templeton international adr equity sma composite
TRANSCRIPT
Data as of December 31, 2018
Templeton International ADR Equity SMA Composite
Templeton Global Equity Group
Templeton Separately Managed Accounts and Templeton are defined as separate firms within Franklin Templeton Investments for the purposes of complying with the Global Investment Performance Standards (GIPS®). Effective July 1,
2014, Templeton Investment Counsel, LLC, assumed responsibility for Templeton Separately Managed Account’s global and international equity SMA accounts. Templeton Investment Counsel, LLC is a sub-adviser to Templeton
Separately Managed Accounts.
For Dealer Use Only. Not for Distribution to the Public.
Non-U.S. Equity
For Dealer Use Only. Not for Distribution to the Public.
2
Table of Contents
Investment Capabilities Overview............................................................................................3
Franklin Templeton Investments—A Trusted, Long-Term Partner in Investment
Management
.......................4
Franklin Templeton Investments—ESG and Corporate Sustainability....................................... 5
Templeton Separately Managed Accounts—Assets Under Management..................................6
Templeton Global Equity Group—Value Investors Focused on Seeking Long-Term
Capital Growth for Our Clients
................. 7
The Templeton Investment Philosophy.................................................................................... 8
Templeton Global Equity Group Organizational Structure.........................................................9
Bottom Up Stock Pickers: Global Focus Uncovers the Best Opportunities Across
Sectors and Geographies
..................10
Templeton’s Valuation-Driven Investment Process.....................................11
Templeton’s Valuation-Driven Investment Process.................................................................12
Performance and Characteristics...................................................................17
Summary..............................................................................................................................18
Sector Allocation...................................................................................................................19
Geographic Allocation...........................................................................................................20
Top Ten Holdings..................................................................................................................21
Portfolio Characteristics........................................................................................................22
Performance Statistics..........................................................................................................23
Calendar Year Returns......................................................................................................... 24
Performance Risk Statistics.................................................................................................. 25
Current Perspectives—Sectors............................................................................................. 26
Current Perspectives—Regions.............................................................................................27
Management Profiles.......................................................................................28
Management Profile..............................................................................................................29
Templeton Global Equity Group Senior Management Profiles.................................................31
Appendix............................................................................................................32
Collaboration with Financial Experts Across Franklin Templeton.............................................33
Risk Management—Templeton Global Equity Group..............................................................34
An Integrated Global Trading Platform...................................................................................35
Important Information............................................................................................................36
Important Disclosures...........................................................................................................38
GIPS Performance Presentation............................................................................................39
Non-U.S. Equity
Source: Franklin Templeton Investments (FTI), as of December 31, 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 organization 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 utilized 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.
Franklin Local Asset Management (LAM) includes Franklin Bissett Investment Management, which is part of Franklin Templeton Investments Corp. In Canada, the advisor to the Franklin Templeton Multi-Asset Solutions mandates is
Fiduciary Trust Company of Canada, a wholly owned subsidiary of Franklin Templeton Investments Corp. Franklin Templeton Multi-Asset Solutions is a business name used by Fiduciary Trust Company of Canada.
For Dealer Use Only. Not for Distribution to the Public.
3
Investment Capabilities Overview
FRANKLIN TEMPLETON INVESTMENTS
Total Combined Assets Under Management : US$649.9 Billion
Institutional AUM : US$157.7 Billion
Single Business Development, Relationship Management, and Consultant Relations Platform
2
Equity
5
Fixed Income
8
Multi-Asset Solutions
11
Alternatives
AUM
US$269.0 Billion US$261.2 Billion US$107.8 Billion US$15.6 Billion
CAPABILITIES
•
Value
•
Government
•
Multi-Asset Income
•
Commodities
•
Deep Value
•
Municipals
•
Diversified Outcome-Oriented
•
Infrastructure
•
Core Value
•
Corporate Credit
•
Risk Premia
•
Real Estate
•
Blend
•
Bank Loans
•
Smart Beta
•
Hedge Funds
•
Growth At a Reasonable Price (GARP)
•
Securitized
•
Balanced Allocation
•
Private Equity
•
Growth
•
Multi-Sector
•
Target Date/Risk
•
ActiveQuant
•
Currencies
•
Model Portfolios
•
Convertibles
•
Sukuk
•
Inflation Protection
•
Sector
•
Managed Volatility
•
Shariah
•
Smart Beta
INVESTMENT
•
Templeton Global Equity Group (1940)
•
Franklin Templeton Fixed Income Group (1970)
•
Franklin Templeton Multi-Asset Solutions (1948)
•
Franklin Real Asset Advisors (1984)
TEAMS
•
Franklin Equity Group (1947)
•
Templeton Global Macro (1986)
•
Franklin Systematic (2011)
•
Darby Overseas Investments (1994)
•
Franklin Mutual Series (1949)
•
Franklin LAM-Fixed Income (1993)
•
K2 Advisors (1994)
•
Franklin Templeton Emerging Markets Equity
(1987)
•
Franklin Bissett Investment Mgmt (1982)
•
Pelagos Capital Management (2005)
•
Franklin Bissett Investment Mgmt (1982)
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
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Non-U.S. Equity
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For Dealer Use Only. Not for Distribution to the Public.
Franklin Templeton Investments—A Trusted, Long-Term Partner in Investment
Management
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 ImpactEnergy usage
Greenhouse gases
Waste/recycling
Water consumption
Social FactorsDiversity and inclusion
Talent management(attracting, retaining top talent)
Charitable giving
Customer privacy and data security
Employee volunteering
GovernanceAnti-money laundering
Code of ethics/conduct
Compliance
Executive compensation
Enterprise risk management
ESG investment integration
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Non-U.S. Equity
5
For Dealer Use Only. Not for Distribution to the Public.
Franklin Templeton Investments—ESG and Corporate Sustainability
Total AUM by MandateAs of December 31, 2018
Templeton Separately Managed Accounts—Assets Under Management
Total AUM by Distribution ChannelAs of December 31, 2018
International ADRUS$448 million
International ORDUS$55 million
Global ADRUS$10 million
Global ORDUS$2 million
World BalancedUS$13 million
Dual ContractUS$210 million
UMAUS$235 million
Sub-AdvisoryUS$83 million
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Non-U.S. Equity
6
For Dealer Use Only. Not for Distribution to the Public.
Templeton Separately Managed Accounts—Assets Under Management
Templeton Global Equity Group—Value Investors Focused on Seeking Long-Term Capital Growth for Our Clients
RIGOROUS BOTTOM-UP STOCK SELECTIONeveryone an analyst in a broadly experienced research team, identifying undervalued stocks across global industries
FORTITUDE TO BE DIFFERENTconviction to purchase out-of-favor securities and patience to wait for value recognition
LONG-TERMPERSPECTIVEfive-year horizon takes advantageof short-term price volatility to reveal long-term investment opportunities
DISCIPLINED, REPEATABLE PROCESSadherence to valuation-driven philosophy and process that have navigated every market cycle over seven decades
TEMPLETON GLOBAL EQUITY GROUP
What Sets Us Apart
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Non-U.S. Equity
7
For Dealer Use Only. Not for Distribution to the Public.
Templeton Global Equity Group—Value Investors Focused on Seeking Long-Term
Capital Growth for Our Clients
We Utilize a Disciplined, Consistent ApproachBased on Three Timeless Principles of Investing
Value• Uncover bargains—seeking companies trading at large discounts to their
business value
• Business value—based on normalized earnings, cash flow or asset value potential
• Flexible approach in a disciplined framework
Patience• Rolling five-year time horizon focused on normalized 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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Non-U.S. Equity
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For Dealer Use Only. Not for Distribution to the Public.
