Notification of changes to the underlying funds of various Franklin Templeton funds

26 May 2022

L39 Franklin Biotechnology Discovery

R97 Templeton Asian Bond

L13 Templeton Emerging Markets Bond

We have received notification from the Board of Directors of Franklin Templeton Investment Funds (the “Company”) of the following upcoming changes to the underlying funds of the above Affected Mirror Funds. These changes will take effect from 24 June 2022 (the “Effective Date”). 

The Company believes there will be no material impact on the way the underlying funds are managed, their portfolio composition, risk profile or synthetic risk reward indicator, nor on the fees charged, as a result of these changes.

The Company has advised that it will be updating the investment policies of the underlying funds, as detailed in the Appendix document opposite. The underlying funds will be reclassified from Article 6 to Article 8 of the Sustainable Finance Disclosure Regulation in order to better reflect the Environmental, Social and Governance (“ESG”) methodology applied to the underlying funds. 

The below bullet points summarise how these changes will work in practice. 

• Employing a proprietary ESG rating to assess each country that issues sovereign bonds that are existing or potential investments for the fund(s). This methodology captures a country’s current ESG score based on a variety of sub-categories but more importantly any expected improvement or deterioration in the country’s ESG practices.
• The investment manager scores each country that issues sovereign debt that may be potential investments for the fund on a scale of 0-100 (100 being the highest).
• For corporate issuers, the Fund utilises ESG ratings according to an external provider.
• The weighted average base ESG score of the sovereign and corporate issuers in the Fund’s portfolio is higher than the average base ESG score of the Fund’s respective investment universe.

As a consequence, Sustainability Risk will be added to the risk considerations of the underlying funds, and the investor profile sub-section of the underlying funds will be updated accordingly, as per the notes at the end of the Appendix.

In addition, the investment policy of the Franklin Biotechnology Discovery Fund will be further amended to enable the investment manager to invest in securities issued by private companies and private investments in public equity and also in special purpose acquisition companies. In this respect, there are additional risk considerations for investing in this security. Please refer to the updated prospectus of the underlying fund for further details.

A full breakdown of the changes can be found in the Appendix document opposite, as well as the Notification from Franklin Templeton Investment Funds.

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Should you have any questions regarding these changes, please contact the Investment Marketing Team.