A (Qdis) USD. Franklin Templeton Investment Funds. Fund Manager Report. Discrete Annual Performance (%) as at 31/03/2018. Calendar Year Returns (%)

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1 Templeton Global Balanced Fund A (Qdis) USD Franklin Templeton Investment Funds Fund Manager Report Total Return Multi-Asset Product Details 1 Fund Assets $ Fund Inception Date 01/06/1994 Number of Issuers 113 Bloomberg ISIN Base Currency Investment Style Benchmark Morningstar Category Overall Morningstar Rating TM 3 TEMGBLI LX LU USD Total Return Custom 65% MSCI ACWI + 35% JP Morgan Global Government Bond Index USD Moderate Allocation Effective 31 July 2017, Templeton Global Balanced Fund changed its benchmark to the Custom 65% MSCI All Country World + 35% JP Morgan Global Government Bond Index. Asset Allocation 2 Percent of Total % Equity Fixed Income Cash & Cash Equivalents Fund Description The fund seeks capital appreciation and current income by investing principally in equity securities and government debt securities issued by entities throughout the world, including emerging markets. The portfolio manager anticipates that the majority of the fund s portfolio is normally invested in equity or equity-linked securities. Key Points During the first quarter, global equity markets generally shed value in US-dollar terms despite strong January performance. The US Federal Reserve raised the federal funds target rate 25 basis points. In emerging markets, bond yields broadly rose across Asia ex Japan and declined across much of Latin America. Among currencies, the euro and the Japanese yen strengthened against the US dollar. Likewise, emerging-market currencies broadly appreciated against a weaker US dollar, with a few notable exceptions. Amongst equities, key sector detractors from relative returns included telecommunication services, health care and information technology. Conversely, the consumer staples, real estate and materials sectors contributed to relative performance. Overall, returns were driven by allocation effects and some stock-specific factors. Within the fixed income portfolio, currency positions and interest-rate strategies contributed to relative performance for the quarter. Performance Data Discrete Annual Performance (%) as at 31/03/2018 3/17-3/18 3/16-3/17 3/15-3/16 3/14-3/15 3/13-3/14 A (Qdis) USD Custom 65% MSCI ACWI + 35% JP Morgan Global Government Bond Index USD Performance Net of Management Fees as at 31/03/2018 (Dividends Reinvested) (%) 4 1 Mth 3 Mths YTD 1 Yr 3 Yrs 5 Yrs 10 Yrs Since Inception (01/06/1994) A (Qdis) USD Custom 65% MSCI ACWI + 35% JP Morgan Global Government Bond Index Calendar Year Returns (%) 100% 50% 0% -50% A (Qdis) USD Custom 65% MSCI ACWI + 35% JP Morgan Global Government Bond Index Past performance is not an indicator or a guarantee of future performance. 1. All holdings are subject to change. Holdings of the same issuers have been combined.

