Templeton Global Currency Fund Advisor Class Unconstrained Fixed Income Product Profile Product Details 1 Fund Assets $35,781,321.47 Fund Inception Date 11/17/1989 Number of Holdings 33 NASDAQ Symbol ICHHX Maximum Sales Charge 0.00 Investment Style Benchmark Lipper Classification Morningstar Category Dividend Frequency Asset Allocation 2 Market Value Percent of Total Fixed Income Unconstrained JP Morgan 3-Month Global Cash Index Alternative Currency Strategies Funds Multicurrency Annually 53.72 Fund Description The fund seeks total return by investing predominately in securities and instruments offering long or short exposure to currencies of any country, including developed and developing markets. Performance Data 3,4 Average Annual Total Returns 5 (%) Since Inception 3 Mths YTD 1 Yr 3 Yrs 5 Yrs 10 Yrs 20 Yrs (11/17/1989) Advisor Class 2.40 2.40 2.40 1.35-2.57-0.13 2.01 3.23 JP Morgan 3- -1.34-4.78-4.78 0.65-3.52-0.70 2.04 3.62 Month Global Cash Index 5% 0% -5% -10% 2.40 2.40 2.40-1.34 3 Mths YTD 1 Yr 3 Yrs 5 Yrs 10 Yrs 20 Yrs Since Inception Advisor Class JP Morgan 3-Month Global Cash Index -4.78-4.78 1.35 0.65-2.57-3.52-0.13-0.70 2.01 2.04 3.23 3.62 Cash & Cash Equivalents 0% 20% 40% 60% Total Annual Operating Expenses With Waiver: 1.07% Without Waiver: 1.41% 30-Day Standardized Yield 6 With Waiver: 5.20% Without Waiver: 4.84% Performance data represents past performance, which does not guarantee future results. Current performance may differ from figures shown. The fund s investment return and principal value will change with market conditions, and you may have a gain or a loss when you sell your shares. Please call Franklin Templeton Investments at (800) DIAL BEN/342-5236 or visit franklintempleton.com for the most recent month-end performance. Advisor Class shares are offered only to certain eligible investors as stated in the prospectus. They are offered without sales charges or Rule 12b-1 fees. The fund offers other share classes subject to different fees and expenses, which will affect their performance. Please see the prospectus for details. The fund has an expense reduction and a fee waiver associated with any investments it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 04/30/2019. Fund investment results reflect the expense reduction and fee waiver; without these reductions, the results would have been lower. Calendar Year Returns (%) 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 Advisor Class 2.40 0.78 0.89-9.20-7.15-3.10 5.34-1.63 9.14 2.57 JP Morgan 3- -4.78 10.24-2.86-8.54-10.37-0.04 2.27-0.17 0.25 9.00 Month Global Cash Index 1. All holdings are subject to change. 4. Source for Index: FactSet. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. 5. Periods shorter than one year are shown as cumulative total returns. 6. The fund s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the fund s actual income distribution rate, which reflects the fund s past dividends paid to shareholders. Not FDIC Insured May Lose Value No Bank Guarantee
Portfolio Manager Insight 7 Performance Review QUARTERLY KEY PERFORMANCE DRIVERS HELPED HURT Currency positions in Asia ex Japan and Latin America contributed to absolute fund performance (the Argentine peso, Brazilian real, Indian rupee and Indonesian rupiah contributed, while the Mexican peso and Colombian peso detracted). We continued to hold currency positions in a number of countries that we believe have strong growth fundamentals and compelling interest-rate differentials. The Japanese yen appreciated against the US dollar during the quarter, while the euro modestly weakened. The fund s net-negative position in the euro contributed to absolute performance, while its net-negative position in the Japanese yen detracted. We expect the widening rate differentials between rising rates in the US and low to negative yields in the eurozone and Japan to weaken the euro and yen against the US dollar. Outlook & Strategy Overall, our investment convictions remain largely unchanged. Many of the countries that we believed were undervalued earlier this year became even more undervalued during the risk-off cycles in August and September. Longer term we continue to have a positive outlook on a number of local-currency markets that we believe are fundamentally stronger than markets have been indicating. We continue to expect global growth to remain largely on trend, with some moderation from current levels in the upcoming year. However, trade disputes between the US and China remain a risk. On the whole, we don t see trade coming to a standstill or the global economy toppling into a recession we continue to have a positive outlook for US growth and the global economy for 2019. In the major developed economies, we anticipate continued monetary accommodation and low rates in Japan and the eurozone while rates rise in the US those increasing rate differentials should depreciate the yen and euro against the US dollar, in our view. Outside of the developed markets, we are focused on specific emerging markets that are less externally vulnerable and more domestically driven, and that have responsible, credible central banks that consistently respond with appropriate monetary policies. We continue to hold select local-currency duration exposures in countries that we believe have healthy fundamentals and significantly higher yields than those available in developed markets. We also expect currency appreciation across a select subset of emerging markets. 7. 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. Portfolio Characteristics 8,9,10 Currencies Duration Credit Argentine Peso Euro (Net-Negative Position) Brazilian Real Japanese Yen (Net-Negative Position) Mexican Peso Colombian Peso Portfolio JP Morgan 3-Month Global Cash Index Average Duration 0.19 Yrs 0.25 Yrs Average Weighted Maturity 0.20 Yrs 0.25 Yrs 9. Source for Index: FactSet. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. franklintempleton.com 2
