Templeton Frontier Markets Fund A (acc) USD

Transcription

1 Templeton Frontier Markets Fund A (acc) USD Franklin Templeton Investment Funds Fund Manager Report Value Equity Product Details 1 Fund Assets $823,769, Fund Inception Date Number of Issuers 59 Bloomberg ISIN Base Currency Investment Style Benchmark Morningstar Category TEMFMAU LX LU USD Value MSCI Frontier Emerging Markets Select Countries Capped Index Global Frontier Markets Equity Asset Allocation 2 % Equity Cash & Cash 3.00 Equivalents Fixed Income Fund Description The Fund aims to achieve long-term capital appreciation by investing principally in transferable equity securities of companies incorporated and/or having their principal business activities in the frontier markets countries across the market capitalisation spectrum. Key Points Frontier-market stocks advanced during the quarter. The fund s performance was largely flat over the first quarter. By sector, financials, materials and consumer staples contributed the most to absolute performance, while industrials and telecommunication services were the largest detractors, followed by energy. At the country level, Kenya, Kuwait, Peru and Saudi Arabia contributed the most. The Philippines, Vietnam and Argentina hampered returns. Performance Data Performance Net of Management Fees as at (Dividends Reinvested) (%) 3 1 Mth 3 Mths YTD 1 Yr 3 Yrs 5 Yrs Since Inception ( ) A (acc) USD MSCI Frontier Emerging Markets Select Countries Capped Index % 50% 0% -50% A (acc) USD MSCI Frontier Emerging Markets Select Countries Capped Index Past performance is not an indicator or a guarantee of future performance. Portfolio Manager Insight Market Review Frontier-market equities produced a robust advance over the first quarter and outperformed the modest gain in emerging markets, while their developed-market counterparts declined. Economic optimism that buoyed returns at the start of the year gave way to worries of resurgent US inflation, followed by rising trade tensions as the United States announced a series of protectionist trade measures. Tunisia, Ivory Coast, Kenya, Romania, Kazakhstan and Vietnam were amongst the bestperforming frontier markets over the period. Romania s central bank hiked rates twice during the quarter, by 25 basis points on each occasion. Vietnam s stock market reached record-high levels during the quarter, supported by foreign and domestic investor interest as economic growth continued at a clip of 7.4% year-on-year in the first quarter. In contrast, Mauritius, the Philippines, Estonia and Argentina were amongst the markets to decline. The Philippines was hobbled by a sharp decline in its currency, while Argentina was impacted by profit-taking after strong performance in 2017, concerns surrounding wage negotiations and inflation, and effects of a longer-than-expected drought. In terms of benchmark sectors, information technology, materials and energy made the strongest gains, while industrials, utilities and real estate stepped lower. 1. All holdings are subject to change. Holdings of the same issuers have been combined.

2 Performance Review The fund s performance was largely flat over the first quarter. By sector, financials, materials and consumer staples contributed the most to absolute performance, while industrials and telecommunication services were the largest detractors, followed by energy. At the country level, Kenya, Kuwait, Peru and Saudi Arabia contributed the most. The Philippines, Vietnam and Argentina hampered returns. In the financials sector, Kenya-based bank KCB Group led contributors, followed by National Bank of Kuwait and Egypt-based Commercial International Bank. However, returns from the financials sector were curbed somewhat as Philippines-based BDO Unibank and Metropolitan Bank & Trust, along with Bangladesh-based Brac Bank detracted from overall returns. In the materials sector, Vietnam-based metals and mining company Hoa Phat rose as it reported record-high earnings for 2017, supported by strength in its core steel production business. Amongst consumer staples holdings, East African Breweries, which is based in Kenya, contributed to absolute returns, as did Ukraine-based food products company MHP. In contrast, industrials company Binh Minh Plastics of Vietnam weakened absolute returns. Telecommunication services detracted primarily because of weakness in Egypt-based Global Telecom, but Kuwait-based Mobile Telecommunications (Zain) partly offset this with a contribution to returns. A position in Vietnam-based health care company DHG Pharmaceutical also held back performance. Portfolio Positioning During the first quarter, the fund s main exposures at the country level were to Vietnam, Argentina, Kuwait and Saudi Arabia. At the sector level, financials, consumer staples, telecommunication services and health care were the top absolute weightings. Country and sector exposures are the outcome of our stock-by-stock fundamental investment research process as applied to the available investment universe. Outlook & Strategy Several frontier markets are amongst the fastest-growing economies in the world, and we believe that this robust progress can continue. In our view, this potential for high growth from relatively low levels could be supported by urbanisation and productivity trends, as well as the population dynamics of frontier markets. Continued progress towards corporate governance reforms, helped by active shareholders pushing for positive change, may add to the appeal of the frontier-equity asset class. In addition, government-level reforms in several key countries could attract capital. Active managers have a compelling opportunity to uncover attractive investment prospects as frontier-market equities tend to be under-researched. In addition, in our view, frontier-market equities, as a group, are attractively valued. Because of the significant domestic drivers that influence frontier stocks, the asset class can provide potential diversification benefits for investors, given generally low correlations with global counterparts. Overall, although volatility can be a feature of frontier markets, we are positive about the prospects for the asset class over the long term. One-Month Performance Review The fund declined slightly in March, as industrials, energy and materials detracted. In contrast, financials, consumer staples and health care added to returns. By market, Vietnam, the Philippines and Argentina detracted the most, while Kenya, Kuwait and Saudi Arabia were the largest contributors. Portfolio Characteristics 4 MSCI Frontier Emerging Markets Select Portfolio Countries Capped Index Price to Earnings (12 Month Trailing) 13.92x 14.79x Price to Book Value 1.97x 1.96x Price to Cash Flow 7.07x 10.23x Market Capitalisation (Millions in USD) 4,817 3,343 Dividend Yield 3.20% 2.90% Portfolio Diversification Top Sector Contributors 5 Total Sector Effect (%) Real Estate 0.45 Utilities 0.23 Materials 0.07 Top Security Contributors 5 Security Total Effect (%) GREENBAY PROPERTIES LTD 0.64 KCB GROUP LTD 0.46 SM PRIME HOLDINGS INC 0.29 AYALA LAND INC JG SUMMIT HOLDINGS INC 0.22 Top Sector Detractors 5 Total Sector Effect (%) Financials Telecommunication Services Energy Health Care Industrials Top Security Detractors 5 Security Total Effect (%) BINH MINH PLASTICS JSC VINGROUP JSC DHG PHARMACEUTICAL JSC GLOBAL TELECOM HOLDING SAE MASAN GROUP CORP Past performance is not an indicator or a guarantee of future performance. Contributors/detractors data shown is for the period from to

