Franklin Gold and Precious Metals Fund A (acc) USD Franklin Templeton Investment Funds Fund Manager Report Precious Metals Equity Product Details 1 Fund Assets $207,885,393.53 Fund Inception Date 30/04/2010 Number of Issuers 64 Bloomberg ISIN Base Currency Investment Style Benchmark Morningstar Category FGPMAAU LX LU0496367417 USD Precious Metals Sector Equity Precious Metals Asset Allocation 2 % Equity 98.73 Cash & Cash 1.27 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 31/07/2018 (Dividends Reinvested) (%) 3,4 1 Mth 3 Mths YTD 1 Yr 3 Yrs 5 Yrs Since Inception (30/04/2010) A (acc) USD -3.49-6.07-13.81-16.42 7.67-3.98-10.87 FTSE Gold Mines Index -5.03-5.79-10.78-8.92 17.58-1.97-9.22 Calendar Year Returns (%) 200% 100% 0% -100% 10.23 52.35 60.72-1.10-21.37-20.47-11.03-14.18-15.82-14.01-24.61-15.06-48.36-52.25 2017 2016 2015 2014 2013 2012 2011 A (acc) USD 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 Barrick Gold (Underweight) Pretium Resources (Off-Benchmark Exposure) OceanaGold (Overweight) Guyana Goldfields (Off-Benchmark Exposure) Industries Gold (Stock Selection) Precious Metals & Minerals (Off- Benchmark Exposure) Copper (Off-Benchmark Exposure) Silver (Stock Selection) Centerra Gold (Overweight) Diversified Metals & Mining (Off- Benchmark Exposure) Newmont Mining (Underweight) The fund s tendency to hold substantial underweightings in large-capitalisation gold miners was generally helpful in relative terms as several of them including key detractors Barrick Gold, Goldcorp and Agnico Eagle Mines suffered negative returns that were steeper than the index s overall loss for the month. Unfortunately, these three investments were also amongst the fund s largest detractors in absolute terms. Pretium Resources, which operates the high-grade Brucejack gold mine in British Columbia (Canada), announced it had achieved steady-state production at this relatively new mine. Management reported strong first-half 2018 production results (over 187,000 ounces of gold, in line with prior guidance of 150,000 200,000 ounces) that showed evidence of a grade reconciliation turnaround amidst smoother operations, and offered favourable guidance for the latter half of 2018. Centerra Gold, which operates mines and development projects primarily in Canada, Central Asia and Turkey, suffered a share-price decline as its Mount Milligan mine (Canada) faced imminent risks to throughput levels due to water shortages and availability at the mine site. The company has taken steps with the local environmental regulatory authority to secure more stable sources of water supply, but the process is not expected to conclude until the fourth quarter of 2018. 1. All holdings are subject to change. Holdings of the same issuers have been combined.
Outlook & Strategy We expect gold equities to continue to show a high correlation to physical gold price movements, although with higher daily volatility, as we have seen the past several quarters. Second quarter reports released in July delivered mixed results, as expected, given the impact of higher oil, steel and other consumables costs to metals and mining companies, although weaker non-us currencies helped producers with mining assets outside the United States. The July drop in physical gold prices has resulted in reduced third quarter financial estimates as analysts update their expectations following second quarter results. Rising gross domestic product forecasts globally, combined with the stimulative effects of the US tax-policy changes and the impact of escalating trade tensions with newly implemented tariffs coming into full effect, have increased the dialogue about the potential for inflationary pressures to return. This environment holds the potential to provide further support to precious metals and related equities. According to our analysis, improving economic activity and positive wealth generation (aided by positive global stock market performance) should offer broadening support for jewellery sales as the market remains a major demand area for gold. We continue to see attractive opportunities in gold- and precious metals-focused equities, especially following the recent pullback. 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 rise. Furthermore, mining companies have maintained a focus on improving the cost structure of their operations, debt repayment and asset rationalisation, which we believe should result in improved performance potential. Portfolio Characteristics 5 Portfolio Market Capitalisation (Millions in USD) 3,723 11,705 Price to Earnings Growth Ratio 0.96x 1.68x 3-Year Sales Growth 16.46% 9.59% Estimated 3-5 Yr EPS Growth 15.31% 9.31% Price to Earnings (12 Month Forward) 18.65x 23.12x Portfolio Diversification Geographic Weightings vs. 2 Sector Weightings vs. 2 Canada 39.20 58.43 Long Life Gold Mines 59.40 80.52 Australia 19.79 14.44 Medium Life Gold Mines 11.88 18.44 South Africa United States Egypt United Kingdom Peru Philippines Cash & Cash Equivalents 2.41 2.12 0.91 0.04 1.27 8.62 9.63 6.41 13.03 22.82 0% 25% 50% 75% Gold Exploration & Development Precious Metals & Minerals Diversified Metals & Mining Copper Silver Cash & Cash Equivalents 1.04 4.00 2.63 1.84 1.27 0% 5%10% 7.54 11.45 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 % NEWCREST MINING LTD Australia 6.20 B2GOLD CORP Canada 6.15 ANGLOGOLD ASHANTI LTD South Africa 5.61 OCEANAGOLD CORP Australia 4.24 ALAMOS GOLD INC Canada 4.16 DETOUR GOLD CORP Canada 3.38 BARRICK GOLD CORP Canada 3.13 PRETIUM RESOURCES INC Canada 3.10 GUYANA GOLDFIELDS INC Canada 3.00 AGNICO EAGLE MINES LTD Canada 2.98 Supplemental Performance Statistics Standard Deviation (%) Franklin Gold and Precious Metals Fund 33.24 33.19 32.12 36.16 37.27 34.33 Tracking Error (%) 10.16 11.03 11.01 Information Ratio 8-0.98-0.18-0.15 Beta 0.88 0.85 0.89 Sharpe Ratio Franklin Gold and Precious Metals Fund 0.21-0.13-0.35 0.47-0.06-0.28 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 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. 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. 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. 4. When performance for either the portfolio or its benchmark has been converted, different foreign exchange closing rates may be used between the portfolio and its benchmark. 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 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 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.
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.