portfolio summary unlocking deep value with … · investing from a company owner’s viewpoint we...
TRANSCRIPT
UNLOCKING DEEP VALUE WITH BUSINESS CATALYSTS Franklin Mutual Global Discovery Fund – Advisor Class (MDISX)
As of March 31, 2018
PORTFOLIO SUMMARY
For Financial Professional Use Only | Not For Distribution to the Public.
For Financial Professional Use Only / Not for Distribution to the Public
Franklin Retirement Payout Funds March 31, 2016
Many global value equity funds speak to buying bargains, but few funds buy their stocks with a comprehensive owner’s mindset. MDISX evaluates a company’s financial prospects not just in terms of traditional fundamentals but also in terms of the potential business outlook.
Investing from a Company Owner’s ViewpointWe seek to understand the business and its ability to generate value and
prefer companies with shareholder-friendly management teams that
return capital to their shareholders. We often purchase significant stakes
in companies and may also exert influence on management.
Offering a Flexible, Go-Anywhere Approach Our approach focuses entirely on the pursuit of the best investment ideas
and the fund is not constructed with any reference to an index. This
allows the investment team to add securities opportunistically depending
on where they are finding value. The net effect has resulted in relatively
higher risk-adjusted returns for investors over the long-term and an active
share score1 of 88.
We diversify our deep value investment strategy with debt securities and
merger arbitrage investments. The team’s in-depth analysis of companies
supports our investment in debt securities, as well as merger arbitrage
opportunities. Although these holdings tend to represent a smaller
percentage of the fund’s portfolio, they offer different value opportunities
than traditional undervalued equity holdings.
Delivering Competitive Returns, Relatively Lower Volatility MDISX offers investors a distinctive global value equity approach as a
core equity holding. The team’s deep value approach is not only intended
to improve the likelihood of upside potential, but the focus on risk
management is also intended to reduce substantial declines.
FRANKLIN MUTUAL GLOBAL DISCOVERY FUND (MDISX)Unlocking Deep Value With Business Catalysts
Our Investment Approach
Outcome of Our Investment Expertise
Strategy In Action
Active Investment Selection
Risk And Reward
Allocating to Global Equity
Franklin Mutual Global Discovery Team
Not FDIC Insured | May Lose Value | No Bank Guarantee
Unlocking Deep Value With Business Catalysts 1
Topics Covered
1. Source: © 2018 Morningstar as of March 31, 2018. The Active Share Score represents the portion of stock holdings in an actively managed fund that differs from its benchmark index. Active share scores range from 0 to 100. An active share score of 0 indicates a portfolio that is identical to its primary benchmark index, while an active share score of 100 represents a portfolio composition that holds no overlapping positions. Different position allocation amounts contribute to active share score and are subject to change. A high active share score does not guarantee positive fund performance, or that a fund will outperform its benchmark index.
For Financial Professional Use Only / Not for Distribution to the Public
Franklin Retirement Payout Funds March 31, 2016
OUR INVESTMENT APPROACH
At Franklin Mutual Series, we are committed to our distinctive value approach to investing, which has generated above-average risk-adjusted returns over time for our shareholders. We primarily invest in undervalued equities.
When selecting undervalued equities, we are attracted to what we believe are companies with high-quality assets, substantial free cash flow and shareholder-oriented management teams and whose stocks are trading at discounts to our assessment of the companies’ intrinsic or business value. We also look for asset-rich companies whose shares may be trading at depressed levels due to concerns over short-term earnings disappointments, litigation, management strategy or other perceived negatives. We aim to tap into a business catalyst such as corporate restructuring or management changes to unlock a greater business value.
We diversify our more traditional investment strategy with two others. One is distressed investing, a highly specialized field. The most common distressed investment the Fund undertakes is the purchase of financially troubled or bankrupt companies’ debt at a substantial discount to face value. After the financially distressed company is reorganized, often in bankruptcy court, the old debt is typically replaced with new securities issued by the financially stronger company.
The other piece of our investment strategy is participating in arbitrage situations, another highly specialized field. When companies announce proposed mergers or takeovers, the target company may trade at a discount to the bid it ultimately accepts. One form of arbitrage involves purchasing the target company’s stock when it is trading below the value we believe it would receive
in a deal. In keeping with our commitment to a relatively conservative investment approach, we typically focus our arbitrage efforts on announced deals, and avoid rumored deals or other situations we consider relatively risky.