3 Geographic Weightings vs. MSCI Frontier Emerging Markets Select Countries Capped Index 2 ASIA MID-EAST L. AMERICA/CARIBBEAN AFRICA EUROPE CASH & CASH EQUIVALENTS % 25% 50% Templeton Frontier Markets Fund MSCI Frontier Emerging Markets Select Countries Capped Index Sector Weightings vs. MSCI Frontier Emerging Markets Select Countries Capped Index 2 Financials Consumer Staples Telecommunication Services Health Care Industrials Energy Consumer Discretionary Materials Information Technology 0.47 Utilities 2.90 Real Estate 8.70 Cash & Cash Equivalents % 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% Templeton Frontier Markets Fund MSCI Frontier Emerging Markets Select Countries Capped Index Top Ten Holdings 6 Top Holdings Sector Country % DHG PHARMACEUTICAL JSC Pharmaceuticals, Biotechnology & Life Vietnam 4.93 Sciences NATIONAL BANK OF KUWAIT SAKP Banks Kuwait 4.18 SONATEL Telecommunication Services Senegal 3.30 GLOBAL TELECOM HOLDING SAE Telecommunication Services Egypt 3.29 KCB GROUP LTD Banks Kenya 3.19 YPF SA Energy Argentina 3.05 HATTON NATIONAL BANK PLC Banks Sri Lanka 2.92 BINH MINH PLASTICS JSC Capital Goods Vietnam 2.71 TELECOM ARGENTINA SA Telecommunication Services Argentina 2.62 DELTA CORP LTD Food Beverage & Tobacco Zimbabwe 2.56 Supplemental Performance Statistics 3 Yrs 5 Yrs Since Inception Standard Deviation (%) Templeton Frontier Markets Fund MSCI Frontier Emerging Markets Select Countries Capped Index Tracking Error (%) Information Ratio Beta Sharpe Ratio Templeton Frontier Markets Fund MSCI Frontier Emerging Markets Select Countries Capped Index 7. Beta, Information Ratio and Tracking Error information are measured against the MSCI Frontier Emerging Markets Select Countries Capped Index. 3

4 Investment Team Portfolio Manager Years with Firm Years Experience Bassel Khatoun Ahmed Awny, CFA, Senior Vice President David Haglund, Senior Vice President Number of Members Average Years Experience Portfolio Managers/Analysts What Are the Key Risks? The value of shares in the Fund and income received from it can go down as well as up and investors may not get back the full amount invested. Performance may also be affected by currency fluctuations. Currency fluctuations may affect the value of overseas investments. The Fund invests mainly in equity securities of frontier markets around the world that are subject to significant price movements, frequently to a greater extent than equity markets generally or emerging markets. As a result, the performance of the Fund can fluctuate over time. Other significant risks include: currency risk, emerging markets risk, liquidity risk, operational risk. For full details of all of the risks applicable to this Fund, please refer to the Risk Considerations section of the Fund in the current prospectus of Franklin Templeton Investment Funds. 4

