Franklin Templeton Shariah Funds Templeton Shariah Global Equity Fund Value Fund Profile Fund Details Inception Date 10 September 2012 Investment Style Benchmark(s) Value MSCI AC World Islamic Index FUND OBJECTIVE Templeton Shariah Global Equity Fund (the Fund ) seeks long-term capital growth by investing primarily in Shariah compliant equity securities of companies located anywhere in the world, including Emerging Markets. The Fund managers believe that greater value can be found by looking at companies globally rather than by limiting oneself to a single market. Sir John Templeton Founder, Templeton Funds It just stands to reason that if you re looking all over the world, you will find better bargains than if you re looking in only one nation. WHY CONSIDER THIS FUND Basic Building Block of a Shariah-Compliant Asset Allocation. Individual markets outperform one another in varying time periods and therefore investing in different countries can help diversify market risk. A diversified Shariah Global Equity fund is a great complement for Shariah-compliant portfolios as it can increase returns compared to an all-global sukuk portfolio. The Fund invests in stocks across different geographies, sectors and market capitalisation. Opportunity to Capitalise on Shariah-Compliant Investment Ideas Globally. Templeton has always believed that when searching for the best investment opportunities, bargains are borderless. Investing in a Shariah Global Equity fund provides easy access to Shariah-compliant global investment opportunities. To find the most promising companies, the Fund managers leverage the experience and resource infrastructure developed over the last 70 years, including analysts and offices that span the globe, from Asia to Europe to the Americas. The Fund invests in both developed and emerging markets. Shariah-Compliance with a Strong Governance Framework. A UCITS 1 -compliant Shariah Global Equity fund provides international passportability and a strong governance framework. Commitment to Shariah investing principles. Templeton brings a premier global equity strategy, with a value investment style and a research process that has been tested over 70 years, to investors seeking Shariah-compliant investing. We apply our asset management expertise in combination with the knowledge and advice of Shariah scholars to offer investors a Shariah-compliant portfolio. The Fund is independently reviewed and endorsed by the Amanie International Shariah Supervisory Board, highly regarded for their extensive Shariah and technical understanding. The Amanie Scholars provide initial approval on investment objectives and strategy, as well as on going supervisory and monitoring services to ensure continuous adherence to internationally accepted Shariah principles and standards. A clear philosophy, consistently applied. For more than 70 years, Templeton has been synonymous with global investment management. We believe in a consistent, long-term strategy based on the three timeless principles of investing: value, patience and bottom-up. 1. Undertaking for the collective investment of transferable securities UCITS coordinates the distribution and management of unit trusts amongst countries within the European Union. For Professional Investor Use Only. Not for Distribution to Retail Investors.
INVESTMENT PHILOSOPHY & PROCESS Founded in 1940, Templeton s investment philosophy is built upon a disciplined, yet flexible, long-term value-oriented approach. It is based on three tenets that we believe are critical to successful long-term investing: value, patience and bottom-up stock selection. Value. We seek to identify the underlying worth of a business and determine what that company s assets can generate in earnings and cash flow. We put all of our research efforts into identifying stocks trading at a discount to what our research indicates the company is worth. As long-term valuation-driven investors, we focus on normalised earnings to seek out compelling opportunities in all sectors and markets around the globe. Patience. Stock markets are often short sighted and affected by sentiment, which creates short-term distortions in share prices. Templeton s long-term focus allows us to look past short-term market noise and identify the fundamental value of a stock. Through our strong research, we determine what a company is worth and patiently wait for the opportunity to purchase it at bargain levels. The depth of our research also gives us the conviction to wait for the market to reflect the fair value of a stock once it is added to our portfolios. Bottom-Up. We conduct comprehensive fundamental analysis to assess a company s long-term prospects and catalysts for value recognition. Templeton s commitment to original research drives our process to uncover opportunities wherever they may exist. Templeton s investment process consists of five steps: Step 1: Identify Potential Bargains Templeton s unconstrained search for value allows us to identify bargains wherever they exist. Quantitative screening, qualitative assessment and the deep experience of our analysts narrows the investable universe of approved Shariah-compliant companies down to a group of securities that merits closer analysis. Our best screen