FranklinTempletonInvestmentFunds TempletonGlobalBalancedFund · PDF file ·...

Franklin Templeton Investment Funds

Templeton Global Balanced Fund - A (acc) USD

Templeton Global Equity Group

Data as of 31 March 2018

Templeton Global Balanced Fund

2

Table of Contents

Investment Capabilities Overview............................................................................................3

Franklin Templeton Investments—A Trusted, Long-Term Partner in Investment

Management

.......................4

We Consider Sustainability in All That We Do.........................................................................5

Who Is Franklin Templeton Investments?................................................................................6

Extensive Global Presence......................................................................................................7

Cornerstones..........................................................................................................................8

Why Templeton Global Balanced Fund?..................................................................................9

Investment Objective and Characteristics..............................................................................10

Templeton’s Investment Philosophy.......................................................................................11

Templeton Global Equity Investment Process........................................................................12

ESG Assessments—Case Studies........................................................................................17

Investment Process—Global Interest Rate, Currency, Sovereign Credit Positioning................18

Global Research—Multiple Perspectives/Lenses................................................................... 19

Isolating Risk Exposures.......................................................................................................20

Summary..............................................................................................................................21

What are the Key Risks?......................................................................................................22

Geographic Allocation—Total................................................................................................23

Geographic Allocation—Equity..............................................................................................24

Geographic Allocation—Fixed Income................................................................................... 25

Sector Allocation—Equity......................................................................................................26

Sector Allocation—Fixed Income...........................................................................................27

Currency Allocation—Fixed Income.......................................................................................28

Quality Allocation—Fixed Income..........................................................................................29

Top Ten Holdings—Equity.....................................................................................................30

Portfolio Characteristics—Total............................................................................................. 31

Discrete Performance........................................................................................................... 32

Historical Performance..........................................................................................................33

Calendar Year Returns......................................................................................................... 34

Performance Risk Statistics.................................................................................................. 35

Management Profile..............................................................................................................36

Glossary...............................................................................................................................38

Important Disclosures...........................................................................................................40

Source: Franklin Templeton Investments (FTI), as of 31 March 2018, based on latest available data. Total combined Assets Under Management (Total AUM) combines U.S. and non-U.S. AUM of the investment management subsidiaries of the parent

company, Franklin Resources, Inc. (FRI) [NYSE: BEN], a global investment management organisation operating as FTI. Only selected business entities within FTI claim compliance with the GIPS standards as described in the table of contents if

applicable. Total and platform AUM includes discretionary and non-discretionary accounts, including pooled investment vehicles, separate accounts and other vehicles. Total and platform AUM may also include advisory accounts with or without trading

authority. In addition, assets for which certain FTI advisers provide limited asset allocation advisory services, and assets that are not allocated to FTI products are not included in the AUM figures shown. Franklin Templeton Multi-Asset Solutions may

invest in various investment platforms advised by a number of investment advisory entities within FTI. Platform AUM reported for FT Multi-Asset Solutions therefore may include certain AUM separately reported under each utilised investment platform.

Total AUM also includes assets managed by certain FTI advisers that do not form part of the selected investment platforms shown. As a result, the combined platform AUMs may not equal Total AUM and may be calculated and reported separately for

regulatory or other purposes under each investment adviser. Each local asset manager may be considered as an entity affiliated with or associated to FTI by virtue of being a direct or indirect wholly-owned subsidiary of FRI, an entity or joint venture in

which FRI owns a partial interest, which may be a minority interest, or a third party asset management company to which investment advisory services have been delegated by an FTI adviser.

3


Investment Capabilities Overview

FRANKLIN TEMPLETON INVESTMENTS

Total Combined Assets Under Management : US$737.5 Billion

2

Equity

5

Fixed Income

8

Multi-Asset Solutions

11

Alternatives

AUM

US$315.0 Billion US$290.0 Billion US$124.0 Billion US$16.2 Billion

CAPABILITIES

•

Value

•

Government

•

Income

•

Commodities

•

Deep Value

•

Municipals

•

Real Return

•

Infrastructure

•

Core Value

•

Corporate Credit

•

Balanced/Hybrid

•

Real Estate

•

Blend

•

Bank Loans

•

Total Return

•

Hedge Funds

•

GARP

•

Securitised

•

Target Date/Risk

•

Private Equity

•

Growth

•

Multi-Sector

•

Absolute Return

•

Convertibles

•

Currencies

•

Tactical Asset Allocation

•

Sector

•

Sukuk

•

Managed Volatility

•

Shariah

•

Smart Beta

INVESTMENT

•

Templeton Global Equity Group (1940)

•

Franklin Templeton Fixed Income Group (1970)

•

Franklin Templeton Multi-Asset Solutions (1996)

•

Franklin Real Asset Advisors (1984)

TEAMS

•

Franklin Equity Group (1947)

•

Templeton Global Macro (1986)

•

Franklin SystematiQ (2011)

•

Darby Overseas Investments (1994)

•

Franklin Mutual Series (1949)

•

Franklin LAM-Fixed Income (1993)

•

K2 Advisors (1994)

•

Franklin Templeton Emerging Markets Equity

(1987)

•

Pelagos Capital Management (2005)

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Franklin Templeton Investments—A Trusted, Long-Term Partner in Investment Management

Investment excellence

• Diverse investment solutions across multiple asset classes

• Time-tested investment disciplines plus exceptional research enables strong long-term performance potential

• Integrated, comprehensive and proven approach to investment risk management

• Committed to environmental, social and governance (ESG) investment integration

Global perspective, local expertise

• Pioneer in global investing, with track record of innovation

• Unmatched breadth and depth of global presence

• Deep experience and long-term commitment to the markets we enter

Strength and experience

• 70 years of navigating well through all market cycles

• Global business diversified by investment objective, geography and client type

• Values-driven culture guides how we work


4

Franklin Templeton Investments—A Trusted, Long-Term Partner in Investment

Management

5888

ESG and Corporate Sustainability

Guides How We Work• Our primary objective is to deliver exceptional investment management through an active fundamental approach…while always acting in the best

interests of our clients and shareholders

• As a fiduciary, we recognize that ESG considerations are a driver of long-term investment performance and thus affect our business and the companies we invest in

• Our approach to ESG is one of the many strengths of our organization

ESG considerations at the corporate level that impact our business:

Environmental Impact

Energy usage

Greenhouse gases

Waste/recycling

Water consumption

Social Factors

Diversity and inclusion

Talent management(attracting, retaining top talent)

Charitable giving

Customer privacy and data security

Employee volunteering

Governance

Anti-money laundering

Code of ethics/conduct

Compliance

Executive compensation

Enterprise risk management

ESG investment integration


5

We Consider Sustainability in All That We Do

Who Is Franklin Templeton Investments?