Ongoing Monitoring
We determine a buy and a sell level for every security held in the portfolio based upon our estimate of the intrinsic value. We monitor the fundamentals of a company and its overall situation to identify any changes. Typically, we begin to scale out of a position as the price of the security approaches the sell level and exit the position entirely once the target is reached.
Use of Hedging for Risk Management
To hedge an investment is to take a position intended to offset potential losses/gains that may be incurred by a companion financial instrument. Franklin Mutual Global Discovery Fund typically hedges the majority of its foreign currency exposure back to the US dollar in an effort to better isolate the local market performance of its foreign holdings and to minimize the impact that currency fluctuations exert on overall fund results. It’s important to note that the currency hedge does not reflect a particular outlook for a currency or group of currencies.
The hedging process begins at the security level. When presenting a foreign investment idea, it is the analyst’s responsibility to make a hedging recommendation based on the particular operational characteristics of the concerned company, which is one reason why the fund is not typically 100% hedged. The currency traders implement the hedge primarily through the use of short-term currency forward contracts. Currency forwards are easily traded, especially for the currencies typically involved with the fund’s strategies, and are widely utilized for hedging purposes.
Unlocking Deep Value With Business Catalysts 2
Example Business Catalyst Potential Opportunity Risks
Symantec • Management Change• Corporate Restructuring• Our Actions
Company priced for past mis-execution, but opportunity to separate unrelated storage and security business with new management focus on growth
Poor acquisitions or failed innovation that result in inferior product offerings or that do not meet customer needs
Royal Dutch Shell • Corporate Restructuring• Capital Structure• Our Actions
Shell needed to rationalize business, constrain cap-ex and cut costs in the face of sustained lower oil prices to drive strong returns on capital and returns for shareholders
Further oil price declines or prices that remain lower than expected for an extended period; management execution of operations and disposals
Vodafone • Corporate Restructuring Monetizing portfolio of assets worldwide and making investments in network quality and expansion, funded by the sale of a Verizon Wireless stake, and expected growth in data usage & monetization that would improve revenue dynamics
Competitive and regulatory environment in Europe does not improve; unable to gain ground against strong incumbents in some markets
For Financial Professional Use Only / Not for Distribution to the Public
Franklin Retirement Payout Funds March 31, 2016
Unlocking Deep Value With Business Catalysts 3
Opportunistic Sector Allocations, Relatively Attractive Valuations Metrics
Our fund’s sector shifts demonstrate our pursuit of the best investment ideas, unconstrained by any reference to an index. Over the past 10 years, the fund decreased consumer staples holdings as valuations rose beyond the levels at which we found them attractive. In an environment where yield is scarce, many investors aimed to generate yield from consumer products and tobacco companies which raised the valuations.
Telecommunication services were attractive in 2009-2010, particularly in Europe as revenues were weak from a poor macro environment. We believed the growth of data services and the attached revenues would offset the declines in voice and texting so the fund’s increased telecommunications holdings reflected our conviction then.
OUTCOMES OF OUR INVESTMENT EXPERTISE
Source: FactSet.
2. The other category consists of municipal bonds and government bonds. Cash holdings are excluded from the active sector positioning chart.The portfolio characteristics listed are based on the Fund’s underlying holdings, and do not necessarily reflect the Fund’s characteristics. Due to data limitations all equity holdings are assumed to be the primary equity issue (usually the ordinary or common shares) of each security’s issuing company. This methodology may cause small differences between the portfolio’s reported characteristics and the portfolio’s actual characteristics. In practice, Franklin Templeton’s portfolio managers invest in the class or type of security which they believe is most appropriate at the time of purchase. Information is historical and may not reflect current or future portfolio characteristics. All portfolio holdings are subject to change.Source: FactSet. Price to Earnings (12-mo Trailing) measures the current price to earnings ratio (P/E) relative to the trailing 12 months of reported earnings. Price to Earnings, Price to Cash Flow and Price to Book Value calculations for the weighted average use harmonic means. Values less than 0.01 (i.e., negative values) are excluded and values in excess of 200x are capped at 200x.. For the benchmark (if applicable), no limits are applied to these ratios in keeping with the benchmark’s calculation methodology. Market capitalization statistics are indicated in the base currency for the portfolio presented.