The Templeton Investment Philosophy
Templeton Global Equity Group Organizational Structure
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CHAIRMANDr. Sandy Nairn, CFA34 Years Industry ExperienceEDINBURGH, UNITED KINGDOM
CHIEF INVESTMENT OFFICERNorman Boersma, CFA33 Years Industry ExperienceNASSAU, BAHAMAS
DIRECTOR OF RESEARCH
Heather Arnold, CFA35 Years Industry ExperienceNASSAU, BAHAMAS
34 Portfolio Managers & Research Analysts
Average 15 Years with TempletonSpeak 13 Languages
Average 20 Years of Industry Experience
Stable Team/Historically Low Turnover
North America15 PM/Analysts
6 Analysts
Europe1 PM/Analyst
2 AnalystsAsia
4 PM/Analysts3 Analysts
Australia2 PM/Analysts
1 Analyst
DIRECTOR OF PORTFOLIO MANAGEMENT
Antonio T. Docal, CFA39 Years Industry ExperienceFORT LAUDERDALE, UNITED STATES
DIRECTOR OF BUSINESS DEVELOPMENT
C. Reed Hutchens, CFA30 Years Industry ExperienceFORT LAUDERDALE, UNITED STATES
9
Investment team information is as of December 31, 2018.
CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.
For Dealer Use Only. Not for Distribution to the Public.
Non-U.S. Equity
Templeton Global Equity Group Organizational Structure
Bottom-Up Stock Pickers: Global Focus Uncovers the Best OpportunitiesAcross Sectors and Geographies
As of December 31, 2018. Note: Sector team leaders in blue boldface.Templeton Separately Managed Accounts and Templeton are defined as separate firms within Franklin Templeton Investments for the purposes of complying with the Global Investment Performance Standards (GIPS®). Effective July 1, 2014, Templeton Investment Counsel, LLC, assumed responsibility for Templeton Separately Managed Account’s global and international equity SMA accounts. Templeton Investment Counsel, LLC is a sub-adviser to Templeton Separately Managed Accounts.CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.
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Director of Research: Heather Arnold, CFAGLOBAL SECTOR TEAMS
Japan
India
Katherine Owen Global Consumer Discretionary
Alan Chua Global Autos & Components
Harlan Hodes Small Cap ConsumersWarren Pustam Americas ConsumersJames Windsor European ConsumersJoanne Wong Global Consumer Staples
CONSUMERS
Tian Qiu Global Health CareRoman Aliev Asian Heath CareCraig Cameron Global Health CareShane Smith Small Cap Health Care
HEALTH CARE
FINANCIALSTina Sadler Global MaterialsDylan Ball European MaterialsTony Docal Americas MaterialsClara Lee Asian MaterialsDavid Tuttle Small Cap Materials
MATERIALSINDUSTRIALS
ENERGY
Matthew Nagle European Banks Americas Banks
Dylan Ball European FinancialsPaul de Josselin Asian BanksHsung Khoo Asian FinancialsWarren Pustam Global Insurance
Global Diversified FinancialsAmericas FinancialsSmall Cap Financials
Maggie Wong Global Real Estate
Peter Moeschter Global IndustrialsFerdinand Cheuk Asian AutosAlan Chua Global MachineryTony Docal Americas IndustrialsHeather Waddell Small Cap IndustrialsJames Windsor European Industrials
COMMUNICATION SERVICES INFORMATION TECHNOLOGY
Peter Nori Global Semiconductors & Semiconductor Equipment
Ferdinand Cheuk Asian Information Technology
Peter Wilmshurst Global Software & ServicesGlobal Technology Hardware & Equipment
James Windsor European Information Technology
Katie Ylijoki Small Cap Information Technology
ADDITIONAL RESOURCESResearchTechnology Group
Global Research Library
Junior Research Analysts
Investment Risk Management Group
ESG Resources
GlobalTrading Platform
Product ManagementGroup
Franklin Templeton Emerging Markets Equity & Templeton Global Macro
Herbert Arnett Global Communication Services
Hsung Khoo Asian Communication Services
Heather Waddell Small Cap Communication Services
Chris Peel Global EnergyHsung Khoo Asian EnergyDavid Tuttle Small Cap Energy
Non-U.S. Equity
10
For Dealer Use Only. Not for Distribution to the Public.
Bottom Up Stock Pickers: Global Focus Uncovers the Best Opportunities Across
Sectors and Geographies
11
Templeton’s Valuation-Driven Investment Process
Non-U.S. Equity
For Dealer Use Only. Not for Distribution to the Public.
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 September 30, 2018, and is not intended to reflect the historical turnover of the strategy. 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 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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Non-U.S. Equity
12
For Dealer Use Only. Not for Distribution to the Public.
Templeton’s Valuation-Driven 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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Non-U.S. Equity
13
For Dealer Use Only. Not for Distribution to the Public.
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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Non-U.S. Equity
14
For Dealer Use Only. Not for Distribution to the Public.
Portfolio Manager Stock Selection Decisions & Oversight
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. The Templeton Global Equity Group has the capability to utilize ESG Value-Based Constraints, but may choose not to do so.2. Although the typical Templeton Global or Non-U.S. SMA equity portfolio holds approximately 90 securities, individual portfolios may vary, depending on various factors, such as portfolio size or investment strategy.
Bottom-Up Portfolio Construction—Step 4
Analysts’highest-conviction holdings per sector
Source of Funds List
Core List
Bargain List
Mandate parameters
Geographic/sector constraints
Portfoliocash flow
Other Client Guidelines
ESG Value-Based Constraints1
Consumer
Health Care
Financials
Telecom
Utilities
Materials/Energy
Industrials
Info Tech
Historically low turnover, which may result in lower transaction costs
TEMPLETON GLOBAL OR
NON-U.S. PORTFOLIO
Approximately 90 Securities2
SELLDISCIPLINE
300–500Securities
on Proprietary Database
Approved Database
Sector Analyst Portfolios
Framework of Sector Ranges
Portfolio-SpecificFeatures
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Non-U.S. Equity
15
For Dealer Use Only. Not for Distribution to the Public.
Portfolio Monitoring and Risk Management—Step 5
The above chart is for illustrative and discussion purposes only.
Ongoing Valuation Analysis Disciplined Sell Methodology Integrated Risk Approach
Research team closely monitorsinvestment thesis including ESG factorsand 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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Non-U.S. Equity
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For Dealer Use Only. Not for Distribution to the Public.
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Performance and Characteristics
Non-U.S. Equity
For Dealer Use Only. Not for Distribution to the Public.
18
Non-U.S. Equity
Summary
Templeton International ADR Equity SMA Composite
As of December 31, 2018
Investment Mandate Non-U.S. Equity
Investment Style Value
Inception Date November 30, 1999
Benchmarks MSCI All Country World ex U.S. Index
MSCI EAFE Index
Total Net Assets (USD) 27,237,792
This presentation is intended only as a general overview of the Templeton Foreign ADR Only SMA Strategy and is for informational purposes only and should not be construed or relied upon as investment advice. It has been provided to
the recipient for use in a private and confidential meeting to discuss a potential or existing investment advisory relationship and may not be reproduced or used for any other purpose. It is intended only for institutional investment
consultants or institutional investors. It is not meant for the general public. Information provided in this presentation is as of the date of this presentation, unless otherwise indicated.
Information is historical and may not reflect current or future portfolio characteristics. All portfolio holdings are subject to change.
For Dealer Use Only. Not for Distribution to the Public.
Non-U.S. Equity
Cash & Cash Equivalents
Real Estate
Utilities
Consumer Discretionary
Consumer Staples
Materials
Information Technology
Industrials
Communication Services
Energy
Health Care
Financials
0% 6% 12% 18% 24% 30%
Information is supplemental to the Historical Performance page and the accompanying full performance presentation prepared in accordance with the Global Investment Performance Standards (GIPS®). Please also
see the Important Information page in the Appendix.
