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 $ 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 Discrete Annual Performance (%) as at 30/09/2018 9/17-9/18 9/16-9/17 9/15-9/16 9/14-9/15 9/13-9/14 A (acc) USD Performance Net of Management Fees as at 30/09/2018 (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. 1. All holdings are subject to change. Holdings of the same issuers have been combined.

2 Portfolio Manager Insight Performance Review QUARTERLY KEY PERFORMANCE DRIVERS HELPED HURT ONE-MONTH KEY PERFORMANCE DRIVERS In Templeton Growth Fund, shares of US-based Advance Auto Parts, one the largest retailers of automotive aftermarket parts in North America, surged to a 52-week high early in the reporting period after the company posted second-quarter results that exceeded expectations and raised its full-year revenue outlook. The company also announced its plan to repurchase stock by the end of Shares of Eli Lilly and Company, a holding in Franklin Mutual Global Discovery Fund, were boosted by strong quarterly results announced in July. Additional drivers included attractive fundamentals and less concern amongst investors regarding the direct impact on the pharmaceutical industry of the Trump administration s efforts to lower prescription drug prices. The manager believes Eli Lilly has a strong product growth story with room for margin expansion. Templeton Global Bond Fund s net-negative positions in the Japanese yen and the euro contributed to absolute performance. The Japanese yen depreciated against the US dollar during the quarter, while the euro modestly weakened. Select duration exposures in Latin America (Argentina) detracted from Templeton Global Bond Fund s absolute performance as yields rose across several local markets in Latin America and Asia ex Japan. In Franklin Mutual Global Discovery Fund, the stock price of Renesas Electronics dropped when the company reported greater-thanexpected inventory levels, which led to a muted outlook for Shares fell further when Renesas announced the purchase of Integrated Devices Technology (IDT) at a premium to IDT s price before the announcement. While the deal weakens Renesas balance sheet, the manager believes the transaction makes strategic sense given IDT s complementary product portfolio and crossselling opportunities in the long run. Israeli generic drug-maker Teva Pharmaceutical Industries weighed on Templeton Growth Fund s results. The company s shares were volatile during the period, with trading activity around their highest levels in a year as investors weighed restructuring progress and positive drug trials against regulatory approval of a competitor s migraine therapy and lukewarm messaging on second-half conditions. HELPED HURT A net-negative position in the Japanese yen contributed to Templeton Global Bond Fund s absolute performance, while a netnegative position in the euro had a largely neutral effect. The Japanese yen depreciated against the US dollar in September, and the manager expects it to continue weakening in upcoming quarters on widening rate differentials with the United States. In Franklin Mutual Global Discovery Fund, shares of Volkswagen moved higher when the company announced that its truck unit will likely be ready for an initial public offering (IPO) in The manager believes an IPO makes strategic sense and will likely increase overall shareholder value. Individual contributors for Templeton Growth Fund included US enterprise software firm Oracle as its shares continued to rebound in September. The manager has long expected growing pains associated with the growth of Oracle s cloud business and resulting change in business mix, believing that some near-term pain was necessary to keep the company on a sustainable long-term growth trajectory. Although the industrials sector weighed on Templeton Growth Fund s performance, the manager believes select opportunities exist in the sector, particularly amongst companies benefitting from restructuring or exposure to growth-oriented end markets, such as aerospace/defence and industrial automation. The stock price of General Electric (GE), held by Franklin Mutual Global Discovery Fund, dropped in September when the company stated that fan blades in some of its power-plant turbines were experiencing oxidation problems. In early October, GE unexpectedly replaced its chief executive officer (CEO). In the manager s view, bringing in an outsider CEO with a successful track record is a positive move. In Templeton Global Bond Fund, currency positions in Asia ex Japan (the Indian rupee) detracted from absolute performance. The fund continued to hold currency positions in a number of countries the manager believes have strong growth fundamentals and compelling interest-rate differentials. Outlook & Strategy Overall, Templeton Global Bond Fund managers investment convictions remain largely unchanged, despite the escalation in emerging-market risk aversion in recent months. Many of the countries that they believed were undervalued earlier this year have become even more undervalued with the recent risk-off cycle. Longer term, they continue to have a positive outlook on a number of local-currency markets that they believe are fundamentally stronger than markets have been indicating. Templeton Growth Fund s managers observed that market conditions remain challenging for value investors. Despite eight rate hikes by the Fed since 2016, real interest rates in the United States and elsewhere remain pinned near historic lows. For Franklin Mutual Global Discovery Fund, the managers note that corporate fundamentals remain a positive driver for developed-market equities. Lower corporate tax rates and the repatriation of foreign earnings appear to be providing a boost to US corporate earnings, business investment and shareholder returns. The earnings outlooks in Europe and Japan also remain upbeat. franklintempleton.lu 2

