Franklin Brazil Opportunities Fund A (Qdis) USD

30 April 2019
Franklin Templeton Investment Funds

Fund Commentary

Performance Review
• Markets in Brazil were relatively stable in April, with a slight bias towards a more positive tone. A benign global backdrop, with the S&P 500®
Index hitting all-time highs and a calmer political environment locally supported this scenario. The Ibovespa (Brazil’s broad equity index) was
stable both in Brazilian real and US-dollar terms and the yield on the five-year local-currency government bond decreased by 8 basis points
(bps). Long term real interest rates, as measured by the return on inflation-linked bonds maturing in 2050, were down by 3 bps, reaching 4.49%
and credit default spreads (insurance against sovereign default) receded 7 bps to 172.
• For the month, the fund’s A (Qdis) USD shares returned 1.10%, and its benchmark, the Blended 90% JP Morgan EMBI Brazil Plus Index + 10%
MSCI Brazil Index, returned ‑0.39%.
ONE-MONTH KEY PERFORMANCE DRIVERS

Equity Duration Credit Foreign Exchange

PETROBRAS DISTRIBUIDORA 2050 AND 2055 NTN-Bs
ELEBRA 5.75 10/27/21 Long Brazilian Real
ORD (Refining & Marketing) (Inflation-linked Bonds)
BRASIL BOLSA BALCAO ORD
HELPED
BANCO DO BRASIL 9
(Security & Commodity — —
PERPETUAL
Exchanges)
CIA ENERGETICA DE MINAS
— PETBRA 6.125 01/17/22 —
GERAIS ORD (Utility Networks)
AZUL SA PREF (Airlines) — BRAZIL 12.5 01/05/2022 BRL —
CIELO SA ORD (Consumer
— BRAZIL 8.5 01/05/24 BRL —
Finance)
HURT SHORT POSITION IN
IBOVESPA FUTURES
— BNDES 6.5 06/10/19 —
CONTRACTS (Partial Portfolio
Hedge)

• The fund’s performance was positive in April as a result of small gains in many of the strategies we hold, including our local-duration position as
inflation-linked bonds benefitted from a slight compression in yields and a high carry caused by the seasonally higher inflation rates.
• As previously mentioned, markets were fairly stable during the period. In addition to our duration position in the local-currency strategy, we also
saw modest positive contributions from our credit exposures and long position in the Brazilian real.
• Despite the stability seen in the equity market in the period, our stock picking strategy detracted from overall fund performance in April, mainly
due to our holdings in the airlines and consumer finance sectors.

Outlook & Strategy

• The fund has a multi-asset approach to investing in Brazilian assets. This approach allows us to allocate resources in asset classes and
securities that we believe have the best risk/reward profile. The fund`s mandate is also compatible with reducing risk when we expect volatility
to increase.
• Concerns over the US monetary and trade policies coupled with EM economic vulnerabilities have sparked a self-reinforcing dynamic of currency
depreciation. However, the country has to face its fiscal deficit and is in the middle of a highly uncertain presidential race. The carry trade, that
used to support the Brazilian real in the past, currently stands as a headwind given that local interest rates have fallen to their lowest level in
history. The consequence of all this has been a sharp depreciation of the local currency that also strongly impacted the yield curve, despite the
benign inflation outlook and a weak economic growth. In order to smooth asset price movements and provide liquidity to the markets both the
Brazilian Central Bank and the Brazilian National Treasury intervened by selling US dollars and buying back Brazilian treasury bills.
• We anticipate that the global scenario will no longer work as a tailwind for EMs and, therefore, EM currencies will have little reason to appreciate
in the short term. The Brazilian Central Bank currency interventions along with a low inflation environment will, in our view, allow the key interest
rate to remain at low historical levels for quite some time. We decided to exit any Brazilian real exposure and concentrate the risk budget in
interest rates through both currency hedged inflation-linked and nominal bonds.

Fund Details Fund Description

Inception Date 27/07/2012 The fund seeks total return, consisting of capital appreciation, income,
cash and currency gains, by investing across the entire range of
Benchmark Blended 90% JP Morgan EMBI Brazil
Plus Index + 10% MSCI Brazil Index available investment opportunities linked to Brazil.

