Franklin U.S. Opportunities Fund A (acc) USD Franklin Templeton Investment Funds Fund Manager Report Growth Equity Product Details 1 Fund Assets $3,989,873,252.69 Fund Inception Date 03.04.2000 Number of Issuers 81 Bloomberg ISIN Base Currency Investment Style Benchmark Morningstar Category Asset Allocation 2 Percent of Total % Equity 98.13 Cash & Cash 1.87 Equivalents Fixed Income 0.00 Overall Morningstar Rating TM 3 TEMAGAI LX LU0109391861 USD Growth Russell 3000 Growth Index US Flex-Cap Equity Fund Description The fund aims to achieve capital appreciation by investing principally in equity securities of US companies believed to possess sustainable growth characteristics and which meet growth, quality and valuation criteria. These include small-, medium- and large-capitalisation companies with strong growth potential across a wide range of sectors that have exceptional growth potential and fast-growing, innovative companies within these sectors. 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 (03.04.2000) A (acc) USD 10.27 1.75 10.27 0.19 13.74 8.67 14.41 2.57 Russell 3000 9.18 0.63 9.18 0.03 16.51 12.57 16.77 4.05 Growth Index Calendar Year Returns (%) 80% 40% 0% -40% -1.85-2.12 26.94 29.59-2.38 7.39 12.44 4.83 5.09 6.71 38.60 34.23 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 9.33 15.21-3.88 2.18 20.68 17.64 41.65 37.01 A (acc) 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 ServiceNow, Inc. Information Technology (Stock Selection) SAGE Therapeutics, Inc. Consumer Staples (Stock Selection) Xilinx, Inc. Health Care (Stock Selection) Facebook, Inc. Class A Communication Services (Stock Selection, Underweight) Lamb Weston Holdings, Inc. Visa Inc. Class A ServiceNow provides cloud-based services that allow companies to become more automated and efficient. The IT specialist is a leader in enabling digital transformation and continues to execute well in its large addressable market. We expect ServiceNow to evolve into a multiplatform growth business in the years ahead. In the health care sector, Sage Therapeutics announced positive Phase III trial results for a post-partum depression treatment. We see ample opportunities for Sage to address the growing need for advances in mental health care, where new treatments have been scarce. An underweighting in the rising shares of Facebook detracted from relative returns. The social media giant reported record fourth-quarter profit helped, in part, by advertising growth and an expanding user community. Looking ahead, however, the company stated it expects a deceleration in the first quarter of 2019. While we do not underestimate Facebook s growth potential, we maintain more conservative positioning than the benchmark. 1. All holdings are subject to change. Holdings of the same issuers have been combined.
Outlook & Strategy While we are seeing some slowing in the US economy from 2018 s strong pace, we expect gross domestic product growth in 2019 to remain positive. Underlying fundamentals appear strong as the two main pillars of the US economy consumer spending and corporate earnings continue to be solid, in our view. Consumers are benefitting from a strong labour market, rising wages, relatively low inflation and low interest rates by historical standards. Corporate profits have not taken a sharp downturn and many companies posted stronger-than-expected profits in the recent quarter. As active managers, we attempt to look beyond short-term market volatility and seek to take advantage of market weakness to build on our investment themes. We are paying attention to the multi-year theme of digital transformation affecting all areas of business, and we have been finding compelling investment opportunities in cutting-edge technologies, such as cloud computing, robotics and artificial intelligence. Portfolio Characteristics 6 Portfolio Market Capitalisation (Millions in USD) 231,615 245,789 Price to Earnings Growth Ratio 1.89x 1.56x 3-Year Sales Growth 17.79% 16.70% Estimated 3-5 Yr EPS Growth 18.41% 16.14% Price to Earnings (12 Month Forward) 28.63x 21.01x Portfolio Diversification Top Ten Holdings 7 Top Holdings % AMAZON.COM INC 7.57 MASTERCARD INC 5.11 MICROSOFT CORP 4.57 ALPHABET INC 4.02 VISA INC 3.69 UNITEDHEALTH GROUP INC 2.78 SERVICENOW INC 2.66 APPLE INC 2.65 SBA COMMUNICATIONS CORP 2.53 ADOBE INC 2.00 Sector Weightings vs. 2 Percent of Total Information Technology Health Care Industrials Consumer Discretionary Communication Services Financials Consumer Staples Real Estate Materials Energy Utilities Cash & Cash Equivalents 14.95 14.98 11.27 12.46 10.26 15.24 9.21 11.78 7.44 4.61 3.72 5.47 3.45 2.38 0.96 1.93 0.82 0.87 0.00 0.04 1.87 0.00 30.23 36.03 0% 5% 10% 15% 20% 25% 30% 35% 40% Franklin U.S. Opportunities Fund www.franklintempleton.co.za 2
Supplemental Performance Statistics Supplemental Risk Statistics 8 3 Yrs 5 Yrs 10 Yrs Since Inception Standard Deviation (%) Franklin U.S. Opportunities Fund 13.44 13.91 15.76 21.69 12.48 12.43 13.95 16.78 Tracking Error (%) 4.01 4.26 4.32 8.06 Information Ratio 9-0.69-0.92-0.55-0.12 Beta 1.03 1.07 1.09 1.22 Sharpe Ratio Franklin U.S. Opportunities Fund 0.94 0.58 0.89 0.08 1.24 0.96 1.17 0.16 Investment Team Portfolio Manager Years with Firm Years Experience Grant Bowers, Portfolio Manager 25 25 Sara Araghi, CFA, Portfolio Manager/Research Analyst 15 15 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 the U.S. 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: 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.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. Source: FTSE. 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 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. 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. 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 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.
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 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.