An Investment Management Organisation• Focusing on research and investment management with more than 600

investment professionals covering all major asset classes

• Serving the needs of investors worldwide with a dedicated team of investment professionals

• Providing the resources, expertise, experience and commitment to ensure outstanding service to our clients

• Offering a broad range of investment strategies and vehicles

Franklin Templeton Investments total firm assetsUS$737.5 billion as of 31 March 20182018

Bissett Investment Management joins Franklin Templeton Investments2000

Franklin Resources, Inc. (BEN), stock is added to S&P 500 Index1998

Mutual Series joins Franklin Templeton Investments1996

Templeton joins Franklin Templeton Investments1992

Franklin Resources, Inc., stock listed and begins trading on New York Stock Exchange1986

Franklin Resources, Inc., moves offices from New York to California1973

Franklin Resources, Inc., formed as a holding company going public as BEN1971

Franklin Distributors, Inc., introduces its first mutual funds1947

Fiduciary Trust Company International joinsFranklin Templeton Investments2001

0718


6

Investment professionals include portfolio managers, analysts and traders.

As of 31 March 2018.

Who Is Franklin Templeton Investments?

Extensive Global Presence

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11 Global Macro and Global Equity offices and more than 160 investment professionals.

Nassau

Ft. Lauderdale

New York Edinburgh

Melbourne

Hong Kong

San Mateo Toronto London

Global Fixed Income OfficesTempleton Global Equity Research OfficesTempleton Global Macro Research Offices

Singapore

Frankfurt


7

As of 31 March 2018.

Extensive Global Presence

Global Perspective

Our global research analysts conduct fundamental research in equity and fixed income around the globe. With analysts on the ground in our local asset management offices, our local contacts and access enable the team to develop unfettered views which underlie our investment decision-making process.

Long-Term Value

Global equity and fixed income analysts search the globe for the best values in both asset classes.

Investment Strategy

Fixed Income • Utilise fundamental, macro-driven research to identify potential sources of total return (current income and capital appreciation)

worldwide

• Identify economic imbalances that may lead to value opportunities in interest rates (duration), currencies, sovereign credit andcorporate/spread sectors

Equity • Markets are often short-sighted and affected by sentiment, which creates short-term distortions in share prices

• Comprehensive, rigorous bottom-up analysis with long-term focus allows us to look beyond short-term noise and identify the fundamental value of a stock

Cornerstones

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8

Cornerstones

Why Templeton Global Balanced Fund?

Growth and Income• Long-term, fundamental research

• Focus on sustainable global capital appreciation and income opportunities

Flexible and Opportunistic• Flexibility to allocate across regions, countries, asset classes and sectors

• Actively managed to precisely isolate desired exposures

Potential for Lower Overall Risk Through Diversification• Truly global approach to investing

• Focus on companies with low valuations

• Identify economic imbalances leading to value in interest rates (duration), currencies, sovereign credit and corporate/spreadsectors

Global Expertise• Recognised pioneer in global investing

• Collaborative investment approach facilitates knowledge sharing

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9

Why Templeton Global Balanced Fund?

FTIF Templeton Global Balanced Fund (the “fund”) seeks capital appreciation and current income, consistent with prudent investment management, by investing principally in equity and government securities issued by entities throughout the world, including Emerging Markets. The Investment Manager anticipates that the majority of the fund’s portfolio will normally be invested in equity securities. The fund will seek income by investing in fixed and floating rate debt securities and debt obligations of governments, government-related or corporate issuers worldwide.

At no time will the fund invest more than 40% of its total net assets in fixed income securities.

Investment Objective and Characteristics

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10

Investment Objective and Characteristics

We Utilise a Disciplined, Consistent Approach Based on Three Timeless Principles of Investing

Value• Uncover bargains—seeking companies trading at large discounts to their business value

• Business value—based on normalised earnings, cash flow or asset value potential

• Flexible approach in a disciplined framework

Patience• Rolling five-year time horizon focused on normalised business value

• Long-term focus takes advantage of short-term price volatility to reveal investment opportunities

• Patience allows time for value recognition and has historically resulted in low turnover

Bottom-up stock picking• Build portfolios with undervalued securities identified through research process

• Portfolio structure reflects where we are finding value across sectors and regions

• Portfolio management process seeks to buy pessimism and sell optimism

The Templeton Investment Philosophy

“The best bargains are those stocks having the lowest prices in relation to possible earning power of future years.”

—Sir John TempletonOctober 1957

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11

Templeton’s Investment Philosophy

Templeton’s Valuation-Driven Investment Process

The above chart is for illustrative and discussion purposes only.1. Historical turnover is based on Templeton Global Equity Group’s overall experience, over a five-year period ended 31 March 2018, and is not intended to reflect the historical turnover of the fund. Please see the fund’s fiscal year-end turnover on the “Portfolio Summary” slide. The turnover is a byproduct of Templeton’s long-term approach to managing portfolios, but various factors, such as a portfolio’s specific investment parameters and market or economic conditions may cause actual portfolio turnover to vary. For more information regarding an individual strategy’s or fund’s historical turnover ratio please contact your Franklin Templeton representative.

Identify Potential Bargains

In-Depth Fundamental Analysis

Research Team Evaluation

Bottom-Up Portfolio Construction

Portfolio Monitoringand Risk Management

Experienced analysts

Focus on global industry sectors

Quantitative and qualitative assessment

Identify material ESG issues

Five-year financial forecasts

Management/supplier/competitive evaluation

Upside/downside return quantification

Recommendation of Bargain List candidates

Presentation of investment thesis

Investment debateand critique: “Devil’s Advocate”

ESG “Devil’s Advocate”

Director of Research approval

Investment parameters

Industry and sector framework

Build and diversify portfolio

Long-term approach: 20% historical turnover1

Ongoing valuation analysis

Ongoing ESG Monitoring

Disciplined sell methodology

Weekly peer review and risk analytics

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TEMPLETON’S BOTTOM-UP STOCK SELECTION PROCESS

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12

Templeton Global Equity Investment Process

A Bottom-Up Research Process Leverages Global Capabilities Across Market Cap Spectrum

The above chart is for illustrative and discussion purposes only.

