Templeton Frontier Markets Fund A (acc) USD Franklin Templeton Investment Funds Fund Manager Report Value Equity Product Details 1 Fund Assets $667,573,342.18 Fund Inception Date 14/10/2008 Number of Issuers 58 Bloomberg ISIN Base Currency Investment Style Benchmark Morningstar Category TEMFMAU LX LU0390136736 USD Value MSCI Frontier Emerging Markets Select Countries Capped Index Global Frontier Markets Equity Asset Allocation 2 % Equity 97.78 Cash & Cash Equivalents Fixed Income Fund Description The Fund aims to achieve long-term capital appreciation by investing principally in transferable equity securities of companies incorporated and/or having their principal business activities in the frontier markets countries across the market capitalisation spectrum. 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 (14/10/2008) A (acc) USD 1.50-8.62-9.11-4.29 1.90 0.91 6.76 MSCI Frontier Emerging Markets Select Countries Capped Index 2.84-6.74-4.60 4.84 5.30 4.94 1.90 Calendar Year Returns (%) 100% 50% 0% -50% 21.55 30.26 8.74 3.16 7.21 16.97-3.48-14.92-14.07-23.85-18.38 2017 2016 2015 2014 2013 2012 2011 2010 2009 26.32 24.08 9.25 19.51 24.24 51.35 11.72 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 Sectors Countries Delta Corporation Limited Energy (Stock Selection) Zimbabwe (Off-benchmark Exposure) YPF SA Sponsored ADR Consumer Staples (Stock Class D Selection) Nigeria (Underweight) Aramex (P.J.S.C) Materials (Underweight) Morocco (Lack of Exposure) Global Telecom Holding Saudi Arabia (Offbenchmark Exposure) Financials (Stock Selection) S.A.E. Egyptian International Pharmaceutical Health Care (Overweight) Egypt (Overweight) Industries Co. Brac Bank Telecommunication Services (Stock Selection) Vietnam (Stock Selection, Overweight) In financials, shares in Brac Bank were impacted by a recent directive by the Bangladesh Association of Banks asking private banks to reduce lending and deposit interest rates. Market sentiment in Egypt was impacted by inflation concerns, stemming from a reduction in government energy subsidies in June, and a neutral monetary policy. A key detractor, Global Telecom, was impacted by uncertainty regarding the valuations of a buy-out of two subsidiaries. Shares in Argentine energy company YPF rebounded in July, following weak performance in June, on government reassurance of free market pricing and no intervention on gasoline prices. An appreciation in the peso also had a positive impact. 1. All holdings are subject to change. Holdings of the same issuers have been combined.
Outlook & Strategy Rising trade tensions, particularly between the United States and China, have prompted a cautious investor outlook, affecting global markets over the short term. However, we believe that the market correction was overdone, and we could see a widespread recovery in the second half of the year. We continue to see positive reform momentum across frontier markets such as Argentina, Saudi Arabia, Pakistan and Vietnam. Valuations also remain attractive, in line with emerging markets and at a discount to developed markets. In our view, frontier markets offer a good way of diversification, as correlation with global capital markets is rather low. This is due in part to differences in the underlying industries and growth drivers in each country. Adding frontier markets exposure, as a component of the international portion of a portfolio, could also help reduce overall volatility. Our investment philosophy remains centred on three tenets: value, patience and a bottom-up approach. We take a holistic view of value to also assess sustainability, quality and growth. Portfolio Characteristics 5 MSCI Frontier Emerging Markets Select Portfolio Countries Capped Index Price to Earnings (12 Month Trailing) 13.07x 13.60x Price to Book Value 1.85x 1.91x Price to Cash Flow 7.21x 9.77x Market Capitalisation (Millions in USD) 5,026 3,154 Dividend Yield 3.04% 3.43% Portfolio Diversification Geographic Weightings vs. MSCI Frontier Emerging Markets Select Countries Capped Index 2 ASIA MID-EAST L. AMERICA/CARIBBEAN AFRICA EUROPE CASH & CASH EQUIVALENTS 3.77 7.06 13.80 0% 25% 50% Templeton Frontier Markets Fund 20.60 20.60 21.81 21.23 29.99 29.29 29.62 Sector Weightings vs. MSCI Frontier Emerging Markets Select Countries Capped Index 2 Financials 40.83 45.51 22.12 Consumer Staples 7.93 Health Care Industrials 9.89 2.52 8.21 7.06 8.06 Telecommunication Services 10.29 Energy 5.15 5.34 2.36 Consumer Discretionary 1.06 Materials Information Technology 0.94 5.93 0.23 0.72 Utilities 3.59 Real Estate 10.04 Cash & Cash Equivalents 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% Templeton Frontier Markets Fund www.franklintempletongem.com 2
Top Ten Holdings 6 Top Holdings Sector Country % NATIONAL BANK OF KUWAIT SAKP Banks Kuwait 4.44 DHG PHARMACEUTICAL JSC Pharmaceuticals, Biotechnology & Life Vietnam 4.23 Sciences YPF SA Energy Argentina 4.08 SAMBA FINANCIAL GROUP Banks Saudi Arabia 3.47 HATTON NATIONAL BANK PLC Banks Sri Lanka 3.28 DELTA CORP LTD Food Beverage & Tobacco Zimbabwe 3.15 SONATEL Telecommunication Services Senegal 3.01 KCB GROUP LTD Banks Kenya 3.00 BINH MINH PLASTICS JSC Capital Goods Vietnam 2.66 GLOBAL TELECOM HOLDING SAE Telecommunication Services Egypt 2.57 Supplemental Performance Statistics Supplemental Risk Statistics 7 3 Yrs 5 Yrs Since Inception Standard Deviation (%) Templeton Frontier Markets Fund 11.32 10.68 15.00 MSCI Frontier Emerging Markets Select Countries Capped 11.14 11.10 16.20 Index Tracking Error (%) 6.38 6.07 8.81 Information Ratio 8-0.53-0.66 0.28 Beta 0.85 0.81 0.78 Sharpe Ratio Templeton Frontier Markets Fund 0.10 0.04 0.41 MSCI Frontier Emerging Markets Select Countries Capped 0.41 0.40 0.23 Index Investment Team Portfolio Manager Years with Firm Years Experience Bassel Khatoun, Managing Director, Director of Portfolio 11 16 Management, Frontier and MENA Ahmed Awny, CFA, Senior Vice President 11 20 David Haglund, Senior Vice President 11 13 Number of Members Average Years Experience Portfolio Managers/Analysts 6 21 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 frontier markets around the world that are subject to significant price movements, frequently to a greater extent than equity markets generally or emerging markets. As a result, the performance of the Fund can fluctuate over time. Other significant risks include: currency risk, emerging markets risk, liquidity risk, operational 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. 7. 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. 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. 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 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.
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 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.