is our experience: Templeton portfolio managers and analysts are industry experts with a comprehensive knowledge of every aspect of their industries. Step 2: In-Depth Fundamental Analysis At Templeton, in-depth fundamental analysis is the foundation of our investment process. Our analysts have been aligned by global industry, with secondary country coverage. This multi-faceted global approach to industry, sector and country research coverage offers a comprehensive perspective. Templeton analysts conduct rigorous fundamental security analysis on all potential investment ideas to determine if the stock is trading at a substantial discount to what our research indicates the company is worth over a normalised five-year investment horizon. This focus on the long term ensures that our research is not biased by short-term cyclical considerations. Step 3: Research Team Evaluation Templeton s collaborative culture ensures that each stock recommendation is thoroughly debated and critiqued. Research meetings, during which analysts present overviews of their stock recommendations to the team, are conducted twice-weekly, and a Devil s Advocate is appointed to take the lead in the questioning of each potential investment idea. This ensures a focused discussion, with each investment idea subjected to the intense scrutiny and rigorous examination of the entire team. Stocks are approved for the Bargain List when the recommendation passes the Templeton Global Equity Group s scrutiny, and the Director of Research determines that the analysis has met Templeton s standards. The Bargain List is comprised of companies that our analysts have determined are mispriced by the market and most undervalued relative to their business prospects based upon our five-year normalised earnings and/or cash flow forecasts. The Core List consists of stocks that are still attractively valued but above Bargain List cut-offs. These undervalued stocks still have significant upside potential and are typically the main drivers of portfolio performance. The Source of Funds List consists of companies that our analysts believe are fully valued, and are recommended for sale. Step 4: Bottom-Up Portfolio Construction At Templeton, we believe that the best investment decisions draw on the collective knowledge of the entire research team. Original research is the foundation of our approach, and the portfolio construction process leverages the insights of all our portfolio managers/analysts within a disciplined framework. All Templeton portfolios are built from the bottom up, on a stock-by-stock basis, with a consistent focus on long-term valuations. As we are concerned first and foremost with the pursuit of compelling valuations, we do not construct portfolios to match the characteristics of any specific benchmark. Our country and industry allocations are a result of the bottom-up stock selection process. When selecting stocks, the portfolio manager has discretion but must do so within a disciplined, structured framework of controls designed to ensure consistency and diversification for all clients as well as compliance to accepted Shariah principles and standards. For Professional Investor Use Only. Not for Distribution to Retail Investors. 2
Step 5: Portfolio Monitoring and Risk Management Templeton actively manages our clients portfolios to ensure they continually reflect our best thinking. This is accomplished through a team commitment to ongoing fundamental research and risk management. Several internal groups work closely with our portfolio managers to monitor portfolios and manage risk, and their strong input and support is critical to the portfolio management process. PORTFOLIO CONSTRUCTION Templeton does not use model portfolios. All portfolios are built from the approved stock lists that comprise Templeton s Global Research Database. Portfolio managers select stocks from the Bargain List, which is comprised of companies our analysts believe are most undervalued relative to their longer-term business prospects, and the more attractively valued end of the Core List (stocks that are still attractively valued but above Bargain List cut-offs). Each stock has an established valuation or price target that is set by the analyst responsible for recommending the security, and stocks are purchased only when the price is within this pre-set price range. A stock is moved to the Source of Funds List (those stocks our analysts believe are fully valued) and sold if: The security price exceeds our estimation of value, Greater value exists in another similar security, or A fundamental change occurs at a company to alter our forecasts. All holdings are regularly reviewed to ensure that analyst recommendations are up-to-date and accurately reflect any changes in company fundamentals. In this way, our ongoing fundamental research drives all buy and sell decisions. A Disciplined, Repeatable Process, Tailored for Shariah Investors For Professional Investor Use Only. Not for Distribution to Retail Investors. 3