2 Portfolio Manager Insight Market Review Despite strong January performance, global equity markets generally shed value in US-dollar terms for the first quarter of Concerns arose that strong economic growth and rising inflation in some parts of the world, particularly the United States, would lead central banks to increase interest rates sooner than expected. A selloff in technology firms amidst worries about consumer data privacy and potentially tighter regulatory controls in the sector affected many developed markets. Sentiment was also dampened by fears that a trade war could develop following protectionist moves by the Trump administration. Frontier- and emerging-market stocks, as measured by MSCI indices, advanced and outperformed global equities as a group, along with their developed-market peers, which generally declined. Latin American bourses collectively surged for the first quarter, mainly on the strength displayed in January due to a rise in appetite for risk assets and optimism about certain economies in the region. Brazil s gross domestic product (GDP) rose year-on-year in the fourth quarter and for 2017 overall after declining in 2015 and Although Mexico revised down its fourth-quarter GDP growth to the slowest pace since 2013, the country s economy grew quarter-on-quarter, with its strongest expansion in four quarters. In Asian emerging markets, China s preliminary GDP growth figure for 2017 beat consensus expectations and the country s target. South Korea s fourth-quarter GDP grew year-on-year but declined quarter-onquarter. The US economy expanded at slightly slower pace in the fourth quarter of 2017 than in the third quarter. Europe s 2017 GDP grew strongly in both the euro area and in the European Union (EU) overall. The February 2018 unemployment rate in the euro area edged down to the lowest reading since December 2008, and the rate in the EU declined to the lowest level since September The United Kingdom s 2017 GDP grew at the weakest annual growth pace since Elsewhere, Japan s revised fourth-quarter GDP marked the eighth consecutive quarter of growth and the longest period of expansion since During the first quarter, the US Federal Reserve (Fed) raised the federal funds target rate 25 basis points (bps) to a range of 1.50% to 1.75% at its March meeting and remained on course for two more rate hikes in Despite a decline in the 10-year US Treasury (UST) note s yield during the final week of March, the yield was still 33 bps higher year-to-date in 2018 (through 31 March). We continue to expect UST yields to rise as the Fed tightens policy while US inflation pressures pick up. Equity market volatility and uncertainty over the potential impacts of protectionist trade policies appeared to drive some risk aversion in the markets; however, US economic resilience and growing inflation pressures are expected to continue in The Fed continued to unwind its UST positions at a targeted pace of US$12 billion per month in 2018 s first quarter and intends to raise that monthly volume to US$18 billion per month in the second quarter. We also expect the Fed s balance sheet unwinding to put upward pressure on yields. Overall, we continue to expect UST yields to rise with growing inflation pressures in an environment of economic resilience and exceptionally strong US labour markets. In Europe, the yield on the 10-year German Bund moderately rose while short-term yields in the eurozone remained negative. The euro strengthened against the US dollar during the quarter; however, we continue to expect the euro to weaken on widening rate differentials between the rising yields in the US and the low to negative yields in the eurozone. European Central Bank (ECB) President Mario Draghi has continued to indicate that monetary policy will remain accommodative in 2018, and that rates are not likely to rise until quantitative easing (QE) measures end. Currently, the ECB s bond-buying programme is scheduled to continue through at least September 2018, with the possibility of continuing at a reduced pace in subsequent months. We think the ECB will keep rates unchanged in We also continue to see ongoing risks to political cohesion across Europe as populist movements continue to influence the political discourse. In Germany, Angela Merkel agreed to a coalition government with the Social Democrats (SPD), but remained in a politically weakened position. The euro continues to be vulnerable to unresolved structural and political risks, in our view. In Japan, we expect Abenomics programmes to continue as planned. The Bank of Japan (BOJ) continued with its QE programme during the quarter as short-term yields in Japan remained negative. Rising UST yields should produce better conditions for the BOJ s monetary accommodation to weaken the yen. The BOJ continues to target a 0.0% yield on the 10-year Japanese government bond. The Japanese yen strengthened against the US dollar during the quarter; however, we expect it to weaken in upcoming quarters on widening rate differentials with the US. In emerging markets, yields broadly rose across Asia ex Japan and declined across much of Latin America. Emerging-market