Emerging Markets Into the Future T E M P L E T O N

Transcription

1 Emerging Markets Into the Future

2 Franklin Resources Inc

3 3 Templeton Emerging Markets Franklin Resources Inc. Headquarters San Mateo, California, U.S.A Number of employees 8,328 (as of 02/28/07) Global offices We have offices in 29 countries (as of 02/28/07) Assets Under Management (AUM) $564.7 billion (as of 02/28/07) Year Subsidiaries Founded Franklin Templeton Mutual Series Bissett Fiduciary Trust Darby

4 Franklin Resources : AUM* 600 (US$bn)) In October 1992, Franklin completed the acquisition of Templeton, Galbraith & Hansberger Ltd * Source: Templeton * Calendar Year End (Dec), for 2006, it s November 2006 AUM 4

5 Templeton Emerging Markets Group

6 6 Templeton Emerging Markets Templeton Emerging Markets Research Offices Dubai Ahmed, Awny 13 Offices 34 Portfolio Managers and Analysts 56 Professionals 20 Nationalities 19 Languages Emerging Markets Research Offices RIO DE JANEIRO Gustavo Stenzel, CFA Marcos Mundim, CFA BUENOS AIRES Claus Born, CFA Santiago Petri JOHANNESBURG Sven Richter Johan Meyer WARSAW Grzegorz Konieczny Krzysztof Musialik VIENNA Matjaz Schroll MOSCOW Roman Filatov, CFA Yuri Mashintsev Gennady Zhilyaev ISTANBUL Carlos Graf von Hardenberg Erman Kalkandelen MUMBAI Chetan Sehgal, CFA Rajesh Sehgal, CFA Vikas Chiranewal, CFA SINGAPORE Dennis Lim Tek Khoan Ong, CFA Thomas Lanyi, Ph.D., CFA Richard Piliero Templeton s competitive advantage: Global resources supporting seasoned local teams to identify opportunities and execute transactions. SHANGHAI Chris Liu, CFA Jim Zhang HONG KONG Mark Mobius, Ph.D. Eddie Chow, CFA Allan Lam, CPA Tom W. K. Wu Eric Mok, CFA Jordan Pong, CFA Claudius Tsang, CFA Victor Lee, ACCA SEOUL Steve Chae Jay Choi, CFA

7 7 Templeton Emerging Markets Templeton s Investment Philosophy OUR PHILOSOPHY -VALUE - PATIENCE -BOTTOM-UP

8 8 Templeton Emerging Markets A Team Approach A DEEP AND EXPERIENCED TEAM RIGOROUS AND CONSISTENT INVESTMENT PROCESS PEER REVIEW DISCUSSIONS *As of September 30, 2006.

9 9 Templeton Emerging Markets Templeton s Investment Process Evaluation and Portfolio Maintenance Construct Portfolio Ongoing Valuation Analysis Disciplined Sell Methodology Weekly Peer Review and Risk Analytics Investment Guidelines Allocation Model Diversified Portfolio Continual Review Process Review Team Evaluation In-Depth Fundamental Analysis Identify Potential Bargains Scrutinize and Approve by Review Team Action List Inclusion Quantitative Analysis Qualitative Analysis Sector and Country Input Initial Screening Global Contacts Master List

10 Performance

11 Emerging Markets Index 01-JAN APR-2007 (INDEX) MSCI EM (Emerging Markets) - Price with Gross Dividends - Daily Official - USD (Index) 1, /88 12/89 11/91 10/93 09/95 08/97 07/99 06/01 06/03 05/05 04/07 Source: MSCI 11

12 Emerging Markets Vs U.S. Index 01-JAN APR-2007 (INDEX) MSCI EM (Emerging Markets) - Price with Gross Dividends - Daily Official - USD (Index) (INDEX) MSCI USA - Price with Gross Dividends - Daily Official - USD (Index) 1, Average Annualized Returns : MSCI Emerging Markets : 15.1% Average Annualized Returns : MSCI U.S. : 12.1% /88 12/89 11/91 10/93 09/95 08/97 07/99 06/01 06/03 05/05 04/07 Source: MSCI 12