For Professional Investor Use Only. Not for distribution to Retail Investors.
 Franklin Brazil Opportunities Fund 30 April 2019

Performance Data
Performance Net of Management Fees as at 30/04/2019 (Dividends Reinvested) (%)1,2
Since Inception
1 Mth 3 Mths YTD 1 Yr 3 Yrs 5 Yrs (27/07/2012)
A (Qdis) USD 1.10 0.32 4.20 5.23 6.12 2.14 2.05
Blended 90% JP Morgan -0.39 0.00 5.45 7.97 9.14 4.51 2.88
EMBI Brazil Plus Index +
10% MSCI Brazil Index

Investment Team

Rodrigo da Rosa Borges Frederico Sampaio, CFA Renato S. Pascon

Years with Firm 4 Years with Firm 12 Years with Firm 3
Years Experience 22 Years Experience 23 Years Experience 16

For Professional Investor Use Only. Not for distribution to Retail Investors.
www.franklintempletongem.com 2
 Franklin Brazil Opportunities Fund 30 April 2019

What Are the Key Risks?

The value of shares in the Fund and income received from it can go down as well as up and investors may not get back the full amount invested.
Performance may also be affected by currency fluctuations. Currency fluctuations may affect the value of overseas investments. The Fund is an
asset allocation fund that invests mainly in equity and equity-related securities issued by companies located in, doing significant business in, or
otherwise linked to Brazil as well as Brazilian debt securities of any quality, including non-investment grade. Such securities have historically been
subject to price movements, generally due to either company-specific or market-related factors and, for the debt securities, movements in interest
rates and the local bond market generally. As a result, the performance of the Fund can fluctuate 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, emerging markets risk, currency risk, derivatives risk, liquidity 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.

Important Legal Information

This document is intended to be of general interest only and does not constitute legal or tax advice nor is it an offer for shares or invitation to apply
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environment, Franklin Templeton Investments disclaims responsibility for updating this material.
Subscriptions to shares of the Fund can only be made on the basis of the current prospectus of the Fund, accompanied by the latest available
audited annual report and the latest semi-annual report if published thereafter. An investment in the Fund entails risks which are described in the
Fund’s prospectus. If the fund invests in a specific sector or geographical area, the returns may be more volatile than a more diversified fund.
A copy of the latest prospectus, the annual report and semi-annual report, if published thereafter can be found on our website:
www.franklintempletongem.com or can be obtained, free of charge, from the address below.
Issued by Franklin Templeton Investments (ME) Limited, authorized and regulated by the Dubai Financial Services Authority.
Dubai office: Franklin Templeton Investments, The Gate, East Wing, Level 2, Dubai International Financial Centre, P.O. Box 506613, Dubai, U.A.E.,
Tel.: +9714-4284100 Fax:+9714-4284140.
Past performance is not an indicator or a guarantee of future performance. The value of shares in the Fund and income received from it can go
down as well as up, and investors may not get back the full amount invested. Investment in the Fund entails risks which are described in the Fund’s
prospectus and, where available, in the relevant Key Investor Information Document or any other relevant offering document. Special risks may be
associated with a Fund’s investment in certain types of securities, asset classes, sectors, markets, currencies or countries and in the Fund’s possible
use of derivatives. References to particular industries, sectors or companies are for general information and are not necessarily indicative of a fund’s
holdings at any one time. Currency fluctuations may affect the value of overseas investments. When investing in a fund denominated in a foreign
currency, your performance may also be affected by currency fluctuations. Where a Fund invests in emerging markets, this investment can be more
risky than an investment in developed markets. No shares of the Fund may be directly or indirectly offered or sold to residents of the United States of
America.
The information provided is not a complete analysis of every material fact regarding any country, market, industry, security or fund. Because market
and economic conditions are subject to change, comments, opinions and analyses are rendered as of the date of this material and may change
without notice. A portfolio manager’s assessment of a particular security, investment or strategy is not intended as individual investment advice or a
recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy; it is intended only to provide insight into the
fund’s portfolio selection process. Holdings are subject to change.
References to indexes 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.
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Important data provider notices and terms available at www.franklintempletondatasources.com.
1. Source for all information is Franklin Templeton Investments. Benchmark related data provided by FactSet. Past performance is not an indicator or a guarantee of future performance.
Portfolio holdings are subject to change. Periods greater than one year are shown as average annual total returns. Sales charges and other commissions, taxes and other relevant costs paid by
investor are not included.
2. 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.

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The Gate, East Wing, Level 2
Dubai International Financial Centre
P.O. Box 506613
Dubai, U.A.E.
Tel.: +9714-4284100
Fax.: +9714-4284140
www.franklintempletongem.com
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