Franklin Templeton Investment Funds Value Equity Fund Manager Report Product Details 1 Fund Assets $832,597,433.81 Fund Inception Date 25/10/2005 Number of Issuers 50 Bloomberg ISIN Base Currency Investment Style Benchmark Morningstar Category Overall Morningstar Rating TM 4 TEMBRAC LX LU0229945570 USD Value BRIC Equity Asset Allocation 2,3 % Equity 100.02 Cash & Cash -0.02 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 or 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. Key Points As a group, BRIC markets moved higher in November, outperforming the broader emergingmarket asset class but underperforming developed-market equities. The fund advanced over the month. Most sectors contributed to absolute returns, led by financials, consumer discretionary and information technology. In terms of markets, Hong Kong, Russia and China contributed the most, while Brazil and Taiwan detracted. Performance Data Performance Net of Management Fees as at 30/11/2017 (Dividends Reinvested) (%) 5 1 Mth 3 Mths YTD 1 Yr 3 Yrs 5 Yrs 10 Yrs Since Inception (25/10/2005) A (acc) USD 1.86 5.86 41.92 40.96 8.37 4.62-2.61 5.27 0.60 4.58 38.04 36.42 8.43 5.91-0.13 8.72 Calendar Year Returns (%) 200% 100% 0% -100% 89.13 93.52 49.67 59.06 14.09 12.37 6.97 14.89 11.84 9.78-15.81-13.25-7.77-2.56-5.43-3.25-26.91-22.67-61.35-59.34 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 A (acc) USD Past performance is not an indicator or a guarantee of future performance. Portfolio Manager Insight Market Review Global equity markets advanced during November, supported by generally positive economic data around the globe. As a group, BRIC markets moved higher in November, outperforming the broader emerging-market (EM) asset class but underperforming developed-market equities. While solid fund inflows, stronger EM currencies and higher oil prices provided EM equities with some support, profit-taking in the information technology (IT) sector and a rotation into financials in late November weighed on overall performance. Among the BRIC markets, Russia and China recorded gains, while Brazil and India ended the month with declines, in US-dollar terms. The Russian market rebounded in November to become one of the top-performing markets in the region, largely driven by higher oil prices. China s performance was likely driven by the government s announcements of regulatory measures in the areas of finance and insurance as part of efforts to reduce risks in the financial system. Sentiment in Brazil, however, was adversely impacted by a lack of progress on social security reform. Equity prices in India declined slightly, despite a credit-rating upgrade by rating agency Moody s, due to weak performances in the materials, health care and industrials sectors. Most sectors in the benchmark index declined, with industrials, real estate and utilities the weakest. In IT and consumer discretionary and financials rose. 1. All holdings are subject to change. Holdings of the same issuers have been combined. 3. The negative cash position reflects a temporary position that is a result of a delay in securities settlement transactions.
Performance Review The fund advanced over the month. Most sectors contributed to absolute returns, led by financials, consumer discretionary and IT. In terms of markets, Hong Kong, Russia and China contributed the most, while Brazil and Taiwan detracted. Key performance drivers in the financials sector included banks Sberbank of Russia and Ping An Bank, as well as Chinese insurer Ping An Insurance. Positive takeaways, especially in the area of technology adaptation, from Ping An Group s corporate day in November boosted investor confidence in the group. For Sberbank, third-quarter earnings that exceeded market expectations, revised guidance for 2017 as a whole, and expectations of a higher dividend pay-out heightened investor interest, driving up the share price. India-based diversified financial holding company Bajaj Holdings & Investment, however, detracted. Among consumer discretionary holdings, top contributors included South Africa-based media conglomerate Naspers, which has significant holdings in major IT companies in China and Russia. Chinese automobile manufacturer Brilliance China Automotive also had a positive impact. Despite reporting weaker-than-expect third-quarter corporate results, a strong product line-up and continued demand for premium brands in China led investors to remain confident about Brilliance China s prospects. In IT, China-based internet software and service stock Tencent and IT services provider Chinasoft International were among the largest contributors. China-based e-commerce company Alibaba, Taiwan-based smartphone component supplier Taiwan Semiconductor Manufacturing (TSMC) and Taiwanese electronics manufacturing service company Hon Hai Precision, however, detracted over the month, amidst a late-month correction in IT stocks. By sector, materials and consumer staples detracted slightly. Geographically, Brazil and Taiwan had a negative impact on portfolio returns. In materials, metals and mining companies Vedanta in India and Russia-based Norilsk Nickel were key detractors. Brazilian bank Banco Bradesco was a key detractor in that market, partly impacted by weaker-than-expected third-quarter loan growth. Portfolio Positioning Our portfolios are constructed using stock-by-stock fundamental analysis, with country and sector positions an outcome of the process. In November, the fund s largest sector weightings were in IT, financials, consumer discretionary and energy. China was the largest absolute country exposure, followed by India and Russia. Outlook & Strategy We believe many BRIC companies have the ability to grow faster than many companies in the developed world. BRIC equity earnings as a whole are benefitting not only from a cyclical rebound in many instances including Brazil emerging from a recession and a recovery in commodity prices but also the ongoing structural shift towards new economy sectors. These companies are not only catering to a dynamic domestic consumer base, they are also gaining a larger share of global exports. In our opinion, Asia is one of the most exciting