FOR PROFESSIONAL INVESTORS ONLY
Franklin Templeton Global Bond Plus
PRODUCT PROFILE
FOURTH QUARTER 2012
STRATEGY OVERVIEW
• High alpha-seeking global strategy that uses a research-driven, value-based approach that seeks to capitalise on
global interest rates, currency and sovereign credit trends. Primary focus includes government and governmentrelated issuance with a 25% maximum limit on below-investment grade.
• Tracking Error: 300–600* basis points (annualised, gross of fees)
• Alpha: 300–600* basis points (annualised, gross of fees)
PERFORMANCE DATA** (AS OF 31/12/12)
Average Annual Total Returns (USD%)
3 Years
5 Years
10 Years
Franklin Templeton Global Bond Plus Composite—Gross of Fees
Quarter
4.1
17.2
9.5
11.2
11.9
Franklin Templeton Global Bond Plus Composite—Net of Fees
4.0
16.7
8.6
10.2
10.7
JP Morgan Global Government Bond Index
-1.8
1.3
4.9
5.7
6.2
17.2
20
10
4.1
9.5
1.3
-1.8
1 Year
11.2
4.9
11.9
5.7
6.2
0
-10
Quarter
1 Year
3 Years
5 Years
Franklin Templeton Global Bond Plus Composite—Gross of Fees JP Morgan Global Government Bond Index
10 Years
Calendar Year Returns (%)
24
8
17.2
1.3
-1.5
7.2
13.7
20.2
6.4
1.9
7.9
12.0
12.3 10.8
15.7
14.8
5.9
23.6
10.1
14.5
-2.3 -6.5
-8
2012
2011
2010
2009
2008
Franklin Templeton Global Bond Plus Composite—Gross of Fees
2007
2006
2005
2004
JP Morgan Global Government Bond Index
2003
QUARTERLY MARKET REVIEW
• During the fourth quarter, negotiations over the so-called “fiscal cliff” did not show signs of concluding in a grand
fiscal bargain to address long-term fiscal problems in the United States.
• Overall, financial markets remained fairly stable in the fourth quarter as investor concerns regarding Europe eased.
While European economic activity continued to stagnate, we believe investors have become increasingly aware
that a challenging growth environment in the eurozone is not likely to automatically lead the monetary union to
break apart.
• In China, evidence continued to affirm our view that the country has not been facing a “hard landing.” Many highfrequency indicators saw consecutive months of improvement during the fourth quarter.
QUARTERLY PERFORMANCE ATTRIBUTION1
• The strategy’s overall currency exposures contributed to absolute performance for the quarter. Exposure to
currencies in Asia ex-Japan contributed to absolute performance. The strategy’s net-negative exposure to the
Japanese yen also added to absolute results. The strategy’s exposures to peripheral European currencies against the
euro detracted from absolute performance over the quarter.
• Interest-rate exposures, particularly in Europe, contributed to the strategy’s absolute performance for the quarter.
The strategy’s sovereign credit exposures also added to absolute results.
INVESTMENT OUTLOOK AND STRATEGY
• As central banks in several developed countries continue to print money and follow unorthodox monetary policies,
the long-term consequences remain uncertain.
• We believe that, ultimately, much of the excess liquidity being created is likely to seek more attractive
opportunities globally, raising inflationary risks in many emerging markets and putting upward pressure on
currencies as well as many commodity prices.
• We have continued to seek to position ourselves to manage the interest-rate risks that we expect from the
combination of historically low interest rates and easy monetary policy among the largest developed economies,
rising price pressures emanating from China, and global demand that we believe is far from collapsing.
*There is no assurance that the strategy will achieve its investment objectives. The strategy is managed in a benchmark unconstrained manner, so
the expected risk and return profile is provided solely to illustrate the manager’s expectations with respect to strategy characteristics, based on the
strategy’s historical experience during normal market conditions. Past performance does not guarantee future results. Thus, the characteristics
do not take into account future market risks or changing economic conditions and are not a prediction or guarantee of future
performance. An investor in the strategy may experience significantly different risk and return characteristics including greater volatility, higher
tracking error and lower returns than the expected characteristics, including the potential for loss of principal amounts invested. Risk and return
characteristics do not take into account management fees or other expenses an investor would incur in the management of its account, which
would reduce any returns and affect the risk characteristic measurements.
