Franklin Global Fundamental Strategies Fund A (acc) USD

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1 Franklin Global Fundamental Strategies Fund A (acc) USD Franklin Templeton Investment Funds Fund Manager Report Total Return Multi-Asset Product Details 1 Fund Assets $2,004,270, Fund Inception Date 25/10/2007 Bloomberg ISIN Base Currency Investment Style Morningstar Category Overall Morningstar Rating TM 3 FGFSACU LX LU USD Total Return USD Moderate Allocation Asset Allocation 2 Percent of Total % Equity Fixed Income Cash & Cash Equivalents Fund Description The fund s investment objective is to seek capital appreciation through a diversified, valueoriented approach, with a secondary objective of seeking income. The fund generally invests in equity securities of companies of any market capitalisation located anywhere in the world, including emerging markets, as well as fixed and floating rate debt securities and debt obligations issued by government, government-related and/or corporate entities worldwide. The fund makes an allocation of its assets between three different investment strategies followed independently by the Templeton Global Equity, Templeton Global Macro and Franklin Mutual Series management groups, with the aim to maintain an equal exposure to two global equity strategies and one global fixed income strategy, subject to appropriate monitoring and rebalancing. Performance Data Performance Net of Management Fees as at 31/07/2018 (Dividends Reinvested) (%) 4,5 1 Mth 3 Mths YTD 1 Yr 3 Yrs 5 Yrs 10 Yrs Since Inception (25/10/2007) A (acc) USD Calendar Year Returns (%) 80% 40% 0% -40% A (acc) USD Past performance is not an indicator or a guarantee of future performance. Portfolio Manager Insight Performance Review ONE-MONTH KEY PERFORMANCE DRIVERS HELPED HURT In Mutual Global Discovery Fund, Check Point Software reported positive quarterly results across the board. The ongoing strength in demand for digital security products helped fuel revenue growth in new product subscriptions and maintenance. Check Point also increased the pace of its share buyback efforts. Currency positions in Latin America (the Mexican peso, Brazilian real and Argentine peso) contributed to Templeton Global Bond Fund s absolute performance. Several local currency markets in Latin America notably rebounded in July after enduring periods of volatility in May and June. US-based pharmaceuticals firm Eli Lilly was amongst Templeton Growth Fund s top performers over the reporting period, with shares surging after the company beat analysts consensus estimates and announced plans to spin off its animal health unit. Although the materials sector was an overall detractor for Templeton Growth Fund, the managers remained positive on select precious metals holdings in the sector. In the manager s analysis, the price of gold is the lowest it has ever been relative to key variables like money supply, global debt and financial assets. For Templeton Global Bond Fund, select duration exposures in Latin America had a largely neutral effect on absolute results (Argentina detracted, while Brazil contributed). Nokia reported quarterly earnings short of market expectations due to weaker demand in China and Europe, and this weighed on absolute returns for Mutual Global Discovery Fund. However, Nokia reiterated its full year earnings guidance and stated that it remains on course to reach its 2018 cost savings target. 1. All holdings are subject to change. Holdings of the same issuers have been combined.