regions in emerging markets today. While commodity production and export remains vital to many economies, the region is worlds away from its commodity-only trade legacy, especially in China. China has moved from producing relatively low-end products to much more sophisticated ones such as electric cars, drones, robots and solar panels. Many of these companies have shown a high degree of innovation and sustainable growth. While we need to be mindful of risks such as geopolitical instability, tapering of quantitative easing in major developed economies, a slowdown in global economic growth and the implementation of protectionist trade policies, we think BRIC stocks still hold much potential. In the current lowgrowth, low-yield environment, BRIC stocks can offer investors access to innovative, fast-growing companies trading at what we consider attractive valuations. Portfolio Characteristics 6,7 Portfolio Price to Earnings (12 Month Trailing) 15.64x 16.45x Price to Book Value 1.89x 1.92x Price to Cash Flow 6.86x 11.43x Market Capitalisation (Millions in USD) 127,419 123,793 Dividend Yield 1.67% 1.97% Portfolio Diversification Top Sector Contributors 8 Total Sector Effect (%) Financials 0.92 Consumer Discretionary 0.61 Health Care 0.28 Industrials 0.24 Real Estate 0.17 Top Sector Detractors 8 Total Sector Effect (%) Information Technology -0.88 Materials -0.14 Contributors/detractors data shown is for the period from 01/11/2017 to 30/11/2017. www.franklintempletongem.com 2
Top Security Contributors 8,9 Security Total Effect (%) NASPERS LTD 0.48 BIOCON LTD. 0.37 PING AN BANK 0.32 SBERBANK OF RUSSIA 0.25 PING AN INSURANCE 0.24 Contributors/detractors data shown is for the period from 01/11/2017 to 30/11/2017. Geographic Weightings vs. 2,10 China India Russia Brazil Taiwan South Africa Hong Kong 0.51 6.87 5.47 5.43-0.02 Cash & Cash Equivalents -25% 0% 25% 50% 75% 11.86 11.18 16.05 14.03 17.64 49.53 61.45 Top Security Detractors 8,9 Security Total Effect (%) TENCENT HOLDINGS LTD -0.35 HON HAI PRECISION INDUSTRY -0.23 CO LTD TAIWAN SEMICONDUCTOR -0.20 MANUFACTURING CO LTD NETEASE INC -0.15 BAJAJ HOLDINGS AND -0.14 INVESTMENT LTD Sector Weightings vs. 2,11 Information Technology 28.18 28.50 Financials 26.36 25.13 Consumer Discretionary 18.17 8.83 Energy 10.82 10.06 Telecommunication Services 5.01 4.33 Materials 4.81 5.38 Health Care 4.27 2.63 Industrials 2.08 4.47 Consumer Staples 0.31 5.06 Real Estate 2.94 Utilities 2.67 Cash & Cash Equivalents -0.02-5% 0% 5% 10% 15% 20% 25% 30% 35% Templeton BRIC Fund Templeton BRIC Fund Top Ten Holdings 12 Top Holdings Sector Country % ALIBABA GROUP HOLDING LTD Software & Services China 8.56 TENCENT HOLDINGS LTD Software & Services China 7.37 NASPERS LTD Media South Africa 5.43 SBERBANK OF RUSSIA PJSC Banks Russia 4.04 PING AN INSURANCE GROUP CO Insurance China 3.98 OF CHINA LTD CHINA MOBILE LTD Telecommunication Services China 3.82 JD.COM INC Retailing China 3.66 BRILLIANCE CHINA AUTOMOTIVE Automobiles & Components China 3.60 HOLDINGS LTD LUKOIL PJSC Energy Russia 3.41 BAJAJ HOLDINGS & INVESTMENT LTD Diversified Financials India 3.41 10,11. The negative cash position reflects a temporary position that is a result of a delay in securities settlement transactions. www.franklintempletongem.com 3
Supplemental Performance Statistics 3 Yrs 5 Yrs 10 Yrs Since Inception Standard Deviation (%) Templeton BRIC Fund 18.73 17.47 26.04 25.68 18.75 17.49 25.78 25.79 Tracking Error (%) 3.82 4.56 4.67 4.61 Information Ratio 14-0.01-0.28-0.53-0.76 Beta 0.98 0.96 0.99 0.98 Sharpe Ratio Templeton BRIC Fund 0.43 0.25-0.11 0.16 0.43 0.32-0.02 0.29 Investment Team Portfolio Manager Years with Firm Years Experience Chetan Sehgal, CFA, Executive Vice President / Director of Global 22 22 Emerging Markets / Small Cap Carlos Hardenberg, Executive Vice President 15 17 Templeton Emerging Markets Team Number of Members Average Years Experience Portfolio Managers/Analysts 45 15 13. Beta, Information Ratio and Tracking Error information are measured against the. 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. Shares of the Fund are not available for distribution in all jurisdictions and prospective investors should confirm availability with their local Franklin Templeton Investments representative before making any plans to invest. 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 Franklin Templeton Investment Funds 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. 4. 2017 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. 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. 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. 7. 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 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 2017 Franklin Templeton Investments. All rights reserved.
8. Past performance is not an indicator or a guarantee of future performance. Information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change. Source: FactSet. Important data provider notices and terms available at www.franklintempletondatasources.com. Total Effect represents the excess return by sector as compared to the index. Performance attribution is calculated in the base currency of the fund. 9. Top Security Contributors and Top Security Detractors are holdings based on the last one month period for rolling months or on the last three months period for quarter end months. These securities do not represent all the securities purchased, sold or recommended for advisory clients, and the reader should not assume that investment in the security listed was or will be profitable. Holdings are subject to change, holdings of the same issuer have been combined. The information provided is not a recommendation to purchase, sell or hold any particular security. The security identified does not represent the Fund s entire holdings and in the aggregate, may represent a small percentage of such holdings. There is no assurance that security purchased will remain in the Fund, or that security sold will not be repurchased. 12. 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. 14. 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 2017 Franklin Templeton Investments. All rights reserved.