Franklin Templeton Investment Funds Franklin GCC Bond Fund Fixed Income Fund Profile Fund Details Inception Date 30 August 2013 Investment Style Benchmark(s) Fixed Income Citigroup MENA Broad Index GCC Mohieddine Kronfol Chief Investment Officer Global Sukuk and MENA Fixed Income We believe we are well positioned to uncover compelling GCC bond opportunities with our investment team on the ground in the U.A.E. and access to a global network of fixed income, trading and risk professionals. FUND OBJECTIVE Franklin GCC Bond Fund (the Fund ) seeks to maximise, consistent with prudent investment management, total investment return consisting of a combination of interest income, capital appreciation and currency gains in the long term. The Fund invests primarily in fixed or floating-rate debt securities and obligations issued by government, government-related or corporate entities located in Gulf Cooperation Council (GCC) member countries. Founded in 1981, the GCC is an economic and political union of 6 member states: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The Fund may also purchase fixed or floating-rate debt securities and obligations issued by entities based in the wider Middle East and North Africa (MENA) regions as well as supranational entities organised by several national governments, such as the International Bank for Reconstruction and Development. WHY CONSIDER THIS FUND Participate in tomorrow s bond story today. The Fund makes it easy to invest in economies that have exhibited remarkably strong fundamentals and a bond market that has expanded significantly over the last decade. Access to a rapidly growing and under-researched area of the fixed income market. Regional debt markets have developed rapidly and have achieved scale in terms of market size, issuance volumes and trading activity. Our locally based team provides the Fund broad research coverage in one of the most under-researched regions in the world. Reduce volatility and add value with a GCC bond allocation. Diversifying your client s fixed income allocation with this Fund can potentially help reduce overall portfolio volatility and contribute to income generation and total return. Invest with a global fixed income leader, with experts on the ground in Dubai. The Fund provides access to both local and global fixed income investing specialists. The Dubai-based investment team is supported by the analysis and insights of a worldwide network of fixed income, trading and risk professionals. For Professional Investor Use Only. Not for Distribution to Retail Investors.
INVESTMENT PHILOSOPHY & PROCESS The Franklin Templeton GCC Fixed Income team is guided by the core belief that a portfolio of diversified, actively managed positions has the potential to generate attractive returns over a full market cycle. The investment process uses a mix of bottom up, top down and quantitative approaches. Bottom up analysis consumes the majority of resources and, together with portfolio optimization, contributes the greater part of the investment process. Our investment process and structure were designed with the GCC market in mind and are well suited to deal with the research requirements, challenges and opportunities the market presents. The investment process is based primarily on fundamental credit research and benefits from company visits, proprietary equity and credit models, and integration with Franklin Templeton s global platform as well as scalable research support in India. We aim to cover the entire GCC market and conduct our own independent research on issuing companies. The investment team s credit reports constitute the core of the investment process and include financial models based on proprietary templates and an internal rating methodology, qualitative assessment of the standalone creditworthiness of a company and the industry it operates in, as well as relative value and security-specific assessments. The focus on fundamental credit research is a function of the investment universe s relatively challenging research requirements (transparency, governance, access to information), as well as the relative concentration of the portfolio, which demands that we seek to avoid potential credit events. The investment process therefore helps the team identify credits that we expect to perform on an absolute return basis and structure optimized portfolios with appropriate characteristics to meet the Fund s target risk and return. Investment Process The Fund s investable universe is researched and rated by the investment management team. The team s credit reports consist of two main modules. The first module is a proprietary financial model with detailed forecasts based on internal and external (management meetings) assumptions, forming the basis for the assignment of a proprietary credit score to the company used for relative value purposes. The investment team differentiates models for different industries as per issuer classifications. We currently work with four industry templates for non-financial corporates, along with dedicated banking and sovereign models. The second module is a relative value assessment and includes the relevant credits yield curve analysis, security