5 Important Legal Information Collective Investment Schemes in Securities (CIS) are generally medium to long term investments. The value of participatory interests may go down as well as up and past performance is not necessarily a guide to the future. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down. CIS are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees and charges and maximum commissions is available on request from Franklin Templeton International Services S.à r.l., 8A rue Albert Borschette, L-1246 Luxembourg. Commission and incentives may be paid and if so, would be included in the overall costs. Franklin Templeton Investment Funds ( FTIF ) are priced on a forward basis and prices are calculated daily. FTIF does not provide any guarantee either with respect to the capital or the return of a portfolio. FTIF is regulated in Luxembourg and the FTIF sub-funds available for public sale in South Africa are approved by the Financial Services Board. Investments in foreign securities may expose the fund to risks such as potential constraints on liquidity and repatriation of funds, macroeconomic, political, foreign exchange, tax, settlement and potential limitations on the availability of market information. For full information on all the risks applicable to this fund, please refer to the fund s prospectus. Franklin Templeton Investments SA (PTY) Ltd ( FTISA ) is an authorised Financial Services Provider. FTISA is a Member of the Association for Savings & Investment SA (ASISA). Copies of the latest prospectus, Minimum Disclosure Document (MDD) and the latest annual and semi-annual reports of FTIF are available on the website or may be obtained free of charge from Franklin Templeton International Services S.à r.l., 8A rue Albert Borschette, L-1246 Luxembourg or your local FTI representative. Performance is calculated as a lump-sum and is quoted in USD or in the base currency of the fund and its respective share classes currencies. Performance is calculated for the portfolio, individual investor performance may differ as a result of initial fees, the actual investment date, the date of reinvestment and dividend withholding tax. Annualised performance is the fund s total return expressed as an annual equivalent percentage rate over the time period listed. Currency fluctuations may affect the value of overseas investments. When investing in a fund denominated in a foreign currency, your performance may also be affected by currency fluctuations. In emerging markets, the risks can be greater than in developed markets. Investments in derivative instruments entail specific risks that may increase the risk profile of the fund. Past performance is not an indicator or a guarantee of future performance. The information provided is not a complete analysis of every material fact regarding any country, market, industry, security or fund. Because market and economic conditions are subject to change, comments, opinions and analyses are rendered as of the date of this material and may change without notice. A portfolio manager s assessment of a particular security, investment or strategy is not intended as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy; it is intended only to provide insight into the fund s portfolio selection process. Holdings are subject to change. In addition, it should not be assumed that any securities mentioned were or will prove to be profitable. Stocks mentioned in this report are not a solicitation to purchase those stocks, and are examples of some stocks which performed well. Not all stocks in the portfolio performed as well. For the most current information on the fund, please contact your Franklin Templeton marketing representative. Performance figures are not based on audited financial statements and assume reinvestment of interest and dividends. When comparing the performance of Franklin Templeton Investment Funds (the Fund ) with a benchmark index, it is important to note that the securities in which Franklin Templeton Investment Funds invests may be substantially different than those represented by the benchmark index. Furthermore, an investment in Franklin Templeton Investment Funds represents an investment in a managed investment company in which certain charges and expenses, including management fees, are applicable. These charges and expenses are not applicable to indices. Lastly, please note that indices are unmanaged and are not available for direct investment. Certain data and other information shown have been supplied by outside sources. While we consider that information to be reliable, we give no assurance that such data and information is accurate or complete. References to indexes are made for comparative purposes only and are provided to represent the investment environment existing during the time periods shown. The indices include a greater number of securities than those held in the Fund. An index is unmanaged and one cannot invest directly in an index. The performance of the index does not include the deduction of expenses and does not represent the performance of any Franklin Templeton fund. Past performance is not an indicator or a guarantee of future performance. 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. Important data provider notices and terms available at 2. 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. 3. Source for all information is Franklin Templeton Investments. Benchmark related data provided by FactSet. Past performance is not an indicator or a guarantee of future performance. Periods greater than one year are shown as average annual total returns. Fund performance data include reinvested dividends, and is net of management fees. Sales charges, other commissions, taxes and other relevant costs to be paid by the investor are not included. The fund offers other share classes subject to different fees and expenses, which will affect their performance. Please see the prospectus for details. 4. The portfolio characteristics listed are based on the fund s underlying holdings, and do not necessarily reflect the fund s characteristics. Due to data limitations all equity holdings are assumed to be the primary equity issue (usually the ordinary or common shares) of each security s issuing company. This methodology may cause small differences between the portfolio s reported characteristics and the portfolio s actual characteristics. In practice, Franklin Templeton s portfolio managers invest in the class or type of security which they believe is most appropriate at the time of purchase. The market capitalisation figures for both the portfolio and the benchmark are at the security level, not aggregated up to the main issuer. Source: Factset. Price ratio calculations for weighted average use harmonic means. Any exceptions to this are noted. Information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change. 5. Past performance is not an indicator or a guarantee of future performance. Information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change. Source: FactSet. Important data provider notices and terms available at Total Effect represents the excess return by sector as compared to Franklin Templeton Investments Kildare House The Oval, 1 Oakdale Road Newlands, Cape Town, 7700 South Africa Tel.: +27 (21) Fax.: +27 (21) Franklin Templeton Investments. All rights reserved.

6 the index. Performance attribution is calculated in the base currency of the fund. 6. 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. 8. 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). Franklin Templeton Investments Kildare House The Oval, 1 Oakdale Road Newlands, Cape Town, 7700 South Africa Tel.: +27 (21) Fax.: +27 (21) Franklin Templeton Investments. All rights reserved.