Portfolio Diversification 8 Currency Exposure 11 Notional Exposure Percent of Total Currency Exposure vs. JP Morgan 3-Month Global Cash Index 11 Notional Exposure Percent of Total 147.58 135.82 US DOLLAR NON-US DOLLAR Mexican Peso Brazilian Real Argentine Peso Colombian Peso MIDEAST/AFRICA EX-JAPAN Indian Rupee Indonesian Rupiah Thai Baht Australian Dollar -10.80-8.40 14.66 12.76 22.91 21.52 46.62 100.96 US DOLLAR NON-US DOLLAR Mexican Peso Brazilian Real Argentine Peso Colombian Peso MIDEAST/AFRICA EX-JAPAN Indian Rupee Indonesian Rupiah Thai Baht Australian Dollar JAPANESE YEN -28.45-38.21-14.29 22.91 14.66 9.76 12.76 40.74 95.08 JAPANESE YEN EUROPE -32.32-39.77-60% -40% -20% Geographic Allocation 2 Market Value Percent of Total 0% 20% 40% 60% 80% 100% 120% 140% 160% 180% EUROPE EURO -110.36-86.83-150% -125% -100% -75% -50% -25% 0% 25% 50% 75% Geographic Allocation vs. JP Morgan 3-Month Global Cash Index 12,2 Market Value Percent of Total 100% 125% 150% 175% 33.57 21.81 Mexico 12.59 NON-US 27.69 Brazil 11.93 Mexico Brazil 12.59 11.93 Argentina Argentina Colombia Colombia 17.16-0.48 Indonesia EX-JAPAN 5.40 Thailand Indonesia Thailand MIDDLE-EAST/AFRICA MIDDLE-EAST/AFRICA CASH & CASH EQUIVALENTS CASH & CASH EQUIVALENTS 0% 10% 20% 30% 40% 50% 60% -25% 0% 25% 50% 75% 12. Source for Index: FactSet. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. franklintempleton.com 3
Credit Quality Allocation 13,2 Percent of Total A- 12.59 BBB+ BBB 16.57 BB- 11.93 B 7.89 Cash & Cash Equivalents 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% Investment Grade Non-Investment Grade Cash & Cash Equivalents Supplemental Performance Statistics 3 Yrs 5 Yrs 10 Yrs Standard Deviation (%) 4.74 5.47 7.62 Tracking Error (%) 6.99 6.40 5.26 Information Ratio 0.10 0.15 0.11 Sharpe Ratio 0.07-0.58-0.06 Performance data represents past performance, which does not guarantee future results. Current performance may differ from figures shown. The fund s investment return and principal value will change with market conditions, and you may have a gain or a loss when you sell your shares. Please call Franklin Templeton Investments at (800) DIAL BEN/342-5236 or visit franklintempleton.com for the most recent month-end performance. 10-Year Risk vs. Return 16,17 Templeton Global Currency Fund vs. JP Morgan 3-Month Global Cash Index Return (%) 0-0.2-0.4-0.6-0.8 0 2.5 5 7.5 10 Risk (Standard Deviation) (%) Templeton Global Currency Fund JP Morgan 3-Month Global Cash Index Investment Philosophy Beliefs and Guiding Principles An unconstrained approach to global currency investing can lead to long-term value potential Integrating global macroeconomic analysis with in-depth country research can help identify long-term economic imbalances Flexible, active currency management with long and short exposures across currency pairs creates the potential for more consistent returns in diverse markets over the long term 13. Ratings shown are assigned by one or more Nationally Recognized Statistical Rating Organizations ( NRSRO ), such as Standard & Poor s, Moody s and Fitch. The ratings are an indication of an issuer s creditworthiness and typically range from AAA or Aaa (highest) to D (lowest). When ratings from all three agencies are available, the middle rating is used; when two are available, the lowest rating is used; and when only one is available, that rating is used. Foreign government bonds without a specific rating are assigned the country rating provided by an NRSRO, if available. The NR category consists of ratable securities that have not been rated by an NRSRO. The N/A category consists of nonratable securities (e.g., equities). Cash includes equivalents, which may be rated. 14. Information Ratio and Tracking Error information are displayed for the product versus the JP Morgan 3-Month Global Cash Index. 15. 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). 16. Risk is measured by the annualized standard deviation of monthly total returns. Performance of the fund does not include sales charges (if applicable), but it does include dividends and capital gains reinvested at net asset value. 17. Source for Index: FactSet. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. franklintempleton.com 4