analysis as well as comparisons to regional, emerging market and global peers. The relative value analysis is conducted monthly or when needed. Company statements, interviews with management and inhouse research constitute the bulk of primary research. Where the issuer is unlisted and/or company financials are unobtainable, ratios and analysis are based on publicly available information such as company prospectus and market intelligence. More than 140 issuers from the MENA region have tapped debt capital markets, and more than 60 issuers are currently represented in fixed income indices, most of which are rated by international rating agencies. The majority of corporate debt issued from the MENA region is from the GCC and is in USD. For Professional Investor Use Only. Not for Distribution to Retail Investors. 2
PORTFOLIO CONSTRUCTION The investment team s global currency, interest rate and credit outlook is supported by weekly meetings with Franklin Templeton fixed income investment professionals based in New York, San Mateo, London and Singapore, and local asset management teams in Australia, Brazil, Canada, China, India, Korea, Malaysia, Mexico, and U.A.E. In addition, our team s own sovereign scores and overall macro rating process affect country allocations and identify key economic variables that influence sovereign spread and currency performance. Credits (or securities) that we believe currently offer value (from credit or security-specific dislocations), or those with projected credit improvements, form the core portfolio. Portfolio construction then incorporates additional securities, taking into consideration diversification, liquidity, currency, duration and other risks to construct the final portfolio. The core portfolio typically comprises two-thirds of the final portfolio. Franklin Templeton Investments has set up an infrastructure for trading in the secondary markets. This infrastructure offers competitive pricing, funding and access to sophisticated trade implementation. As the universe grows and new products and innovations are introduced, so will the opportunities to realize benefits from credit rating changes (positive and negative), basis trades, and secondary market inefficiencies. RISK MANAGEMENT Although portfolio managers make the final risk management decisions for their respective strategies, they rely on the risk analysis and recommendations of two groups the Quantitative Research Group and the Performance Analysis and Investment Risk (PAIR) Group. The Quantitative Research Group monitors fixed income portfolio risk exposures, generating detailed risk reports with metrics that include risk exposures related to duration, yield curve, credit, sector, country, and currency positions. PAIR conducts periodic reviews of all Franklin Templeton portfolios to further increase risk awareness by quantifying sources and levels of portfolio risk and suggesting methods of effective risk deployment. Through the use of Barra and Barclays POINT risk systems, the PAIR Group assesses the active risk or tracking error of the portfolio versus the benchmark. They can also highlight the sources of active risk such as country, industry, currency, duration and style differences, as well as the specific issues that are the largest contributors to active risk. Additionally, these quantitative techniques are used to compare each portfolio with its relevant composite, or all other similar accounts, to estimate the potential future difference in returns. All of these findings are summarized in a report format and distributed to portfolio managers and the Chief Investment Officer. This risk report is a significant tool for understanding investment risk at the portfolio level. To help ensure appropriate independence, PAIR does not have direct reporting lines to portfolio management but instead reports directly to the Executive Vice President of Portfolio Operations. PORTFOLIO MANAGEMENT TEAM The GCC Fixed Income investment team benefits from the breadth of Franklin Templeton s global fixed income resources including macroeconomic and sector guidance from the Fixed Income Policy Committee, sector expertise from analysts covering every major fixed income market segment, quantitative analysis from the Quantitative Research Group, as well as real time perspectives on regional markets by investment professionals based in Australia, Brazil, Canada, China, India, Korea, Malaysia, Mexico, and U.A.E. The GCC Fixed Income investment team consists of 7 investment professionals based in the U.A.E., India and the U.S. The investment team is able to take advantage of Franklin Templeton Investments broader resources in many ways, including oversight from the local asset management (LAM) group and dedicated support from global risk, compliance and operations. The investment team is based in Dubai, geographically close to the majority of GCC issuing companies. They are able to take advantage of Franklin Templeton Investments global footprint, resources and expertise in combination with local understanding and insight. The investment team participates in regional calls on a weekly basis and international fixed income calls several times a week, providing information about MENA markets, and receiving outlooks on global credit, interest and currency outlooks. For Professional Investor Use Only. Not for Distribution to Retail Investors. 3
