Templeton Euroland Fund A (acc) EUR Franklin Templeton Investment Funds Fund Manager Report Value Equity Product Details 1 Fund Assets 581,473,382.53 Fund Inception Date 08.01.1999 Number of Issuers 56 Bloomberg Base Currency Investment Style Benchmark Morningstar Category Asset Allocation 2 % Equity 99.89 Cash & Cash Equivalents Fixed Income Overall Morningstar Rating TM 3 TEMGROA LX EUR Value Eurozone Large-Cap Equity Fund Description The Fund aims to achieve long-term capital appreciation by investing primarily in equity and debt securities of European Monetary Union member country governments and companies with at least 75% of its total assets in equity securities issued by companies which have their head office in the European Union. Performance Data Performance Net of Management Fees as at 31.01.2019 (Dividends Reinvested) (%) 4,5 Since Inception 1 Mth 3 Mths YTD 1 Yr 3 Yrs 5 Yrs 10 Yrs (08.01.1999) A (acc) EUR 5.89-2.98 5.89-14.14 4.40 3.19 8.13 3.85 6.33-0.75 6.33-9.32 5.99 5.79 9.06 3.72 Calendar Year Returns (%) 80% 40% 0% -40% -16.69-12.01 8.49 13.30 9.33 16.70 5.25 10.55 5.08-4.20 30.36 24.42 22.80 20.61-9.15-14.08 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 0.98 3.29 28.66 18.09 A (acc) EUR Past performance is not an indicator or a guarantee of future performance. Portfolio Manager Insight Performance Review ONE-MONTH KEY PERFORMANCE DRIVERS Helped Hurt Stocks Sectors Countries JENOPTIK AG Information Technology (Stock Selection) Italy (Stock Selection) Siemens Gamesa Renewable Energy, S.A. Materials (Stock Selection) Spain (Stock Selection) LANXESS AG Consumer Staples (Underweight) Ireland zooplus AG Consumer Discretionary (Stock Selection) Belgium (Stock Selection) Telefonica Deutschland Holding AG Health Care (Overweight) Finland (Stock Selection) Flow Traders NV Industrials (Stock Selection) Germany (Stock Selection) We have continued to find attractive bargains in the health care sector, which on average generates higher revenue growth and margins than the global market with lower-than-average correlation and leverage, according to our analysis. Concerns persist about regulation and pricing, but history suggests that companies capable of innovating to provide products that address unmet medical needs can continue to thrive and profit. Shares of Lanxess, a specialty chemicals company, rebounded from fourth-quarter weakness and finished the month as the fund s top relative contributor in the materials sector. Several of the company s segments have been performing very strongly (including engineering plastics and specialty additives), and earnings have been solid overall. As of year-end, the stock traded at what we view as an excessive discount to its average historical multiples and to chemical peers, and which we believe does not accurately reflect its earnings and cash flow power through the cycle. The stock price of Telefonica Deutschland, one of three mobile network operators in Germany, declined in value at the prospect of a fourth operator entering the market. We believe investors have under-appreciated the growth from high-margin wholesale revenue which has benefitted from rising mobile data consumption. 1. All holdings are subject to change. Holdings of the same issuers have been combined.
