy or sell securities. Mutual fund distributions are not guaranteed, are set and may change at the discretion of Franklin Templeton Investments Corp. Unlike fixed income securities, there is no obligation to distribute any fixed amount, and reductions in, or suspensions of, distributions may occur that would reduce yield. Distributions are not an indication of performance, rate of return, or yield. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus or fund facts document before investing. The indicated rates of return are historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Franklin Templeton Investments Canada is a business name used by Franklin Templeton Investments Corp. Investors should carefully consider a fund s investment risks, fees and expenses before investing. To obtain a prospectus, which contains this and other information, talk to your investment advisor, call us at (800) or visit franklintempleton.ca Franklin Templeton Investments Corp. All rights reserved. UPD 11/ INVE 12/17