Franklin Gold and Precious Metals Fund A (acc) USD Franklin Templeton Investment Funds Fund Manager Report Precious Metals Equity Product Details 1 Fund Assets $228,490,147.50 Fund Inception Date 30/04/2010 Number of Issuers 63 Bloomberg ISIN Base Currency Investment Style Benchmark Morningstar Category Overall Morningstar Rating TM3 FGPMAAU LX LU0496367417 USD Precious Metals Sector Equity Precious Metals Asset Allocation 2 % Equity 97.85 Cash & Cash 2.15 Equivalents Fixed Income Fund Description The fund seeks capital appreciation by investing at least 80% of its net assets in the securities of companies around the world that mine, process or deal in gold and other precious metals such as platinum, palladium and silver. The fund has a secondary goal of current income. Performance Data Performance Net of Management Fees as at 30/04/2018 (Dividends Reinvested) (%) 4 1 Mth 3 Mths YTD 1 Yr 3 Yrs 5 Yrs Since Inception (30/04/2010) A (acc) USD 1.98-8.04-8.24-14.88 0.99-5.99-10.49 FTSE Gold Mines Index 0.89-7.92-5.30-2.24 5.96-3.75-8.82 Calendar Year Returns (%) 200% 100% 0% -100% 10.23-1.10-21.37-20.47-11.03-14.18-15.82-14.01-24.61-15.06-48.36-52.25 2017 2016 2015 2014 2013 2012 2011 A (acc) USD 52.35 60.72 Past performance is not an indicator or a guarantee of future performance. Portfolio Manager Insight Performance Review ONE-MONTH KEY PERFORMANCE DRIVERS Stocks Industries Torex Gold Resources (Off-Index Gold (Stock Selection) Exposure) HELPED Nevsun Resources (Off-Index Exposure) Copper (Off-Index Exposure) Goldcorp (Significant Underweighting) Silver (Stock Selection) Precious Metals and Minerals (Stock Barrick Gold (Significant Underweighting) Selection) Diversified Metals and Mining (Off-Index HURT Detour Gold (Overweighting) Exposure) Platinum Group Metals (Off-Index Exposure) Torex Gold s share value skyrocketed by roughly two-thirds. A rival union at its El Limon- Guajes Mine in Guerrero, Mexico withdrew its application to represent the already-unionised workforce and ended their blockade of the mine. With this uncertainty eliminated, the mine restarted in April. Nevsun s Bisha Mine in Eritrea reported a strong first quarter with better zinc and copper grades, throughput and recoveries, resulting in improving cash flow generation. The company guided production to the upper end of targets with costs moving to the lower end. In terms of key detractors, Detour Gold released a solid quarterly production report, yet offered a somewhat disappointing preliminary update to its life-of-mine plan for its flagship Detour Lake Mine in Canada. Operating costs and capital expenditures were increased over the life of the mine, increasing total cash costs and decreasing the estimated net present value of the mine. Furthermore, permitting issues with local Aboriginal communities have delayed the development of a northern pit. Platinum Group Metals, meanwhile, completed the sale of its Maseve mine in South Africa, but still needs additional funding to refinance some of its existing debt. 1. All holdings are subject to change. Holdings of the same issuers have been combined.