currencies broadly appreciated against a weaker US dollar during the quarter, with a few notable exceptions. Overall, we continue to see a number of local-currency markets that we believe remain undervalued, particularly in India, Indonesia, Mexico and Colombia. We also see attractive risk-adjusted yields in places like Brazil and Argentina. On the whole, we expect select currencies to appreciate over the medium term, particularly in countries with economic resilience and relatively higher, maintainable rate differentials. Performance Review Equity Analysis Stock selection and an overweighting in the telecommunication services sector hindered relative portfolio performance. UK-based mobile telecommunication services firm Vodafone hurt relative results in the sector. In general, valuations in the European telecoms industry reached multidecade lows over the course of 2017, creating select opportunities to add to high-yielding stocks featuring potential catalysts as the industry consolidates, the regulatory backdrop improves and cash flows begin to recover. Select opportunities also have existed amongst Asian telecoms with undervalued growth prospects, data exposure and/or stakes in attractive affiliated businesses. Stock selection was also a drag on relative returns in the health care sector. The shares of Getinge, a Swedish manufacturer of hospital products, dropped due to concerns over future profitability, largely related to US Food & Drug Administration (FDA) compliance costs. While the business is not without its challenges, many of those relating to FDA manufacturing issues and restructuring are now over. Looking forward, the markets Getinge serves are growing, with high barriers to entry. The company has a track record in delivering attractive top-line growth and remains a market leader across its end markets. With new product launches, a refined marketing structure and some recovery in emerging markets, the business looks poised for a more respectable growth profile. With the market sceptical, we believe the shares offer significant upside potential from future earnings growth. Stock selection and an underweight allocation in the information technology sector curbed relative results. While we think many of the consumer and internet technology stocks that have led the market recently traded at prohibitively expensive valuations and appear vulnerable to a correction at this point in the cycle, we have found sufficient value elsewhere in the sector to justify a moderate absolute allocation. Ultimately, we recognise that technology is a sector defined by innovation and disruption, and our approach is to identify both mature companies with the ability to adapt to change, as well as new entrants likely to emerge as winners, trading at attractive valuations. Many such opportunities have emerged over recent franklintempleton.lu 2

3 years in mature software companies developing new revenue models and businesses in fast-growing segments like cloud computing. The market was slow to catch on in many cases, valuing these companies as low-multiple, ex-growth legacy businesses. But seeing is believing, and a string of above-consensus earnings results and profit upgrades driven by the success of the new operating segments has underpinned a re-rating in many stocks. We believe a number of our tech holdings still have reasonable upside potential, though true bargains have become increasingly scarce in the sector. An individual detractor was UK-based home improvement retailer Kingfisher in the consumer discretionary sector. Its shares rose in early February after Australian competitor Wesfarmers (not a portfolio holding) reported a write-down of UK retail subsidiary Homebase, which had previously been viewed as a possible aggressive competitor to Kingfisher. Brexit remains an uncertainty for UK sales, but many investors are becoming increasingly optimistic over a recovery in the French housing market, which should lead to an improvement in sales after years of decline. Additionally, evidence has been building that management has been successfully executing on its restructuring plan to improve sales and margins. While there are macroeconomic and competitive risks, we believe Kingfisher will emerge as a stronger and more profitable company when the restructuring programme is complete. Conversely, security selection and an underweighting in the consumer staples sector supported relative performance during the first quarter. Within the sector, shares of Japanese beverage-maker Suntory rallied on expectations that a robust new product pipeline would help the firm outpace rivals profit and volume growth. While the stock has partially re-rated, we believe the market has continued to underestimate Suntory s earnings potential in Japan as the company cuts costs and reduces promotional activity. The company s Southeast Asian operations also look poised to improve after the firm switched distributors in Thailand and Indonesia. Suntory continued to trade at a discount to its global peers, and should be able to narrow the valuation gap as anticipated improvements come to fruition. Stock selection in the real