**Periods of more than one year are annualised.
Franklin Templeton Global Bond Plus
Information is supplemental to the Historical Performance
PORTFOLIO CHARACTERISTICS OF A REPRESENTATIVE ACCOUNT1 (AS OF 31/12/12)
Franklin Templeton Global Bond Plus
JP Morgan Global Government Bond Index
Yield to Maturity
3.8%
1.2%
Average Duration
1.6 years
6.8 years
A-
A
Average Credit Quality*
PORTFOLIO DIVERSIFICATION (%) OF A REPRESENTATIVE ACCOUNT (AS OF 31/12/12)
Credit Rating Breakdown1,2
30%
15%
22.2
16.8
14.5
16.2
6.5
0%
AAA
0.9
0.1
AA+
AA
1.2
AA-
A+
3.9
1.0
A
A-
BBB+
Geographic Weightings1,2
EUROPE/AFRICA
NON-EMU EUROPE/AFRICA
Poland
Hungary
Ukraine
Sweden
Norway
Lithuania
Russia
Israel
Republic of Serbia
Iceland
Denmark
United Kingdom
EMU
Ireland
Slovenia
Belgium
France
Germany
Italy
Netherlands
Spain
ASIA
ASIA, NON-JAPAN
South Korea
Malaysia
Australia
Indonesia
Singapore
Philippines
Sri Lanka
Vietnam
JAPAN
AMERICAS
NON-USA AMER.
Mexico
Brazil
Venezuela
Peru
Canada
USA
United States
SUPRANATIONAL
ST CASH AND CASH EQUIVALENTS
8.6
BBB
BBB-
BB+
0.6
1.8
BB-
B+
4.5
1.3
0.0
B
B-
NR**
Over/Under vs. JP Morgan Global Government Bond Index1,2
39.6
30.1
10.7
6.2
3.8
3.8
1.3
1.3
1.3
1.0
0.5
0.3
0.0
0.0
9.4
9.2
0.3
0.0
0.0
0.0
0.0
0.0
0.0
34.2
34.2
14.0
8.5
3.9
3.0
2.5
1.0
0.9
0.4
0.0
4.4
2.9
7.9
7.6
0.2
0.1
0.0
0.3
0.3
1.3
0%
8%
17.0
16% 24%
32%
40%
5.6
EUROPE/AFRICA
NON-EMU EUROPE/AFRICA
Poland
Hungary
Ukraine
Sweden
Norway
Lithuania
Russia
Israel
Republic of Serbia
Iceland
Denmark
United Kingdom
EMU
Ireland
Slovenia
Belgium
France
Germany
Italy
Netherlands
Spain
ASIA
ASIA, NON-JAPAN
South Korea
Malaysia
Australia
Indonesia
Singapore
Philippines
Sri Lanka
Vietnam
JAPAN
AMERICAS
NON-USA AMER.
Mexico
Brazil
Venezuela
Peru
Canada
USA
United States
SUPRANATIONAL
ST CASH AND CASH EQUIVALENTS
10.7
6.2
3.8
3.3
1.3
1.3
1.3
1.0
0.5
0.3
-0.6
-7.3
-16.2
9.2
0.3
-1.8
-6.8
-5.9
-6.2
-1.9
-3.0
4.8
8.5
2.9
3.0
2.5
1.0
0.9
0.4
-28.4
-28.7
5.9
4.4
2.9
0.2
0.1
-1.7
-34.6
-34.6
1.3
-35%
-21%
-7%
7%
21.9
33.1
14.0
17.0
21%
35%
*Source: Franklin Templeton Investments. The average credit quality (ACQ) rating may change over time. The portfolio itself has not been rated by an independent rating agency. The letter
rating, which may be based on bond ratings from different agencies, is provided to indicate the average credit rating of the portfolio’s underlying bonds and generally ranges from AAA (highest)
to D (lowest). The ACQ is determined by assigning a sequential integer to all credit ratings AAA to D, taking a simple, asset-weighted average of debt holdings by market value and rounding to
the nearest rating. The risk of default increases as a bond’s rating decreases, so the ACQ provided is not a statistical measurement of the portfolio’s default risk because a simple, weighted
average does not measure the increasing level of risk from lower rated bonds. The ACQ is provided for informational purposes only. Derivative positions and unrated securities are not reflected
in the ACQ.
