Franklin Templeton Shariah Funds Templeton Shariah Asian Growth Fund Value Fund Profile Fund Details Inception Date 27 August 2012 Investment Style Benchmark(s) Value MSCI AC Asia ex-japan Islamic Index FUND OBJECTIVE The investment objective of the Templeton Shariah Asian Growth Fund is longterm capital appreciation by investing primarily in Shariah compliant equity securities of companies incorporated or who have their area of primary activity in Asia (excluding Australia, New Zealand and Japan). The Fund is managed in accordance with Templeton s investment philosophy and approach, which are based on three tenets: value, patience, and bottom-up stock selection. Mark Mobius, Ph.D. Executive Chairman, Portfolio Manager Asia is the largest emerging markets region in the world and home to some of the fastest growing economies globally. In fact, more than 50 per cent of the world's population lives in Asia, providing the region with a huge consumer base. WHY CONSIDER THIS FUND Commitment to Shariah investing principles. We apply our specialized emerging markets asset management expertise in combination with the knowledge and advice of Shariah scholars to offer investors this Shariah-compliant portfolio. The fund is independently reviewed and endorsed by the Amanie International Shariah Supervisory Board, highly regarded for their extensive Shariah and technical understanding. The Amanie Scholars provide initial approval on investment objectives and strategy, as well as on going supervisory and monitoring services to ensure continuous adherence to internationally accepted Shariah principles and standards. A pioneer in emerging markets investing. Recognizing the profound political and structural changes occurring in emerging markets, Templeton Emerging Markets Group introduced the industry s first closed end fund dedicated solely to emerging markets, Templeton Emerging Markets Fund, in 1987 1. Managed by an experienced team. Led by Dr. Mark Mobius, one of the longest tenured managers in emerging markets with over 40 years of experience, the Templeton Emerging Markets Group adheres to the same investment philosophy established by Sir John Templeton over 70 years ago. Backed by extensive emerging markets resources. Templeton Emerging Markets Group keeps an active presence in local markets with a team of over 50 dedicated portfolio managers and analysts located across 18 offices around the world helping them maintain a first-hand understanding of the economic trends of their respective regions. Researching capable Asian companies for long-term growth. The Fund managers invest with a long-term view in Asian companies they believe are undervalued, fundamentally strong, growing, and capable of weathering difficult times. They look at a wide range of criteria to evaluate companies in Asia, including earnings prospects, return on capital, margins, asset value, growth and cash flow. 1. Templeton Emerging Markets Fund is a closed-end fund whose shares are traded on a stock exchange and are not offered to the public by Franklin Templeton Distributors, Inc. For Professional Investor Use Only. Not for Distribution to Retail Investors.
INVESTMENT PHILOSOPHY & PROCESS Founded in 1940, Templeton s investment philosophy is built upon a disciplined, yet flexible, long-term value-oriented approach. As it is applied to emerging markets investing, it is based on three tenets that we believe are critical to successful long-term investing: value, patience, and bottomup stock selection. Value. We seek to identify the underlying worth of a business and determine what that company s assets can generate in earnings and cash flow. We put all of our research efforts into identifying stocks trading at a discount to what our research indicates the company is worth. As long-term, valuationdriven investors, we focus on normalized earnings to seek out compelling opportunities in all sectors and markets around the globe. Patience. Stock markets are often short sighted and affected by sentiment, which creates short-term distortions in share prices. Templeton s long-term focus allows us to look past short-term market noise and identify the fundamental value of a stock. Through our strong research, we determine what a company is worth and patiently wait for the opportunity to purchase it at bargain levels. The depth of our research also gives us the conviction to wait for the market to reflect the fair value of a stock once it is added to our portfolios. Bottom-up. We conduct comprehensive, rigorous fundamental analysis to assess a company s long-term prospects and catalysts for value recognition. Templeton s commitment to original research drives our process to