Outlook & Strategy European economic indicators remain quite mixed, reducing confidence that the economy will bounce back from last year s summer lull as strongly as initially expected. Political events will likely have considerable influence, for better or worse, on the direction of economic growth, financial market performance and investor sentiment in 2019. The potential for Brexit without a deal by the March deadline may be the first big negative risk of the year, while resolution of US-China trade tensions could be the first positive. The consensus view is for modest economic and corporate profit growth in Europe. However, downside risks appear to be greater, while investor sentiment is cautious and the general level of financial market volatility is higher. In our view, 2019 should favour prudent stock pickers with a disciplined approach. From a sector perspective, our portfolio is currently overweight companies in financial services, with a greater focus on insurance companies compared to banks. The portfolio is underweight health care and consumer staples, as despite the market selloff in late 2018 we have not found attractive opportunities in those areas yet. The value style has been out of favour for the past decade, but we remain committed to our approach. Over the long term, we believe that a bottom-up stock picking process based on fundamental analysis will reward investors, while market dislocations offer opportunities to acquire companies in attractive end markets trading at valuation levels that offer downside protection. Over the past year, we have seen an increase in activism in European equities, which we view as encouraging. We believe our approach to actively engaging with management teams and our long-term approach to investing with a disciplined focus on valuation will serve our shareholders well over the long term. Portfolio Characteristics 6,7 Portfolio Price to Earnings (12-Month Trailing) 11.83x 14.17x Price to Book 1.33x 1.51x Price to Cash Flow 7.33x 8.29x Market Capitalisation (Millions in EUR) 30,824 45,403 Dividend Yield 3.43% 3.53% Portfolio Diversification Geographic Weightings vs. 2 26.68 Germany 27.84 21.83 France 34.87 18.82 Netherlands 10.87 8.83 Italy 7.25 6.56 Spain 9.77 5.23 Belgium 3.09 3.56 Ireland 1.69 2.74 United Kingdom 2.57 Denmark 1.55 Finland 3.35 1.52 Portugal 0.49 Cash & Cash Equivalents 0% 25% 50% Templeton Euroland Fund Sector Weightings vs. 2 Financials 21.16 17.68 18.14 Health Care 7.58 Energy Industrials 11.92 6.03 9.55 14.51 9.23 Consumer Discretionary 13.25 Information Technology 8.97 8.87 8.36 Utilities 6.30 Materials Consumer Staples 6.69 7.25 4.47 10.57 1.40 Communication Services 5.70 Real Estate 2.27 Cash & Cash Equivalents 0% 5% 10% 15% 20% 25% Templeton Euroland Fund www.franklintempleton.co.za 2
Top Ten Holdings 8 Top Holdings Sector Country % MERCK KGAA Germany 3.05 SANOFI France 2.83 UCB SA Belgium 2.81 ENI SPA Energy Italy 2.77 TOTAL SA Energy France 2.76 ROYAL DUTCH SHELL PLC Energy United Kingdom 2.74 ORSTED A/S Utilities Denmark 2.57 ONTEX GROUP NV Household & Personal Products Belgium 2.41 SIEMENS GAMESA RENEWABLE Capital Goods Spain 2.38 ENERGY SA AXA SA Insurance France 2.31 Supplemental Performance Statistics Supplemental Risk Statistics 9 Standard Deviation (%) 0.58 0.47 0.58 0.12 Investment Team 3 Yrs 5 Yrs 10 Yrs Since Inception Templeton Euroland Fund 11.82 13.47 14.77 15.74 11.61 13.44 15.71 17.51 Tracking Error (%) 4.48 4.49 4.45 6.79 Information Ratio 10-0.38-0.59-0.21 0.03 Beta 0.92 0.92 0.89 0.83 Sharpe Ratio Templeton Euroland Fund 0.43 0.27 0.56 0.15 Portfolio Manager Years with Firm Years Experience Dylan Ball, EVP, Portfolio Manager, Research Analyst 11 19 Heather Arnold, CFA, EVP, Director of Research, Portfolio Manager, 14 35 Research Analyst Peter Moeschter, CFA, EVP, Portfolio Manager, Research Analyst 21 26 Templeton Global Equity Team Number of Members Average Years Experience Portfolio Managers/Analysts 22 24 Research Analysts 12 11 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 companies located in or doing significant business in euroland countries. 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 significantly over relatively short time periods. Other significant risks include: currency risk, liquidity 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. 9. Beta, Information Ratio and Tracking Error information are measured against the. www.franklintempleton.co.za 3
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 www.franklintempleton.co.za 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 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. 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 www.franklintempletondatasources.com. 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. 2019 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 Franklin Templeton Investments Kildare House The Oval, 1 Oakdale Road Newlands, Cape Town, 7700 South Africa Tel.: +27 (21) 831 7400 Fax.: +27 (21) 831 7422 www.franklintempleton.co.za 2019 Franklin Templeton Investments. All rights reserved.
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. 7. The dividend yield quoted here is the yield on securities within the portfolio and should not be used as an indication of the income received from this portfolio. 8. 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. 10. 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) 831 7400 Fax.: +27 (21) 831 7422 www.franklintempleton.co.za 2019 Franklin Templeton Investments. All rights reserved.