Mohieddine Kronfol Chief Investment Officer Global Sukuk and MENA Fixed Income Franklin Templeton Investments (ME) Limited Mohieddine (Dino) Kronfol is the chief investment officer of Global Sukuk and MENA fixed income at Franklin Templeton Investments. Mr. Kronfol is responsible for the investment process, research and performance of the Global Sukuk and MENA Fixed Income teams. He is one of the founding partners and a board member of Franklin Templeton Investments (ME), formerly Algebra Capital, and has been with the firm since its inception in 2006. He is the lead portfolio manager of the FTSF Global Sukuk Fund and FTIF GCC Bond Fund. Dino is a pioneer in Arab capital markets where he has committed the past 20 years to the development of MENA debt markets and Sharia compliant finance across the globe. He has one of the longest track records managing global Sukuk assets, since 2008, and under his leadership, Franklin Templeton has established itself as a prominent player in Global Sukuk investing. Dino frequently shares his views as a commentator on regional and international media and is a regular speaker at industry events. Sharif Eid Portfolio Manager Fixed Income, Franklin Local Asset Management Franklin Templeton Investments (ME) Limited Sharif Eid is a portfolio manager for Franklin Templeton Investments (Middle East) Limited. Mr. Eid joined the Global Sukuk and MENA Fixed Income investment team in April 2009 as a research analyst where he helped develop the group's fundamental research process and production. Mr. Eid was promoted to portfolio manager in 2011 and is currently the co-manager of the FTIF GCC Bond Fund and co-manager of Global Sukuk institutional accounts. Prior to joining Franklin Templeton Investments (Middle East) Limited, formerly Algebra Capital, Mr. Eid worked for TD Securities in Toronto as a trader. He rotated through credit, FX and interest rate option desks. Mr. Eid holds a bachelor's degree in industrial engineering and a master's degree in mathematical finance, both from the University of Toronto. Preceding his tenure at FT, Dino was part of a small team that, in 2000, helped build from scratch and run what became SHUAA Capital's financial services business. He was initially head of Capital Markets and later became head of Debt Asset Management and, in 2002, fund manager of the first fund to focus exclusively on MENA debt. Prior to that, he was an early employee at one of the first pan-arab investment banks, Middle East Capital Group (MECG). Mr. Kronfol has received international recognition from clients and peers over the years, winning numerous awards on behalf of the firm and as an individual, including the first Failaka Islamic Award for The Best Sukuk Fund in 2010, the first Employee Provident Fund of Malaysia (EPF) Award for Best Global Sukuk Portfolio Manager in 2014 and the MENA Fund Manager Award for Outstanding Achievement by an Individual in 2016. Mr. Kronfol holds a bachelor's degree in business administration and an M.B.A. from the American University of Beirut. For Professional Investor Use Only. Not for Distribution to Retail Investors. 4
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 debt securities issued by any type of entity located in Gulf Cooperation Council (GCC) member countries. Such securities have historically been subject to price movements, generally due to interest rates or movements in the bond market. As a result, the performance of the Fund fluctuate moderately over time. The Fund may distribute income gross of expenses. Whilst this might allow more income to be distributed, it may also have the effect of reducing capital. Other significant risks include: credit risk, currency risk, emerging markets risk, derivatives 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. Any research and analysis contained in this document has been procured by Franklin Templeton Investments for its own purposes and is provided to you only incidentally. References to particular industries, sectors or companies are for general information and are not necessarily indicative of a fund s holding at any one time. 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 Luxembourgdomiciled 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. 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. Past performance is not an indicator or a guarantee of future performance. 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 and are more fully 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. 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. Opinions expressed are the author s at publication date and they are subject to change without prior notice. Any research and analysis contained in this document has been procured by Franklin Templeton Investments for its own purposes and is provided to you only incidentally. 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. For Professional Investor Use Only. Not for Distribution to Retail Investors. DE 2-18 2018 Franklin Templeton Investments. All rights reserved.