Bargain List

1. Identify Potential Bargains

• Global focus– Analysts are aligned by

sectors globally– Unconstrained investable

universe

• Fundamental and quantitative assessment– Price/Earnings– Price/Book Value– Price/Cash Flow

• Identify material ESG issues– Environmental– Social– Governance

• Most attractively valued companies based on valuation

2. In-Depth Fundamental Analysis

• Develop research models– Revenue drivers; growth

potential– Assessment of ESG factors

on long-term risk/return– Operating costs– Capital expenditures– Capital allocation– Retained capital– Competitor analysis

• Five-year financial forecasts– Emphasis on future earnings

potential– Cash flow potential

• Upside/downside return quantification

• Recommendation of Bargain List candidates

3. Research Team Evaluation

• Presentation of investment thesis– Valuation history– Business outlook relative to

global industry– Why we believe business is

undervalued– Opportunities and risks– Capital strength appraisal

• Rigorous investment team debate– Team vetting generates best

thinking– “Devil’s Advocate” critique– ESG “Devil’s Advocate”

• Director of Research approval

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13

Lifecycle of a Templeton Stock

Templeton’s research platform is designed to track securities through their valuation lifecycle. The above chart is intended solely to illustrate the ideal interplay between the Bargain List, Core List and Source of Funds List over an anticipated holding period but there is no guarantee any Templeton stock will follow this lifecycle. The chart is hypothetical and is not intended to represent an actual Templeton portfolio, or any stock purchased or sold by Templeton.

SOURCE OF FUNDS LISTFully valued stocks recommended for sale

CORE LISTAttractively priced stocks with potential

for significant price upside

BARGAIN LISTStocks priced at a significant discount to our estimation of their future business value

VALU

ATI

ON

TIME

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Portfolio Manager Stock Selection Decisions & Oversight

Bottom-Up Portfolio Construction—Step 4

The above chart is for illustrative and discussion purposes only.The turnover is a byproduct of Templeton’s long-term approach to managing portfolios, but various factors, such as a portfolio’s specific investment parameters and market or economic conditions may cause actual portfolio turnoverto vary. For more information regarding an individual strategy’s or fund’s historical turnover ratio please contact your Franklin Templeton representative.Portfolio managers purchase securities from the approved Templeton database of 300–500 securities which was derived from the investable universe of approximately 10,000 equity securities. 1. Although the typical Templeton Global or Non-U.S. equity portfolio holds approximately 100 securities, individual portfolios may vary, depending on various factors, such as portfolio size or investment strategy.

Analysts’highest-conviction holdings per sector

Historically low turnover, which may result in lower transaction costs

TEMPLETON GLOBAL OR

NON-U.S. PORTFOLIO

Approximately 100 Securities1

SELLDISCIPLINE

300–500Securities

on Proprietary Database

Approved Database

Sector Analyst Portfolios

Portfolio-SpecificFeatures

Mandate parameters

Geographic/sector constraints

Portfoliocash flow

Source of Funds List

Core List

Bargain List

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Portfolio Monitoring and Risk Management—Step 5


Ongoing Valuation Analysis Disciplined Sell Methodology Integrated Risk Approach

Research team closely monitorsinvestment thesis including ESG factors and updates forecasts and recommendations:• Sector Team Meetings—Meet monthly to

review main holdings, best ideas and sector analyst portfolios, discuss sector drivers and trends, and vet potential new bargains

• Industry Reviews—Industry analysis reports and stock holdings formally reviewed twice a year by each analyst to the full investment team

• Analyst Database Reviews—All stocks under analysts’ coverage also formally reviewed on a rotating weekly schedule

Stocks placed on the Source of Funds List and sold if:• Price meets/exceeds our estimation of

full value, or• Greater value exists in another similar

security, or• Fundamental change in our

investment thesis occurs

• Stock-specific risk is addressed primarily through our research discipline and team vetting process

• Ongoing assessment of material ESG issues provides another way to quantify potential downside risk

• Portfolio risk is managed through sector and geographic diversification and weekly peer review process

• Investment Risk Management Group—an independent team of risk specialists reporting directly to the CEO—performs a risk oversight function and can consult with the portfolio managers to provide unbiased risk insights

TEMPLETON GLOBAL EQUITY GROUP

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ESG Assessments—Case Studies

This is not a complete analysis of every material fact regarding an industry, security or investment and should not be viewed as an investment recommendation. It is, however, intended to provide insight into the fund’s portfolio selection process. The actions taken with respect to this investment, and its performance, may not be representative of other advice or investments. Factual statements are taken from sources considered reliable, but have not been independently verified for completeness or accuracy by the fund’s manager or its affiliates. These opinions may not be relied upon as investment advice or an offer for a particular security or as an indication of trading intent for any Franklin Templeton fund. In addition, it should not be assumed that any securities transactions discussed were or will prove to be profitable. Logo used for illustrative purposes to identify respective company and should not be construed as an endorsement of or affiliation with Franklin Templeton Investments.

5960

Environmental Social GovernanceHeidelbergCement KasikornBank Petrofac

• During our ESG Assessment of HeidelbergCement, a leading building materials company based in Germany, we observed a significant increase in carbon intensity, which presented the risk of increased costs linked to carbon pricing or regulatory caps on emissions.

• We raised these concerns with management to confirm that the company had policies and programmes in place to manage future emissions. The company provided data showing that their carbon intensity had actually been declining per ton of cement produced over the past several years.

• Emissions have been stable during a period of rising production, and the company has generated relatively low emissions per sales compared to peers. The company has also instated a new 2030-based carbon target, and is working to increase the energy efficiency and the proportion of alternate fuels to 30% by FY2020, which is among the strongest targets in the construction materials industry.

• KasikornBank, a major bank in Thailand, financed the construction of Xayaburi Dam in Laos. A non-governmental organisation (NGO) claimed it had received substantial opposition to the dam from residents. Protestors voiced concerns the dam would have negative effects on the nearby communities, such as forced displacement, the end to gold panning in the river and difficult access to forest products.

• We contacted the company regarding these potential ESG concerns. The bank believed it complied with Laos’ social and environmental laws, based on World Bank standards. KasikornBank had an established ESG Governance System for all credit underwriting, third-party technical advisors to identify areas of non-compliance and direct any necessary corrective actions, and a requirement to submit periodic Environmental Management Reports on projects for monitoring purposes.

• Multiple ESG concerns would have indicated inadequate risk structures and would have been factored into our determination of the company’s valuation. However, this was not the case, as no controversies have been reported since this incident.