Weightings as percent of total. Percentage may not total 100% due to rounding. Information is historical and may not reflect current or future portfolio characteristics. All portfolio holdings are subject to change.
For Dealer Use Only. Not for Distribution to the Public.
Sector Allocation
Templeton International ADR Equity SMA Composite
vs. MSCI All Country World ex U.S. Index
As of December 31, 2018
Templeton International ADR Equity SMA Composite
MSCI All Country World ex U.S. Index
19
Portfolio % Index % Over/Under %
Financials 21.94 22.16 -0.22
Banks
10.73 13.90 -3.17
Diversified Financials
6.48 3.03 3.46
Insurance
4.73 5.23 -0.50
Health Care 18.64 8.36 10.28
Pharmaceuticals, Biotechnology & Life Sciences
16.90 6.89 10.00
Health Care Equipment & Services
1.74 1.47 0.28
Energy 11.35 7.30 4.05
Communication Services 11.24 7.63 3.61
Telecommunication Services
8.17 4.08 4.09
Media & Entertainment
3.07 3.56 -0.48
Industrials 8.47 11.70 -3.23
Capital Goods
7.14 7.68 -0.54
Transportation
1.33 2.66 -1.34
Commercial & Professional Services
0.00 1.36 -1.36
Information Technology 6.56 8.01 -1.45
Semiconductors & Semiconductor Equipment
4.57 2.24 2.33
Technology Hardware & Equipment
1.99 3.49 -1.50
Software & Services
0.00 2.29 -2.29
Materials 6.48 7.67 -1.19
Consumer Staples 4.41 9.85 -5.44
Food, Beverage & Tobacco
2.39 5.57 -3.19
Food & Staples Retailing
2.02 1.78 0.24
Household & Personal Products
0.00 2.50 -2.50
Consumer Discretionary 4.08 10.56 -6.49
Consumer Durables & Apparel
1.76 2.88 -1.13
Automobiles & Components
1.56 3.77 -2.22
Retailing
0.76 2.51 -1.75
Consumer Services
0.00 1.40 -1.40
Utilities 3.67 3.39 0.28
Real Estate 0.00 3.35 -3.35
Cash & Cash Equivalents 3.16 0.00 3.16
20
Information is supplemental to the Historical Performance page and the accompanying full performance presentation prepared in accordance with the Global Investment Performance Standards (GIPS®).
Please also see the Important Information page in the Appendix.
Percentages may not equal 100% due to rounding.
Weightings as percent of total. Percentage may not total 100% due to rounding. Information is historical and may not reflect current or future portfolio characteristics. All portfolio holdings are subject to change.
Emerging markets exposure is based on the countries included in the MSCI Emerging Markets Index.
For Dealer Use Only. Not for Distribution to the Public.
Non-U.S. Equity
Cash & Cash Equivalents
Latin America / Caribbean
Australia / New Zealand
North America
Mid-East / Africa
Asia
Europe
0% 12% 24% 36% 48% 60%
Templeton International ADR Equity SMA Composite
MSCI All Country World ex U.S. Index
As of December 31, 2018
Templeton International ADR Equity SMA Composite
Geographic Allocation
vs. MSCI All Country World ex U.S. Index
Portfolio % Index % Over/Under %
Europe 56.93 43.80 13.13
France 13.94
7.50
6.44
United Kingdom 12.14
11.44
0.70
Germany 10.01
5.96
4.05
Switzerland 6.96
5.84
1.12
Netherlands 4.10
2.32
1.78
Italy 3.47
1.52
1.95
Denmark 2.64
1.18
1.46
Ireland 1.99
0.37
1.63
Spain 0.00
2.09
-2.09
Others 1.67 5.58 -3.91
Asia 36.55 39.23 -2.68
Japan 13.14
16.62
-3.48
China 7.43
7.90
-0.48
South Korea 5.94
3.58
2.35
Singapore 4.48
0.92
3.55
Hong Kong 2.97
2.64
0.33
Taiwan 2.60
2.96
-0.36
India 0.00
2.44
-2.44
Others 0.00 2.16 -2.16
Mid-East / Africa 1.88 2.50 -0.62
Israel 1.88
0.36
1.51
Others 0.00 2.14 -2.14
North America 1.48 6.47 -4.99
Canada 1.48
6.47
-4.99
Australia / New Zealand 0.00 4.83 -4.83
Australia 0.00
4.68
-4.68
New Zealand 0.00
0.16
-0.16
Latin America / Caribbean 0.00 3.17 -3.17
Others 0.00 3.17 -3.17
Cash & Cash Equivalents 3.16 0.00 3.16
Emerging Markets Exposure 15.97 26.00 -10.03
Non-U.S. Equity
Information is supplemental to the Historical Performance page and the accompanying full performance presentation prepared in accordance with the Global Investment Performance Standards (GIPS®). Please also
see the Important Information page in the Appendix.
Top ten equity holdings information is historical and may not reflect current or future composite characteristics. All holdings are subject to change. Holdings of the same issuers have been combined.
The information provided is not a recommendation to purchase, sell, or hold any particular security. The securities identified do not represent an account’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 account’s portfolio, or that securities sold will not be repurchased. In addition, it should not be assumed that any securities mentioned were or will prove to be
profitable.
Holdings of the same issuer have been combined, unless otherwise noted. Information is historical and may not reflect current or future portfolio characteristics. All portfolio 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 purchased. In addition, it should not be assumed that any securities transactions discussed were or will prove to be
profitable. 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.
For Dealer Use Only. Not for Distribution to the Public.
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Templeton International ADR Equity SMA Composite
As of December 31, 2018
Top Ten Holdings
Name of Issuer Country Industry % of Total
ISHARES MSCI SOUTH KOREA ETF 4.55
BP PLC United Kingdom Energy 2.77
ENI SPA Italy Energy 2.76
Taiwan Semiconductor Manufacturing Co Ltd Taiwan Semiconductors & Semiconductor Equipment 2.60
Royal Dutch Shell PLC United Kingdom Energy 2.57
Sanofi France Pharmaceuticals, Biotechnology & Life Sciences 2.56
Total SA France Energy 2.54
Novartis AG Switzerland Pharmaceuticals, Biotechnology & Life Sciences 2.52
ROCHE HOLDING AG Switzerland Pharmaceuticals, Biotechnology & Life Sciences 2.50
Singapore Telecommunications Ltd Singapore Telecommunication Services 2.49
Total 27.87
Templeton International ADR Equity SMA Composite
vs. MSCI All Country World ex U.S. Index
As of December 31, 2018
Non-U.S. Equity
Portfolio Characteristics
22
Information is historical and may not reflect current or future portfolio characteristics. All portfolio holdings are subject to change.
The portfolio characteristics listed are based on the composite's underlying holdings, and do not necessarily reflect the composite'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 composite's portfolio and
should not be used as an indication of the income received from this portfolio. The market capitalization 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 capitalization statistics are indicated in the base currency for the portfolio presented.
Past performance is not an indicator or a guarantee of future performance.
For Dealer Use Only. Not for Distribution to the Public.