estate sector benefitted results, particularly our position in commercial real estate services provider Jones Lang LaSalle. The company reported strong fourth-quarter financial results that boosted its shares. While 2018 may be a more challenging year for the commercial real estate markets as rising interest rates take the stage, these rates remain low on a historical basis and the appetite for real estate debt and equity remains steady. Favourable stock selection in the materials sector supported relative performance in the first quarter due mostly to security selection in the chemicals and the metals and mining industries. In mining, the cycle offered up a few bargains amongst industrial metals producers, though last year s reflationary rally prompted our rotation into some select precious metals firms featuring what we viewed as cheap valuations, strong balance sheets, attractive growth profiles and defensive characteristics. Depressed precious metals stocks have become increasingly attractive to us as the cycle matures given what we view as their historically cheap valuations and defensive characteristics. The related stocks re-rated somewhat during the month. On a regional basis, stock selection in China hindered relative results in Asia. Conversely, investments in Thailand and Japan helped the portfolio s relative performance. Stock selection in the United States also proved adverse, while our exposure in Canada contributed to relative results. An overweighting in Europe further dampened relative performance, pressured by investments in France and Sweden. In contrast, Italy and the United Kingdom were notable contributors in the region. Fixed Income Analysis Within the fixed income portfolio, currency positions and interest-rate strategies contributed to relative performance for the quarter. Amongst currencies, overweighted positions in Latin America (the Mexican peso and Colombian peso) contributed to relative results. However, the portfolio s lack of exposures to the Japanese yen and the euro detracted from relative performance. The portfolio maintained a defensive approach regarding interest rates in developed markets, while holding duration exposures in select emerging markets. Select overweighted duration exposures in Latin America (Brazil) contributed to relative results, as did underweighted duration exposure in the United States. However, select underweighted duration exposures in Europe detracted from relative performance. Portfolio Positioning In the first quarter, the fund s equity portfolio was most overweight in the health care and energy sectors relative to the benchmark index. Conversely, the portfolio was most underweight in the consumer staples and consumer discretionary sectors. Regionally, the portfolio was overweight in Europe and underweight in the United States. In the fixed income portfolio, we continued to maintain positioning in a number of emerging markets, with notable local-currency duration exposures in Brazil, Argentina, Colombia and India, and notable currency exposure to the Mexican peso. Overall, we remained positioned for rising yields by maintaining low overall portfolio duration and holding negative duration exposure to USTs through interest-rate swaps. Outlook & Strategy Equity Portfolio Surveying the current global investment environment, a number of situations appear incongruous and unsustainable to us. First, the US-led economic cycle is now the second-longest of the post-war era, with the world s largest economy nearing full employment and peak profitability. This strikes us as an odd moment to unleash large-scale fiscal stimulus, especially if it needs to be deficit-financed at a time of waning demand for Treasury debt. Second, US stocks are near their highest valuation levels in history, at least based on the metrics that are most correlated to future long-term returns. This seems a strange time to rush indiscriminately into US equities, yet data confirms that 2017 saw record inflows into USfocused exchange-traded funds. Third, corporate debt-to-gdp is back near previous peaks, while the government debt-to-gdp ratio of the Group of Seven countries is near the highest level since World War II. This seems a perilous time to increase borrowing costs, but nevertheless rates have been rising. Our broader point is that risks appear elevated at this mature stage in the cycle, with volatility resurfacing in an environment of full valuations, rising interest rates and still fragile economic growth. We would not want to own the leaders of the last cycle in this environment, and believe that the inevitable market transition come when it may could significantly bolster the case for active value investing. In keeping with our time-tested value discipline, recent quarters have seen us reducing exposure to expensive sectors like internet technology, consumer discretionary and US banks and reinvesting proceeds into beleaguered sectors like health care, telecommunications and select energy stocks. The aim of a longterm, contrarian investment framework is to spot such opportunities and get there before the crowds arrive to erode the return potential. In this environment of impending transition, we have continued to find what we consider the best long-term opportunities amongst unloved and overlooked stocks. franklintempleton.lu 3