• Petrofac is a large engineering and construction company focusing on the oil and gas industry in the Middle East. Its stock fell sharply on news of the UK Serious Fraud Office’s (SFO) investigation of bribery, corruption and money laundering by Petrofac and its officers, including the CEO and COO.

• We did not expect the SFO to investigate Petrofac as an earlier investigation by Freshfields and KPMG, which was shared with SFO, indicated that Petrofac’s directors were not aware of misconduct and there was no evidence of bribes.

• The reputational impact of the SFO’s investigation will likely have a negative impact on new contracts. This could create financial stress as the company’s balance sheet is already stretched. Also, the SFO’s investigation highlights corporate governance problems, which could lead to further de-rating, especially if the CEO and COO are charged with bribery.


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ESG Assessments—Case Studies

Investment Process—Global Interest Rate, Currency, Sovereign Credit Positioning

PM Team• Potential Return

vs. Expected Risk• Global Allocations

Trading• Trade Structuring• Market Flows• Local Execution/

Settlement

Risk Modelling• VaR• Correlations• Scenario/Stress

Duration Ideas

Currency Ideas

Sovereign Credit Ideas

Best Execution

Risk Analysis

In-DepthCountry Analysis

Macro Models/Analysis

Local Asset ManagementPerspectives

GLOBAL RESEARCHPORTFOLIO CONSTRUCTION

AND IMPLEMENTATION

PORTFOLIO

Review/Performance AttributionFeedback Feedback

SOURCES OF POTENTIAL ALPHA

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Investment Process—Global Interest Rate, Currency, Sovereign Credit Positioning

Global Research—Multiple Perspectives/Lenses

COUNTRY ANALYSIS• Fundamentals• Monetary and fiscal policy• Macroeconomic disequilibria• Capacity for change and

policy implementation• Country visits• Meetings with policymakers

MACRO MODELLING• Currency and interest rate valuation• Currency models

– Purchasing Power Parity (PPP), equilibrium exchange rates, interest rate differentials

• Interest rate models– Econometric analysis, Taylor

Rule, yield curve analysis• Trading

– Short-term technicals and flows• Ad hoc thematic research

– Scenario, shock and theme/trend analysis

LOCAL PERSPECTIVE1

• Local/regional perspectives– Australia– Brazil– Canada– China2

– India– Malaysia– Mexico– Poland– South Korea– United Arab Emirates

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1. This unit is comprised of investment professionals located in affiliates of and joint venture partners with Franklin Templeton Investments. Reference to Local Asset Management is in relation to fixed income teams (excluding equity).

2. Includes individuals that are not employees of Franklin Resources, Inc. (FRI) or wholly owned subsidiaries of FRI. However, these individuals are part of our joint venture or strategic partnership relationships worldwide and are an integral component

of our overall fixed income research efforts.

Global Research—Multiple Perspectives/Lenses

• Our flexible investment approach allows us to manage interest rate (duration), currency and sovereign credit exposures and risksindependently

• For example, if we find an attractive local interest rate opportunity in a country, but find the currency unattractive, we can hedge out the currency risk, or cross-hedge the currency to a different currency that we do find attractive

• Example: Long maturity local Mexico bonds (denominated in Mexican pesos) cross-hedged to Indian rupees

Isolating Risk Exposures

Step 1 = Purchase peso-denominated Mexican bond

Step 2 = Cross-hedge peso risk into Indian rupee risk

Result = “Rupee-denominated” long-dated Mexican debt

Cross-Hedge

Mexican Interest Rate Risk

Indian Rupee Risk=

Single Security Hedge-Out Mexican Peso and Hedge-In Indian Rupee Result

+Indian RupeeMexican Peso

Mexican Interest Rate Risk

Mexican Peso Risk-

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For illustrative purposes only; not representative of any current holdings.

Isolating Risk Exposures


21

Fund Identifiers

ISIN Code LU0128525689

SEDOL Code 7116580

Bloomberg Code TEMGBLA LX


As of 31 March 2018

Summary

Portfolio Manager(s)

Michael Hasenstab, PhD United States

Peter Wilmshurst, CFA Australia

Sonal Desai, PhD United States

Alan Chua, CFA Singapore

Tian Qiu, CFA Hong Kong

Fund Ratings (31 March 2018)

Overall Morningstar Rating™

«««

Summary of Investment Objective

The Fund seeks capital appreciation and current income by investing principally in

equity securities and government debt securities issued by entities throughout the

world, including emerging markets. The portfolio manager anticipates that the majority

of the Fund’s portfolio is normally invested in equity or equity-linked securities.

Morningstar Category™ USD Moderate Allocation

Investment Style Balanced

Fund Inception Date 1 June 1994

Share Class Inception Date 14 May 2001

Benchmark Custom 65% MSCI ACWI + 35% JP

Morgan Global Government Bond Index

Base Currency for Fund USD

Base Currency for Share Class USD

Total Net Assets (USD) 954,692,402.67

Asset Allocation Equity: 64.33%

Fixed Income: 18.18%

Cash & Cash Equivalents: 17.49%

Number of Issuers 113

Total Expense Ratio 1.64%

Holdings of the same issuer have been combined.

© Morningstar, Inc. 2018. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) 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.

Information is historical and may not reflect current or future portfolio characteristics. All portfolio holdings are subject to change.

Asset Allocation figures reflect certain derivatives held in the portfolio (or their underlying reference assets) and may not total 100% or may be negative due to rounding, use of any derivatives, unsettled trades or other factors.

The fund offers other share classes subject to different fees and expenses, which will affect their performance. Please see the prospectus for details.

Past performance is not an indicator or a guarantee of future performance.


22

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, equity-related and debt securities around the world. Such securities have historically been subject to significant price movements that

may occur suddenly due to equity and bond market or company-specific factors. As a result, the performance of the Fund can fluctuate considerably over time.

The Fund may distribute income gross of expenses. Whilst this might allow more income to be distributed, it may also have the effect of reducing capital.

Other significant risks include: credit risk, currency risk, emerging markets risk, liquidity risk, derivatives 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.

What are the Key Risks?

23


Geographic Allocation—Total


vs. Custom 65% MSCI ACWI + 35% JP Morgan Global Government Bond Index

As of 31 March 2018

Cash & Cash Equivalents

Other

Australia / New Zealand

Mid-East / Africa

Latin America / Caribbean

Asia

Europe

North America

0% 10% 20% 30% 40% 50% 60%


Custom 65% MSCI ACWI + 35% JP Morgan

Global Government Bond Index


Figures reflect certain derivatives held in the portfolio (or their underlying reference assets) and may not total 100% or may be negative due to rounding, use of any derivatives, unsettled trades or other factors.