Portfolio Index
Price to Earnings (12-month Trailing) 12.26x 13.01x
Price to Cash Flow 6.80x 7.98x
Price to Book 1.23x 1.49x
Dividend Yield 3.70% 3.46%
Market Capitalization (Millions USD) 64,797 55,315
Market Capitalization Breakdown in USD Portfolio %
2.0-5.0 Billion 7.06
5.0-10.0 Billion 6.71
10.0-25.0 Billion 31.98
25.0-50.0 Billion 15.83
>50.0 Billion 38.41
Performance Statistics
Templeton International ADR Equity SMA Composite
As of December 31, 2018
Non-U.S. Equity
Annualized Total Returns (%)
Inception
Date 1 Mth* 3 Mths* YTD* 1 Yr 3 Yrs 5 Yrs 10 Yrs
Since
Incept
Templeton International ADR Equity SMA Composite—Gross of Fees
(USD)
11.30.1999 -6.55 -14.13 -17.25 -17.25 1.21 -1.22 4.93 3.35
Templeton International ADR Equity SMA Composite—Net of Fees
(USD)
-6.65 -14.49 -18.67 -18.67 -0.60 -2.86 3.30 1.90
MSCI All Country World ex U.S. Index (USD) -4.49 -11.41 -13.78 -13.78 4.98 1.14 7.06 3.89
MSCI EAFE Index (USD) -4.83 -12.50 -13.36 -13.36 3.38 1.00 6.81 3.31
23
Annualized Performance: Trailing Period Total Returns
Gross of fees: Pure gross of fees
“Pure” gross does not reflect the deduction of any expenses, including trading costs, and is provided as supplemental information. Templeton Separately Managed Accounts claims compliance with GIPS® for the period January 1, 2000
to the present. Any performance presented prior to that date is not in compliance. Please see accompanying full performance presentation prepared in accordance with the Global Investment Performance Standards (GIPS®)
which includes additional information regarding net of fee calculations. Please also see the Important Information page in the Appendix. Past performance is not an indicator or a guarantee of future performance.
Performance data is shown rounded to the nearest hundreth.
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.
*Cumulative Total Returns
For Dealer Use Only. Not for Distribution to the Public.
24
Non-U.S. Equity
Calendar Year Returns
Annualized Performance: Trailing Period Total Returns
Gross of fees: Pure gross of fees
“Pure” gross does not reflect the deduction of any expenses, including trading costs, and is provided as supplemental information. Templeton Separately Managed Accounts claims compliance with GIPS® for the period January 1, 2000
to the present. Any performance presented prior to that date is not in compliance. Please see accompanying full performance presentation prepared in accordance with the Global Investment Performance Standards (GIPS®)
which includes additional information regarding net of fee calculations. Please also see the Important Information page in the Appendix. Past performance is not an indicator or a guarantee of future performance.
Performance data is shown rounded to the nearest hundreth.
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.
For Dealer Use Only. Not for Distribution to the Public.
2018 2017 2016 2015 2014 2013 2012 2011 2010 2009
-19%
-3%
13%
29%
45%
-17.25-18.67-13.78-13.36
22.57
20.07
27.77
25.62
2.22
0.57
5.01
1.51
-2.74 -4.12 -5.25 -0.39 -6.75 -8.14 -3.44 -4.48
21.75
20.02
15.78
23.29
20.77
18.95
17.39
17.90
-11.32-12.64-13.33-11.73
6.04
4.55
11.60
8.21
24.42
22.70
42.14
32.46
Templeton International ADR Equity SMA Composite—Gross of Fees (USD)
MSCI All Country World ex U.S. Index (USD)
Templeton International ADR Equity SMA Composite—Net of Fees (USD)
MSCI EAFE Index (USD)
Templeton International ADR Equity SMA Composite
As of December 31, 2018
As of December 31, 2018
Non-U.S. Equity
25
Performance Risk Statistics
Templeton International ADR Equity SMA Composite
Information is supplemental to the Historical Performance page and the accompanying full performance presentation prepared in accordance with the Global Investment Performance Standards (GIPS®). Please also
see the Important Information page in the Appendix.
Risk statistics are calculated using gross of fees performance.
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.
^^Measured against the MSCI All Country World ex-US Index.
*Annualized.
Past performance is not an indicator or a guarantee of future performance.
For Dealer Use Only. Not for Distribution to the Public.
Performance Risk Statistics
1 Yr 3 Yrs* 5 Yrs* 10 Yrs* 15 Yrs*
Standard Deviation (%):
Templeton International ADR Equity SMA Composite 13.57 12.09 11.97 16.34 16.06
MSCI All Country World ex-US Index 12.18 11.40 11.83 16.31 16.80
Tracking Error (%)^^ 2.74 3.58 3.44 4.02 4.35
Information Ratio^^ -1.27 -1.05 -0.69 -0.53 -0.28
Beta^^ 1.10 1.01 0.97 0.97 0.92
Sharpe Ratio -1.41 0.02 -0.15 0.28 0.20
Current Perspectives—Sectors
2895
All statements are opinions only and are expressed as of the publication date and are subject to change without prior notice. This is not a complete analysis of any industry, sector or region and should not be construed as an investment recommendation or advice.
Sector Opportunities Comments
Financials MANY
We continued gradually repositioning our financials portfolio in 2018 to rationalize holdings and reduce concentrated political risk. Our thesis on European banks rests largely on valuation and shareholder returns. As of year-end, European lenders traded at the same earnings multiple as they did in the sovereign debt crisis, despite significant progress restructuring and recapitalizing to improve asset quality and returns. Depressed valuations combined with generous shareholder returns have resulted in dividend yields exceeding price/earnings ratios at a number of European banks. In Asia, we believe prospects for improving corporate governance and political stability, combined with rising interest rates and solid economic growth, should benefit banks over time.
Health Care MANY
Unlike other defensive sectors, health care is less of a simple bond proxy, offering defensiveness independent of rate fluctuations. The sector also offers above-average growth through innovation and untapped market potential. At year-end, the industry was generating higher profit margins than the overall global market with lower-than-average leverage ratios. Investors might expect to pay a premium for such attributes, but the industry has been trading at a discount based on price-to-free-cash flow, with some of that cash having been returned to shareholders through an overall dividend yield on par with that of 10-year US Treasuries. Concerns persist about regulation and pricing, but history suggests that companies capable of innovating to provide products that address unmet medical needs can continue to thrive and profit. It is these kinds of companies in which we seek to invest.
Energy SOME
As the price of oil rose above our estimate of the marginal cost of demand in late 2017/early 2018, we began selling into strength the higher beta, price-sensitive oilfield services and exploration and production stocks. This allowed us to shift into more defensive integrated oil producers with still-modest valuations and high dividend yields. The rise of US shale as the industry’s swing producer means that oil market fundamentals are becoming increasingly driven by a highly leveraged, low-intensity production regime functioning in a market-based economy. Compared to the regime led by Saudi Arabia and OPEC (Organization of the Petroleum Exporting Countries), that can mean a more rapid supply response to prevailing imbalances and, ultimately, shorter, more volatile cycles. We remain constructive on our more defensive positioning, but with oil prices falling back to levels on the cost curve historically associated with support, we have also begun using weakness to again search for potential bargains in more cyclical parts of the sector.
Information Technology SOME
Over the past year, leading internet stocks were increasingly driven by multiple expansion, not earnings growth, leaving them vulnerable to the sharp sell-off experienced in the second half of 2018 as sentiment abruptly changed. We have avoided expensive, momentum-driven stocks, finding opportunities instead among mature, cash-generative software firms developing new growth businesses, as well as hardware companies with restructuring potential and semiconductor manufacturers excessively pressured by supply concerns.
Industrials SOMESelect opportunities exist, particularly among companies benefiting from restructuring or exposure to growth-oriented end markets, such as aerospace/defense and industrial automation. We have avoided expensive companies that fail to reflect the maturity of their business cycles or are excessively optimistic about sustainable growth rates and returns. Protectionism is a risk as export-oriented capital goods firms remain at the forefront of trade war rhetoric, though valuations are beginning to reflect such concerns.
Consumer Discretionary SOME Fuller valuations led us to sell some holdings and redirect proceeds toward areas that we believe offer greater long-term value. We remain cautious on consumer names exposed
to steel/aluminum and trade war risks. Opportunities remain in some select retail franchises that can grow in a challenging environment or restructure their operations.