2 Outlook & Strategy Higher crude oil prices have led energy company valuations to become generally less attractive now than at the start of the year, according to Mutual Global Discovery Fund. The manager still believes some upside potential still exists, as the demand for crude oil is likely to grow faster than supply. In the manager s view, the more compelling investments are amongst infrastructure companies, which are likely to benefit from increasing US onshore crude oil production, while having limited direct exposure to potentially volatile commodity prices. Templeton Global Bond Fund continues to hold select local-currency duration exposures in countries that the managers believe have healthy fundamentals and significantly higher yields than those available in developed markets. The managers also expect currency appreciation across a select subset of emerging markets. At the end of the second quarter, Templeton Growth Fund s managers noted 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. Put another way, value globally has been this cheap only a tiny fraction of the time in the past three decades, which the managers believe could be a turning point for value investors. Portfolio Characteristics 6,7 Portfolio Price to Earnings (12 Month Trailing) 14.16x Price to Book Value 1.50x Price to Cash Flow 6.64x Market Capitalisation (Millions in USD) 96,261 Dividend Yield 2.90% Portfolio Yield to Maturity 8.06% Yield to Worst 8.03% Average Duration Yrs Average Credit Quality 8 BBB Average Weighted Maturity 3.83 Yrs Portfolio Diversification Geographic Allocation 9 Percent of Equity United States United Kingdom France Germany Switzerland Netherlands Japan China South Korea Italy Israel Canada Luxembourg Singapore India Finland Denmark Hong Kong Thailand Spain Sweden Macao Ireland Indonesia % 10% 20% 30% 40% 50% Geographic Allocation 2 Mexico South Korea Brazil Indonesia India Argentina Colombia Ghana Philippines Ukraine United States % -30% -20% -10% 0% 10% 20% 30% The average credit quality (ACQ) rating may change over time. The portfolio itself has not been rated by an independent rating agency. The letter rating, which may be based on bond ratings from different agencies, is provided to indicate the average credit rating of the portfolio s underlying bonds and generally ranges from AAA (highest) to D (lowest). The ACQ is determined by assigning a sequential integer to all credit ratings AAA to D, taking a simple, asset-weighted average of debt holdings by market value and rounding to the nearest rating. The risk of default increases as a bond s rating decreases, so the ACQ provided is not a statistical measurement of the portfolio s default risk because a simple, weighted average does not measure the increasing level of risk from lower rated bonds. The ACQ is provided for informational purposes only. Derivatives are excluded from this breakdown. 2

3 Sector Allocation 9 Percent of Equity Pharmaceuticals, Biotechnology & Life Sciences Banks Energy Insurance Capital Goods Software & Services Telecommunication Services Media Technology Hardware & Equipment Health Care Equipment & Services Diversified Financials Materials Utilities Automobiles & Components Food, Beverage & Tobacco Retailing Food & Staples Retailing Consumer Services Consumer Durables & Apparel Transportation Household & Personal Products Real Estate Semiconductors & Semiconductor Equipment Currency Allocation % 5% 10% 15% 20% Sector Allocation 2 Local Currency Government/Agency Bonds - Investment Grade Local Currency Government/Agency Bonds - Non- Investment Grade Corporate Bonds - Non-Investment Grade Derivatives Non-Local Currency Sovereign Bonds - Non-Investment Grade Credit Quality Ratings % 25% 50% 75% 100% Mexican Peso AA A South Korean Won BBB Brazilian Real BBB- BB Indonesian Rupiah B B Indian Rupee CC 0.43 US Dollar 5.84 N/A % 5% 10% 15% 20% 25% Argentine Peso 5.66 Investment Grade Non-Investment Grade Colombian Peso 5.32 Ghanaian Cedi-New 2.18 Philippine Peso % 20% 40% 3