**Includes securities that are not rated and securities not covered by a ratings agency. The N/A category may encompass negative cash, net currency forwards, and negative derivative
(market value).
FRANKLIN TEMPLETON INVESTMENTS
Information is supplemental to the Historical Performance
PORTFOLIO DIVERSIFICATION (%) OF A REPRESENTATIVE ACCOUNT (CONTINUED)
Currency Weightings1,2
Over/Under vs. JP Morgan Global Government Bond Index1,2
AMERICAS
US DOLLAR
NON-USA AMER.
8.2
Peru Nuevo Sol
ASIA
ASIA, NON-JAPAN
50.9
15.7
4.6
3.0
2.8
2.2
Sri Lanka Rupee
JAPANESE YEN
EUROPE/AFRICA
-11.5
-3.9
0.9
PERIPHERY EUROPE/E. EUROPE
Polish Zloty
11.2
3.0
Norwegian Krone
Israeli Shekel
Danish Krone
1.9
1.0
0.0
-33%
Australian Dollar
Indonesian Rupiah
3.0
Indian Rupee
Philippine Peso
Sri Lanka Rupee
2.8
2.2
0.9
JAPANESE YEN
-39.9
-37.9
19.9
11.2
10.7
3.0
1.9
Norwegian Krone
Israeli Shekel
1.0
-0.6
Danish Krone
British Pound
0.0
-32.2
-13%
13.4
8.3
3.6
Swedish Krona
Hungarian Forint
11.2
British Pound
EURO
49.9
15.7
EUROPE/AFRICA
PERIPHERY EUROPE/E. EUROPE
Polish Zloty
28.2
Swedish Krona
Hungarian Forint
10.0
Malaysian Ringgit
Singapore Dollar
13.4
8.3
Indian Rupee
Philippine Peso
-1.7
ASIA
ASIA, NON-JAPAN
South Korean Won
39.4
Australian Dollar
Indonesian Rupiah
3.8
2.9
0.1
Peru Nuevo Sol
Canadian Dollar
0.1
0.0
South Korean Won
Malaysian Ringgit
Singapore Dollar
13.3
8.2
Chilean Peso
Brazilian Real
3.8
2.9
Canadian Dollar
14.6
US DOLLAR
NON-USA AMER.
Mexican Peso
49.5
15.0
Mexican Peso
Chilean Peso
Brazilian Real
27.9
AMERICAS
64.6
-7.3
-57.8
EURO
7%
27%
47%
-58%
67%
-36%
-14%
8%
30%
52%
SUPPLEMENTAL PERFORMANCE STATISTICS* (AS OF 31/12/12)
10 Years
5 Years
3 Years
11.9
11.2
9.5
6.2
5.7
4.9
Annualised Performance (USD%)
Franklin Templeton Global Bond Plus
Composite—Gross of Fees
JP Morgan Global Government Bond Index
Tracking Error
vs. JP Morgan Global Government Bond Index
7.5
9.4
Risk and Return Characteristics**
Franklin Templeton Global Bond Plus Composite
vs. Mercer Global Fixed Unhedged Universe
5-Year Period Ending 30 September 2012
13
8.2
9
1.4
10.2
0.7
1
11
5.9
7
1.2
7.9
0.4
1
9
3.6
5
1.0
5.6
0.1
1
7
1.3
2
0.8
3.3
-0.2
0
9.5
Information Ratio3
vs. JP Morgan Global Government Bond Index
0.8
0.6
0.5
Alpha
vs. JP Morgan Global Government Bond Index
-1.0
0
5
6.9
7.9
6.8
Return
Franklin Templeton Global
Bond Plus Composite
-0.5
0
1.0
0.6
Alpha
Reward to
Risk
Tracking
Error
Information
Ratio
JP Morgan Global
Government Bond Index
*Periods of more than one year are annualised.
**Source: Mercer Global Investment Manager Database. As of the quarter ended 30 September 2012. Peer universe data for the most recently completed quarter was not available at the time
this material was printed. The peer universe includes unaffiliated institutional asset managers that manage similar mandates. Universe percentile rankings were calculated using gross of fees
performance.
Past performance does not guarantee future results and results may differ over future time periods.