Materials SOMESome renewed opportunities among construction materials firms that have de-rated amid cyclical concerns. Select chemicals stocks offer opportunities to own high-quality businesses. In mining, we used reflationary tailwinds to sell into strength industrial metals producers and rotate into select precious metals firms featuring what we viewed as cheap valuations, strong balance sheets and defensive characteristics. Encouragingly, these holdings began to show signs of life as volatility resurfaced in the fourth quarter.
Communication Services SOME
Among telecoms, we look for lowly valued firms with strong balance sheets, declining capital intensity and attractive dividends operating in markets with stable competitive dynamics and regulatory structures. The sector’s defensiveness and yield profile should help in a low-rate, elevated risk environment. The other part of this new sector grouping—media and entertainment—is home to a number of former tech and consumer stocks we have avoided on valuation grounds.
Consumer Staples FEW After underperforming for the better part of two years amid low volatility and global reflationary tailwinds, defensive consumer stocks rallied strongly as volatility re-emerged at the
end of the year. Valuations had become more interesting in recent years, but re-rated sharply in the second half of 2018 and are once again expensive for a low-growth sector.
Utilities FEW In our view, utilities are broadly expensive considering the potential impacts of weaker economic growth and increasing regulatory interference on power demand and industry pricing. Oversupply concerns persist in developed markets. However, select opportunities evident among renewable power generators.
Real Estate FEW Few opportunities in this late-cycle sector as bond yields rise, given already-expensive valuations and compressed cap rates.
As of December 31, 2018
Non-U.S. Equity
26
For Dealer Use Only. Not for Distribution to the Public.
Current Perspectives—Sectors
As of December 31, 2018
Current Perspectives—Regions
2896
Equity weakness in 2018 seemed to be more a function of sentiment than fundamentals. European stocks—especially cyclicals—underperformed to an extent typically associated with contraction and recession. Although growth did slow in 2018, composite manufacturing data remained firmly expansionary and gross domestic product growth was positive. Looking ahead, lead indicators suggest European PMIs (purchasing manufacturer indices) may be bottoming as the inventory cycle improves and euro strength fades. Europe’s economy remains highly exposed to global growth trends, which show signs of troughing on expectations of Chinese stimulus and a potential pause in Federal Reserve Board (“the Fed”) normalization efforts. Politics remain highly uncertain, though 2019 will likely bring clarity on Brexit and possibly the containment of turmoil in Italy and France; keep in mind that modern Europe has a long history of muddling through political crises. In the meantime, we expect quantitative tightening by the European Central Bank to be gradual and overall policy to remain dovish given the bank’s single mandate of price stability. With a solid 4% dividend yield and attractive 8% equity risk premium, European remained excessively cheap as of the end of the quarter and appears poised for recovery following protracted weakness.
Emerging markets are not homogenous; conditions between markets can vary dramatically. On a headline basis, many emerging markets look attractively valued relative to developed-market peers. However, such discounts are sometimes justified given higher risks and economic concentration in lowly valued resource and financials sectors. Recently, emerging markets have been buffeted by a series of headwinds originating in the US, including a stronger dollar and diminished liquidity thanks to quantitative tightening, as well as the uncertainty surrounding trade. Those threats are at least partially reflected in emerging market equity valuations hovering near three-year lows, and we continue to find selective opportunities among cheap emerging market stocks with unique value catalysts in this environment.
We believe the best opportunities in the region are effectively plays on the long-term wealth accumulation and demand potential of Asian consumers. We are finding many such opportunities among providers of the critical services and infrastructure—utilities, telecoms, insurers—required to facilitate the rise of a middle class. In China, the impact of trade wars and economic imbalances are becoming apparent in softer economic data. While officials will continue to pursue a more sustainable economic model by deleveraging, de-risking and closing excess capacity over the long term, short-term pressures will probably necessitate easier policy in 2019. From an investment standpoint, Chinese companies still offer an attractive combination of high organic growth and cheap valuations, though opportunities are selective. To this end, we have largely avoided state-controlled industries plagued by excess leverage and capacity, focusing instead on lowly valued consumer- and service-oriented sectors likely to capture an increasing share of China’s future economic growth.
Japan is one of the few markets in the world that is both under-owned and trading at a discount to its historical valuation levels. Investor caution relates to legacy issues of low growth, expensive valuations, excessive leverage and poor returns. Yet, conditions have improved. Corporate governance reform is gaining traction and earnings have recently risen to multi-decade highs while leverage fell to multi-decade lows. According to the Bank of Japan, the country’s economy has delivered two consecutive years of above-potential growth, the longest streak since before the global financial crisis. Valuations are becoming more attractive, with the market trading at a record discount to the US on both earnings and book value in 2018. Structural headwinds attributable to aging demographics and high government debt persist, but Japan is making progress, and continues to produce select bargains.
Limited value opportunities.
Region Opportunities Comments
Europe MANY
Emerging Markets SOME
Asia ex-Japan SOME
Japan SOME
Australia FEW
Non-U.S. Equity
27
All statements are opinions only and are expressed as of the publication date and are subject to change without prior notice. This is not a complete analysis of any industry, sector or region and should not be construed as an investment
recommendation or advice.
For Dealer Use Only. Not for Distribution to the Public.
Current Perspectives—Regions
28
Management Profiles
Non-U.S. Equity
For Dealer Use Only. Not for Distribution to the Public.
HEATHER WADDELL, CFAExecutive Vice PresidentPortfolio Manager, Research AnalystTempleton Global Equity GroupTempleton Investment Counsel, LLCFort Lauderdale, Florida, United States
Heather Waddell, Executive Vice President, joined the Templeton organization in 1996. Ms. Waddell is a research analyst and lead portfolio manager on a number of institutional separate account relationships and sub-advised portfolios.
Ms. Waddell has research responsibility for the global small capitalization industrials and communication services sectors.
Ms. Waddell earned an M.B.A. from the Columbia University Graduate School of Business in New York and a B.A. in economics from the University of California, Santa Cruz. She is a Chartered Financial Analyst (CFA) charterholder and an active member of the Columbia University and the University of California Alumni associations, and the South Florida Society of Financial Analysts.
Non-U.S. Equity
Management Profile
For Dealer Use Only. Not for Distribution to the Public.
29
MATTHEW R. NAGLE, CFA, CPAExecutive Vice PresidentPortfolio Manager, Research AnalystTempleton Global Equity GroupTempleton Investment Council, LLCFort Lauderdale, Florida, United States
Matthew R. Nagle is an executive vice president, portfolio manager and research analyst in the Templeton Global Equity Group, responsible for managing institutional portfolios. He also has global research responsibilities for the US banks sector, electronic manufacturing services and component manufacturer companies.
Prior to joining Franklin Templeton in 2003, Mr. Nagle was an associate sell-side analyst for Sanford C. Bernstein & Co., a research associate with ABN AMRO, and an auditor for financial services companies at Coopers & Lybrand. He entered the financial services industry in 1998.
Mr. Nagle holds a B.B.A. in accounting from Siena College and an M.B.A. in finance from New York University. He is a Chartered Financial Analyst (CFA) charterholder and a Certified Public Accountant (CPA).
Non-U.S. Equity
For Dealer Use Only. Not for Distribution to the Public.
30
Management Profile
Templeton Global Equity Group Senior Management Profiles
NORMAN J. BOERSMA, CFAChief Investment Officer, Templeton Global Equity GroupPresident, Templeton Global Advisors LimitedNassau, Bahamas
Norman J. Boersma is the chief investment officer of Templeton Global Equity Group (TGEG) and president of Templeton Global Advisors. He is also lead portfolio manager for the Templeton Growth Fund, Templeton Growth (Euro) Fund and Templeton World Fund and related strategies.
