Templeton Latin America Fund A (Ydis) USD Franklin Templeton Investment Funds Fund Manager Report Value Equity Product Details 1 Fund Assets $1,050,576,208.81 Fund Inception Date 28/02/1991 Number of Issuers 35 Bloomberg TEMLAAI LX ISIN LU0029865408 Base Currency USD Investment Style Value Benchmark MSCI EM Latin America Index Morningstar Category Latin America Equity Asset Allocation 2 % Equity 97.54 Cash & Cash Equivalents Fixed Income Overall Morningstar Rating TM 3 Fund Description The Fund aims to achieve long-term capital appreciation by investing primarily in equity securities of issuers incorporated or having their principal business activities in the Latin American region. Performance Data Performance Net of Management Fees as at 31/05/2018 (Dividends Reinvested) (%) 4 1 Mth 3 Mths YTD 1 Yr 3 Yrs 5 Yrs 10 Yrs Since Inception (28/02/1991) A (Ydis) USD -14.87-15.74-8.64 0.94 2.75-5.27-5.26 6.84 MSCI EM Latin America Index -14.01-15.87-8.19 4.01 3.74-3.32-3.89 11.63 Calendar Year Returns (%) 200% 100% 0% -100% 22.99 24.15 23.90 31.47-28.49-18.09-12.03-17.06-13.15-30.82-22.54-19.15-50.64-51.28 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 A (Ydis) USD 10.83 8.90 18.20 14.89 101.29 104.20 Past performance is not an indicator or a guarantee of future performance. Portfolio Manager Insight Performance Review ONE-MONTH KEY PERFORMANCE DRIVERS Helped Hurt Stocks Sectors Countries Intercorp Financial Services Inc. Energy (Stock Selection) Peru (Overweight) Ternium S.A. Sponsored Luxembourg (Offbenchmark Industrials (Stock Selection) ADR Tenaris S.A. Sponsored Health Care (Stock Italy (Off-benchmark ADR Selection) Vale S.A. Materials (Stock Selection) Brazil (Stock Selection) Itausa - Investimentos Itau Chile (Stock Selection, Financials (Overweight) SA Pfd Underweight) Itau Unibanco Holding S.A. Sponsored ADR Pfd Stock selection in Brazil and the materials sector weighed on relative returns. The portfolio had an underweight to mining company Vale, which edged lower but fared better than broader Latin American markets thanks to firm metals prices. An overweight to the financials sector was a source of relative weakness. Also in Brazil, labour strikes against rising fuel costs hit economic activity and banking-related stocks, including Itau Unibanco and its controlling stockholder Itausa - Investimentos Itau. Relative performance was supported by an overweight to Peru, largely through a position in Intercorp Financial Services. The banking and insurance company posted a jump in quarterly earnings, helped by lower provisions. Outlook & Strategy We believe that Latin American economies are poised to gain pace, fuelled by robust trade and solid commodity prices. We also continue to see improvement in the earnings power and cash flow of many companies in the region. The impact of rising US interest rates, stock valuations, market volatility and political events all play a role in our analysis of the development of Latin America. What we have seen so far in 2018 is a reminder that markets can be volatile, and we expect continued volatility this year. 1. All holdings are subject to change. Holdings of the same issuers have been combined. Colombia (Lack of
Nevertheless, we remain optimistic about the opportunities that we see across the region. Rising wealth is a secular driver and we expect it to continue lifting demand for a broad array of goods and services. Financials are also interesting to us, as improving macroeconomics create a potential tailwind for banks. Our investment approach is driven by fundamental research and rigorous stock selection, emphasising companies with sustainable earnings power and reasonable valuations. Geopolitical uncertainty may trigger bouts of market volatility, but these can also be opportunities for long-term investors to acquire shares in well-run companies at reasonable valuations. Portfolio Characteristics 5,6 Portfolio Price to Earnings (12 Month Trailing) 15.31x 17.76x Price to Book Value 2.12x 1.89x Price to Cash Flow 6.80x 9.28x Market Capitalisation (Millions in USD) 21,906 27,380 Dividend Yield 2.24% 2.98% Portfolio Diversification Geographic Weightings vs. 2 Brazil Mexico Peru Chile Luxembourg Argentina Panama Italy Cash & Cash Equivalents Templeton Latin America Fund 7.18 3.82 5.14 2.95 1.74 1.61 6.85 10.56 23.42 24.43 48.64 56.97 0% 25% 50% 75% Sector Weightings vs. 2 Financials 43.81 30.31 19.35 Consumer Staples 15.81 Materials 13.16 18.59 Consumer Discretionary 7.36 5.07 6.98 Industrials 6.00 Energy 4.37 9.61 1.60 Information Technology 0.96 Utilities Telecommunication Services 0.59 5.17 0.32 6.27 Health Care 0.83 Real Estate 1.39 Cash & Cash Equivalents 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Templeton Latin America Fund Top Ten Holdings 7 Top Holdings Sector Country % ITAUSA - INVESTIMENTOS ITAU SA Banks Brazil 8.11 GRUPO FINANCIERO BANORTE Banks Mexico 6.16 SAB DE CV B3 SA - BRASIL BOLSA BALCAO Diversified Financials Brazil 5.59 ITAU UNIBANCO HOLDING SA Banks Brazil 5.28 WAL-MART DE MEXICO SAB DE CV Food & Staples Retailing Mexico 5.25 TERNIUM SA Materials Luxembourg 5.14 LOJAS AMERICANAS SA Retailing Brazil 5.05 BANCO BRADESCO SA Banks Brazil 5.05 AMBEV SA Food Beverage & Tobacco Brazil 4.56 BOLSA MEXICANA DE VALORES SAB DE CV Diversified Financials Mexico 4.24 www.franklintempletongem.com 2
Supplemental Risk Statistics 8 3 Yrs 5 Yrs 10 Yrs Since Inception Templeton Latin America Fund A (Ydis) USD Supplemental Performance Statistics Standard Deviation (%) Templeton Latin America Fund 22.27 21.58 26.12-25.01 24.13 27.48 28.02 Tracking Error (%) 4.80 4.55 4.71 - Information Ratio 9-0.21-0.43-0.29 - Beta 0.88 0.88 0.94 - Sharpe Ratio Templeton Latin America Fund 0.10-0.26-0.21-0.12-0.15-0.15 0.32 Investment Team Portfolio Manager Years with Firm Years Experience Gustavo Stenzel, CFA, Executive Vice President 20 20 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 securities of companies located in or doing significant business in Latin America. Such emerging markets 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 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. 8. Beta, Information Ratio and Tracking Error information are measured against the. www.franklintempletongem.com 3
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 the Fund 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. 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. Information is historical and may not reflect current or future portfolio characteristics. All holdings are 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.
subject to change. 6. 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. 7. 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. 9. 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.