Portfolio % Index % Over/Under %

North America 25.98 54.96 -28.99

United States 24.56 52.31 -27.75

Canada 1.41 2.65 -1.24

Europe 24.36 28.55 -4.19

United Kingdom 9.26 6.79 2.48

France 4.81 5.47 -0.66

Germany 2.52 4.26 -1.74

Netherlands 2.15 1.48 0.68

Switzerland 1.92 1.88 0.04

Italy 1.70 3.27 -1.57

Spain 0.00 2.44 -2.44

Other 1.99 2.96 -0.97

Asia 21.10 14.17 6.93

South Korea 5.96 0.00 5.96

Japan 5.33 12.98 -7.65

India 4.89 0.00 4.89

China 2.76 0.00 2.76

Other 2.16 1.20 0.97

Latin America / Caribbean 9.73 0.00 9.73

Mexico 3.66 0.00 3.66

Brazil 3.64 0.00 3.64

Colombia 1.74 0.00 1.74

Other 0.69 0.00 0.69

Mid-East / Africa 0.80 0.11 0.69

Israel 0.71 0.11 0.60

Ghana 0.08 0.00 0.08

Australia / New Zealand 0.00 2.20 -2.20

Australia 0.00 2.16 -2.16

New Zealand 0.00 0.04 -0.04

Other 0.54 0.00 0.54

Supranational 0.54 0.00 0.54

Cash & Cash Equivalents 17.49 0.00 17.49


MSCI All Country World Index

Latin America / Caribbean

Australia / New Zealand

Mid-East / Africa

Asia

Europe

North America

0% 12% 24% 36% 48% 60%

24


Weightings as percent of equity. Information is historical and may not reflect current or future portfolio characteristics. All portfolio holdings are subject to change.



vs. MSCI All Country World Index

As of 31 March 2018

Geographic Allocation—Equity


North America 40.38 55.23 -14.84

United States 38.18

52.28

-14.10

Canada 2.20

2.94

-0.75

Europe 37.87 21.46 16.41

United Kingdom 14.40

5.64

8.76

France 7.48

3.56

3.92

Germany 3.92

3.16

0.76

Netherlands 3.35

1.20

2.15

Switzerland 2.98

2.54

0.44

Italy 2.65

0.82

1.83

Ireland 1.81

0.15

1.66

Spain 0.00

1.05

-1.05

Others 1.29 3.33 -2.05

Asia 20.64 18.47 2.18

Japan 8.29

7.97

0.32

China 4.29

3.65

0.64

South Korea 3.74

1.84

1.90

India 1.59

0.99

0.60

Hong Kong 1.23

1.17

0.05

Singapore 0.85

0.44

0.41

Taiwan 0.00

1.43

-1.43

Others 0.66 0.98 -0.32

Mid-East / Africa 1.10 1.13 -0.02

Israel 1.10

0.15

0.96

Others 0.00 0.98 -0.98

Australia / New Zealand 0.00 2.20 -2.20

Australia 0.00

2.15

-2.15

New Zealand 0.00

0.05

-0.05

Latin America / Caribbean 0.00 1.52 -1.52

Others 0.00 1.52 -1.52

Weightings as percent of fixed income. Information is historical and may not reflect current or future portfolio characteristics. All portfolio holdings are subject to change.


Other

Supranational

Non-EMU Europe

EMU Europe

Middle East / Africa

Japan

Asia ex-Japan

USA

Non-US Americas

-35% -14% 7% 28% 49% 70%


JP Morgan Global Government Bond Index


25

Geographic Allocation—Fixed Income


vs. JP Morgan Global Government Bond Index

As of 31 March 2018

Portfolio %

Index % Over/Under %

AMERICAS 61.67 40.23 21.44

NON-US AMERICAS 61.67 1.35 60.32

Mexico 33.98 0.00 33.98

Brazil 16.62 0.00 16.62

Colombia 7.94 0.00 7.94

Argentina 3.14 0.00 3.14

Canada 0.00 1.35 -1.35

USA 0.00 38.89 -38.89

ASIA 35.68 21.87 13.81

ASIA EX-JAPAN 35.68 1.64 34.04

India 17.66 0.00 17.66

South Korea 16.20 0.00 16.20

Philippines 1.82 0.00 1.82

Australia 0.00 1.64 -1.64

JAPAN 0.00 20.23 -20.23

MIDDLE EAST /

AFRICA

0.39 0.00 0.39

Ghana 0.39 0.00 0.39

EUROPE 0.00 37.89 -37.89

EMU EUROPE 0.00 29.63 -29.63

France 0.00 8.09 -8.09

Italy 0.00 7.61 -7.61

Germany 0.00 5.50 -5.50

Spain 0.00 4.73 -4.73

Belgium 0.00 2.01 -2.01

Netherlands 0.00 1.70 -1.70

NON-EMU EUROPE 0.00 8.26 -8.26

United Kingdom 0.00 7.47 -7.47

Denmark 0.00 0.48 -0.48

Sweden 0.00 0.32 -0.32

SUPRANATIONAL 2.47 0.00 2.47

OTHER -0.21 0.00 -0.21


26

Weightings as percent of equity. Information is historical and may not reflect current or future portfolio characteristics. All portfolio holdings are subject to change.