Franklin Templeton Global Bond Plus
INVESTMENT PHILOSOPHY
We believe that applying our bottom-up, research-driven approach focused on identifying potential sources of high current income worldwide and
seeking to capitalise on global interest rates and currency trends provides the best potential for superior risk-adjusted returns. This is a high alpha-seeking
global strategy that may include allocations to both developed and emerging markets; however, below investment-grade exposure is limited to not more
than 25% of total assets.
INVESTMENT PROCESS AND PORTFOLIO CONSTRUCTION
• In-Depth Macroeconomic Fundamental Research and Analysis: Conduct independent analysis of countries, interest rates, and exchange rates using
proprietary models and research. Research analysts specialise by geographic region and conduct frequent discussions with key local decision makers.
The team’s research drives country weightings in addition to target ranges for duration, currency, and cash.
• Long-Term Focused: Maintain a 12- to 18-month outlook.
• Portfolio Construction: Build diversified portfolios seeking the most attractive risk-return profile utilising yield curve and horizon analysis.
• Disciplined Approach: Adhere to long-term strategy through changing market environments, supported by analysis and monitoring from Franklin’s
internal risk management group.
INTEGRATED RESEARCH APPROACH
The Franklin Templeton Global Fixed Income Team exchanges insight and information with fixed income and equity investment professionals around
the globe.
FRANKLIN TEMPLETON FIXED INCOME GROUP
OVER 100 INVESTMENT PROFESSIONALS
• Mortgages/ABS
• Quantitative
• Emerging Markets/Global Sovereigns
• Local Asset Management
• Global Credit
• Municipals
• Bank Loans
GLOBAL FIXED INCOME TEAM
U.S., UK AND SINGAPORE
• GLOBAL BONDS
• EMERGING MARKETS DEBT
24 Investment Professionals
LOCAL ASSET MANAGEMENT*
BRAZIL, CHINA**, INDIA,
KOREA AND UAE**
FIXED INCOME TEAM
25 Investment Professionals
TEMPLETON GLOBAL EQUITY
RESEARCH TEAM*
37 Investment Professionals
INFORMATION
SHARING
TEMPLETON EMERGING MARKETS
EQUITY RESEARCH TEAM*
53 Investment Professionals
As of 31.12.12.
*These units are affiliates of Franklin Resources, Inc., and are not part of, but do share research with, Franklin Templeton Fixed Income Group, a unit of Franklin.
** Includes individuals that are not employees of Franklin Resources, Inc. (FRI) or wholly owned subsidiaries of FRI. However, these individuals are part of our joint venture or strategic
partnership relationships worldwide and are an integral component of our overall fixed income research efforts.
INVESTMENT TEAM
Franklin Templeton Global Bond Plus Portfolio Management Team
Michael Hasenstab, Ph.D.
Canyon Chan, CFA
Sonal Desai
Additional Resources
Global Sovereign/EMD
Local Asset Management
Product Managers
Elsa G. Goldberg
Susan Wong, CFA
Harry A. Phinney
Years with Firm
14
21
3
Years Experience
18
21
19
Quantitative
Years with Firm
5
7
<1
Years Experience
16
8
6
COMPLIANCE STATEMENT AND OTHER INFORMATION
Franklin claims compliance with the Global Investment Performance Standards (GIPS®).
Franklin (the “firm”) encompasses the equity, fixed income and balanced accounts managed by Franklin Advisers, Inc., and related Franklin affiliates, including, effective 1 January 2007, the
equity accounts managed by the institutional investment teams of Franklin Templeton Institutional, LLC under the former firm name of Fiduciary Global Advisors. The combined equity assets
of Franklin and Fiduciary Global Advisors form the Franklin Equity Group (formerly Franklin Global Advisers prior to 30 June 2010) unit of Franklin. Effective 1 January 2006, the fixed income
assets managed from that date forward by Franklin Templeton Institutional, LLC (“FTI”) or its related affiliates (managed previously by Fiduciary Trust Company International - Institutional
Division or “FTCI’s Institutional Division”) that went through the institutional portfolio review process were combined with the fixed income assets of Franklin to form the Franklin Templeton
Fixed Income unit of Franklin.