uncover opportunities wherever they may exist. Templeton Emerging Markets Group s investment process consists of five steps: Step 1: Identify Potential Bargains Templeton s unconstrained search for value allows us to identify bargains wherever they exist. Quantitative screening (including screening for Shariah compliance), qualitative assessment and the deep experience of our analysts narrows the investable universe down to a group of securities that merits closer analysis. Our best screen is our experience: Templeton portfolio managers and analysts are industry experts with a comprehensive knowledge of every aspect of their industries. Step 2: In-Depth Fundamental Analysis At Templeton, in-depth fundamental analysis is the foundation of our investment process. Our analysts have been aligned by global industry, with secondary country coverage. This multi-faceted global approach to industry, sector and country research coverage offers a comprehensive perspective. Templeton analysts conduct rigorous fundamental security analysis on all potential investment ideas to determine if the stock is trading at a substantial discount to what our research indicates the company is worth over a normalised five-year investment horizon. The analysis includes a detailed examination of the company s financial statements, particularly factors such as price-to-earnings, price-to-cash flow, debt/equity, price-to-book and dividend yield, in addition to market capitalization and liquidity criteria. We also evaluate a company s competitive position relative to its peers, as well as its management quality, ownership structure, corporate governance, and commitment to creating shareholder value. The latter is accomplished largely through 850-1,000 research visits per year, which includes meetings with company management, competitors, suppliers and customers. When analysing investment ideas, we utilise normalised earnings so as to capture a company s prospects over a full business cycle. Analysts formulate a detailed assessment of trends and analyse cash flow and asset value potential over a long-term investment horizon. They examine a company s fair value based on projected future earnings and evaluate that estimate relative to the current stock price. When assessing the true fundamental value of a company, we are disciplined yet flexible. We adhere to strict and well-defined valuation criteria across all stocks, but our analysts use varying approaches and tools for finding value in different sectors. Through in-depth research, investment ideas are narrowed down to a group of viable Action List candidates. The Action List is the Templeton Emerging Markets Group s approved stock list, comprised of Buy, Sell, and Hold-rated stocks. The Templeton Emerging Markets Group prepares its inhouse Action List, which comprises companies that have been determined to be mispriced by the market and the most undervalued relative to their business prospects. Templeton s collaborative culture ensures that each stock recommendation is thoroughly debated and critiqued. The Action List is the entry point for all approved purchases and is distributed to all analysts and portfolio managers. Each stock on the Action List has a specified buy and sell target. Step 3: Review Team Evaluation The Templeton Emerging Markets Group prepares its inhouse action list, which comprises companies that have been determined to be mispriced by the market and the most undervalued relative to their business prospects. Templeton s collaborative culture ensures that each stock recommendation is thoroughly debated and critiqued. The action list is the entry point for all approved purchases and is distributed to all analysts and portfolio managers. The action list is the emerging markets group s approved stock list and consists of 700-900 securities from which all funds and For Professional Investor Use Only. Not for Distribution to Retail Investors. 2
portfolios are selected for inclusion in portfolios. Each stock on the action list has a specified buy and sell target. Step 4: Allocate Portfolio At Templeton, we believe that the best investment decisions draw on the collective knowledge of the entire research team. Original research is the foundation of our approach, and the portfolio construction process leverages the insights of all our portfolio managers/analysts within a disciplined framework. All Templeton portfolios are built from the bottom up, on a stock-by-stock basis, with a consistent focus on long-term valuations. As we are concerned first and foremost with the pursuit of compelling valuations, we do not construct portfolios to match the characteristics of any specific benchmark. As a