13 Indices : Performances as of April 6 th, 2007 MSCI Index Change From High Date of High Emerging Markets 0% 04/07 India -10% 02/07 Pakistan -5% 04/06 Argentina -4% 02/07 China -3% 01/07 Taiw an -3% 01/07 Russia -3% 01/07 Chile -3% 02/07 Egypt -2% 02/07 Hong Kong -2% 01/07 Turkey -2% 04/06 Indonesia -2% 04/07 Mexico 0% 04/07 Hungary 0% 04/07 Malaysia 0% 04/07 Brazil 0% 04/07 South Africa 0% 04/07 Poland 0% 04/07 Singapore 0% 04/07 Source: Factset Note: The MSCI All Country World Index, the primary benchmark for this composite, is an equity index calculated by Morgan Stanley Capital International (MSCI). The index measures the total return (gross dividends are reinvested) of equity securities available to foreign (nonlocal) investors in the developed and emerging markets globally. Securities included in the index are weighted according to their Free Float adjusted market capitalization (Price*Shares outstanding*foreign Inclusion Factor). 13

14 Currencies : Performances as of April 6 th, 2007 NAME Change From High Date of High Turkish New Lira -90% 04/97 Russian Rouble -78% 04/97 Indonesian Rupiah -74% 04/97 Argentine Peso -68% 12/01 Colom bian Peso -52% 04/97 Brazilian Real -48% 04/97 Egyptian Pound -40% 05/97 South African Rand -38% 04/97 Pakistan Rupee -34% 04/97 Thailand Baht -32% 06/97 Mexican Peso -30% 10/97 Malaysian Ringgit -28% 05/97 Chilean Peso -23% 10/97 Indian Rupee -17% 07/97 Taiw an Dollar -17% 04/97 Singapore Dollar -6% 06/97 South Korean Won -5% 07/97 Hungarian Forint -2% 04/97 Hong Kong Dollar -1% 10/03 Czech Koruna 0% 01/07 Polish Zloty 0% 04/07 China Renminbi Source: Factset 0% 04/07 14

15 Commodities : Performances as of April 6 th, 2007 Source: Factset NAME Change From High Date of High PALLADIUM -68% 04/03 NATURAL GAS -60% 12/98 SOYABEANS -28% 07/99 GASOLINE -28% 02/99 ZINC -26% 08/02 WOOL -24% 10/98 CORN -19% 10/05 COCOA -18% 12/00 RUBBER -18% 01/02 COFFEE -17% 06/06 COPPER -15% 11/01 ALUMINIUM -14% 03/99 COAL -11% 05/03 BRENT CRUDE OIL -9% 12/98 SILVER -9% 11/01 PLATINUM -8% 10/98 Soya Oil -7% 11/00 GOLD -6% 08/99 NAPTHA -4% 05/03 TIN -3% 09/01 NICKEL 0% 12/98 15

16 MSCI Emerging Markets Index 01-JAN APR-2007 MSCI EM (Emerging Markets) - - Price with Gross Dividends - Daily Official - USD (Index) 2006 Fall : -24% 1 Month 1, Gulf War -29% 4 months Mexican Crisis :-24% 5 Months Asia Financial Crisis : -56% 13 Months TMT Bubble Burst : -49% 17 Months Accounting Scandal :-29% 5 Months Madrid Train Bombing -20% 1 Month UP : 44% Log Scale UP : 251.4% 47 Months UP : 38% 28 Months UP : 114% 18 Months UP : 50% 7 Months UP : 116% 18 Months UP : 136% 24 Months /88 01/90 01/92 01/94 01/96 01/98 01/00 01/02 01/04 01/06 Source: Factset UP : 181% 31 Months Declines of over 20% are indicated 16