Investment Process Multiple Research Lenses Can Lead to High-Conviction Opportunities Global Research Portfolio Construction Lenses and Implementation Country Visits Local Asset Management Perspectives E S G Macroeconomic analysis Macro-models analysis Identification of High- Conviction Opportunities Risk Modeling VaR Analysis Correlation Analysis Scenario/Stress Testing Team Management Potential Return vs. Expected Risk Global Allocations Trading Trade Structuring Market Flows Local Execution/Settlement Liquidity Analysis PORTFOLIO Review Review/ Performance Attribution Investment Team Portfolio Manager Years with Firm Years Experience Michael Hasenstab, Ph. D., Executive VP & Chief Investment Officer 20 24 Calvin Ho, Ph. D., Senior VP, Director of Research 13 14 Additional Resources Global Sovereign/EMD Local Asset Management Average Duration: A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Duration is expressed as a number of years. Average Weighted Maturity: An estimate of the number of terms to maturity, taking the possibility of early payments into account, for the underlying holdings. Maturity is expressed as a number of years. Information Ratio: In investing terminology, the ratio of expected return to risk. Usually, this statistical technique is used to measure a manager s performance against a benchmark. This measure explicitly relates the degree by which an investment has beaten the benchmark to the consistency by which the investment has beaten the benchmark. Sharpe Ratio: To calculate a Sharpe ratio, an asset s excess returns (its return in excess of the return generated by risk-free assets such as Treasury bills) are divided by the asset s standard deviation. Standard Deviation: A measure of the degree to which returns vary from the average of its previous returns. The larger the standard deviation, the greater the likelihood (and risk) that performance will fluctuate from the average return. Tracking Error: Measure of the deviation of the return of a product compared to the return of a benchmark over a fixed period of time. Expressed as a percentage. The more passively the investment is managed, the smaller the tracking error. franklintempleton.com 5
What Are The Risks? All investments involve risks, including possible loss of principal. Foreign securities involve special risks, including currency fluctuations and economic and political uncertainties. Investments in emerging markets involve heightened risks related to the same factors, in addition to those associated with these markets smaller size and lesser liquidity. The fund s assets are largely invested in foreign currencies, and therefore involve potential for significant gain or loss from currency exchange rate fluctuations. Changes in interest rates will affect the value of the fund s portfolio and its share price and yield. Bond prices generally move in the opposite direction of interest rates. As the prices of bonds in the fund adjust to a rise in interest rates, the fund s share price may decline. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio which may result in significant volatility and cause the fund to participate in losses (as well as enable gains) on an amount that exceeds the fund s initial investment. The fund may not achieve the anticipated benefits, and may realize losses when a counterparty fails to perform as promised. The markets for particular securities or types of securities are or may become relatively illiquid. Reduced liquidity will have an adverse impact on the security s value and on the fund s ability to sell such securities when necessary to meet the fund s liquidity needs or in response to a specific market event. Changes in the financial strength of a bond issuer or in a bond s credit rating may affect its value. Investments in lower-rated bonds include higher risk of default and loss of principal. The fund is also nondiversified, which involves the risk of greater price fluctuation than a more diversified portfolio. These and other risk considerations are discussed in the fund s prospectus. Important Legal Information Investors should carefully consider a fund s investment goals, risks, charges and expenses before investing. To obtain a summary prospectus and/or prospectus, which contains this and other information, talk to your financial advisor, call us at (800) DIAL BEN/342-5236 or visit franklintempleton.com. Please carefully read a prospectus before you invest or send money. Important data provider notices and terms available at: www.franklintempletondatasources.com 2. Market value figures reflect the trading value of the investments. Portfolio breakdown percentages may not total 100% and may be negative due to rounding, use of any derivatives, unsettled trades or other factors. 3. Effective 01/02/1997, the fund began offering Advisor Class Shares. For periods prior to the fund s Advisor Class inception date, a restated figure is used based on the fund s oldest share class, Class A performance, excluding the effect of Class A s maximum initial sales charge but reflecting the effect of the Class A Rule 12b-1 fees; and b) for periods after the fund s Advisor Class inception date, actual Advisor Class performance is used, reflecting all charges and fees applicable to that class. 8. Information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change. 10. Average Duration and Average Weighted Maturity reflect certain derivatives held in the portfolio (or their underlying reference assets). 11. Notional exposure figures are intended to estimate the portfolio s exposure, including any hedged or increased exposure through certain derivatives held in the portfolio (or their underlying reference assets). Portfolio breakdown percentages may not total 100% and may be negative due to rounding, use of any derivatives, unsettled trades or other factors. Franklin Templeton Distributors, Inc. One Franklin Parkway San Mateo, CA 94403-1906 (800) DIAL BEN/342-5236 franklintempleton.com 2019 Franklin Templeton Investments. All rights reserved. 612 PP 12/18