result, our country and industry allocations are a result of the bottom-up stock selection process. When selecting stocks, the portfolio manager has discretion but must do so within a disciplined, structured framework of controls designed to ensure consistency and diversification for all clients. Step 5: Evaluation and Portfolio Maintenance Templeton actively manages our clients portfolios to ensure they continually reflect our best thinking. This is accomplished through a team commitment to ongoing fundamental research and risk management. Several internal groups work closely with our portfolio managers to monitor portfolios and manage risk, and their strong input and support is critical to the portfolio management process. PORTFOLIO CONSTRUCTION The portfolio is built from the approved stock list that comprises Templeton s Global Research Database. Portfolio managers select stocks from the action list, which is comprised of companies our analysts believe are most undervalued relative to their longer-term business prospects. Each stock has an established valuation or price target that is set by the analyst responsible for recommending the security, and stocks are purchased only when the price is within this pre-set price range. A stock is sold if: The security price exceeds our estimation of value, Greater value exists in another similar security, or A fundamental change occurs at a company to alter our forecasts. All holdings are regularly reviewed to ensure that analyst recommendations are up-to-date and accurately reflect any changes in company fundamentals. In this way, our ongoing fundamental research drives all buy and sell decisions. A Disciplined, Repeatable Process, Tailored for Shariah Investors For Professional Investor Use Only. Not for Distribution to Retail Investors. 3
RISK MANAGEMENT The Fund has specific investment guidelines and requirements that are set forth by the board of directors of Franklin Templeton Shariah Funds and is reviewed on a quarterly basis to ensure that the risk management process is adhered to: Stock Selection Constraints Portfolio Managers have the discretion in selecting stocks for the portfolio, but they must be within the approved stock list and general guidelines. Asset Classes The Fund invests primarily in equity securities of companies that are incorporated, or have their area of primary activity, in Asia. The Fund may also invest in equity securities, which are listed on recognized exchanges in capital markets of the Asia Region (excluding Australia, New Zealand, and Japan), as specified in the Fund s Prospectus. However, the Fund may seek investment in other types of securities such as preferred stock, securities convertible into common stock and fixed income securities, both USD and non-usd denominated. However, depending on market conditions, it can invest up to 25% of the total net assets in debt securities of companies and governments located anywhere in the world. Country/regional and Sector Limits The Fund should invest at least 67% of its assets in securities and other investments to reflect the Asian investment region. Min/Max Stock Positions On average the fund will be invested in 50 to 75 positions at any given time. The average size of a position within the Fund is between 0.5% and 8%, with a flexible maximum of 10%. Cash Policy Portfolio managers intend to remain fully invested at all times with a maximum cash position of 10%. Currency Policy Portfolios are not actively hedged. Risk management is integrated into every aspect of the Fund s investment process. To ensure consistency, all portfolios are built within a structured framework of dynamic sector ranges and approved stock lists. Templeton primarily focuses on three types of risk: Stock-specific risk is addressed primarily through the quality of Templeton s research. A disciplined sell methodology also helps to minimize stock-specific risk. Portfolio risk is addressed by creating fund portfolios that are well-diversified and benefit from Templeton s best thinking. Weekly peer reviews are conducted for the portfolio managers to review their positioning relative to their peers and internal guidelines, and to ensure that each portfolio continually reflects Templeton s best investment practices. Operational risk is minimized by the due diligence of the portfolio managers and the separation of all major investment and its related functions. A comprehensive system of checks and balances involving distinct and independent groups ensures that all investment guidelines and restrictions are strictly adhered to. Additionally, market, political and economic risks are taken into account and are address primarily at the