4 Fixed Income Portfolio Recent US protectionist policies in the form of steel and aluminium tariffs, and sector-specific tariffs on China, have the potential to impact growth and raise costs for consumers. Trade restrictions will likely add to existing inflation. US consumers had been benefitting from cheaper goods for decades trade restrictions would shift the current benefits that consumers enjoy (cheaper goods) to a narrow sector of manufacturers of specific products. At this stage, the risks of a full-scale retaliatory trade war appear contained, but an escalating trade conflict that damages global growth remains possible. Exchange rate tensions and trade frictions around the world could continue for some time, but we do not see trade coming to a standstill or the global economy toppling into a recession. Overall, we continue to have a positive outlook for US growth and the global economy for 2018, but we continue to watch for potential economic disruptions. One of the trade-offs of tax reform was the likelihood that it will increase the deficit, which raises the borrowing needs of the government. Theoretically, tax reform was intended to be revenue neutral over 10 years, but in the near term the deficit is likely to grow. Concurrently, the Fed is no longer funding the deficit through its QE programme and is instead reducing its UST holdings. Rising deficits and diminished bond-buying from the Fed should pressure UST yields higher, in our view. We expect the glide path of monetary policy to remain largely unchanged in 2018, under the new Fed chairmanship of Jay Powell. The pace of balance sheet unwinding and expected rate hikes this year are likely to stay on the course outlined by the previous committee, in our view. The reduction of the Fed s balance sheet will be a significant change factor for bond markets in the upcoming year we think those effects are being underappreciated by markets and that USTs remain overvalued. On the whole, we continue to expect inflation pressures to rise with resilience in the US economy and exceptionally strong US labour markets. We have seen wage pressures pick up in specific pockets of the economy, and we expect those pressures to accelerate. Policy constraints on immigration have also been pressuring wages in various labour sectors. Additionally, financial sector deregulation has the potential to accelerate credit activity, stimulate investment and accelerate the velocity of money, which would further drive inflation. Fiscal expansion and the effects of tax reform can similarly add to the inflation dynamics. Overall, we see preconditions for rising inflation over the next couple years, which should pressure yields higher. In the major developed economies, we anticipate continued monetary accommodation and low rates in Japan and the eurozone while rates rise in the US those increasing rate differentials should depreciate the yen and euro against the US dollar, in our opinion. With the recent upturns in global growth, there should be less demand for perceived safe-haven assets, yet the yen has strengthened in recent months that trend is inconsistent with historical correlations, in our assessment, and we expect it to reverse on stronger global growth and rising rates in the US. Additionally, we expect the BOJ s current monetary stance to remain largely unchanged in the upcoming year. BOJ Governor Haruhiko Kuroda was formally confirmed to another five-year term in March. The current BOJ is very dovish, and Prime Minister Shinzo Abe needs a dovish central bank. With yields rising in the US, the rate differentials with Japanese government bonds should widen, which should ultimately flow through to the exchange rate, weakening the yen and strengthening the US dollar. Our view on the yen would likely adjust if we expected an end in this growth cycle, or a global crisis, but we do not see an end to the cycle quite yet. A large part of the recent strength in the euro has been driven by optimism in Europe. Growth in the eurozone has notably improved, so part of the optimism is deserved. Yet the economy still needs accommodative monetary policy (according to the ECB), and inflation has remained persistently subdued, below the ECB s target. Additionally, we think eurozone growth has peaked in the current cycle and is not likely to be as strong as it was in Thus we do not see Europe narrowing the growth differential with the US in the upcoming year. We expect the widening rate differentials with the US should ultimately weaken the euro and pull the US dollar stronger. We have recently focused on countries that are less externally vulnerable and more domestically driven, and that have demonstrated their resilience to potential increases in trade costs. Specific emerging markets that have higher rate environments and domestically oriented economies are likely to fare better in a rising-rate environment than countries with low yields and more externally driven economies, in our view. In