17 Emerging Markets : Bear / Bull Markets Dates % Increase # of Months Dates % Decline # of Months Bull 01/88-08/90 181% 31 Bear 08/90-12/90-29% 4 Bull 12/90-11/94 251% 47 Bear 11/94-04/95-24% 5 Bull 04/95-08/97 38% 28 Bear 08/97-09/98-56% 13 Bull 09/98-04/00 114% 19 Bear 04/00-10/01-49% 17 Bull 10/01-05/02 50% 7 Bear 05/02-10/02-29% 5 Bull 10/02-04/04 116% 18 Bear 04/04-05/04-20% 1 Bull 05/04-05/06 136% 24 Bear 05/06-06/06-24% 1 Bull 06/06-44% Average 116% 25-33% 7 Source: Factset * Based on 20% changes 17

18 Emerging Markets Statistics

19 Emerging Markets Statistics : Market Capitalization January 2007 US$ Billion 0 5,000 10,000 15,000 20,000 25,000 United States Japan UK China Russ ia India South Korea Brazil South Africa Taiwan Hong Kong Mexico Singapore Malaysia Israel Turkey Chile Poland Thailand Indonesia Egypt Argentina Philippines Peru Colombia Pakistan Czech Republic Hungary Venezuela Source : S&P/IFC; FIBV; EIU; Various Stock Exchanges 4,614 3,794 2,610 1, ,286 Market Cap (US$ Bn) Developed * Market Cap for Hong Kong excludes red chips & H shares, as they account for about 50% of the total number. For Singapore s market cap, it excludes foreign listing as it accounts for about 30% 19

20 Emerging Markets Statistics : Daily Trading Value January 2007 US$ Million 0 20,000 40,000 60,000 80, , , , , ,000 United States UK Japan China Taiwan South Korea India Hong Kong Russia Singapore Brazil South Africa Turkey Israel Mexico Malaysia Pakistan Thailand Poland Indonesia Hungary Egypt Chile Czech Philippines Colombia Peru Argentina Venezuela Source : S&P/IFC; FIBV; EIU; Various Stock Exchanges 4,713 4,623 2,894 2,427 2,193 1,398 1,333 1, ,689 31,426 19,663 Daily Trading Value (US$ Mn) Developed Trading value for Hong Kong excludes red chips & H shares, as they account for about 50% of the total number. For Singapore s trading value is not excluded as breakdown is not available. 166,572 20

21 Emerging Markets Statistics : # of Listed Companies January 2007 # of Companies 0 1,000 2,000 3,000 4,000 5,000 6,000 United States India UK Japan South Korea China South Africa Taiwan Hong Kong Malaysia Singapore Pakistan Israel Egypt Thailand Brazil Indonesia Turkey Russia Poland Chile Philippines Peru Mexico Colombia Argentina Venezuela Hungary Czech Republic Source : S&P/IFC; FIBV; EIU; Various Stock Exchanges 1,704 1,451 1,222 1,222 1,172 1, ,416 3,236 Emerging Markets 4,796 # of Companies for Hong Kong excludes red chips & H shares, as they account for about 50% of the total number. For Singapore, # of listed companies also excludes foreign listing as it accounts for 35% of the total # of companies 5,355 Developed 21

22 Emerging Markets Statistics : Market Capitalization % of GDP January 2007 % 0% 100% 200% 300% 400% 500% 600% Hong Kong South Africa Singapore Taiwan UK Malaysia Israel Chile United States Russia Japan China India South Korea Egypt Brazil Peru Thailand Philippines Poland Turkey Mexico Colombia Pakistan Indonesia Argentina Hungary Czech Venezuela 3% 209% 180% 160% 158% 129% 120% 116% 106% 105% 97% 91% 89% 82% 77% 69% 68% 64% 47% 44% 42% 42% 39% 38% 38% 35% 34% 285% 480% Market Cap/GDP (%) Developed Source : S&P/IFC; FIBV; EIU; Various Stock Exchanges 22

23 Emerging Markets : Economic Fundamentals

24 Emerging vs Developed Countries: GDP Growth % Developed Countries Emerging Countries 1987 to 2007F E 07F Source: IMF; World Economic Outlook; April