ANTONIO T. DOCAL, CFAPresident, Templeton Investment Counsel, LLCDirector of Portfolio ManagementTempleton Global Equity GroupFort Lauderdale, Florida, United States
Antonio Docal is the President of Templeton Investment Counsel, LLC and the Director of Portfolio Management for the Templeton Global Equity Group (TGEG).Mr. Docal has lead portfolio manager responsibilities for the TIF-International Equity Series and portfolio management responsibility for a number of other institutional commingled funds and separate account relationships. He also oversees the institutional segment of TGEG’s global investment management business. Mr. Docal has research responsibility for the U.S. and previously served as the Deputy Director of Research, and in the past has covered various global sectors.
HEATHER ARNOLD, CFADirector of ResearchPortfolio Manager, Research AnalystTempleton Global Equity GroupNassau, Bahamas
Heather Arnold is the director of research for the Templeton Global Equity Group, as well as a portfolio manager and research analyst. Ms. Arnold is the lead portfolio manager for the Templeton Global Fund as well as the lead portfolio manager on a number of Global, International and European institutional separate accounts. She is also the lead equity portfolio manager of TGIT Templeton Global Balanced Fund, FTIF Templeton Global Income Fund and Templeton Global Balanced Fund in Canada.
C. REED HUTCHENS, CFAExecutive Vice President, Director of Business ManagementTempleton Global Equity GroupFort Lauderdale, Florida, United States
Reed Hutchens is an executive vice president and director of business management for the Templeton Global Equity Group. He works closely with the senior management team, focusing on thoughtfully and strategically managing the Templeton business worldwide.
4748
Non-U.S. Equity
31
For Dealer Use Only. Not for Distribution to the Public.
Templeton Global Equity Group Senior Management Profiles
32
Appendix
Non-U.S. Equity
For Dealer Use Only. Not for Distribution to the Public.
Collaboration with Financial Experts Across Franklin Templeton
2894
Analysts and Portfolio Managers in 16 Locations
Analysts and Portfolio Managers in over 20 Locations
TEMPLETON GLOBAL EQUITY34 Analysts, Portfolio Managers
Consultants and Analysts in 19 Locations
Expertise on Macroeconomic and Currency Trends
Generates Accurate, Relevant and Timely Performance and Investment Risk Analytics
Perspective and Insights on Local Business Conditions and Economic and Political Risks
Non-U.S. Equity
33
As of December 31, 2018.
Templeton Global Equity leverages expertise and resources throughout the broader global organization, Franklin Templeton Investments. Templeton Global Equity is part of the Templeton firm definition and Templeton Global Macro,
Franklin Fixed Income and Franklin Templeton Emerging Markets Equity are part of the Franklin firm definition for purposes of compliance with the Global Investment Performance Standards (GIPS®).
Franklin and Templeton claim compliance with GIPS®. LAM firms, Franklin Templeton Investment Trust Management Co., Ltd. (Korea) and Bissett Investment Management (Canada) also claim compliance with GIPS®; all other LAM
firms do not claim compliance with GIPS®. Franklin Europe has been integrated into the Templeton firm definition as of December 1, 2017.
For Dealer Use Only. Not for Distribution to the Public.
Collaboration with Financial Experts Across Franklin Templeton
Templeton maintains a robust, multi-faceted risk management process throughout its organizational structure.
Levels of Risk Management:
Risk Management—Templeton Global Equity Group
Templeton Philosophy and ProcessTempleton applies a long-term, bottom-up, value investment philosophy• Long-term view allows us to use volatility to our advantage over a secular
investment horizon• Rigorous, bottom-up analysis determines normalized business value• Search for significant valuation discount to help reduce downside risk
Equally important is the process by which Templeton’s philosophy is implemented• Analysts bring their best ideas to our global investment team• Pre-mortem “devil’s advocate” exercise attempts to identify potential flaws in
the thesis• Portfolios are diversified in an effort to help reduce stock-specific risk
• Frequent communication ensures portfolios reflect convictions
Core: Templeton Global Equity Group (GEG)
Dedicated Risk Review Corporate Risk CommitteesInvestment Risk Management Group• A team of specialized risk professionals reporting directly
to Franklin Templeton’s CEO• Generates accurate, relevant and timely performance and
investment risk analytics• Oversees the strategy’s performance against guidelines,
company policies and industry standards
• The Complex Securities Review Committee helps PMs understand the risks associated with more esoteric securities
• The Counterparty Credit Committee (CCC) assesses risks posed by banks and brokers that act as our trading partners
• These two Franklin Templeton committees that assess and manage portfolio risk have been in place since before the most recent Global Financial Crisis
Complementary: Investment Risk Management Group Complementary: Franklin Templeton (FT)
CorporateRisk
Committees (FT)Investment
Risk Management
GroupTempleton
Philosophy & Process (GEG)
2898
Non-U.S. Equity
34
For Dealer Use Only. Not for Distribution to the Public.
Risk Management—Templeton Global Equity Group
Trade Execution and Implementation• Integrating trading and overlaying informed execution on top of investment decisions may provide opportunities for
increased investment performance by maximizing market insight, relationships, trading strategies and technologies
An Integrated Global Trading Platform
GLOBAL TRADINGPLATFORM
IMPLEMENTATION
AND
EXECUTION
Present trading ideas and strategies
Suggest timing and manage liquidity
Filter and present potentially opportunistic information
Actively seek to reduce trading costs
Seek to decrease impact and opportunity costs of trading
Coordinate and foster collaboration
Manage and seek to optimize commissions
Understand the daily market dynamics
2899
Non-U.S. Equity
35
For Dealer Use Only. Not for Distribution to the Public.
An Integrated Global Trading Platform
Non-U.S. Equity
36
For Dealer Use Only. Not for Distribution to the Public.
Important Information
Templeton Separately Managed Accounts and Templeton claim compliance with the Global Investment Performance Standards (GIPS®). Please see accompanying full performance
presentation prepared in accordance with Global Investment Performance Standards (GIPS®) which includes additional information regarding the net of fee calculations.
Templeton Separately Managed Accounts (the “firm”) manages portfolios for high net worth individuals and institutional clients, applying a bottom-up, value oriented, long-term investment style,
focusing on global and non-U.S. markets. Templeton Separately Managed Accounts is a division of Franklin Templeton Portfolio Advisors, Inc. (“FTPA”), a subsidiary of Franklin Resources, Inc.
(“FRI”) and is a unit of the broader Templeton organization. At Templeton Separately Managed Accounts, brokerage, administrative, custodial and investment management fees may be charged
together as a percentage of the portfolios’ assets (comprehensive fee or wrap-fee) or may in some instances be charged separately (unbundled fee). Retail and Institutional separate accounts
managed by affiliated Templeton entities are not included in the firm definition. Templeton Separately Managed Accounts was previously known as Templeton Portfolio Advisors prior to June 30,
2012. Templeton Portfolio Advisors was previously known as the Templeton Private Client Group prior to October 1, 2004. Effective July 1, 2014, Templeton Investment Counsel, LLC, assumed
responsibility for Templeton Separately Managed Accounts' global and international equity SMA accounts. Templeton Investment Counsel, LLC is a sub-adviser to Templeton Separately
Managed Accounts.
Templeton (or the “firm”) as defined encompasses the wholly owned investment management subsidiaries of Templeton Worldwide, Inc. with global, international, single country or regional, and
emerging market equity investment objectives serving both retail and institutional clients. The firm definition for Templeton does not include the foreign-domiciled investment advisory subsidiaries
of Templeton Worldwide, Inc. that primarily offer only locally registered investment mandates or funds and the wrap-fee and non wrap-fee accounts managed by Templeton Separately Managed
Accounts. Each investment advisory subsidiary within Templeton employs the same bottom-up, value-oriented investment style whether managing global equity, non-U.S. equity, single country
or regional equity, or emerging market equity mandates. Portfolio managers pursuing similar investment mandates share research, have equivalent access to Templeton’s bargain and source of
funds lists, and are subject to the same peer review process.
