Franklin Templeton Investment Funds Value Equity Fund Manager Report Product Details 1 Fund Assets $68,086,079.02 Fund Inception Date 04/05/2012 Number of Issuers 30 Bloomberg FTAFAAU LX ISIN LU0727123662 Base Currency USD Investment Style Value Benchmark Dow Jones Africa Titans 50 Index Morningstar Category Africa Equity Asset Allocation 2 % Equity 81.01 Cash & Cash Equivalents Fixed Income Fund Description The Fund s investment objective is to provide long-term capital appreciation by investing principally in equity and equity-related securities of companies across the market capitalisation spectrum which are (i) incorporated or listed in African countries, and/or (ii) listed or incorporated elsewhere in the world but have their principal business activities in African countries. Performance Data Performance Net of Management Fees as at 31/08/2018 (Dividends Reinvested) (%) 3,4 1 Mth 3 Mths YTD 1 Yr 3 Yrs 5 Yrs Since Inception (04/05/2012) A (acc) USD -7.56-9.38-10.65-5.89-2.95-6.13-2.88 Dow Jones Africa Titans 50 Index -7.91-10.53-10.37-3.28 5.11-2.64-1.88 Calendar Year Returns (%) 100% 50% 0% -50% 25.34 23.50 17.08-9.07-10.69-11.81-27.08-29.40 2017 2016 2015 2014 2013 9.63 2.24 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 Juhayna Food Industries Materials (Underweight) Canada (Lack of Exposure) MCB Group Limited Health Care (Overweight) Egypt (Overweight) Life Healthcare Group Holdings Limited MTN Group Limited Egypt-based packaged dairy and fruit juice producer Juhayna Food Industries advanced. We expect improving economic growth, higher incomes and rising consumption in Egypt to benefit the company, which recently reported strong earnings growth for the first half of 2018. South Africa-based private hospital operator Life Healthcare Group contributed to relative returns. Investors welcomed news of potential buyers for its Indian business, Max Healthcare. We see long-term growth potential in Life Healthcare as ageing populations drive demand for medical treatments. Conversely, South Africa-based wireless carrier MTN Group, which operates across Africa and the Middle East, was a detractor. Nigeria alleged improper dividend repatriations by MTN s local unit and ordered the return of those payments. MTN has denied wrongdoing, and we believe its core businesses remain steady amidst growing mobile penetration and service usage in the region. Outlook & Strategy Macroeconomic factors including mounting global trade tensions, a stronger US dollar and rising interest rates have been primary contributors to market volatility this year. In such periods, heightened risk aversion can lead to indiscriminate selling in stock markets, often at the expense of solid fundamentals. 1. All holdings are subject to change. Holdings of the same issuers have been combined. Telecommunication Services (Stock Selection) United Kingdom (Lack of Exposure) South Africa (Stock Selection) Pick N Pay Stores Limited Energy (Lack of Exposure) Ghana (Lack of Exposure) Mr Price Group Limited Financials (Underweight) Morocco (Lack of Exposure)
We still have a constructive view on Africa given its strong economic growth potential, which provides a healthy backdrop for business development and earnings growth. We believe that the selloff in the South African rand is largely a function of it being amongst the more liquid bellwether EM currencies. Our outlook for South Africa remains positive, due in part to the new president s business-centric approach and a potential recovery in the country s economic growth. As long-term investors, we attempt to look past short-term market turbulence to identify sustainable value in African stocks. In fact, the recent volatility allows us, as stock-pickers, to identify fundamentally strong companies and invest at valuations we find attractive. Portfolio Characteristics 5,6 Portfolio Price to Earnings (12 Month Trailing) 12.15x 14.51x Price to Book Value 2.30x 1.69x Price to Cash Flow 10.07x 7.45x Market Capitalisation (Millions in USD) 11,412 18,716 Dividend Yield 3.94% 2.42% Portfolio Diversification Geographic Weightings vs. 2 South Africa Egypt Kenya Nigeria Mauritius Zimbabwe Togo Senegal Cash & Cash Equivalents 3.07 1.79 1.61 1.11 Templeton Africa Fund 6.34 8.58 6.37 9.32 12.71 17.19 31.51 37.17 0% 25% 50% Sector Weightings vs. 2 Financials Consumer Staples Consumer Discretionary Telecommunication Services Health Care Materials Industrials Real Estate Energy Cash & Cash Equivalents 4.38 1.18 0.61 1.54 1.24 Templeton Africa Fund 6.69 10.29 8.35 8.81 7.94 10.23 24.63 26.22 32.29 36.60 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Top Ten Holdings 7 Top Holdings Sector Country % NASPERS LTD Media South Africa 5.71 MTN GROUP LTD Telecommunication Services South Africa 5.63 COMMERCIAL INTERNATIONAL Banks Egypt 5.27 BANK EGYPT SAE EASTERN TOBACCO Food Beverage & Tobacco Egypt 5.17 PICK N PAY STORES LTD Food & Staples Retailing South Africa 5.07 EAST AFRICAN BREWERIES LTD Food Beverage & Tobacco Kenya 4.12 KCB GROUP LTD Banks Kenya 3.91 JUHAYNA FOOD INDUSTRIES Food Beverage & Tobacco Egypt 3.74 OLD MUTUAL LTD Insurance South Africa 3.43 EQUITY GROUP HOLDINGS LTD Banks Kenya 3.30 www.franklintempletongem.com 2
Supplemental Risk Statistics 8 3 Yrs 5 Yrs Since Inception Templeton Africa Fund A (acc) USD Supplemental Performance Statistics Standard Deviation (%) Templeton Africa Fund 17.27 15.43 14.91 17.44 17.76 17.12 Beta (%) 15.66 13.66 12.83 Information Ratio 9-0.51-0.26-0.14 Beta 0.59 0.58 0.60 Sharpe Ratio Templeton Africa Fund -0.22-0.43-0.19 0.25-0.18-0.06 Investment Team Portfolio Manager Years with Firm Years Experience Ahmed Awny, CFA, Senior Vice President 11 20 David Haglund, Senior Vice President 11 13 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 companies across the market capitalization spectrum that are located in or doing business in African countries (including emerging and frontier markets), which have historically been subject to significant price movements, frequently to a greater extent than equity markets generally. As a result, the performance of the Fund can fluctuate considerably 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. 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. 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. 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 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.