25 Emerging vs Developed Countries: GDP Growth % 2007F Emerging Markets Developed Market 25 Mexico Hungary U.S. Japan Germany Brazil Turkey South Africa Taiwan Korea China India Argentina Indonesia Russia Chile Philippines Malaysia Czech Poland Thailand Singapore Source: EIU

26 Emerging Markets : Inflation % 30-APR MAR Cpi % Change Percent Per Annum - Developing Countries '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 Source: Factset 26

27 Emerging vs Developed Markets: Foreign Reserves US$ bn December China Japan* Russia* Taiwan* South Korea India* Singapore* Hong Kong* Brazil* Malaysia* Mexico* Thailand* Turkey* United States* Poland* Indonesia* Czech Republic* Argentina* South Africa* Hungary* Chile* Emerging Asia South Africa Rest of Emerging Markets Developed 1074 Source : EIU; IMF 27

28 Emerging Markets :Yield Spreads vs Stock Market Index Basis Point 1,100 1, APR APR-2007 JP Morgan EMBI+ - Index Spread (Basis Points) - Emerging Markets Indices (Left) MSCI EM (Emerging Markets) - Price - USD (Right) Index 1, /02 04/03 04/04 04/05 03/06 04/07 Source : Factset *- Emerging Markets Bond Yield Spreads Over US Treasuries 28

29 Emerging vs Developed Countries: Labour Productivity Growth % Rest of Emerging Markets Emerging Asia Developed Market China India Argentina Singapore Russia Indonesia Czech Republic Hong Kong Turkey South Korea Philippines Thailand Malaysia Taiwan Mexico Poland Germany United Kingdom Japan United States BRAZIL Source: EIU Labour Productivity growth - efficiency of labour measured in terms of output per worker ( Real GDP per person employed)

30 Emerging Markets Trends

31 US, UK, Japan & EU: Money Supply vs MSCI EMF Index 11,000 10,000 9, APR MAR-2007 Money supply M1,U.S. + U.K. + Japan + EU (Left) MSCI EM (Emerging Markets) - Price with Gross Dividends - Daily Official - USD (Index) (Right) 1,600 1,400 1,200 8,000 1,000 7,000 6,000 5,000 4,000 3, , /87 03/89 03/91 03/93 03/95 03/97 03/99 03/01 03/03 03/05 03/07 Source: Factset 31

32 Emerging Markets : Equity Fund Flows US$ billion Cumulative since Jan 1995 to Dec Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Source: EmergingPortfolio.com 32

33 Emerging Markets : Equity Fund Flows Source: EmergingPortfolio.com *- Includes both offshore and US-registered funds. 33

34 34 Templeton Emerging Markets Templeton Emerging Markets Group : AUM US$ Bn AUM February 1987 vs February 2006 US$32.6billion /8702/88 02/8902/9002/91 02/9202/9302/94 02/9502/96 02/9702/9802/99 02/0002/0102/02 02/0302/0402/05 02/0602/07 Source : Templeton

35 Templeton Emerging Markets Group : Number of Countries Invested Since inception # of Countries Invested to Jan 2007 Number of Countries Invested Since inception Source : Templeton

36 36 Templeton Emerging Markets Emerging markets Funds Raised Via IPO & Follow-On Issues In Relation To The MSCI EM Index US$ bn January 1988 to February Total Funds Raised (Quarterly) MSCI EM index /88 03/91 03/94 03/97 03/00 03/03 03/06 Source : Dealogic 0

37 Convergence

38 Emerging Asia s Trade % of World s Total Trade % of World s Total APR MAR-2007 (MOV 12M) Emerging Asia's Export % of World's Total Export (MOV 12M) Emerging Asia's Import % of World's Total Import 0 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 Source: Factset; IFS * data Smoothed by 12-mths moving average 38