RISK MANAGEMENT The Fund has specific investment guidelines and requirements that are set forth by the board of directors of Franklin Templeton Shariah Funds and reviewed on a quarterly basis to ensure that the risk management process is adhered to: Stock Selection Constraints Portfolio managers have discretion in selecting stocks for the portfolio, but they must be within the approved stock list and general guidelines. Asset Classes The Fund invests primarily in equities. Country/Regional and Sector Limits There are no limits. Min/Max Stock Positions Individual stock positions are limited, with a typical weighting of 1% to 3%. Additionally, market, political and economic risks are taken into account and addressed primarily at the stock level. Analysts take all political, economic and currency factors into consideration when making financial forecasts and recommendations. PORTFOLIO MANAGEMENT TEAM The Fund is managed by members of the Templeton Global Equity Group, which consists of 23 portfolio managers/analysts and 13 dedicated research analysts located in offices worldwide. All portfolio managers also have research analyst responsibilities. Team members are organised along global industry lines, allowing them to compare companies on a worldwide basis without country limitations. Alan Chua is the lead portfolio manager of the Templeton Shariah Global Equity Fund. Cash Policy Portfolio managers intend to remain fully invested at all times with a maximum cash position of 5%. Currency Policy Portfolios are not actively hedged. Capitalisation Limits In general, there are no established minimum market-cap guidelines. However for reason of liquidity, the analysts only research companies with more than US$150 million in free float. Risk management is integrated into every aspect of the Fund s investment process. We primarily focus on three types of risk: Stock-specific risk is addressed primarily through the quality of Templeton s research. A disciplined sell methodology also helps minimise stock-specific risk. Portfolio risk is addressed by creating fund portfolios that are well-diversified and benefit from Templeton s best thinking. Weekly peer reviews allow portfolio managers to review their positioning relative to their peers and internal guidelines, and to ensure that each portfolio continually reflects Templeton s best investment practices. Operational risk is minimised by the due diligence of the portfolio managers and the separation of all major investment and its related functions. A comprehensive system of checks and balances involving distinct and independent groups ensures that all investment guidelines and restrictions are strictly adhered to. For Professional Investor Use Only. Not for Distribution to Retail Investors. 4
Alan Chua, CFA Executive Vice President, Portfolio Manager, Research Analyst Templeton Global Equity Group Templeton Asset Management Limited Singapore Alan Chua is an executive vice president and research analyst for the Templeton Global Equity Group, as well as a portfolio manager for a number of institutional and retail clients based in and outside Singapore. He has global research responsibilities for the machinery industry, as well as country research coverage of Japan. Prior to joining Franklin Templeton in 2000, Mr. Chua was an associate director with UBS Asset Management and a senior corporate relationship officer for Deutsche Bank. He entered the financial services industry in 1989. Mr. Chua holds a B.Sc. in economics from the University of Oregon and an M.B.A. from the London Business School. He is a Chartered Financial Analyst (CFA) charterholder. Peter Wilmshurst, CFA Executive Vice President Portfolio Manager,Research Analyst Templeton Global Equity Group Franklin Templeton Investments Australia Limited Melbourne, Victoria, Australia Peter Wilmshurst is an executive vice president in the Templeton Global Equity Group with research responsibility for banks in Europe, and Asian telecommunications companies. He is also the coordinator for the financials sector team and the portfolio manager of a number of Templeton's global portfolios. Prior to joining Franklin Templeton in 1998, Mr. Wilmshurst was an equity portfolio manager and analyst with Norwich Investment Management in Australia and an actuary at MLC Life Company. He entered the financial services industry in 1993. Mr. Wilmshurst holds a bachelor of economics degree and a master of economics degree from Macquarie University (Australia). He qualified as a Fellow of the Institute of the Actuaries of Australia and as a Fellow of the Financial Services Institute of Australia. Mr. Wilmshurst is a Chartered Financial Analyst (CFA) charterholder and a past president of the CFA Society of Melbourne. For Professional Investor Use Only. Not for Distribution to Retail Investors. 5