Templeton Separately Managed Accounts and Templeton are defined as separate firms within Franklin Templeton Investments for the purposes of complying with the Global Investment
Performance Standards (GIPS®). Templeton is a sub-adviser to Templeton Separately Managed Accounts.
Templeton International ADR Equity SMA Composite consists of all the fully discretionary wrap-fee portfolios which have a non-U.S. equity investment objective with a restriction that accounts
may invest in foreign securities only through American Depositary Receipts (ADRs) and for which the brokerage (including trading expenses), administrative, custodial, and investment
management fees are charged together as a percentage of the portfolios' assets (known as a comprehensive fee, wrap-fee or bundled fee). As the criterion for inclusion in this composite is that
the portfolios have bundled fees (i.e. where commission costs are not charged separately), 100% of the accounts in the composite have bundled fees for all time periods presented.
All returns are presented in U.S. dollars and have been calculated using time-weighted total rates of return. Net-of-fees returns have been reduced by the total “wrap fee” which includes
brokerage fees (including trading expenses), administrative, custodial and investment management fees. Gross performance returns presented are “pure” gross-of-fees returns, which are before
wrap fees, including brokerage fees related to trading expenses for transactions executed through the sponsor. “Pure” gross-of-fees returns are presented as supplemental information only. Both
net- and “pure” gross-of-fees returns assume the reinvestment of dividends, interest, and realized and unrealized capital gains and losses.
Non-U.S. Equity
For Dealer Use Only. Not for Distribution to the Public.
37
Important Information (continued)
The primary benchmark for this composite is the MSCI All Country World ex-U.S. Index, which is a free float adjusted market capitalization weighted equity index comprised of securities in
MSCI's developed and emerging market country-specific indexes, excluding the U.S. The MSCI EAFE Index, which is a free float adjusted market capitalization weighted equity index comprised
of securities in MSCI's developed market country-specific indexes, excluding the U.S. and Canada.
Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request. To receive a complete list of composite descriptions
for Templeton Separately Managed Accounts and/or a presentation that adheres to the GIPS® standards for any composite, contact your Franklin Templeton separately managed account sales
team at (800) 822-8464 or visit www.franklintempleton.com. This publication is intended only as a general overview of the Templeton management team and philosophy and is for informational
purposes only. It has been prepared solely for the use of the person to whom it has been delivered and may not be reproduced or used for any other purpose. It is intended only for institutional
investment consultants or institutional investors. It is not meant for the general public. For specific information on available equity products or services, please contact your consulting services
representative.
The information contained in this piece is not a complete analysis of every material fact regarding the market and any industry, sector, security or portfolio. Statements of fact cited by the
manager have been obtained from sources considered reliable but no representation is made as to their completeness or accuracy. Because market and economic conditions are subject to rapid
change, opinions provided are valid only as of the date of the material, and are subject to change without notice. The manager’s opinions are intended solely to provide insight into how the
manager analyzes securities and are not a recommendation or individual investment advice for any particular security, strategy or investment product. Any securities discussed may not
represent an account’s entire portfolio and in the aggregate may represent a small percentage of an account’s portfolio holdings. There is no assurance that any such securities will remain in an
account’s portfolio, or that securities sold have not been repurchased. It should not be assumed that any securities transactions discussed were or will prove to be profitable. The information
provided should not be considered a recommendation to purchase, sell or hold any particular security.
Investors should review their investment objectives, risk tolerance and liquidity needs before choosing a manager. There is no guarantee that investment strategies will work under all market
conditions, and investors should evaluate their ability to invest for the long term, especially during periods of market downturns. Past performance is not an indicator or a guarantee of future
performance.
Foreign investing is subject to certain risks, such as currency fluctuations and social and political changes, which may result in increased stock price volatility. Since no one manager is suitable
for all types of investors, this information is provided for informational purposes only. Please review your investment objectives, risk tolerance and liquidity needs before choosing a manager. The
performance of an individual portfolio may differ from that of a benchmark, representative account or composite included herein for various reasons, including but not limited to, the objectives,
limitations or investment strategies of a particular portfolio. Management fees will reduce the rate of return on any particular account or portfolio.
Non-U.S. Equity
38
Important Disclosures
For Dealer Use Only. Not for Distribution to the Public.
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.
© 2019 Franklin Templeton Investments Corp. All rights reserved. Franklin Templeton Investments Canada is a business name used by Franklin Templeton Investments Corp.
CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.
Secondary Benchmark Annualized 3-Yr St Dev
Total Firm Assets
(Millions)
No of Portfolios (End of Period)
Equal-Wtd Dispersion
Calendar Year
Composite Total Return
Gross
Primary Benchmark
Return
Secondary Benchmark
Return
Composite Gross
Annualized 3-Yr St Dev
Primary Benchmark Annualized 3-Yr St Dev
Composite Assets
(Millions)
All Returns and Asset Figures in USD
Composite Total Return
Net
Templeton International ADR Equity SMA Composite
-3.64% -4.90% 342.57 6210.63% 0.14%-2.67% -0.98% 10.81% 10.73% 38.19YTD*
22.57% 20.07% 383.92 3711.85% 0.19%27.77% 25.62% 11.51% 11.88% 19.902017
2.22% 0.57% 350.74 6912.48% 0.27%5.01% 1.51% 12.08% 12.53% 22.192016
-2.74% -4.12% 619.72 37212.47% 0.21%-5.25% -0.39% 12.07% 12.13% 135.122015
-6.75% -8.15% 589.72 42512.99% 0.18%-3.44% -4.48% 13.53% 12.78% 161.122014
21.75% 20.02% 669.23 52316.22% 0.25%15.78% 23.29% 17.05% 16.20% 189.782013
20.77% 18.95% 718.27 70019.32% 0.29%17.39% 17.90% 20.20% 19.22% 196.772012
-11.32% -12.64% 743.25 89322.45% 0.29%-13.33% -11.73% 22.22% 22.74% 210.892011
6.04% 4.55% 916.17 112026.28% 0.26%11.60% 8.21% 24.74% 27.33% 308.802010
24.42% 22.70% 1,403.41 145623.65% 0.50%42.14% 32.46% 21.99% 25.30% 404.422009
-39.07% -39.96% 1,402.84 184719.26% 0.57%-45.24% -43.06% 18.08% 20.90% 373.592008
1 Templeton Separately Managed Accounts claims compliance with the Global Investment Performance Standards (GIPS®) and has prep ared and presented this report in compliance with the GIPS standards. Templeton Separately Managed Accounts has not been independently verified.
2 For wrap fee composites, gross of fee returns are "pure" gross, before wrap fees that include trading expenses. "Pure" gross returns are presented as supplemental information.
3 Past performance is not an indicator or a guarantee of future performance. Please see notes to this performance presentation starting on page 2.
4 Beginning with the third quarter of 2010, accounts in Unified Managed Account (UMA) programs are excluded from firm assets. See footnote a for more information.
N/A = Not Available
* Year to Date reflects performance through 9/30/2018 and composite composition as of 9/30/2018
Primary Benchmark: MSCI All Country World ex-U.S. Index. Secondary Benchmark: MSCI EAFE Index.
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For Dealer Use Only. Not for Distribution to the Public.