39 Asian Export Shares to U.S. and China Exports /Total Exports 31-MAR MAR % 22% Asian Exports To US /Total Exports Asian Exports To China /Total Exports 20% 18% US 16% 14% 12% China 10% 8% 6% 4% '99 '00 '01 '02 '03 '04 '05 '06 Source: Factset * data Smoothed by 12-mths moving average; Includes Hong Kong, Taiwan, South Korea, Singapore, Malaysia, Thailand and the Philippines 39

40 Taiwan s Export Shares to U.S. and China Exports /Total Exports 29-JAN MAR % 25% Taiwan's Exports To China / Total Exports Taiwan's Exports To US / Total Exports China 20% 15% US 10% 5% Source: Factset 0% 01/99 01/00 01/01 01/02 01/03 01/04 01/05 01/06 01/07 40

41 Korea s Export Shares to U.S. and China Exports /Total Exports 29-JAN MAR % China 22% 20% 18% 16% 14% US 12% 10% 8% (Korea's Exports To China / Total Exports Korea's Exports To US / Total Exports 6% Source: Factset 01/99 01/00 01/01 01/02 01/03 01/04 01/05 01/06 01/07 41

42 World Major Ports ('000 TEUs) 000 TEUs 25,000 20, to 2005 Singapore Hong Kong Shanghai Shenzhen Busan Kaohsiung Rotterdam Hamburg Dubai Los Angeles Long Beach 15,000 10,000 5, Source: Shipping Statistics Yearbook & various port authority internet site 42

43 Consumers

44 Emerging vs Developed Countries: Population Million 1, ,200 BRIC Developed Countries 1, China India EU US Brazil Russia Japan Korea Taiwan Source: EIU 44

45 45 Templeton Emerging Markets Emerging Vs Developed Markets : GDP Per Capita Growth 60% % 50% 40% 30% 25% 20% 10% 0% Emerging Markets Developed Markets Source : EIU * - GPD Per Capita Growth for the5 year period from 2001 to 2005

46 46 Templeton Emerging Markets Cellular Phone Subscribers: Per 100 People per India China US Japan Taiwan UK Source : Nationmaster.com; ITU

47 # of Cellular Phone Subscribers : If Per Capita Usage Was The Same as Taiwan Total Number of Cellular Phone Subscribers (billion) Source : Nationmaster.com; ITU China India Assuming that all countries reach the same per capita usage of Taiwan which is 102% and assuming end 2006 population numbers. 47

48 Cellular Phone Subscribers Millions China US Russia India Brazil Japan Germany Italy UK France Canada Source : Nationmaster.com; ITU 48

49 Issues in 2007

50 World Economic Situation : U.S. PMI vs MSCI EM Index MSCI Index 1, APR MAR-2007 Business Surveys ISM (NAPM) Manufacturing PMI total, SA - United States (Right) MSCI EM (Emerging Markets) - Price with Gross Dividends - Daily Official - USD (Index) (Left) US PMI 65 1, , , /98 01/99 01/00 01/01 01/02 01/03 01/04 01/05 01/06 01/07 35 Source: Factset 50

51 Oil Prices - EM Index vs Crude Oil 1,600 1,400 1,200 1, JAN MAR-2007 MSC EM Total Return Price Index (Left) Energy Oil Brent Crude Futures 1-Pos, IPE, Price, Close - World (Right) Recession Periods - United States /88 01/90 01/92 01/94 01/96 01/98 01/00 01/02 01/04 01/06 Source:Factset 0 51

52 Emerging Markets vs U.S. : Interest Rates % APR MAR-2007 Emerging Markets Short Term Interest Rates Policy Rates Fed Funds Target Rate, Percent - United States /02 10/02 04/03 10/03 04/04 10/04 04/05 10/05 04/06 10/06 04/07 Source: Factset 52

53 53 Templeton Emerging Markets Emerging Markets : Interest Rates % JAN APR-2007 Policy Rates Lending Rate, 1 Year, Percent, End of Period - China, Peoples Rep of Policy Rates SELIC Target Rate, Percent - Brazil Policy Rates Refinancing Rate, Percent - Russia Policy Rates Bank Rate, Percent - India Policy Rates Discount Rate, Percent - Taiwan Policy Rates Target Overnight Call Rate, Percent - South Korea Brazil Russia China India Korea 0 01/03 07/03 12/03 04/04 09/04 03/05 08/05 12/05 06/06 10/06 04/07 Taiwan Source : Factset