AMANIE INTERNATIONAL SHARIAH SUPERVISORY BOARD Sheikh Dr. Mohamed Ali Elgari, Chairman, Kingdom of Saudi Arabia Dr. Mohamed Ali Elgari is a Professor of Islamic Economics and the former Director of the Centre for Research in Islamic Economics at King Abdul Aziz University in Saudi Arabia. He is an advisor to many Islamic financial institutions throughout the world and is also on the Shariah board of the Dow Jones Islamic index. He is also a member of the Islamic Fiqh Academy as well as the Islamic Accounting & Auditing Organisation for Islamic Financial Institution (AAOIFI). Dr. Elgari has written several books on Islamic banking. He graduated from the University of California with a Ph.D in Economics. Dr. Muhammad Amin Ali Qattan, Kuwait Dr. Muhammad Amin Ali Qattan has a Ph.D. in Islamic Banking from Birmingham University and is himself a lecturer as well as a prolific author of texts and articles on Islamic economics and finance. He currently is the Director of Islamic Economics Unit, Centre of Excellence in Management at Kuwait University. Dr Qattan also serves as the Shariah adviser to many reputable institutions such as Ratings Intelligence, Standard & Poors Shariah indices, Al Fajer Retakaful, amongst others. He is a highly regarded Shariah scholar and is based in Kuwait. Dr. Mohd Daud Bakar, Malaysia Dr. Mohd Daud Bakar is the founder and group chairman of Amanie Advisors, a global boutique Shariah advisory firm with offices located in Kuala Lumpur, Dubai, Luxembourg, Cairo, Kazakhstan, Oman, Australia, South Korea and Dublin. He is also the founder and chairman of Amanie Nexus Sdn Bhd (Kuala Lumpur). Prior to this, he was the deputy vice-chancellor at the International Islamic University Malaysia. He received his first degree in Shariah from University of Kuwait in 1988 and obtained his PhD from University of St. Andrews, United Kingdom in 1993. In 2002, he went on to complete his external Bachelor of Jurisprudence at University of Malaya. He has published a number of articles in various academic journals and has made many presentations in various conferences both local and overseas. Dr. Mohd Daud is currently the chairman of the Shariah Advisory Council of the Central Bank of Malaysia, the SACSC and the Shariah Supervisory Council of Labuan Financial Services Authority. He is also a member of the Shariah Board of Dow Jones Islamic Market Index (New York), Oasis Asset Management (Cape Town, South Africa), The National Bank of Oman, Financial Guidance (USA), BNP Paribas (Bahrain), Morgan Stanley (Dubai), Jadwa-Russell Islamic Fund (Kingdom of Saudi Arabia), Bank of London and Middle East (London), Noor Islamic Bank (Dubai), Islamic Bank of Asia (Singapore), and in other financial institutions both local and abroad. Apart from that, Dr. Mohd Daud is also actively advising, locally and overseas, on capital markets product structuring such as sukuk. Dr. Osama Al Dereai, Qatar Dr. Osama Al Dereai is a Shariah scholar from Qatar. He has extensive experience in teaching, consulting and research in the field of Islamic finance. He received his Bachelor's degree specialising in the Science of Hadeth Al Sharef from the prestigious Islamic University of Madinah (Saudi Arabia). He obtained his Masters degree from the International Islamic University (Malaysia) and was later conferred his Doctorate in Islamic Transactions from the University of Malaya. Dr Al Dereai is a Shariah board member of various financial institutions which include the First Leasing Company, Barwa Bank, First Investment Company and Ghanim Al Saad Group of Companies amongst others. For Professional Investor Use Only. Not for Distribution to Retail Investors. 6
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 Shariah-compliant equity and equity-related securities of companies around the world. 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: emerging markets risk, currency risk, liquidity risk, Shariah compliance 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. CFA and Chartered Financial Analyst are trademarks owned by CFA Institute. Templeton Shariah Global Equity Fund is a sub-fund of the Luxembourg-domiciled SICAV Franklin Templeton Shariah Funds. 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 Shariah 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. 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. Past performance is not an indicator or a guarantee of future performance. 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 and are more fully 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. The investment activities will be undertaken in accordance with the Shariah Guidelines. As a consequence, the performance of a Fund may possibly be lower than other investment funds that do not seek to strictly adhere to the Islamic investment criteria. The requirement to purify cash holdings or dividend income will likely result in payments being made to charities. The return to investors will be reduced by the amount of such payments. The International Shariah Supervisory Board of Amanie Advisors Sdn Bhd has certified that the Fund is in compliance with the requirements of the Shariah principles. 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. Opinions expressed are the author s at publication date and they are subject to change without prior notice. Any research and analysis contained in this document has been procured by Franklin Templeton Investments for its own purposes and is provided to you only incidentally. A copy of the latest prospectus, the annual report and semi-annual report, if published thereafter can be found on our website: www.franklintempletongem.com 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 506613, Dubai, U.A.E., Tel.: +9714-4284100 Fax:+9714-4284140. For Professional Investor Use Only. Not for Distribution to Retail Investors. DE 06-18 2018 Franklin Templeton Investments. All rights reserved.