4 Top Ten Holdings 11 Percent of Total Top Holdings Sector Country % Eli Lilly & Co. Pharmaceuticals, Biotechnology & Life United States 1.45 Sciences Citigroup Inc. Banks United States 1.35 Government of Mexico, senior note, Government securities Mexico 1.29 M, 5.00%, 12/11/19 Medtronic PLC Health Care Equipment & Services United States 1.09 Letra Tesouro Nacional, Strip, 7/01/19 Government securities Brazil 1.08 Samsung Electronics Co. Ltd. Technology Hardware & Equipment South Korea 1.08 BP PLC Energy United Kingdom 1.04 Korea Treasury Bond, senior note, Government securities South Korea %, 9/10/21 Government of Indonesia, senior Government securities Indonesia 0.94 bond, FR70, 8.375%, 3/15/24 Merck & Co. Inc. Pharmaceuticals, Biotechnology & Life Sciences United States 0.86 Investment Team Portfolio Manager Years with Firm Years Experience T. Anthony Coffey, CFA, Senior Vice President - Portfolio Manager Marzena Hofrichter, CFA, Portfolio Manager 7 12 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 and debt securities of companies around the world, including emerging markets. Such securities have historically been subject to significant price movements that may occur suddenly due to market or company-specific factors. As a result, the performance of the Fund can fluctuate considerably over time. Other significant risks include: credit risk, derivatives risk, emerging markets risk, liquidity risk, currency risk, Shanghai-Hong Kong Stock Connect 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 This document is intended to be of general interest only and does not constitute legal or tax advice nor is it an offer for shares or invitation to apply for shares of any of the Luxembourg-domiciled SICAV Franklin Templeton Investment Funds (the Fund ). Given the rapidly changing market environment, Franklin Templeton Investments disclaims responsibility for updating this material. Subscriptions to shares of the Fund can only be made on the basis of the current prospectus of the Fund, accompanied by the latest available audited annual report and the latest semi-annual report if published thereafter. An investment in the Fund entails risks which are described in the Fund s prospectus. If the fund invests in a specific sector or geographical area, the returns may be more volatile than a more diversified fund. A copy of the latest prospectus, the annual report and semi-annual report, if published thereafter can be found on our website: or can be obtained, free of charge, from the address below. Issued by Franklin Templeton Investments (ME) Limited, authorized and regulated by the Dubai Financial Services Authority. Dubai office: Franklin Templeton Investments, The Gate, East Wing, Level 2, Dubai International Financial Centre, P.O. Box , Dubai, U.A.E., Tel.: Fax: Past performance is not an indicator or a guarantee of future performance. 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. Investment in the Fund entails risks which are described in the Fund s prospectus and, where available, in the relevant Key Investor Information Document. Special risks may be associated with a Fund s investment in certain types of securities, asset classes, sectors, markets, currencies or countries and in the Fund s possible use of derivatives. References to particular industries, sectors or companies are for general information and are not necessarily indicative of a fund s holdings at any one time. 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. Where a Fund invests in emerging markets, this investment can be more risky than an investment in developed markets. No shares of the Fund may be directly or indirectly offered or sold to residents of the United States of America. Shares of the Fund are not available for distribution in all jurisdictions and prospective investors should confirm availability with their local Franklin Templeton Investments representative before making any plans to invest. 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. Securities mentioned in this report are not a solicitation to purchase those securities, and are examples of some securities which performed well. Not all securities in the portfolio performed well. These securities do not represent all the securities purchased, sold or recommended for advisory clients, and the reader should not assume that investment in the security listed was or will be profitable. Holdings are subject to change, holdings of the same issuer have been combined. The information provided is not a recommendation to purchase, sell or hold any particular security. The security identified does not represent the Fund s entire holdings and in the aggregate, may represent a small percentage of such holdings. There is no assurance that security purchased will remain in the Fund, or that security sold will not be repurchased. 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 the Fund 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. Important data provider notices and terms available at 2. 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. Information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change Morningstar, Inc. All rights reserved. The information contained herein is proprietary to Morningstar and/or its content providers; may not be copied or distributed; and 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. 4. 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. 5. When performance for either the portfolio or its benchmark has been converted, different foreign exchange closing rates may be used between the portfolio and its benchmark. 6. 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 Franklin Templeton Investments The Gate, East Wing, Level 2 Dubai International Financial Centre P.O. Box Dubai, U.A.E. Tel.: Fax.: Franklin Templeton Investments. All rights reserved.

6 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. Average Credit Quality, Average Duration, Average Weighted Maturity, Yield to Maturity and Yield to Worst data points pertain to the fixed income component of the fund. Information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change. 7. Yield to Maturity, Yield to Worst, Average Duration and Average Weighted Maturity reflect certain derivatives held in Portfolio (or their underlying reference assets). 9. 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. 10. Ratings shown are assigned by one or more Nationally Recognized Statistical 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. If listed, the NR category consists of rateable securities that have not been rated by an NRSRO. The N/A category consists of nonrateable securities (e.g., equities). Cash includes equivalents, which may be rated. Derivatives are excluded from this breakdown. Information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change. 11. 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. Franklin Templeton Investments The Gate, East Wing, Level 2 Dubai International Financial Centre P.O. Box Dubai, U.A.E. Tel.: Fax.: Franklin Templeton Investments. All rights reserved.