Utilities

Real Estate

Consumer Staples

Materials

Telecommunication Services

Industrials

Consumer Discretionary

Energy

Information Technology

Health Care

Financials

0% 6% 12% 18% 24% 30%

Sector Allocation—Equity


MSCI All Country World Index


As of 31 March 2018

vs. MSCI All Country World Index


Financials 21.74 18.69 3.05

Banks

12.97 10.43 2.54

Diversified Financials

5.01 4.29 0.71

Insurance

3.76 3.97 -0.20

Health Care 16.23 10.63 5.60

Pharmaceuticals, Biotechnology & Life Sciences

14.74 7.04 7.70

Health Care Equipment & Services

1.49 3.59 -2.10

Information Technology 14.86 18.84 -3.98

Software & Services

7.56 10.54 -2.98

Technology Hardware & Equipment

6.47 4.96 1.51

Semiconductors & Semiconductor Equipment

0.83 3.34 -2.51

Energy 11.07 6.20 4.86

Consumer Discretionary 8.48 12.26 -3.78

Media

2.44 2.07 0.37

Automobiles & Components

2.35 2.56 -0.21

Consumer Durables & Apparel

1.87 1.95 -0.08

Retailing

1.81 3.97 -2.16

Consumer Services

0.00 1.71 -1.71

Industrials 8.24 10.85 -2.61

Capital Goods

7.70 7.69 0.01

Transportation

0.54 2.16 -1.62

Commercial & Professional Services

0.00 1.00 -1.00

Telecommunication Services 7.19 2.89 4.30

Materials 5.55 5.35 0.19

Consumer Staples 3.82 8.40 -4.58

Food, Beverage & Tobacco

1.65 4.83 -3.18

Food & Staples Retailing

1.34 1.65 -0.31

Household & Personal Products

0.83 1.92 -1.09

Real Estate 2.14 2.99 -0.85

Utilities 0.70 2.90 -2.20

27

Supranational

Derivatives

US Treasuries/Agencies

Local Curr. Govt/Agency Bonds: Non-Investment Grade

Local Curr. Govt/Agency Bonds: Investment Grade

-2% 15% 32% 49% 66% 83%



As of 31 March 2018

Sector Allocation—Fixed Income




Local Curr. Govt/Agency Bonds 97.74 61.11 36.63

Investment Grade 77.60 61.11 16.48

Non-Investment Grade 20.14 0.00 20.14

US Treasuries/Agencies 0.00 38.89 -38.89

Derivatives -0.21 0.00 -0.21

Supranational 2.47 0.00 2.47





28

Currency Allocation—Fixed Income



As of 31 March 2018

Swedish Krona

Danish Krone

British Pound

Euro

Ghanaian Cedi

Japanese Yen

Australian Dollar

South Korean Won

Philippine Peso

Indian Rupee

U.S. Dollar

Canadian Dollar

Argentine Peso

Colombian Peso

Brazilian Real

Mexican Peso

0% 15% 30% 45% 60% 75%


AMERICAS 74.81 40.23 34.57

NON-US DOLLAR 64.14 1.35 62.79

Mexican Peso 36.45 0.00 36.45

Brazilian Real 16.62 0.00 16.62

Colombian Peso 7.94 0.00 7.94

Argentine Peso 3.14 0.00 3.14

Canadian Dollar 0.00 1.35 -1.35

U.S. DOLLAR 10.67 38.89 -28.22

ASIA 24.81 21.87 2.93

ASIA EX-JAPAN 24.81 1.64 23.17

Indian Rupee 22.27 0.00 22.27

Philippine Peso 1.82 0.00 1.82

South Korean Won 0.71 0.00 0.71

Australian Dollar 0.00 1.64 -1.64

JAPANESE YEN 0.00 20.23 -20.23

MIDEAST/AFRICA 0.39 0.00 0.39

Ghanaian Cedi 0.39 0.00 0.39

EUROPE 0.00 37.89 -37.89

Euro 0.00 29.63 -29.63

NON-EURO 0.00 8.26 -8.26

Euro 0.00 29.63 -29.63

British Pound 0.00 7.47 -7.47

Danish Krone 0.00 0.48 -0.48

Swedish Krona 0.00 0.32 -0.32





NR

B-

B

BB-

BBB-

BBB

A-

A+

AA-

AA

AA+

AAA

0% 20% 40% 60% 80%




29

The information only pertains to the fixed income component of the portfolio.

Weightings as percent of fixed income. Percentage may not total 100% due to rounding.

Ratings shown are assigned by one or more Nationally Recognized Statistical Rating Organizations ('NRSRO'), such as Standard & Poor's, Moody's and Fitch. The ratings are an indication of an issuer's creditworthiness and typically range from AAA or

Aaa (highest) to D (lowest). When ratings from all three agencies are available, the middle rating is used; when two are available, the lowest rating is used; and when only one is available, that rating is used. Foreign government bonds without a specific

rating are assigned the country rating provided by an NRSRO, if available. The NR category consists of rateable securities that have not been rated by an NRSRO. Cash and equivalents as well as derivatives are excluded from this breakdown. As a

result, the chart does not reflect the fund's total net assets.



As of 31 March 2018

Quality Allocation—Fixed Income


AAA 2.46 65.20 -62.74

AA+ 0.00 2.01 -2.01

AA 16.17 0.00 16.17

AA- 0.00 20.23 -20.23

A+ 0.00 7.61 -7.61

A- 33.91 0.31 33.60

BBB 9.74 0.00 9.74

BBB- 17.62 0.00 17.62

BB- 16.58 0.00 16.58

B 3.13 0.00 3.13

B- 0.39 0.00 0.39

NR 0.00 4.64 -4.64

Investment Grade

79.90 95.36 -15.46

Non-Investment Grade

20.10 4.64 15.46


30

The Ten Largest Holdings represent the ten largest holdings of the fund as of the date indicated. These securities do not represent all of the securities purchased, sold or recommended for advisory clients, and the reader should not assume that

investment in the securities listed was or will be profitable. All portfolio holdings are subject to change.

Holdings of the same issuer have been combined.

The portfolio manager for the fund reserves the right to withhold release of information with respect to holdings that would otherwise be included in the top 10 holdings list.

Name of Issuer Country Industry % of Total

SAMSUNG ELECTRONICS CO LTD South Korea Technology Hardware & Equipment 1.62

ROYAL DUTCH SHELL PLC United Kingdom Energy 1.34

ORACLE CORP United States Software & Services 1.32

MICROSOFT CORP United States Software & Services 1.31

BP PLC United Kingdom Energy 1.30

ALPHABET INC United States Software & Services 1.27

SOFTBANK GROUP CORP Japan Telecommunication Services 1.07

SUNTORY BEVERAGE & FOOD LTD Japan Food Beverage & Tobacco 1.06

CITIGROUP INC United States Banks 1.05

CAPITAL ONE FINANCIAL CORP United States Diversified Financials 1.03

Total 12.38

Top Ten Holdings—Equity


As of 31 March 2018

31

Portfolio Characteristics—Total


vs. MSCI All Country World Index & JP Morgan Global Government Bond Index

As of 31 March 2018


Total Characteristics Portfolio

Blended Yield

2.98%

Fixed Income Characteristics Portfolio Benchmark

Average Credit Quality

BBB+ AA

Average Duration 2.56 Yrs 8.00 Yrs

Average Weighted Maturity 3.26 Yrs 9.96 Yrs

Yield to Maturity 7.27% 1.36%

Yield to Worst 7.27% 1.36%

Equity Characteristics Portfolio Benchmark

Price to Earnings (12-mo Trailing) 16.04x 18.84x

Price to Cash Flow 6.93x 11.45x

Price to Book 1.47x 2.23x

Dividend Yield 2.56% 2.42%

Market Capitalisation (Millions USD) 114,232 113,218

Market Capitalisation Breakdown in USD Portfolio %

<2.0 Billion 0.57

2.0-5.0 Billion 4.79

5.0-10.0 Billion 8.65

10.0-25.0 Billion 16.07

25.0-50.0 Billion 21.07

>50.0 Billion 48.85


Average Duration, Average Weighted Maturity, Yield to Maturity, Yield to Worst and Blended Yield reflect certain derivatives held in the portfolio (or their underlying reference assets).

