Franklin Templeton Investment Funds Growth Equity Fund Manager Report Product Details 1 Fund Assets $97,294,995.20 Fund Inception Date 16/06/2008 Number of Issuers 46 Bloomberg ISIN Base Currency Investment Style Benchmark FTMNAUS LX LU0352132103 USD Blend Hybrid: MSCI Arabian Markets SA Capped 20% until 30 September 2010 then S&P Pan Arab Composite Large Mid Cap KSA Capped at 30% Asset Allocation 2 % Equity 99.70 Cash & Cash 0.30 Equivalents Fixed Income 0.00 Fund Description The Fund aims to achieve long-term capital appreciation by investing primarily in equity securities of companies across the entire market capitalisation spectrum in the Middle East and North Africa (MENA) region, including, but not limited to Bahrain, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia and the United Arab Emirates. Performance Data 4 Performance Net of Management Fees as at 31/01/2019 (Dividends Reinvested) (%) 5,6 Since Inception 1 Mth 3 Mths YTD 1 Yr 3 Yrs 5 Yrs 10 Yrs (16/06/2008) A (acc) USD 4.35 5.67 4.35 1.36 9.57 1.14 7.19-3.69 Hybrid: MSCI 5.33 4.53 5.33 11.88 13.39 2.95 8.45-0.94 Arabian Markets SA Capped 20% until 30 September 2010 then S&P Pan Arab Composite Large Mid Cap KSA Capped at 30% Calendar Year Returns (%) 80% Overall Morningstar Rating TM 3 40% 0% -40% 34.00 24.87 12.75 18.14 19.91 11.59 2.39 3.93 9.08 9.06 5.58 8.11 6.97 2.19 13.65-5.43-11.03-14.19-15.35-12.66 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 A (acc) USD Hybrid: MSCI Arabian Markets SA Capped 20% until 30 September 2010 then S&P Pan Arab Composite Large Mid Cap KSA Capped at 30% 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 Qatar National Bank (Not in Portfolio) Financials (Stock Selection) Egypt (Overweight) Al Rahji Bank Materials (Stock Selection) Qatar (Stock Selection) Samba Financial Group Communication Services (Lack of Exposure) Morocco (Lack of Exposure) Agthia Group Consumer Discretionary Saudi Arabia (Stock (Overweight) Selection) Emaar Malls Consumer Staples (Stock United Arab Emirates (Stock Selection) Selection) Orascom Construction Industrials (Stock Selection) Kuwait (Stock Selection) The consumer discretionary sector detracted as overweight exposure to the diversified consumer services and specialty retail industries hindered progress. Kuwait-based education company Human Soft was amongst the key detractors in the sector. Agthia group, which is a United Arab Emirates-based food and beverages distributor, was a key individual detractor from relative performance over the month, weakening returns in the consumer staples sector. 1. All holdings are subject to change. Holdings of the same issuers have been combined.
In contrast, the financials sector added the most to relative performance as a lack of exposure to benchmark heavyweight Qatar National Bank, which trailed the index s advance in January, proved helpful. In addition, positions in Saudi Arabia-based financials Al Rajhi Bank and Samba Financial Group contributed as their share prices made robust progress Outlook & Strategy In January, Saudi Arabia announced plans for investments in large infrastructure projects, worth over US$425 billion through to 2030. The proposals included mining, roads, railroads, energy and a defence initiative. Several infrastructure deals, in total worth around US$53 billion, were signed during the month in a ceremony overseen by Crown Prince Mohammed bin Salman. Saudi Arabia also closed a US$7.5 billion international bond sale that was almost four times covered. This shows ongoing interest and confidence in investment in the Kingdom despite recent geopolitical controversies that threw a negative light on the country. Egypt s inflation picture continued to evolve as it was announced that consumer prices had risen by 12% over the year to December well below the 15.7% recorded in November. December s figure was primarily impacted by a softening of inflation in fruit and vegetables prices. As inflation has eased and foreign reserves remain at a robust level (of around eight-months cover of the country s imports), the central bank s case for a rate cut has been strengthened. However, the timing of any move remains uncertain and it may be that the bank requires more data before acting. The population of Qatar reached all-time highs as it recovered from initial reductions in the wake of the Saudi Arabia-backed embargo of the country, which has been running for over 19 months. Meanwhile, the visit of US Secretary of State Mike Pompeo to Qatar made it clear that the US government want the dispute with its neighbours in the Gulf to be resolved. There was some positive news from Lebanon as a government was finally formed after nine months of wrangling following the country s elections. This should lead to measures to reduce the budget deficit positive steps that should unlock foreign aid promised at a Paris conference in April 2018. The pledges made at that time included over US$10 billion in loans and almost US$900 million in grants, contingent upon economic reforms in Lebanon. In Kuwait, the minister of state for economic development put the 2019 2020 