3 Portfolio Characteristics 6,7 Portfolio Price to Earnings (12 Month Trailing) 14.04x Price to Book Value 1.45x Price to Cash Flow 6.56x Market Capitalisation (Millions in USD) 95,646 Dividend Yield 3.02% Portfolio Yield to Maturity 7.99% Yield to Worst 7.97% Average Duration Average Credit Quality 8 Average Weighted Maturity Yrs BBB 3.67 Yrs Portfolio Diversification Geographic Allocation 9 Percent of Equity United States United Kingdom France Germany Switzerland Netherlands China Japan South Korea Italy Canada Israel Luxembourg Denmark Singapore Finland India Hong Kong Thailand Spain Macao Sweden Ireland Indonesia % 10% 20% 30% 40% 50% Geographic Allocation 2 Mexico South Korea Brazil Indonesia India Colombia Argentina 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. franklintempleton.lu 3

4 Sector Allocation 9 Percent of Equity Pharmaceuticals, Biotechnology & Life Sciences Banks Energy Insurance Media & Entertainment Capital Goods Telecommunication Services Technology Hardware & Equipment Software & Services Health Care Equipment & Services Diversified Financials Utilities Materials Automobiles & Components Food, Beverage & Tobacco Food & Staples Retailing Retailing Consumer Durables & Apparel Consumer Services 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 BBB Brazilian Real BB B 7.50 Indonesian Rupiah B Indian Rupee CCC+ CC US Dollar 6.10 N/A 0% 5% 10% 15% 20% 25% Colombian Peso 5.24 Investment Grade Non-Investment Grade Argentine Peso 4.37 Ghanaian Cedi-New Philippine Peso % 20% 40% franklintempleton.lu 4

5 Top Ten Holdings 11 Percent of Total Top Holdings Sector Country % Eli Lilly & Co. Pharmaceuticals, Biotechnology & Life United States 1.46 Sciences Citigroup Inc. Banks United States 1.38 Government of Mexico, senior note, Fixed Income Mexico 1.34 M, 5.00%, 12/11/19 Samsung Electronics Co. Ltd. Technology Hardware & Equipment South Korea 1.17 BP PLC Energy United Kingdom 1.09 Medtronic PLC Health Care Equipment & Services United States 1.08 Korea Treasury Bond, senior note, Fixed Income South Korea %, 9/10/21 Letra Tesouro Nacional, Strip, 7/01/19 Fixed Income Brazil 1.04 Merck & Co. Inc. Pharmaceuticals, Biotechnology & Life United States 0.95 Sciences Walgreens Boots Alliance Inc. Food & Staples Retailing United States 0.90 Investment Team Portfolio Manager Years with Firm Years Experience T. Anthony Coffey, CFA, Senior Vice President - Portfolio Manager Marzena Hofrichter, CFA, Portfolio Manager 8 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. franklintempleton.lu 5

6 Important Legal Information This document does not constitute legal or tax advice nor is it investment advice or an offer for shares of Franklin Templeton Investment Funds (the Fund ). Subscriptions to shares of the Fund can only be made on the basis of the current prospectus and, where available, the relevant Key Investor Information Document, accompanied by the latest available audited annual report and the latest semi-annual report accessible on our website or which can be obtained, free of charge, from Franklin Templeton International Services, S.à r.l. - 8A, rue Albert Borschette, L-1246 Luxembourg. 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 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 Franklin Templeton International Services, S.à r.l. 8A, rue Albert Borschette L-1246 Luxembourg franklintempleton.lu 2018 Franklin Templeton Investments. All rights reserved.

7 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 International Services, S.à r.l. 8A, rue Albert Borschette L-1246 Luxembourg franklintempleton.lu 2018 Franklin Templeton Investments. All rights reserved.