Franklin Templeton Global Bond Plus Composite consists of all portfolios managed on a fully discretionary basis with an investment objective that seeks to achieve above average total return
by investing principally in a portfolio of fixed or floating rate debt securities and debt obligations issued by government or government-related entities worldwide. The strategy may also
purchase debt obligations issued by supranational entities organised or supported by several national governments, such as the International Bank for Reconstruction and Development or the
European Investment Bank. The portfolio may invest a portion in below investment grade bonds (rated below BBB-). The portfolio may also utilise financial derivative instruments dealt in either
regulated or over-the-counter markets for investment purposes. These financial derivative instruments which are used on a less frequent basis may include, inter alia, swaps (such as credit
default swaps or total return swaps), forwards and cross forwards, futures contracts (including those on government securities), as well as options. The strategy regularly takes tactical
exposure to various foreign currencies, including through the frequent use of foreign currency forward contracts and cross forwards, and, to a lesser degree, futures contracts and
currency options.
Total returns are presented in U.S. dollars both gross and net of investment advisory fees, are inclusive of commissions and transaction costs, and assume reinvestment of any dividends,
interest income, capital gains, or other earnings. If mutual funds are included in a composite, gross of fee returns are based on the primary share class (typically Class A) and are calculated by
adding 1⁄12 of the funds’ annual expense ratio, which includes management fees and all other fund expenses, to the 12 monthly returns for each fiscal year. Net of fee returns for separate
accounts are net of actual management fees. Returns for periods of less than one year are not annualised. The performance presented for Franklin is in compliance with GIPS® from
1 January 2000 to the present. Past performance does not guarantee future results and results may differ over future time periods.
The JP Morgan Global Government Bond Index is used as a benchmark. The benchmark is used for comparative purposes only and is provided to represent the investment environment
existing during the time periods shown. The JP Morgan Global Government Bond Index is a market value weighted fixed income index comprised of government bonds in developed countries.
Additional information regarding the firm’s policies and procedures for calculating and reporting performance results is available upon request. To receive a complete list and description of
Franklin composites (including any single account mutual fund composite) and/or a presentation that adheres to the GIPS® standards for any composite, contact your Franklin Templeton
representative at +44 (0) 20 7073 8500.
Effective with the third quarter of 2008, composite returns in base currency are translated to other currencies using London FX rates instead of New York rates for all time periods presented,
which may result in revisions to multi-currency returns compared to what was previously reported for prior periods.
CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.
Explanatory Notes
1. Portfolio information is based on a representative account taken from the Franklin Templeton Global Bond Plus Composite. The information is historical, may not reflect current or future
characteristics, and may vary among individual separate accounts depending on a variety of factors such as portfolio size, specific investment guidelines and inception dates of the
individual accounts.
2. Percentages may not equal 100% due to rounding. Credit rating distribution, geographic diversification, over/under information, and currency weightings information is historical and may not
reflect current or future portfolio characteristics.
3. Information ratio is a way to evaluate a manager’s ability to outperform a benchmark in relation to the risk that manager is assuming, with risk defined as deviation from the benchmark. This
measure is calculated by dividing the portfolio’s excess return (portfolio return less the benchmark return) by the tracking error (derived by taking the standard deviation of the monthly
differences between the portfolio return and the benchmark return over time).
Disclaimer:
The descriptions in this document of our investment management service and other matters are general in nature. The information contained in this document is subject to updating,
completion, modification, and amendment. It should not be assumed that the approach described will necessarily be followed in a particular case. Such matters will also be subject to any
specific arrangements with a particular client.
It is the responsibility of every person receiving a copy of this document to satisfy him- or herself as to the full observance of laws of any relevant country, including obtaining any government
or other consent which may be required or observing any other formality which needs to be observed in that country. None of the services or other matters described herein should be taken as
an offer or solicitation of those services or other matters in any jurisdiction where such an offer or solicitation is not permitted under applicable legislation.
This document is issued in the United Kingdom (UK)/Dubai by Franklin Templeton Investment Management Limited (FTIML), The Adelphi, 1-11 John Adam Street, London WC2N 6HT. FTIML
is authorised and regulated by the Financial Services Authority. The Dubai branch of Franklin Templeton Investment Management Limited (FTIML) is regulated by the Dubai Financial Services
Authority. This material is intended for the use of professional investors, institutional investment consultants or eligible counterparties only and is not directed at private individuals or retail
investors and in no way does it constitute investment advice.
© 2013 Franklin Templeton Investments. All rights reserved.
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