Outlook & Strategy Given the recent divergence in performance between gold and gold mining stocks, we are looking to incoming first-quarter results as a potential catalyst as companies have an opportunity to show the positive financial impact of higher gold prices on their business. Gold equities have underperformed the rise in physical gold since September 2017, but unlike previous periods when this type of divergence could be attributed to rising capital costs that eroded mining companies profit margins, the current underperformance appears to us to be more of a valuation contraction as investors seemed to focus on other, even better-performing segments of the global equity market. Fundamental trends in the gold industry continue to appear healthy to us, as the gold price has remained at supportive levels while many gold miners persist in their hesitancy to invest, thereby limiting future gold supplies. Rising gross domestic product forecasts globally, combined with the stimulative effects of the US tax policy changes and the impact of rising trade tensions, have increased the dialogue about the potential for inflationary pressures to return, which could provide further support to precious metals and related equities. Structurally, we believe many of the major mining companies have been underinvesting in long-lead projects required to maintain their current production profiles. Against this backdrop, mergers and acquisitions offer the potential to rebuild their asset bases while reducing overhead and driving efficiencies of scale. Risk-sharing for large projects has also emerged as a theme for gold companies seeking to move their projects forward. We continue to see attractive investment opportunities in gold and precious metals equities, with many companies trading at valuations well below their historical averages at spot prices. We also believe many gold companies are well positioned to survive another downturn in prices if it should occur, and yet they offer significant upside potential if prices move higher. Furthermore, mining companies have maintained focus on improving the cost structure of their operations, debt repayment and asset rationalisation, which we believe should result in improved performance potential and which is conducive to equity-price appreciation, especially in a rising gold-price environment. Portfolio Characteristics 5 Portfolio Market Capitalisation (Millions in USD) 3,961 12,523 Price to Earnings Growth Ratio 0.54x 1.13x 3-Year Sales Growth 15.78% 9.52% Estimated 3-5 Yr EPS Growth 22.92% 13.45% Price to Earnings (12 Month Forward) 18.46x 21.94x Portfolio Diversification Geographic Weightings vs. 2 Sector Weightings vs. 2 Canada 37.35 59.17 Long Life Gold Mines 59.07 80.18 Australia 12.42 18.86 Medium Life Gold Mines 11.27 16.42 South Africa United States Egypt United Kingdom Peru Philippines Cash & Cash Equivalents 7.52 9.10 5.59 21.22 3.14 2.48 16.47 1.05 0.05 2.15 0% 25% 50% 75% 10.78 Gold Exploration & Development 7.52 Precious Metals & Minerals 2.38 3.76 Diversified Metals & Mining 3.39 Copper 2.05 Silver 1.02 2.15 Cash & Cash Equivalents 0% 5%10% 15% 20%25% 30% 35%40% 45% 50%55% 60% 65%70% 75% 80%85% 90% Franklin Gold and Precious Metals Fund Franklin Gold and Precious Metals Fund www.franklintempletongem.com 2
Supplemental Risk Statistics 7 3 Yrs 5 Yrs Since Inception Franklin Gold and Precious Metals Fund A (acc) USD Top Ten Holdings 6 Top Holdings Country % B2GOLD CORP Canada 6.61 NEWCREST MINING LTD Australia 5.69 ANGLOGOLD ASHANTI LTD South Africa 5.17 BARRICK GOLD CORP Canada 4.01 ALAMOS GOLD INC Canada 3.77 GUYANA GOLDFIELDS INC Canada 3.58 OCEANAGOLD CORP Australia 3.54 CENTERRA GOLD INC Canada 3.53 CENTAMIN PLC Egypt 3.14 ST BARBARA LTD Australia 3.08 Supplemental Performance Statistics Standard Deviation (%) Franklin Gold and Precious Metals Fund 34.92 34.88 32.60 38.92 38.57 34.83 Tracking Error (%) 10.90 11.47 11.16 Information Ratio 8-0.46-0.19-0.15 Beta 0.86 0.86 0.89 Sharpe Ratio Franklin Gold and Precious Metals Fund 0.01-0.18-0.33 0.14-0.11-0.26 Investment Strategy & Process Actively managed with a long-term focus Research driven Top down/bottom-up approach Valuation discipline Diversified globally across precious metals Look to maintain a stable risk profile over time Top-Down Macro Analysis to determine industry weightings (Supply & Demand, Commodity Cycles) Integrate macro view seeking to identify companies that have outperform potential Portfolio of Our Best Ideas Micro level feedback to refine macro models Bottom-Up In-Depth Fundamental Research seeking to identify the most attractive investment opportunity Investment Team Portfolio Manager Years with Firm Years Experience Steve Land, CFA, Portfolio Manager/Research Analyst 20 21 Fred Fromm, CFA, Portfolio Manager/Research Analyst 25 26 7. Beta, Information Ratio and Tracking Error information are measured against the. 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 gold and precious metal companies in both developed and emerging countries. Such securities 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 very significantly over relatively short time periods. Other significant risks include: currency risk, emerging markets risk, 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. 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. 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. 2018 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. 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. 6. 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 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 2018 Franklin Templeton Investments. All rights reserved.
for the fund reserves the right to withhold release of information with respect to holdings that would otherwise be included. 8. 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 2018 Franklin Templeton Investments. All rights reserved.