Source: FactSet.
Fund’s Active Sector Positioning2
As of March 31, 2018
Source: FactSet.
Price to Earnings (12-mo Trailing)As of March 31, 2018
Price to Cash Flow As of March 31, 2018
0
5
10
15
31/03/2008 31/03/2010 31/03/2012 31/03/2014 31/03/2016 31/03/2018
MDISX MSCI World Index
0
10
20
30
31/03/2008 31/03/2010 31/03/2012 31/03/2014 31/03/2016 31/03/2018
MDISX MSCI World Index
0%
20%
40%
60%
80%
100%
12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 3/31/2018
Financials Consumer Discretionary Health Care Information Technology
Energy Consumer Staples Industrials Telecommunication Services
Materials Utilities Other Real Estate
For Financial Professional Use Only / Not for Distribution to the Public
Franklin Retirement Payout Funds March 31, 2016
STRATEGY IN ACTION
Our team strives to identify and unlock business catalysts including corporate restructuring, management change and capital structure.
The investment below illustrates our deep due diligence and how a company transformation led to improved performance.
KONINKLIJKE PHILIPSProvider of Health Technology
1890s-2000s: Poor Execution of Acquisition-Based Expansion
Founded in the 1890s as a filament lamps manufacturer, Koninklijke Philips NV (Philips) expanded over the years into business segments including razors, televisions and compact discs (CDs). By the 2000s, the company’s stock price reflected a “conglomerate discount” owing to its broad range of business lines that offered few synergies and a track record of poor capital allocation. Management had indicated a renewed discipline of capital allocation and then repeatedly made decisions and investments that were value destroying. As a result, the stock continued to trade at a valuation less than the sum of its parts and at a discount to peers, reflecting ongoing investor concern that the company would continue to engage in expensive acquisitions.
2011: Management Change Served as a Potential Catalyst
In 2011, the incumbent CEO retired and was succeeded by Fransvan Houten, a Philips insider with a reputation for leading restructurings. Despite the change in leadership, investors remained skeptical and the company’s stock price continued to reflect an enterprise valuation to sales multiple of 0.8x and a 3% dividend yield.
2014-2016: Company Transformation Led to Improved Performance
After van Houten took the helm, our team continued to monitor the company, searching for a point when we felt that management’s actions would reflect their rhetoric and when the upside potential outweighed the downside risk. We identified that point in 2014 after the company more clearly outlined its plans to focus the company on health care technology – a higher growth, higher margin business.
The catalysts that we envisioned would not only lead to Philips’ transformation but also potential drivers to increase the stock price. We believed the stock price should appreciate as the company improved margins in their core health care business to peer levels. As investors recognized Philips as a health technology company rather than an industrial conglomerate, the valuation multiples increased. From a downside risk perspective, we were attracted to the company’s “safe balance sheet,” which we projected to be net debt free, and a 7% free cash flow yield.
In 2016, Philips posted 3% consolidated revenue growth, which was boosted to estimates of 4-6% for 2017 with the bulk of the revenues coming from health technology. The company began to post strong results in 2017, meeting the 4% revenue growth targets despite uncertainty on pending health care legislation in the US and a temporary pullback in spending by the Veteran’s Administration (VA), one of their key customers.
2018: Bright Future Ahead
To further solidify the transition, the company will continue making acquisitions to boost the health tech business and has entered into a range of strategic partnerships where Philips’ products are part of a broader solution. We continue to monitor the company’s transition and investors’ understanding of it as a health technology company. While the bulk of the business transition has occurred and margin improvement came through in 2017, the shares continue trade at a discount to healthcare peers. Through consistent execution on both their margin improvement plans and on integrating acquisitions, we believe this gap should narrow.
Unlocking Deep Value With Business Catalysts 4
The portfolio held 2.09% of total net assets in Koninklijke Philips NV as of March 31, 2018. This is not a complete analysis of every material fact regarding an industry or security. The actions taken with respect to this stock, and its performance, may not represent other advice or investments of the Franklin Templeton Investments. It should not be assumed that any securities transactions were or will be profitable. The analysis and opinions of the security discussed herein may change at any time. There is no assurance that any security purchased will remain in the fund’s portfolio, or that any security sold will not be repurchased. Factual statements are from sources deemed reliable, but have not been independently verified for completeness or accuracy. These opinions may not be relied upon as investment advice orrecommendations or an offer for a particular security or as an indication of trading intent for any Franklin Templeton fund.
