Unconstrained Fixed Income Product Profile Product Details Composite Assets $612,308,518.31 Inception Date 30/11/2005 Base Currency USD Investment Style Unconstrained Overview 1 High alpha-seeking regional strategy that uses a research-driven, value-based approach that seeks to capitalise on regional interest rates, currency and sovereign credit trends. Primary focus includes government and government-related issuance. Excess Return Target: 200 400 basis points (gross of fees) Tracking Error Target: 200 400 basis points (gross of fees) Performance Data Average Annual Total Returns (USD %) 2,3 Since Inception 3 Mths YTD 1 Yr 3 Yrs 5 Yrs 10 Yrs (30/11/2005) Templeton Asian -0.93-0.93 3.99 1.02 0.69 4.31 6.23 Bond Composite - GROSS Templeton Asian -1.04-1.04 3.52 0.57 0.24 3.48 5.27 Bond Composite - NET JPM GBI-EM Broad 2.06 2.06 9.48 4.86 2.50 4.29 5.65 Diversified Asia Index 20% 10% 0% -10% 9.48 2.06 2.06 3.99 3.52 4.86 4.31 1.02 0.57 0.69 2.50 0.24 3.48 6.23 4.29 5.27 5.65-0.93-1.04-0.93-1.04 3 Mths YTD 1 Yr 3 Yrs 5 Yrs 10 Yrs Since Inception - GROSS - NET Calendar Year Returns (USD %) 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 Templeton Asian 7.05 3.30-7.36 3.84-1.61 11.95 0.87 12.87 24.95-4.21 Bond Composite - GROSS Templeton Asian 6.58 2.84-7.78 3.37-2.05 11.45-0.53 11.32 23.25-5.54 Bond Composite - NET JPM GBI-EM Broad Diversified Asia Index 11.65 4.84-3.17 4.36-5.72 8.93 5.00 12.17 6.33 0.98 1. Targets represent the goal the strategy seeks against the and do not take into account management fees or other expenses an investor would incur in the management of its account, which would reduce any returns. There is no assurance that employment of the strategy will result in the intended targets being achieved. 2. Periods of more than one year are annualised. Past performance is not an indicator or a guarantee of future performance. 3. The reflects the HSBC Asian Local Bond Index from inception to 31 March 2016 and the from 1 April 2016 to present.
Portfolio Characteristics of a Representative Account 4,5 Portfolio Number of Securities Including Cash 55 141 Yield to Maturity 5.65% 5.12% Yield to Worst 5.65% 5.11% Average Duration -0.83 Yrs 5.68 Yrs Average Credit Quality 6 BBB BBB+ Average Weighted Maturity 3.43 Yrs 8.09 Yrs Portfolio Diversification of a Representative Account 4 Geographic Weightings vs. 7 ASIA EX-JAPAN 95.46 10 33.54 Indonesia 21.56 India 32.78 26.58 South Korea 12.32 11.83 Thailand 14.47 4.98 Philippines 0.50 China 26.59 Malaysia 10.31-0.10 USA ST CASH & CASH EQUIVALENTS 5.24 OTHER -0.60-25% 0% 25% 50% 75% 100% 125% Currency Weightings vs. 7 ASIA EX-JAPAN 70.12 10 Indonesian Rupiah 33.54 21.56 Indian Rupee 32.78 26.58 Thai Baht 11.83 14.47 Philippine Peso 4.98 0.50 South Korean Won 0.09 Chinese Yuan 26.59 Malaysian Ringgit 10.31 Australian Dollar -13.11 US-DOLLAR 64.28 US Dollar 64.28 JAPANESE YEN -34.41 Japanese Yen -34.41-50% -25% 0% 25% 50% 75% 100% 125% 6. The average credit quality (ACQ) rating may change over time. The portfolio itself has not been rated by an independent rating agency. The letter rating, which may be based on bond ratings from different agencies, is provided to indicate the average credit rating of the portfolio s underlying bonds and generally ranges from AAA (highest) to D (lowest). The ACQ is determined by assigning a sequential integer to all credit ratings AAA to D, taking a simple, asset-weighted average of debt holdings by market value and rounding to the nearest rating. The risk of default increases as a bond s rating decreases, so the ACQ provided is not a statistical measurement of the portfolio s default risk because a simple, weighted average does not measure the increasing level of risk from lower rated bonds. The ACQ is provided for informational purposes only. Derivatives are excluded from this breakdown. 2
Credit Quality Ratings vs. 8 Sector Weightings vs. 7 AA BBB+ 12.30 11.82 Local Currency Government/Agency Bonds - Investment Grade 95.46 10 BBB 4.98 0.50 Derivatives -0.10 BBB- 4.64 Cash & Cash Equivalents 0% 5%10% 15% 20%25% 26.58 30% 35%40% 45% 50%55% 60% 65%70% 66.26 75% Cash & Cash Equivalents -15% 0% 4.64 15% 30% 45% 60% 75% 90% 105% 120% Maturity Breakdown vs. 7 Duration Breakdown vs. 7 0 to 1 Year 11.44 0 to 1 Year 20.51 1 to 2 Years 2 to 3 Years 3 to 5 Years 5 to 7 Years 7 to 10 Years 10 to 15 Years 15 to 20 Years 2.58 6.41 7.47 10.04 12.63 18.56 17.46 16.24 20.93 16.41 26.17 29.78 1 to 2 Years 2 to 3 Years 3 to 5 Years 5 to 7 Years 7 to 10 Years 10 to 15 Years 15 to 20 Years 20 to 30 Years -17.11-0.62 0.83 17.10 8.73 15.20 11.20 25.98 8.78 20.72 27.15 5.39 34.67 20 to 30 Years -0.05 3.94 Offset Derivatives 21.48-5 % 0 % 5 % 10 % 15 % 20 % 25 % 30 % 35 % -30 % -20 % -10 % 0 % 10 % 20 % 30 % 40 % 8. 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. If listed, the NR category consists of rateable securities that have not been rated by an NRSRO. The N/A category consists of nonrateable securities (e.g., equities). Cash includes equivalents, which may be rated. Derivatives are excluded from this breakdown. Information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change. 3
