Franklin Templeton Investment Funds Value Equity Fund Manager Report Product Details 1 Fund Assets $677,114,757.61 Fund Inception Date 25.10.2005 Number of Issuers 51 Bloomberg ISIN Base Currency Investment Style Benchmark Morningstar Category TEMBRAC LX LU0229945570 USD Blend BRIC Equity Asset Allocation 2 % Equity 96.91 Cash & Cash Equivalents Fixed Income Fund Description The Fund aims to achieve long-term capital appreciation by investing primarily in equity securities of companies organised under the laws of or having their principal office in Brazil, Russia, India and China (including Hong Kong and Taiwan) (BRIC), as well as in companies that derive the principal portion of their revenues or profits from BRIC economies, or have the principal portion of their assets there. 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 (25.10.2005) A (acc) USD 10.46 10.60 10.46-14.66 19.79 5.53 7.34 4.55 9.87 11.29 9.87-14.49 19.11 6.87 9.34 7.76 Calendar Year Returns (%) 200% 100% 0% -100% -14.81-13.25 46.19 42.04 14.09 12.37-15.81-13.25-7.77-2.56-5.43-3.25 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 6.97 14.89-26.91-22.67 11.84 9.78 89.13 93.52 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 Countries Banco Bradesco S.A. Sponsored ADR Pfd Financials (Stock Selection) China (Stock Selection) Sberbank Russia OJSC Consumer Discretionary Sponsored ADR (Stock Selection) Brazil (Stock Selection) Brilliance China Automotive Materials (Stock Selection, Russia (Stock Selection, Holdings Limited Underweight) Overweight) Taiwan Semiconductor Information Technology Taiwan (Off-benchmark Manufacturing Co., Ltd. (Stock Selection) Exposure) Bajaj Holdings & Investment Limited. Health Care (Stock Selection) ICICI Bank Limited Auto maker Brilliance China Automotive climbed as China prepared to roll out measures in support of car sales in a slowing economy. Uncertainty around the company s joint venture with Germany s BMW also receded Brilliance s shareholders approved the sale of a 25% stake in the partnership to BMW, allowing the latter to raise its interest to 75%. We expect Brilliance China to continue benefitting from long-term growth in luxury auto demand as rising incomes drive premiumisation in consumption. Several banks in Brazil, Russia and China were amongst the top individual relative contributors. Banco Bradesco and Itausa Investimentos Itau in Brazil, Sberbank Russia and China-based Ping An Bank all added to returns in January. Chip maker Taiwan Semiconductor Manufacturing Company (TSMC) recovered somewhat from weakness early in the month, but detracted from the fund s performance. TSMC was negatively impacted by a weak update from US smart-phone maker Apple, and, while its own quarterly results were in line with market consensus, the firm reduced its revenue guidance. 1. All holdings are subject to change. Holdings of the same issuers have been combined.
Outlook & Strategy Investor sentiment in EMs 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 poised to set in. While gross domestic product growth in China has eased recently, we do not expect a hard landing as long as the government maintains adequate liquidity and close control over the capital account. The economy continued to grow at a robust rate, making the country one of the fastest growing major economies in the world. Meanwhile, a shift towards innovation, technology and consumption as primary drivers of growth could support sustainability over the long term. In the interim, however, we maintain a cautious view as a prolonged trade US-China trade dispute could lead to significant volatility. We will continue to monitor the situation and look for attractive investment opportunities. With the national elections coming up, Indian markets are expected to remain volatile, with the compounding effect from global macro uncertainty. In the longer run, however, the case for investing in India remains strong as fundamentals remain intact. Indian equities are also expected to show resilience to global trade concerns due to less export dependence, reasonably robust macroeconomic situation and rising domestic liquidity BRIC countries are home to a rising middle class that is also technologically savvy, and a new generation of companies have attained success through consumer-focused innovation. We are particularly upbeat about growth prospects for the information technology and consumer-related sectors. Overall, we continue to find long-term investment opportunities in the region, and we remain 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) 11.47x 13.33x Price to Book 1.59x 1.75x Price to Cash Flow 5.38x 9.35x Market Capitalisation (Millions in USD) 121,610 91,777 Dividend Yield 2.13% 2.48% Portfolio Diversification Geographic Weightings vs. 2 China Brazil India Russia Taiwan United States Macao Cash & Cash Equivalents Templeton BRIC Fund 1.54 0.43 11.68 7.52 5.57 7.73 16.93 15.63 14.15 16.45 38.86 60.40 0% 25% 50% 75% Sector Weightings vs. 2 Financials 28.65 25.47 17.22 Consumer Discretionary 15.44 Communication Services Information Technology 16.19 17.20 14.21 4.67 11.67 Energy 12.07 Health Care 4.12 2.76 3.93 Materials 5.88 Industrials Consumer Staples 0.89 4.66 5.28 Real Estate 3.62 Utilities 2.96 Cash & Cash Equivalents 0% 5% 10% 15% 20% 25% 30% 35% Templeton BRIC Fund www.franklintempleton.co.za 2
Top Ten Holdings 7 Top Holdings Sector Country % ALIBABA GROUP HOLDING LTD Retailing China 9.30 TAIWAN SEMICONDUCTOR Semiconductors & Semiconductor Taiwan 6.46 MANUFACTURING CO LTD Equipment TENCENT HOLDINGS LTD Media & Entertainment China 5.69 NASPERS LTD Media & Entertainment 5.57 LUKOIL PJSC Energy Russia 4.91 SBERBANK OF RUSSIA PJSC Banks Russia 4.14 BANCO BRADESCO SA Banks Brazil 3.88 ICICI BANK LTD Banks India 3.86 ITAU UNIBANCO HOLDING SA Banks Brazil 3.80 ITAUSA - INVESTIMENTOS ITAU SA Banks Brazil 3.74 Supplemental Performance Statistics Supplemental Risk Statistics 8 Standard Deviation (%) 1.10 0.34 0.41 0.26 Investment Team 3 Yrs 5 Yrs 10 Yrs Since Inception Templeton BRIC Fund 15.89 18.11 22.03 25.15 16.37 18.04 21.89 25.27 Tracking Error (%) 3.99 4.44 4.53 4.60 Information Ratio 9 0.17-0.30-0.44-0.71 Beta 0.94 0.97 0.98 0.98 Sharpe Ratio Templeton BRIC Fund 1.18 0.27 0.32 0.13 Portfolio Manager Years with Firm Years Experience Chetan Sehgal, CFA, Senior Management Director, Director of 23 24 Portfolio Management, Emerging Markets Equities Number of Members Average Years Experience Portfolio Managers/Analysts 7 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 the BRIC countries. 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: emerging markets risk, currency risk, liquidity risk, derivatives risk, Shanghai-Hong Kong Stock Connect 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 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. 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. 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. Franklin Templeton Investments Kildare House The Oval, 1 Oakdale Road Newlands, Cape Town, 7700 Tel.: +27 (21) 831 7400 Fax.: +27 (21) 831 7422 www.franklintempleton.co.za 2019 Franklin Templeton Investments. All rights reserved.
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 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 Tel.: +27 (21) 831 7400 Fax.: +27 (21) 831 7422 www.franklintempleton.co.za 2019 Franklin Templeton Investments. All rights reserved.