For Financial Professional Use Only / Not for Distribution to the Public
Franklin Retirement Payout Funds March 31, 2016
0.00%
1.00%
2.00%
MicrosoftCorporation
Medtronic Check PointSoftware
Technologies
JPMorganChase
SamsungElectronics
Apple Relx StrykerCorporation
CignaCorporation
ING Groep NV
Fund
/Inde
x W
eigh
t
Average Fund Weight Average Index Weight
Distinctly Different than the Benchmark
The value of active management is illustrated by the fund's top ten contributors to performance. For the five-year period, nine of the fund’s positions were overweight compared to its benchmark index. Each of the top 10 detractors represented less than 1% of the fund’s holdings, with the majority representing 0.25% of the fund’s holdings.
Unlocking Deep Value With Business Catalysts 5
ACTIVE INVESTMENT SELECTION
Top 10 Performance Contributors By Average Fund WeightMDISX vs MSCI World Index5-Year Period Ended March 31, 2018
Bottom 10 Performance Detractors By Average Fund Weight MDISX vs MSCI World Index5-Year Period Ended March 31, 2018
Performance data represents past performance, which does not guarantee future results. Current performance may differ from figures shown. The Fund’s investment return and principal value will change with market conditions, and investors may have a gain or a loss when they sell their shares. Please call Franklin Templeton Investments at (800) DIAL BEN/(800) 342-5236 or visit franklintempleton.com for the most recent month-end performance.
Holdings of the same issuer have been combined. Information is historical and may not reflect current or future portfolio characteristics. All portfolio holdings are subject to change.Source: FactSet. Data is calculated as a percentage of total including cash and cash equivalents but excluding fixed income. 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.
0.00%
0.25%
0.50%
0.75%
1.00%
ApacheCorporation
CommerzbankAG
General ElectricCompany
Avon Products Transocean Macy's Tesco JP Morgan Rite AidCorporation
WhitingPetroleum
Corporation
Fund
/Inde
x W
eigh
t
Average Fund Weight Average Index Weight
Average Weight in Fund 0.79% 0.33% 0.26% 0.23% 0.21% 0.17% 0.17% 0.15% 0.13% 0.06%
Average Weight in Index 0.07% 0.04% 0.77% 0.01% 0.00% 0.05% 0.09% 0.00% 0.01% 0.01%
Fund – Total Return -44.58% -52.42% -49.72% -80.37% -57.48% -45.21% -48.25% -99.00% -78.76% -73.58%
Average Weight in Fund 1.97% 1.89% 1.33% 1.17% 1.06% 1.00% 1.00% 0.99% 0.65% 0.59%
Average Weight in Index 1.18% 0.27% 0.01% 0.76% 0.00% 1.89% 0.06% 0.10% 0.10% 0.16%
Fund – Total Return 262.89% 90.20% 111.41% 164.07% 116.96% 98.81% 123.26% 164.70% 113.50% 178.09%
For Financial Professional Use Only / Not for Distribution to the Public
Franklin Retirement Payout Funds March 31, 2016
RISK AND REWARD
Track Record of Long-Term Outperformance, Relatively Lower Volatility
The fund seeks to offer investors an attractive balance of upside return with less downside. The fund posted a competitive track record, with MDISX outperforming its benchmark index and category average over the 10-year period. When viewed as a 5-year rolling annualized return, the fund outperformed stocks in global developed markets, as measured by the MSCI World Index, 74% of the time.
MDISX generated a down capture ratio of 90% and 64% for the for the 5-year and 10-year periods, and an up/down capture ratio >1.0 for the 10-year period.
A lower downside capture indicates the fund captured a lower proportion of the losses during periods of negative returns of the benchmark. Effective risk management led to lower volatility compared to the global stock index and peer group.