Source: Franklin Templeton Investments. The average credit quality (ACQ) rating may change over time. The portfolio itself has not been rated by an independent rating agency. The letter rating, which may be based on bond ratings from different

agencies, is provided to indicate the average credit rating of the portfolio’s underlying bonds and generally ranges from AAA (highest) to D (lowest). The ACQ is determined by assigning a sequential integer to all credit ratings AAA to D, taking a

simple, asset-weighted average of debt holdings by market value and rounding to the nearest rating. The risk of default increases as a bond’s rating decreases, so the ACQ provided is not a statistical measurement of the portfolio’s default risk

because a simple, weighted average does not measure the increasing level of risk from lower rated bonds. The ACQ is provided for informational purposes only. Derivative positions and unrated securities are not reflected in the ACQ.

Yield figures quoted should not be used as an indication of the income that has or will be received. Yield figures are based on the portfolio's underlying holdings and do not represent a payout of the portfolio.

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 dividend yield quoted here is the yield on securities within the Fund’s portfolio and should not be used as an indication of the

income received from this portfolio. The market capitalisation figures for both the portfolio and the benchmark are the security level, not aggregated up to the main issuer.

Source: FactSet. Price Ratio calculations for the weighted average use harmonic means. Any exceptions to this are noted. Market capitalisation statistics are indicated in the base currency for the portfolio presented.

A blended measure used for balanced funds, the internal or blended yield is the market-weighted average of the current yield of the fund's fixed income component and the dividend yield of the fund's equity component. This measure is gross of

fees.



32

Discrete Performance

Discrete Annual Performance (%)

Inception

Date

03/17

03/18

03/16

03/17

03/15

03/16

03/14

03/15

03/13

03/14

Templeton Global Balanced Fund - A (acc) USD—Net of Fees 14.5.2001 8.45 10.85 -8.27 -2.81 15.73

Custom 65% MSCI ACWI + 35% JP Morgan Global Government Bond Index 12.74 8.68 -0.24 2.55 11.34

Effective 31 July 2017, Templeton Global Balanced Fund changed its benchmark to the Custom 65% MSCI All Country World + 35% JP Morgan Global Government Bond Index.

All performance data shown is in the Fund currency stated and net of management fees. Sales charges and other commissions, taxes and other relevant costs paid by the investor are not included in the calculations.

Performance data may represent blended share class performance, e.g., hybrid created from an A (dis) share class which was converted to A (acc).


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. Past performance is not an indicator

or a guarantee of future performance. Current performance may differ from figures shown. Currency fluctuations may affect the value of overseas investments. When investing in a fund

denominated in a foreign currency, performance may also be affected by currency fluctuations. Please visit franklintempleton.lu for current performance.


As of 31 March 2018

Annualised Total Returns (%)

Inception

Date 1 Yr 3 Yrs 5 Yrs 10 Yrs

Since

Incept

Templeton Global Balanced Fund - A (acc) USD—Net of Fees 14.5.2001 8.45 3.31 4.40 3.08 5.20

Custom 65% MSCI ACWI + 35% JP Morgan Global Government Bond Index 12.74 6.92 6.89 5.10 6.29


Historical Performance


As of 31 March 2018








33

Cumulative Performance (%)

Inception

Date 1 Mth 3 Mths YTD 1 Yr 3 Yrs 5 Yrs 10 Yrs

Since

Incept

Templeton Global Balanced Fund - A (acc) USD—Net of Fees 14.5.2001 -1.21 -0.58 -0.58 8.45 10.27 24.03 35.44 135.31

Custom 65% MSCI ACWI + 35% JP Morgan Global Government Bond Index -0.81 0.27 0.27 12.74 22.23 39.55 64.44 179.84


34








Calendar Year Returns


As of 31 March 2018

YTD 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008

-31%

-17%

-3%

11%

25%

-0.58

0.27

15.52

18.13

3.82

6.22

-6.12 -1.88 -2.74

3.34

17.89

12.98

17.97

11.37

-5.68 -1.82

5.81

11.22

21.35

23.13

-29.22 -25.96

Templeton Global Balanced Fund - A (acc) USD—Net of Fees Custom 65% MSCI ACWI + 35% JP Morgan Global Government Bond Index


35


The base currency of a fund determines the risk-free rate index used in calculating certain risk statistics on this page. A fund that is based in USD uses the US T-Bill Index as the risk free rate return, a EUR-based fund uses the Euro 3-Month T-Bill

Index, a GBP-based fund uses the UK Treasury Bills 3 Month Index, a JPY-based fund uses the Japan Financing Bill 3 Month Index, and an AUD-based fund uses the Australia T-Note 3 Month Index.

^^Measured against the Custom 65% MSCI ACWI + 35% JP Morgan Global Government Bond Index.

*Annualised.


As of 31 March 2018

Performance Risk Statistics

1 Yr 3 Yrs* 5 Yrs* 10 Yrs* 15 Yrs*

Standard Deviation (%):

Templeton Global Balanced Fund - A (acc) USD 6.61 9.37 8.99 14.67 13.06

Custom 65% MSCI ACWI + 35% JP Morgan Global

Government Bond Index

5.76 7.41 7.22 11.58 10.37

Tracking Error (%)^^ 2.64 3.98 3.60 4.55 4.11

Information Ratio^^ -1.62 -0.91 -0.69 -0.44 -0.32

Beta^^ 1.05 1.16 1.15 1.22 1.22

Sharpe Ratio 1.11 0.30 0.45 0.19 0.43


Performance Risk Statistics

PETER WILMSHURST, CFAExecutive Vice PresidentPortfolio Manager, Research AnalystTempleton Global Equity GroupFranklin Templeton Investments Australia LimitedMelbourne, Victoria, Australia

Peter Wilmshurst is an executive vice president in the Templeton Global Equity Group with research responsibility for banks in Europe, and Asian telecommunications companies. He is also the coordinator for the financials sector team and the portfolio manager of a number of Templeton's global portfolios.