development plan to the National Assembly. This plan includes around 135 projects aimed at improving education and human resources, as well as diversifying the economy to improve the business environment. It was also announced that there have been delays in project spending on the national development plan. However, faster project awards should be expected to support the economy going forward. Our view on the global economy remains cautious given the elevated political and economic risks. We see promise in the budget trajectories of the region s key countries and in the read across to the local economies, while looking to the anticipated MSCI and FTSE index-related events to support market performances. Although the Fed has pointed towards further interest rate policy restraint, we believe that global growth worries remain a key focus for market participants. At the end of January, the fund was nearly fully invested given the valuations and opportunities we see in the region, but we continue to carefully monitor what effects global risks may have on the portfolio. Portfolio Characteristics 7 Hybrid: MSCI Arabian Markets SA Capped 20% until 30 September 2010 then S&P Pan Arab Composite Large Mid Cap KSA Portfolio Capped at 30% Price to Earnings (12-Month Trailing) 10.26x 13.18x Price to Book 1.75x 1.70x Price to Cash Flow 9.38x 8.59x Market Capitalisation (Millions in USD) 11,054 22,398 Price to Earnings Growth Ratio 0.87x 1.45x 3-Year Sales Growth 11.35% 8.70% Estimated 3-5 Yr EPS Growth 14.79% 9.42% Price to Earnings (12 Month Forward) 12.26x 12.98x www.franklintempletongem.com 2
Portfolio Diversification Geographic Weightings vs. Hybrid: MSCI Arabian Markets SA Capped 20% until 30 September 2010 then S&P Pan Arab Composite Large Mid Cap KSA Capped at 30% 2 Saudi Arabia United Arab Emirates Egypt Kuwait Qatar Cash & Cash Equivalents 0.30 0.00 4.62 5.18 12.60 15.33 15.62 0% 25% 50% Franklin MENA Fund Hybrid: MSCI Arabian Markets SA Capped 20% until 30 September 2010 then S&P Pan Arab Composite Large Mid Cap KSA Capped at 30% 19.84 22.18 23.94 31.45 35.11 Sector Weightings vs. Hybrid: MSCI Arabian Markets SA Capped 20% until 30 September 2010 then S&P Pan Arab Composite Large Mid Cap KSA Capped at 30% 2 Financials Industrials Consumer Discretionary Consumer Staples Real Estate Health Care Energy Utilities Materials Communication Services Cash & Cash Equivalents 0% 15.51 6.32 8.74 0.99 8.61 1.85 5.64 5.91 5.32 0.35 4.05 0.84 1.78 1.81 1.64 11.27 0.00 9.74 0.30 0.00 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% Franklin MENA Fund Hybrid: MSCI Arabian Markets SA Capped 20% until 30 September 2010 then S&P Pan Arab Composite Large Mid Cap KSA Capped at 30% 48.40 60.92 Top Ten Holdings 8 Attention - Top Ten Holdings Table No Data Found. Supplemental Performance Statistics Supplemental Risk Statistics 9 3 Yrs 5 Yrs 10 Yrs Since Inception Standard Deviation (%) Franklin MENA Fund 8.45 14.31 15.31 20.29 Hybrid: MSCI Arabian Markets SA Capped 20% until 8.26 13.06 14.03 17.67 30 September 2010 then S&P Pan Arab Composite Large Mid Cap KSA Capped at 30% Tracking Error (%) 5.36 6.63 5.65 6.47 Information Ratio 10-0.71-0.27-0.22-0.43 Beta 0.82 0.97 1.01 1.09 Sharpe Ratio Franklin MENA Fund 1.00 0.03 0.45-0.19 Hybrid: MSCI Arabian Markets SA Capped 20% until 1.49 0.17 0.57-0.07 30 September 2010 then S&P Pan Arab Composite Large Mid Cap KSA Capped at 30% Investment Team Portfolio Manager Years with Firm Years Experience Purav Jhaveri, CFA 19 25 9. Beta, Information Ratio and Tracking Error information are measured against the Hybrid: MSCI Arabian Markets SA Capped 20% until 30 September 2010 then S&P Pan Arab Composite Large Mid Cap KSA Capped at 30%. www.franklintempletongem.com 3
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 equity-related securities of companies located in or doing significant business in the MENA (Middle East and North Africa) region. 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 considerably over time. Other significant risks include: emerging markets risk, currency risk, liquidity risk, operational 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. www.franklintempletongem.com 4
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. Standard & Poor s, S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC. S&P does not sponsor, endorse, sell or promote and S&P index-based product. 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. The benchmark performance shown is derived from a combination of the MSCI Arabian Markets SA Capped 20% Index from the Fund s inception to 29 September 2010 and the S&P Pan Arab Composite Large Mid Cap KSA Capped at 30% Index from 29 September 2010 to current reporting period. 5. 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. 6. 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. 7. 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 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.
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. 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 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.