54 54 Templeton Emerging Markets China : Lending vs Deposit Rates JUL APR-2007 China Best Lending Rate 12 Months China Deposit Rate 12 Months Trendline: Average Trendline: Average /94 01/95 01/96 01/97 01/98 01/99 01/00 01/01 01/02 01/03 01/04 01/05 01/06 01/07 Source : Factset

55 Valuations

56 56 Templeton Emerging Markets P/E : Emerging Markets vs World APR MAR-2007 MSCI EM (Emerging Markets) - IBES Aggregates - Price to Earnings - 12 Month MSCI AC World - IBES Aggregates - Price to Earnings - 12 Month Trendline: Average World Average Emerging Markets Source : MSCI; I/B/E/S 01/98 01/99 01/00 01/01 01/02 01/03 01/04 01/05 01/06 01/07

57 EPS Growth : Emerging Markets vs World APR MAR-2007 MSCI EM (Emerging Markets) - IBES Aggregates - EPS Growth 12 Month MSCI AC World - IBES Aggregates - EPS Growth 12 Month Trendline: Average World 20 Average 10 Emerging Markets Source : MSCI; I/B/E/S 01/98 01/99 01/00 01/01 01/02 01/03 01/04 01/05 01/06 01/07 57

58 P/BV : Emerging Markets vs World APR MAR-2007 MSCI EM (Emerging Markets) - Price to Book Value Ratio - Monthly (Index) MSCI AC World - Price to Book Value Ratio - Monthly (Index) Trendline: Average World Average Emerging Markets 0 01/98 01/99 01/00 01/01 01/02 01/03 01/04 01/05 01/06 01/07 Source : MSCI; FactSet 58

59 Dividend Yield : Emerging Markets vs World 4 30-APR MAR-2007 MSCI EM (Emerging Markets) - Dividend Yield - Monthly (Index) MSCI AC World - Dividend Yield - Monthly (Index) Trendline: Average Average Emerging Markets World 1 04/97 04/99 03/01 03/03 03/05 03/07 Source : MSCI; FactSet 59

60 ROE: Emerging Markets vs World 30-APR MAR MSCI EM (Emerging Markets) - Return on Equity - Monthly (Index) MSCI AC World - Return on Equity - Monthly (Index) Trendline: Average Average Emerging Markets World 12 04/04 07/04 10/04 01/05 04/05 07/05 10/05 01/06 04/06 07/06 10/06 01/07 Source : MSCI; FactSet 60

61 PE vs MSCI EM Index 31-DEC MAR-2007 MSCI EM (Emerging Markets) - IBES Aggregates - Price to Earnings - 12 Month (Left) (INDEX) MSCI EM (Emerging Markets) - Price with Gross Dividends - Daily Official - USD (Index) (Right) 1,800 1, ,400 1, , /88 01/90 01/92 01/94 01/96 01/98 01/00 01/02 01/04 01/06 Source : MSCI; FactSet 0 61

62 Currency Valuations

63 Brazil : Currency Real per US$ 0 Real / US$ Exchange Rates vs Brazil / US PPP Index Real undervalued 5% 28/02/07 : 2.1 Real /US$ Source: IMF; Templeton Brazil / US PPP Real per US$ Based date : JAN

64 China : Currency RMB per US$ 4.0 RMB/ US$ Exchange Rates vs China/ US PPP Index RMB undervalued 16% /02/07: 7.7 RMB/US$ China / US PPP RMB per US$ Based date : JAN 1990 Source: IMF; Templeton 64

65 India : Currency Rupee per US$ 10 Rupee / US$ Exchange Rates vs India/ US PPP Index Indian Rupee undervalued 17% 28/02/07: 44.3 Rupee/ US$ Source: IMF; Templeton India/ US PPP Rupee per US$ Based date : JAN