Prior to joining Franklin Templeton in 1998, Mr. Wilmshurst was an equity portfolio manager and analyst with Norwich Investment Management in Australia andan actuary at MLC Life Company. He entered the financial services industry in 1993.

Mr. Wilmshurst holds a bachelor of economics degree and a master of economics degree from Macquarie University (Australia). He qualified as a Fellow of theInstitute of the Actuaries of Australia and as a Fellow of the Financial Services Institute of Australia. Mr. Wilmshurst is a Chartered Financial Analyst (CFA) charterholder and a past president of the CFA Society of Melbourne.


36

Management Profile

MICHAEL HASENSTAB, PH.D.Executive Vice President, Portfolio ManagerChief Investment OfficerTempleton Global MacroFranklin Advisers, Inc.San Mateo, California, United States

Michael Hasenstab, Ph.D., is executive vice president and chief investment officer for Templeton Global Macro, which conducts in-depth global macroeconomic analysis covering thematic topics, regional and country analysis, and interest rate, currency and sovereign credit market outlooks. Templeton Global Macro offers global, unconstrained investment strategies through a variety of investment vehicles ranging from retail mutual funds to unregistered, privately offered hedge funds. Dr. Hasenstab is a portfolio manager for a number of funds, including Templeton Global Bond Fund and Templeton Global Total Return Fund.

Dr. Hasenstab is economic advisor to the CEO of Franklin Resources, Inc., providing his perspective and insight through the lens of Templeton Global Macro. In addition, he is a member of Franklin Resources' executive committee, a small group of the company's top leaders responsible for shaping the firm's overall strategy.

Dr. Hasenstab has received numerous industry awards and accolades throughout his investment career. Over the last decade, the funds that he and his team manage have collectively received more than 400 awards from various rating agencies globally, including Lipper and Morningstar. In addition, various publications have recognized Dr. Hasenstab's investment expertise including, most recently, his being named one of Forbes' Money Masters of 2015. Investment Week named him Global Bond Manager of the Year in 2008, 2010 and 2011 and recognized him as one of the most influential fund managers in 2010. Morningstar awarded him Fixed Income Manager of the Year in Canada in 2013 and Fund Manager of the Year in the U.S. in 2010. In 2011 and 2012, he was highlighted as one of the most influential young people in business in Fortune's 40 under 40.

Dr. Hasenstab initially joined Franklin Templeton Investments in July 1995. After a leave of absence to obtain his doctor of philosophy (Ph.D.) degree, he rejoined the company in April 2001. He has worked and traveled extensively abroad, with a special focus on Asia.

Dr. Hasenstab holds a Ph.D. in economics from the Asia Pacific School of Economics and Management at Australian National University, a master's degree in economics of development from the Australian National University, and a B.A. in international relations/political economy from Carleton College in the United States.


Management Profile

37

Glossary


38

Average Credit Quality: The credit rating of a bond is an assessment of the creditworthiness of individuals and corporations. It is based upon the history of borrowing and repayment,

as well as the availability of assets and extent of liabilities. The average credit quality of a fund reflects the holdings of the underlying issues, based on the size of each holding. Usually

we quote the average credit quality as per Standard & Poor's or Moody's credit rating agencies.

Average Duration: A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Duration is expressed as a number of

years.

Average Weighted Maturity: An estimate of the number of years to maturity, taking the possibility of early payments into account, for the underlying holdings.

Beta: A measure of the magnitude of a portfolio's past share-price fluctuations in relation to the ups and downs of the overall market (or appropriate market index). The market (or index)

is assigned a beta of 1.00, so a portfolio with a beta of 1.20 would have seen its share price rise or fall by 12% when the overall market rose or fell by 10%.

Dividend Yield: The annual dividend received on an equity security as a percentage of the price. For a portfolio, the value represents a weighted average of the stocks it holds. It should

not be used as an indication of the income received from this portfolio.

Information Ratio: In investing terminology, the ratio of expected return to risk. Usually, this statistical technique is used to measure a manager's performance against a benchmark.

This measure explicitly relates the degree by which an investment has beaten the benchmark to the consistency by which the investment has beaten the benchmark.

Market Capitalisation: A determination of a company's value, calculated by multiplying the total number of company stock shares outstanding by the price per share.

Price to Book: The price per share of a stock divided by its book value (i.e., net worth) per share. For a portfolio, the value represents a weighted average of the stocks it holds.

Price to Cash Flow: Supplements price/earnings ratio as a measure of relative value for a stock. For a portfolio, the value represents a weighted average of the stocks it holds.

Price to Earnings (12-mo Trailing): The share price of a stock, divided by its per-share earnings over the past year. For a portfolio, the value represents a weighted average of the

stocks it holds.

Sharpe Ratio: To calculate a Sharpe ratio, an asset's excess returns (its return in excess of the return generated by risk-free assets such as Treasury bills) are divided by the asset's

standard deviation.

Standard Deviation: A measure of the degree to which a fund's return varies from the average of its previous returns. The larger the standard deviation, the greater the likelihood (and

risk) that a fund's performance will fluctuate from the average return.

Tracking Error: Measure of the deviation of the return of a fund compared to the return of a benchmark over a fixed period of time. Expressed as a percentage. The more passively the

investment fund is managed, the smaller the tracking error.

Glossary (continued)


39

Yield to Maturity: Yield to Maturity ('YTM') also known as the 'Gross Redemption Yield' or 'Redemption Yield'. The rate of return anticipated on a bond if it is held until the maturity date.

YTM is considered a long-term bond yield expressed as an annual rate. The calculation of YTM takes into account the current market price, par value, coupon interest rate and time to

maturity. It is also assumed that all coupons are reinvested at the same rate.

Yield to Worst: The yield to maturity if the worst possible bond repayment takes place. If market yields are higher than the coupon, the yield to worst would assume no prepayment. If

market yields are below the coupon, the yield to worst would assume prepayment. In other words, yield to worst assumes that market yields are unchanged. Normally this value is not

aggregated since it varies but if a weighted average value is used for a Fund then the figure will reflect the values of the underlying issues, based on the size of each holding.

Important Disclosures


40

References to indices are made for comparative purposes only and are provided to represent the investment environment existing during the time periods shown. 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.

© 2018 Franklin Templeton Investments. All rights reserved.

CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges.

All MSCI data is provided “as is.” The Fund described herein is not sponsored or endorsed by MSCI. In no event shall MSCI, its affiliates or any MSCI data provider have any liability of any kind

in connection with the MSCI data or the Fund described herein. Copying or redistributing the MSCI data is strictly prohibited.

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