stock level. Analysts take all political, economic and currency factors into consideration when making financial forecasts and recommendations. PORTFOLIO MANAGEMENT TEAM Templeton uses a team approach for the management of its emerging markets funds. The Templeton Emerging Markets Group, with over 50 portfolio managers and analysts, is spread across 18 emerging markets offices, providing access to local resources and facilitating relationships with local contacts. Dr. Mark Mobius, based in Hong Kong, is the lead portfolio manager of the Fund with Dennis Lim as the co-manager of the Fund. Capitalization Limits In general, there are no established minimum market-cap guidelines. However for reason of liquidity, the team focuses on companies with at least US$300 million in market capitalization and US$3 million in daily turnover. For Professional Investor Use Only. Not for Distribution to Retail Investors. 4
Mark Mobius, Ph.D. Executive Chairman Templeton Emerging Markets Group Dr. Mobius is Executive Chairman of Templeton Emerging Markets Group. He currently directs the analysts based in Templeton's emerging markets offices and manages the emerging markets portfolios. Dr. Mobius has spent over four decades working in emerging markets all over the world. Dr. Mobius earned Bachelor's and Master's degrees from Boston University, and a Ph.D. in economics and political science from the Massachusetts Institute of Technology. He is the author of the books "Trading with China," "The Investor's Guide to Emerging Markets," "Mobius on Emerging Markets," "Passport to Profits", "Equities - An Introduction to the Core Concepts" and "Mutual Funds - An Introduction to the Core Concepts." Dr. Mobius has received numerous awards such as the "Top 100 Most Powerful and Influential People by Asiamoney magazine in 2006, "Emerging Markets Equity Manager of the Year 2001" by International Money Marketing and "Ten Top Money Managers of the 20th Century" in a survey by the Carson Group in 1999. Dr. Mobius was also appointed joint chairman of the Global Corporate Governance Forum Investor Responsibility Taskforce of the World Bank and Organization for Economic Cooperation and Development. Dennis Lim Senior Executive Vice President Senior Managing Director Templeton Emerging Markets Group Mr. Dennis Lim is a senior executive vice president and senior managing director. Mr. Lim co-manages a number of Templeton's emerging-markets funds, including Templeton Developing Markets Trust, Templeton Institutional Funds Inc. and Templeton's BRIC funds. He also has research responsibilities for Southeast Asian markets and telecommunications companies in emerging markets. In addition, Mr. Lim is co-chief executive officer of Templeton Asset Management Ltd. in Singapore. Prior to joining Franklin Templeton in 1990, Mr. Lim worked for the Government of Singapore's Ministry of National Development. He entered the financial services industry in 1984. Mr. Lim holds an M.S. from the University of Wisconsin, Milwaukee and a B.S. from the National University of Singapore. He served on the Investment Management Association of Singapore's Executive Committee and is a member of the Panel of Experts of the Singapore Government Commercial Affairs Department. He is proficient in English, Mandarin Chinese and Bahasa Melayu. For Professional Investor Use Only. Not for Distribution to Retail Investors. 5
AMANIE INTERNATIONAL SHARIAH SUPERVISORY BOARD Sheikh Dr. Mohamed Ali Elgari, Chairman, Kingdom of Saudi Arabia Dr. Mohamed Ali Elgari is a Professor of Islamic Economics and the former Director of the Centre for Research in Islamic Economics at King Abdul Aziz University in Saudi Arabia. He is an advisor to many Islamic financial institutions throughout the world and is also on the Shariah board of the Dow Jones Islamic index. He is also a member of the Islamic Fiqh Academy as well as the Islamic Accounting & Auditing Organisation for Islamic Financial Institution (AAOIFI). Dr. Elgari has written several books on Islamic banking. He graduated from the University of California with a Ph.D in Economics. Dr. Mohd Daud Bakar, Malaysia Dr. Mohd Daud Bakar is currently the Chairman of the Shariah Advisory Council at the Central Bank of Malaysia, the Securities Commission of Malaysia and the Labuan Financial Services Authorities. He was previously the Deputy Vice-Chancellor at the International Islamic University (Malaysia). Dr. Bakar is a Shariah board member of various financial institutions, including the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) (Bahrain), Morgan Stanley (Dubai), Bank of London and Middle East (London), Noor Islamic Bank (Dubai), Jadwa- Russell Islamic Fund (Saudi Arabia), Salama Islamic Insurance, amongst many others. Dr. Muhammad Amin Ali Qattan, Kuwait Dr. Muhammad Amin Ali Qattan is a prolific author of texts and articles on Islamic economics and finance. He is currently the Director of Islamic Economics Unit, Centre of Excellence in Management at Kuwait University. He also serves as the Shariah advisor to many reputable institutions such as Ratings Intelligence, Standard & Poor s Shariah Indices, Al Fajer Retakaful amongst others. Dr. Qattan is a highly regarded Shariah Scholar and is based in Kuwait. He has a Ph.D. in Islamic Banking from Birmingham University (UK). Dr. Osama Al Dereai, Qatar Dr. Osama Al Dereai is a Shariah scholar from Qatar. He has extensive experience in teaching, consulting and research in the field of Islamic finance. He received his Bachelor's degree specialising in the Science of Hadeth Al Sharef from the prestigious Islamic University of Madinah (Saudi Arabia). He obtained his Masters degree from the International Islamic University (Malaysia) and was later conferred his Doctorate in Islamic Transactions from the University of Malaya. Dr Al Dereai is a Shariah board member of various financial institutions which include the First Leasing Company, Barwa Bank, First Investment Company and Ghanim Al Saad Group of Companies amongst others. For Professional Investor Use Only. Not for Distribution to Retail Investors. 6
CFA and Chartered Financial Analyst are trademarks owned by CFA Institute. Templeton Shariah Asian Growth Fund is a sub-fund of the Luxembourg-domiciled Franklin Templeton Shariah Funds. Collective Investment Schemes in Securities (CIS) are generally medium to long term investments. The value of participatory interests may go down as well as up and past performance is not necessarily a guide to the future. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down. CIS are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees and charges and maximum commissions is available on request from Franklin Templeton International Services S.à r.l., 8A rue Albert Borschette, L-1246 Luxembourg. Commission and incentives may be paid and if so, would be included in the overall costs. Franklin Templeton Shariah Funds ( FTSF ) are priced on a forward basis and prices are calculated daily. FTSF does not provide any guarantee either with respect to the capital or the return of a portfolio. FTSF is regulated in Luxembourg and the FTSF sub-funds available for public sale in South Africa are approved by the Financial Services Board. Investments in foreign securities may expose the fund to risks such as potential constraints on liquidity and repatriation of funds, macroeconomic, political, foreign exchange, tax, settlement and potential limitations on the availability of market information. For full information on all the risks applicable to this fund, please refer to the fund s prospectus. Franklin Templeton Investments SA (PTY) Ltd ( FTISA ) is an authorised Financial Services Provider. FTISA is a Member of the Association for Savings & Investment SA (ASISA). Copies of the latest prospectus, Minimum Disclosure Document (MDD) and the latest annual and semi-annual reports of FTSF are available on the website www.franklintempleton.co.za or may be obtained free of charge from Franklin Templeton International Services S.à r.l., 8A rue Albert Borschette, L-1246 Luxembourg or your local FTI representative. Performance is calculated as a lump-sum and is quoted in USD or in the base currency of the fund and its respective share classes currencies. Performance is calculated for the portfolio, individual investor performance may differ as a result of initial fees, the actual investment date, the date of reinvestment and dividend withholding tax. Annualised performance is the fund s total return expressed as an annual equivalent percentage rate over the time period listed. 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. The investment activities will be undertaken in accordance with the Shariah Guidelines. As a consequence, the performance of a Fund may possibly be lower than other investment funds that do not seek to strictly adhere to the Islamic investment criteria. The requirement to purify cash holdings or dividend income will likely result in payments being made to charities. The return to investors will be reduced by the amount of such payments. The International Shariah Supervisory Board of Amanie Advisors Sdn Bhd has certified that the Fund is in compliance with the requirements of the Shariah principles. For Professional Investor Use Only. Not for Distribution to Retail Investors. DE 2017 Franklin Templeton Investments. All rights reserved. 02-14