66 Korea : Currency Won per US$ ,000 1,100 1,200 1,300 1,400 1,500 1,600 1,700 1,800 Won / US$ Exchange Rates vs S. Korea / US PPP Index Won undervalued 3% 1, Won / US PPP Won per US$ Based date: JAN 1990 Source: IMF; Templeton 28/02/07: 943 Won/ US$ 66

67 Thailand : Currency Baht per US$ 20.0 Baht / US$ Exchange Rates vs Thailand / US PPP Index Baht undervalued 9% 28/02/07: 36.2 baht /US$ Source: IMF; Templeton Thailand / US PPP Baht per US$ Based date: JAN

68 South Africa : Currency Rand per US$ 0.0 Rand/ US$ Exchange Rates vs South Africa/ US PPP Index Rand undervalued 21% 28/02/07: 7.3Rand/US$ South Africa / US PPP Rand per US$ Based date: JAN 1990 Source: IMF; Templeton 68

69 Mexico: Currency Peso per US$ 0.0 Peso/ US$ Exchange Rates vs Mexico/ US PPP Index Peso Overvalued 24% /02/07: 11.2 Peso/US$ Mexico/ US PPP Peso per US$ Based date: JAN 1990 Source: IMF; Templeton 69

70 Russia : Currency Rubles per US$ Rubles / US$ Exchange Rates vs Russia/ US PPP Index Russian Rubles overvalued 11% /02/07 : 26.1 Rubles/ US$ Russia/ US PPP Rubles per US$ Based date : JAN 1997 Source: IMF; Templeton 70

71 FTIF Templeton Emerging Markets Fund

72 72 Templeton Emerging Markets FTIF - Templeton Emerging Markets Fund Years ending February 2007 FTIF-TEMF /02 08/02 02/03 08/03 02/04 08/04 02/05 08/05 02/06 08/06 02/07 Source: Templeton Performance figures shown represent the aggregate total return for the period indicated assuming, where relevant, the reinvestment of dividends and distributions. The performance figures are shown net of all fees, but do not reflect the effect of any sales charges that might apply. Such sales charges would have the effect of reducing the performance returns shown. Past performance is no guarantee of future results.

73 FTIF - Templeton Emerging Markets Fund: Top Markets February % 2% 4% 6% 8% 10% 12% 14% 16% SOUTH AFRICA TAIWAN TURKEY KOREA BRAZIL CHINA /HONG KONG RUSSIA HUNGARY BRITAIN Fund THAILAND Source: Templeton Top markets by assets invested in each market. Holdings are subject to change. 73

74 FTIF - Templeton Emerging Markets Fund: Top Industries February % 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% ENERGY BANKS TELECOMMUNICATION SERVICES MATERIALS SEMI & SEMICONDUCTOR EQUIP CAPITAL GOODS FOOD, BEVERAGE & TOBACCO RETAILING TECHNOLOGY HARDWARE & EQUIPMENT Fund INSURANCE Source: Templeton These industries are the ten largest industries by asset size in the Fund as of the date indicated. Holdings are subject to change. 74

75 75 Templeton Emerging Markets FTIF - Templeton Emerging Markets Fund: Top Holdings February 2007 TAIWAN SOUTH AFRICA TURKEY SOUTH AFRICA HK - 'H' SHARE BRAZIL BRAZIL RUSSIA SOUTH AFRICA RUSSIA Holdings TSMC REMGRO LTD AKBANK AS OLD MUTUAL PETROCHINA VALE RIO DOCE PETROBRAS PRF NORILSK NICK-MMC ANGLO AMERICAN CORP GAZPROM % OF FUND 4% 3% 3% 3% 2% 2% 2% 2% 2% 2% These securities represent the ten largest holdings held in the Fund as of the date indicated. These securities do not represent all of the securities purchased, sold or recommended for advisory clients, and the reader should not assume that investment in the securities listed was or will be profitable. Holdings are subject to change.

76 End