Templeton Latin America Fund A (Ydis) USD Franklin Templeton Investment Funds Fund Manager Report Blend Equity Product Details 1 Fund Assets $1,076,825,961.83 Fund Inception Date 28/02/1991 Number of Issuers 30 Bloomberg TEMLAAI LX ISIN LU0029865408 Base Currency USD Investment Style Blend Benchmark MSCI EM Latin America Index Morningstar Category Latin America Equity Asset Allocation 2 % Equity 99.05 Cash & Cash Equivalents Fixed Income Fund Description The Fund aims to achieve long-term capital appreciation by investing primarily in equity securities of issuers incorporated or having their principal business activities in the Latin American region. Performance Data Performance Net of Management Fees as at 31/01/2019 (Dividends Reinvested) (%) 3,4 Since Inception 1 Mth 3 Mths YTD 1 Yr 3 Yrs 5 Yrs 10 Yrs (28/02/1991) A (Ydis) USD 15.33 13.65 15.33-5.03 19.17 0.65 5.01 7.24 MSCI EM Latin 14.96 11.63 14.96-4.74 22.62 3.41 6.77 11.98 America Index Calendar Year Returns (%) 200% 100% 0% -100% -7.91-6.23 22.99 24.15 23.90 31.47-28.49-18.09-12.03-30.82-17.06-13.15 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 10.83 8.90-22.54-19.15 18.20 14.89 101.29 104.20 A (Ydis) 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 Stocks Sectors Countries Vale Materials (Stock Selection, Underweight) Brazil (Stock Selection) B3 Financials (Overweight) Mexico (Stock Selection) Itausa - Investimentos Itau Industrials (Stock Selection) Colombia (Lack of Exposure) Petroleo Brasileiro Consumer Staples (Stock Selection) Peru (Overweight) Intercorp Financial Services Utilities (Lack of Exposure) Luxembourg (Offbenchmark Exposure) Embotelladora Andina Energy (Underweight) Chile (Stock Selection) Relative returns were supported by the fund s underweight to Brazil-based metals producer Vale, which was affected by a dam collapse at one of its mines. Uncertainty over the operational, financial and regulatory fallout from the event weighed on the stock. We are monitoring developments and expect news flow to trigger short-term volatility in Vale s share price, while we also recognise that the company remains one of the world s largest mining companies and is highly cash-generative. An overweight to Itausa - Investimentos Itau delivered relative gains as the Brazil-based company surged. Its principal asset is a stake in commercial bank Itau Unibanco, which benefitted from a positive market outlook for the Brazilian banking industry amidst a growing book of loans and improving asset quality. We are drawn to Itausa for the exposure it offers to one of the country s leading banks at what we view as an attractive valuation. However, Peru-based Intercorp Financial Services (IFS) was a relative detractor. The banking, insurance and wealth management company rose but lagged broader regional stocks. We believe IFS remains well-positioned to grow in Peru s underbanked market, and the country s economic expansion is likely to be an additional tailwind for the stock. 1. All holdings are subject to change. Holdings of the same issuers have been combined.