Supplemental Performance Statistics Supplemental Risk Statistics (USD) 9,10 Standard Deviation (%) 3 Yrs 5 Yrs 10 Yrs Since Inception Templeton Asian Bond 5.80 5.88 11.26 10.51 Composite JPM GBI-EM Broad 6.23 6.21 7.27 6.82 Diversified Asia Index Tracking Error (%) 5.14 4.59 6.58 6.06 Information Ratio 11-0.75-0.39 0.10 Sharpe Ratio Templeton Asian Bond 0.09 0.06 0.36 0.49 Composite JPM GBI-EM Broad Diversified Asia Index 0.70 0.35 0.55 0.67 Historical Long-Term Performance Quarterly rolling three-year gross returns in USD (%) since 30/11/2005 as of 31/03/2018 15 10 5 0-5 -5 0 5 10 15 Investment Philosophy We believe that applying our bottom-up, research-driven approach focused on identifying potential sources of total return throughout Asia and seeking to capitalise on regional interest rates and currency trends provides the Asian Bond strategy with the best potential for superior risk-adjusted returns. This is a high alpha-seeking regional strategy that may include allocations to all types of fixed income instruments in both developed and emerging markets. Investment Process In-Depth Macroeconomic Fundamental Research and Analysis: Conduct independent analysis of countries, interest rates, and exchange rates using proprietary models and research. Research analysts specialise by geographic region and conduct frequent discussions with key local decision makers. The team s research drives country weightings in addition to target ranges for duration, currency, and cash. Portfolio Construction: Build diversified portfolios seeking the most attractive risk-return profile utilising yield curve and horizon analysis. Disciplined Approach: Adhere to long-term strategy through changing market environments, supported by analysis and monitoring from Franklin s internal risk management group. Integrated Research Approach The Templeton Global Macro Team exchanges insight and information with more than 170 fixed income and over 90 equity investment professionals around the globe. Franklin Templeton Fixed Income WEEKLY Templeton Global Macro MONTHLY Templeton Emerging Markets Equity Research Team Local Asset Management 1 WEEKLY San Mateo, Singapore MONTHLY Templeton Global Equity Research Team Investment Team Templeton Asian Bond Management Team Years with Firm Years Experience Michael Hasenstab, Ph. D., Executive VP & Chief Investment Officer 19 23 Vivek Ahuja, Portfolio Manager, Research Analyst 11 22 Additional Resources Corporates - High Yield Corporates - Investment Grade Global Sovereign/EMD Local Asset Management Quantitative 9. Risk statistics are calculated using gross of fees composite performance. 10. Information Ratio and Tracking Error information are displayed for the product versus the. 4
Important Legal Information Franklin claims compliance with the Global Investment Performance Standards (GIPS ). Franklin (the firm ) encompasses the equity, fixed income and balanced accounts managed by Franklin Advisers, Inc., and related Franklin affiliates, including, effective 1 January 2007, the equity accounts managed by the institutional investment teams of Franklin Templeton Institutional, LLC under the former firm name of Fiduciary Global Advisors. The combined equity assets of Franklin and Fiduciary Global Advisors form the Franklin Equity Group (formerly Franklin Global Advisers prior to 30 June 2010) unit of Franklin. Effective 1 January 2006, the fixed income assets managed from that date forward by Franklin Templeton Institutional, LLC ( FTI ) or its related affiliates (managed previously by Fiduciary Trust Company International - Institutional Division or FTCI s Institutional Division ) that went through the institutional portfolio review process were combined with the fixed income assets of Franklin to form the Franklin Templeton Fixed Income unit of Franklin. The primary reason for these changes to the firm definition was to consolidate equity and fixed income asset