Unlocking Deep Value With Business Catalysts 6
Total Annual Operating Expenses —0.99%Performance data represents past performance, which does not guarantee future results. Current performance may differ from figures shown. The Fund’s investment return and principal value will change with market conditions, and investors may have a gain or a loss when they sell their shares. Please call Franklin Templeton Investments at (800) DIAL BEN/(800) 342-5236 or visit franklintempleton.com for the most recent month-end performance. Class Z shares are only offered to certain eligible investors as stated in the prospectus. They are offered without sales charges or Rule 12b-1 fees. The fund offers other share classes subject to different fees and expenses, which will affect their performance. Please see the prospectus for details. Returns shown are a restatement of the original class to include both the Rule 12b-1 expenses and the current sales charges applicable to each share class.
Source: Morningstar and MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted. This report is not prepared or endorsed by MSCI. Performance data represents past performance, which does not guarantee future results.
Upside Capture (%)
Downside Capture (%)
Overall Capture Ratio (%)
Average Annual Total Returns (%)
5 Year 10 Year 5 Year 10 Year 5 Year 10 Year 1 Year 3 Year 5 Year 10 Year 20 Year
MDISX 81.05 71.28 90.45 63.71 0.90 1.12 2.36 4.15 7.35 6.23 8.27
MSCI World Index 100.00 100.00 100.00 100.00 1.00 1.00 14.20 8.58 10.32 6.51 5.76
US Fund World Large Stock 93.12 96.03 98.55 99.88 0.94 0.96 15.06 7.71 9.01 5.51 5.53
Performance Returns and Key Risk Stats Periods Ending March 31, 2018
-10
0
10
20
-10 0 10 20
MD
ISX
(%)
MSCI World Index (%)
0%
5%
10%
15%
20%
25%
1997 2002 2007 2012 2017
MDISX MSCI World Index
5-Year Rolling Returns: Fund vs. BenchmarkOutperformed the Benchmark 73% of the TimeDecember 31, 1992 to March 31, 2018
5-Year Rolling Standard Deviation: Fund vs. BenchmarkDecember 31, 1992 to March 31, 2018
For Financial Professional Use Only / Not for Distribution to the Public
Franklin Retirement Payout Funds March 31, 2016
ALLOCATING TO GLOBAL EQUITY
Relatively lower volatility with MDISX
To illustrate how our fund (MDISX) may benefit your clients’ portfolios, we created a 60% equity/40% fixed income hypothetical portfolio, where the initial portfolio had a 15% global equity allocation, represented by the MSCI World Index.
In portfolio 2, we replace 10% of the global equity allocation with a 10% allocation to MDISX. In portfolio 3, we replace the full global equity allocation with 15% our fund.
The portfolios demonstrate a lower standard deviation with the allocation to MDISX. Looking at the three-year period, the standard deviation decreased from 6.60% to 6.37%, moving from portfolio 1 to portfolio 3, respectively. Returns moved from 6.70% to 6.04%, between portfolio 1 to portfolio 3.
Figure 1: Hypothetical 3-Year AllocationAs of March 31, 2018
Portfolios with MDISX showed lower volatility in both three-and five-year periods.
8
Asset Class Portfolio 1 Portfolio 2 Portfolio 3
Fixed Income
High Yield Corporate Bonds 5.0% 5.0% 5.0%
US 30.0% 30.0% 30.0%
US TIPS 5.0% 5.0% 5.0%
Equity
US 30.0% 30.0% 30.0%
US Small Cap 5.0% 5.0% 5.0%
Emerging Markets 10.0% 10.0% 10.0%
Global 15.0% 5.0% 0.0%
MDISX 0.0% 10.0% 15.0%
Figure 2: Hypothetical 5-Year AllocationAs of March 31, 2018
Performance data represents past performance, which does not guarantee future results. Source: FactSet. All data as March 31, 2018. Fund data is based Franklin Mutual Global Discovery Fund class Z shares (MDISX). 3. For the fixed income allocations, high yield corporate bonds are represented by the Bloomberg Barclays High Yield Corporate Index, US fixed income is represented by the Bloomberg Barclays US Aggregate Index, and US TIPS are represented by the Bloomberg Barclays US Treasury TIPS 0-5 Year Index. For the equity allocations, emerging markets equity is represented by the MSCI Emerging Markets Index, global equity is represented by the MSCI World, U.S. equity is represented by the S&P 500 Index and U.S. small cap equity is represented by the Russell 2000 Index. All hypothetical portfolios are rebalanced monthly with the reinvestment of all dividends and capital gains.Each asset class is represented by an index with the longest performance history within that asset class. If these hypothetical portfolios included other indexes and/or asset classes not shown here, they may have provided outcomes more or less favorable than those shown within these illustrations. This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel. Any investment products or services named herein are for illustrative purposes only, and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. As a financial professional, only you can provide your customers with personalized advice and investment recommendations tailored to their specific goals, individual situation, and risk tolerance.Franklin Templeton does not provide legal or tax advice. Federal and state laws and regulations are complex and subject to change, which can materially impact results. FTDI cannot guarantee that such information is accurate, complete or timely; and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.