GIPS Performance Presentation
Disclosures:
a Firm Definition: Templeton Separately Managed Accounts (the "firm") manages portfolios for high net worth individuals and institutional clients, applying a bottom-up, value oriented, long-term investment style, focusing on global and non-U.S. markets. Templeton Separately Managed Accounts is a division of Franklin Templeton Portfolio Advisors, Inc. ("FTPA"), a subsidiary of Franklin Resources, Inc. ("FRI") and is a unit of the broader Templeton organization. At Templeton Separately Managed Accounts, brokerage, administrative, custodial and investment management fees may be charged together as a percentage of the portfolios’ assets (comprehensive fee or wrap-fee) or may in some instances be charged separately (unbundled fee). Effective July 1, 2014, Templeton Investment Counsel, LLC (TICLLC) assumed responsibility for Templeton Separately Managed Accounts’ global and international equity SMA accounts. TICLLC is a sub-adviser to Templeton Separately Managed Accounts. Retail and Institutional separate accounts managed by affiliated Templetonentities are not included in the firm definition. Templeton Separately Managed Accounts was previously known as Templeton Portfolio Advisors prior to June 30, 2012. Templeton Portfolio Advisors was previously known as the Templeton Private Client Group prior to October 1, 2004.
Beginning with the third quarter of 2010, Templeton Separately Managed Accounts changed its policy with respect to the inclusion of accounts in Unified Managed Account (UMA) programs. UMA accounts are accounts where end investors of the sponsor invest in various strategies or “sleeves”, with the asset allocation determined by the sponsor according to the investment objectives of the end investor. In most cases, Templeton Separately Managed Accounts has either no or only partial trading discretion. Such accounts have historically been included in firm assets for Templeton Separately Managed Accounts on the basis that they are (and continue to be) included in the Form ADV filed with the Securities and Exchange Commission, but since the firm does not have full trading discretion for these accounts, the assets will be excluded from total firm assets beginning with the third quarter of 2010. Total firm assets reported for periods prior to the third quarter of 2010 will not be revised to reflect the exclusion of UMA assets.
To provide some continuity for the reporting of firm assets, the table below provides a sample of historical total firm assets reflecting the inclusion of UMA accounts as reported as well as historical total firm assets excluding UMA accounts as though reported under the revised policy. These figures are provided as supplemental information.
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For Dealer Use Only. Not for Distribution to the Public.
b Composite Description: Templeton International ADR Equity SMA Composite consists of all the fully discretionary wrap-fee portfolios which have a non-U.S. equity investment objective with a restriction that accounts may invest in foreign securities only through American Depositary Receipts (ADRs) and for which the brokerage (including trading expenses), administrative, custodial, and investment management fees are charged together as a percentage of the portfolios' assets (known as a comprehensive fee, wrap-fee or bundled fee). The criterion for inclusion in this composite is that portfolios have bundled fees (i.e. where commission costs are not charged separately), 100% of the accounts in the composite have bundled fees for all time periods presented. Foreign investing, especially in developing countries, has additional risks such as currency and market volatility and political or social instability. No account in this composite uses leverage or derivatives. The inception date of the composite is November 30, 1999. The composite creation date is December 31, 2005. Templeton Separately Managed Accounts claims compliance with GIPS® for the period January 1, 2000 to the present. Certain accounts are deemed to be non-fee-paying because the sponsors involved billed the client directly without charging the account managed by Templeton Separately Managed Accounts or charged another account of the client not managed by Templeton Separately Managed Accounts. See footnote c. below for more information. Eligible new accounts and eligible accounts that have changed to this objective have historically been added to the composite after two full calendar months of performance following inception or the change in objective. Effective with accounts added on or after January 1, 2008, this policy was changed such that eligible accounts are added to the composite after one full calendar month of performance, excluding any first partial month following inception or notification of objective change. Accounts are removed from the composite at the end of the month prior to notification if they become non-discretionary due to client-directed restrictions according to the firm’s definition of what constitutes discretion.
c Basis of Presentation: The composite performance results are presented in U.S. Dollars and have been calculated using time-weighted total rates of return. For comprehensive fee composites, net of fee returns have been reduced by the total "comprehensive fee", which includes brokerage fees (i.e. trading expenses), investment management, administrative and custodial fees. Any administrative or custodial fees charged to accounts over and above the comprehensive fee that are specifically identified as such fees are treated as cash withdrawals and do not negatively impact performance. Gross of fee returns for comprehensive fee composites are "pure" gross before comprehensive fees, including brokerage fees related to trading expenses for transactions executed through the sponsor. "Pure" gross of fee returns are presented as supplemental information only. For "unbundled fees" composites, returns are inclusive of trading expenses and are shown both gross and net of investment management fees. For non-fee paying accounts that may be included in the composite, the maximum applicable fee is applied to the gross of fees return as a model fee to generate a net of fees return. All returns assume the reinvestment of dividends, interest, and realized and unrealized capital gains and losses. Dividends, interest income and capital gains are net of any applicable withholding taxes. Account portfolios are valued daily at fair market value on a trade date basis, and market values include accrued income for fixed income securities. Monthly composite returns are calculated by weighting each account’s monthly return by its beginning market value as a percent of the total composite beginning market value ("asset-weighted" performance). Quarterly and annual time-weighted returns are calculated by linking the monthly returns geometrically through compounded multiplication. Returns for periods of less than one year are not annualized. Past performance is not an indicator or a guarantee of future performance.
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For Dealer Use Only. Not for Distribution to the Public.
d Description of Index: The primary benchmark for this composite is the MSCI AC World ex-U.S. Index, which is a free float-adjusted market capitalization weighted equity index comprised of securities in MSCI's developed and emerging market country-specific indexes, excluding the U.S. Returns are also included for MSCI EAFE Index, which is a free float-adjusted market capitalization weighted equity index comprised of securities in MSCI's developed market country-specific indexes, excluding the U.S. and Canada. Returns for the MSCI benchmarks include dividends not adjusted for foreign withholding taxes (the “gross of dividends” series of MSCI) and are based on foreign exchange rates established at mid-day New York time (equivalent to the London close). FX rates used by index providers are obtained from their respective FX vendors and may differ slightly from the FX rates used by Franklin Templeton, particularly since index providers tend to use London close, whereas Templeton Separately Managed Accounts has been using New York close since 1 September 2004. Beginning 1 January 2008, Templeton Separately Managed Accounts reverted to the use of London FX rates for all time periods back to inception for converting composite base currency returns into other currencies and for reporting benchmark returns, in order to conform to more common industry practice. The benchmarks are used for comparative purposes only and are provided to represent the investment environment existing during the periods shown. Additionally, the benchmarks do not reflect any fees, expenses or sales charges.
All MSCI data is provided “as is”. The composite 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 date or the composite described herein. Copying or redistributing MSCI data is strictly prohibited.
e Minimum Account Size: Effective 1 July 2006, the minimum account size required for inclusion in the composite is $50,000 based on ending market value for the month. Accounts are removed from the composites for a given month if they fall below $50,000 based on ending market value for that month. Composite inclusion and exclusion occur with no grace period when implementing the minimum account size policy. Prior to 1 July 2006, all accounts, once accepted for management, were included in the composite regardless of asset size and were not removed from the composite by virtue of falling below any minimum account size.
f Standard Fee Schedule: The maximum applicable fee, which comprises brokerage (including trading expenses), administrative, custodial and investment management fees (together, the wrap-fee) is 3.0% of portfolio assets.
g Internal Dispersion: The dispersion of annual returns is measured by the standard deviation of equal-weighted portfolio returns for those accounts that were in the composite for each full calendar year, or partial year for the most recent year-to-date. Dispersion is not meaningful when there are five or fewer accounts in a given year or time period.
h Additional Information: The firm's policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. To receive a complete list and description of Templeton Separately Managed Accounts' composites and/or a presentation for any composite that adheres to the GIPS® standards for any composite, contact your Franklin Templeton separately managed account sales team at 1-800-822-8464 or visit www.franklintempleton.com.
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For Dealer Use Only. Not for Distribution to the Public.