management for Franklin (as previously defined), Fiduciary Global Advisors (institutional equities) and FTCI s Institutional Division (institutional fixed income) under one firm, Franklin. The firm definition for Franklin does not include multistrategy asset allocation portfolios managed by Franklin Templeton Multi-Asset Solutions (FTMAS), which was previously known as Franklin Templeton Solutions as well as Franklin Templeton Multi-Asset Strategies and the wrap-fee and non-wrap-fee accounts managed by Franklin Separately Managed Accounts (formerly Franklin Portfolio Advisors) or Franklin Europe which integrated into the Templeton firm definition effective 1 December 2017. consists of all portfolios managed on a fully discretionary basis with an investment objective that seeks to achieve an above-average total return by investing primarily in a portfolio of fixed and floating rate debt securities and debt obligations of governments and/or government-related issuers located throughout Asia. The strategy may also invest in debt obligations issued by supranational entities organised or supported by several national governments, in corporate bonds and in securities or structured products where the security is linked to or derives its value from another security, asset or currencies of any Asian country. The portfolio may also utilise financial derivatives instruments dealt in either regulated or over-the-counter markets for investment purposes. These financial derivative instruments which are used on a less frequent basis may include, inter alia, swaps (such as credit default swaps or total return swaps), forwards and cross forwards, futures contracts (including those on government securities), as well as options. The strategy regularly takes tactical exposure to various foreign currencies, including through the frequent use of foreign currency forward contracts and cross forwards, and, to a lesser degree, future contracts and currency options. Total returns are presented in U.S. dollars both gross and net of investment advisory fees, are inclusive of commissions and transaction costs, and assume reinvestment of any dividends, interest income, capital gains, or other earnings. Periods greater than one year are shown as average annual total returns. Performance data is shown rounded to the nearest hundredth. Past performance is not an indicator or a guarantee of future performance. The primary benchmark is the JPMorgan GBI-EM Broad Diversified Asia Index. This index is a U.S. Dollar denominated market value weighted fixed income index comprised of local currency government bonds of emerging market countries within the Asia region. Prior to 31 March 2016, the primary benchmark was the HSBC Asian Local Bond USD Index. The HSBC Asian Local Bond USD Index is a market value weighted fixed income index comprised of local-currency denominated, high quality, liquid bonds in Asia, excluding Japan. The benchmark is broadly indicative of the style of the composite and is provided for comparative purposes only to represent the investment environment existing during the time periods shown. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. To receive a complete list and description of Franklin composites (including any single account mutual fund composite) and/or a presentation that adheres to the GIPS standards for any composite, contact your Franklin Templeton institutional representative listed below. CFA and Chartered Financial Analyst are trademarks owned by CFA Institute. Important data provider notices and terms available at www.franklintempletondatasources.com. 4. Portfolio information is based on a representative account taken from the. The information is historical, may not reflect current or future characteristics and may vary significantly among individual separate accounts depending on a variety of factors such as portfolio size, specific investment guidelines and inception dates of the individual accounts. 5. Yield to Maturity, Yield to Worst, Average Duration and Average Weighted Maturity reflect certain derivatives held in Portfolio (or their underlying reference assets). 7. Figures reflect certain derivatives held in the portfolio (or their underlying reference assets) and may not total 100% or may be negative due to rounding, use of derivatives, unsettled trades or other factors. Information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change. 11. 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. 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