Hypothetical Portfolios (60% Equity/ 40% Fixed Income)3
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
5.5% 5.8% 6.0% 6.3% 6.5% 6.8% 7.0%
Portfolio 3with 15% MDISX
Portfolio 2 with 10% MDISX
Portfolio 1
Standard Deviation
Ann
ualiz
ed R
etur
n
7.0%
7.2%
7.4%
7.6%
7.8%
8.0%
5.5% 5.7% 5.9% 6.1% 6.3% 6.5%
Portfolio 1
Ann
ualiz
ed R
etur
n
Standard Deviation
Portfolio 2 with 10% MDISX
Portfolio 3with 15% MDISX
For Financial Professional Use Only / Not for Distribution to the Public
Franklin Retirement Payout Funds March 31, 2016
FRANKLIN MUTUAL GLOBAL DISCOVERY TEAM
Local Knowledge, Global Reach
Based in Short Hills, New Jersey, the portfolio management team brings together value expertise and distressed debt investing supported by their degrees in law, accounting, political science and economics. The portfolio management team works with a dedicated team of nine traders covering equity, debt, currency and merger arbitrage. The close alignment between the investment team and trading team provides effective execution of the portfolio strategy.
Our global reach through Franklin Templeton Investments provides access to sophisticated risk management and trading resources. Portfolio management collaborates with the Performance Analysis and Investment Risk Group, which regularly examines risk analytics to help identify and address areas of excessive risk exposure within our portfolios.
Peter LangermanCo-Portfolio Manager
Tim Rankin, CFACo-Portfolio Manager
Philippe Brugère-TrélatCo-Portfolio Manager
Unlocking Deep Value With Business Catalysts 9
36Portfolio Managers & Research Analysts
21Years on average ofindustry experience
14Years on average with Templeton
The Franklin U.S. Value team, comprised of 9 investment professionals responsible for the management of Franklin U.S. Small Cap Value, Franklin U.S. Micro Cap and Franklin Balance Sheet funds, was integrated into the Franklin Mutual Series team and included in counts above.
We look where investors are
discouraged because there’s
often overlooked opportunities.
We search for undervalued
companies poised to benefit from
increased market recognition and
internal catalysts.”
— Peter Langerman
“
Franklin Retirement Payout Funds March 31, 2016
This page intentionally left blank.
Franklin Retirement Payout Funds March 31, 2016
This page intentionally left blank.
MGD B 0318
Franklin Templeton Distributors, Inc.One Franklin ParkwaySan Mateo, CA 94403-1906(800) DIAL BEN® / 342-5236franklintempleton.com
For Financial Professional Use Only / Not For Distribution to the Public.© 2017 Franklin Templeton Investments. All rights reserved.
WHAT ARE THE RISKS
All investments involve risks, including possible loss of principal. Value securities may not increase in price as anticipated or may decline further in value. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Because the Fund may invest its assets in companies in a specific region, including Europe, it is subject to greater risks ofadverse developments in that region and/or the surrounding regions than a fund that is more broadly diversified geographically. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in companies in Europe. Smaller-company stocks have exhibited greater price volatility than larger-company stocks, particularly over the short term. The fund’s investments in companies engaged in mergers, reorganizations or liquidations also involve special risks as pending deals may not be completed on time or on favorable terms. The fund may invest in lower-rated bonds, which entail higher credit risk. Please consult the prospectus for a more detailed description of the fund’s risks.
CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute
Your clients should carefully consider a fund's investment goals, risks, charges and expenses before investing. They should read the summary prospectus and/or prospectus carefully before they invest or send money. To obtain a prospectus, which contains this and other information, please call Franklin Templeton Investments at (800) DIAL BEN/(800) 342-5236.