Outlook & Strategy Global investor sentiment improved in January, supported by a dovish US Federal Reserve and hopes for the US and China to reach a trade deal by March, when higher US tariffs on Chinese goods are set to take effect. Against this backdrop, we see the potential for Latin American equities to fare well. Brazil s new president, who took office in January, has pledged to reform the pension system and privatise state-owned companies to boost economic growth. We expect economic activity in Brazil to recover, which should support the business environment. Our outlook for Peru is positive. Its economy has shown signs of a pick-up in the fourth quarter of 2018, and the government has embarked on a path of fiscal consolidation. While Peru s stock market has traded at a valuation that is slightly above the region s average, we have been able to identify individual investment opportunities that we find attractive. Overall, we are constructive about Latin America s long-term economic prospects, anchored by economic reforms, a growing middle class, lowcost and long-life commodity reserves and other strengths. We continue to find long-term investment opportunities in the region, and we are drawn to companies that demonstrate sustainable earnings power and trade at a discount relative to their intrinsic value and other investments available in the market. Portfolio Characteristics 5,6 Portfolio Price to Earnings (12-Month Trailing) 18.65x 18.39x Price to Book 2.52x 2.07x Price to Cash Flow 9.63x 9.36x Market Capitalisation (Millions in USD) 30,200 29,037 Dividend Yield 2.07% 3.04% Portfolio Diversification Geographic Weightings vs. 2 Brazil Mexico Peru Chile Luxembourg Italy Cash & Cash Equivalents 3.30 3.16 1.67 Templeton Latin America Fund 7.56 6.10 8.75 21.23 21.89 59.33 62.74 0% 25% 50% 75% Sector Weightings vs. 2 Financials Consumer Staples Materials Consumer Discretionary Industrials Energy Information Technology Real Estate Communication Services Health Care Utilities Cash & Cash Equivalents Templeton Latin America Fund 17.53 14.37 11.32 14.65 7.91 5.22 7.36 6.26 6.10 10.36 1.89 0.60 0.84 1.49 6.71 0.45 5.21 34.67 46.11 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% www.franklintempletongem.com 2
Top Ten Holdings 7 Top Holdings Sector Country % ITAUSA - INVESTIMENTOS ITAU SA Banks Brazil 9.89 BANCO BRADESCO SA Banks Brazil 7.57 B3 SA - BRASIL BOLSA BALCAO Diversified Financials Brazil 6.73 GRUPO FINANCIERO BANORTE Banks Mexico 5.28 SAB DE CV LOJAS AMERICANAS SA Retailing Brazil 5.06 BOLSA MEXICANA DE VALORES Diversified Financials Mexico 4.85 SAB DE CV PETROLEO BRASILEIRO SA Energy Brazil 4.44 ITAU UNIBANCO HOLDING SA Banks Brazil 4.22 RUMO SA Transportation Brazil 4.12 INTERCORP FINANCIAL SERVICES INC Banks Peru 3.94 Supplemental Performance Statistics Supplemental Risk Statistics 8 Standard Deviation (%) 0.87 0.11 0.26 0.33 Investment Team 3 Yrs 5 Yrs 10 Yrs Since Inception Templeton Latin America Fund 23.49 22.83 23.67-24.78 24.57 25.04 27.94 Tracking Error (%) 4.80 4.60 4.46 - Information Ratio 9-0.72-0.60-0.39 - Beta 0.93 0.91 0.93 - Sharpe Ratio Templeton Latin America Fund 0.77 0.20 - Portfolio Manager Years with Firm Years Experience Gustavo Stenzel, CFA, Executive Vice President 20 21 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 Latin America. Such emerging markets have historically been subject to significant price movements, frequently to a greater extent than equity markets globally. As a result, the performance of the Fund can fluctuate significantly over relatively short time periods. Other significant risks include: currency risk, emerging markets 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. 8. Beta, Information Ratio and Tracking Error information are measured against the. www.franklintempletongem.com 3
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: 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. 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. The Fund is registered in Luxembourg. The Fund may be marketed in Luxembourg and other member states of the EEA, to professional investors only, on the basis of the passport regime set out in article 29 and following of the Law of 12 July 2013. 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. 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. 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. 5. 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. The Estimated 3-5 Year EPS Growth uses simple weighted average means. There can be no assurance that the Estimated 3-5 Year EPS Growth will be realised. Information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change. 6. 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. 7. 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. 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 www.franklintempletongem.com 2019 Franklin Templeton Investments. All rights reserved.
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. 9. 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 The Gate, East Wing, Level 2 Dubai International Financial Centre P.O. Box 506613 Dubai, U.A.E. Tel.: +9714-4284100 Fax.: +9714-4284140 www.franklintempletongem.com 2019 Franklin Templeton Investments. All rights reserved.