Asia, we currently prefer countries with strong domestic drivers that are less leveraged to China, such as India and Indonesia, while we have moved away from economies that are more externally dependent, such as Malaysia. In Latin America, we are focused on countries that have turned away from previous failed experiments with populism, such as Brazil and Argentina, and are now moving towards more orthodox policies with credible monetary policy, proactive business environments and outward-looking trade. We also see attractive valuations in countries like Mexico and Colombia that have maintained sound policy discipline while broadening their economies beyond commodities. China s economy remains in a soft landing, but ongoing rebalancing is needed for the long term. The near-term picture looks fairly stable, in our assessment, but we have concerns for two or three years down the road as China s pace of growth now depends on significantly more credit expansion than it did a decade ago. The Chinese authorities appear aware of this, but it remains to be seen if they can effectively manage a slowdown in credit. We have seen a number of policies wind down, but we do not expect a hard landing at this point. However, if China has not reduced its credit dependence in a couple years and we get an exogenous shock, such as an eventual recession in the US, then China s ability to intervene to stimulate its economy will be substantially less effective than it was during the last US recession. These risks warrant ongoing monitoring, but the near-term picture appears to support a continued moderation in growth and not a hard landing. One-Month Performance Review The equity portfolio underperformed its benchmark in March. Stock selection in the financials and consumer discretionary sectors detracted from relative returns. Conversely, favourable stock selection within the metals and mining industry supported relative performance in the materials sector. Elsewhere, the portfolio s overweight and stock selection in the energy sector contributed to relative returns, as did stock selection in the health care sector. On a regional basis, stock selection in Europe, particularly in France, largely driven by AXA shares, detracted from the fund s relative performance in March. Conversely, stock selection in Canada contributed to relative performance. Within the fixed income portfolio, currency positions contributed to relative performance in March, while interest-rate strategies detracted. Amongst currencies, overweighted positions in Latin America contributed to relative results (the Mexican peso and Colombian peso contributed, while the Brazilian real detracted). However, the portfolio s lack of exposure to the euro detracted from relative performance, while its lack of exposure to the Japanese yen had largely neutral effect. The portfolio maintained a defensive approach regarding interest rates in developed markets, while holding duration exposures in select emerging markets. Select underweighted duration exposures in Europe detracted from relative results, as did underweighted duration exposure in the United States. However, select overweighted duration exposures in Latin America (Brazil) contributed to relative performance. franklintempleton.lu 4

5 Portfolio Characteristics 5,6,7 Portfolio MSCI All Country World Index Price to Earnings (12 Month Trailing) 15.81x 18.84x Price to Book Value 1.47x 2.23x Price to Cash Flow 6.93x 11.45x Market Capitalisation (Millions in USD) 114, ,218 Dividend Yield 2.56% 2.42% JP Morgan Global Government Bond Portfolio Index Yield to Maturity 7.27% 1.36% Yield to Worst 7.27% 1.36% Average Duration 2.56 Yrs 8.00 Yrs Average Credit Quality 8 BBB+ AA Average Weighted Maturity 3.26 Yrs 9.96 Yrs Portfolio Diversification Top Ten Holdings 9 Percent of Total Top Holdings % Nota Do Tesouro Nacional, 10.00%, /01/21 Samsung Electronics Co. Ltd Government of Mexico, senior note, 1.59 M, 5.00%, 12/11/19 Oracle Corp Royal Dutch Shell PLC, B 1.32 Microsoft Corp BP PLC 1.30 Alphabet Inc., A 1.27 Government of India, senior note, %, 11/25/23 Nota Do Tesouro Nacional, 10.00%, /01/25 Geographic Allocation 2 Percent of Total NORTH AMERICA EUROPE ASIA L. AMERICA/CARIBBEAN MID-EAST/AFRICA CASH & CASH EQUIVALENTS OTHER % 5% 10% 15% 20% 25% 30% 8. 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. Derivatives are excluded from this breakdown. franklintempleton.lu 5

6 Geographic Allocation 10 Percent of Equity United States United Kingdom Japan France China Germany South Korea Netherlands Switzerland Italy Canada Ireland India Hong Kong Israel Singapore Sweden Thailand Denmark % 5% 10% 15% 20% 25% 30% 35% 40% 45% Sector Allocation 10 Percent of Equity Geographic Allocation 2 Percent of Fixed Income Mexico India Brazil South Korea Colombia Argentina Philippines Ghana N/A Supranational % 0% 5% 10% 15% 20% 25% 30% 35% 40% Sector Allocation 2 Percent of Fixed Income Financials Health Care Local Currency Government/Agency Bonds - Investment Grade Information Technology Energy Local Currency Government/Agency Bonds - Non- Investment Grade Consumer Discretionary 8.48 Derivatives Industrials Telecommunication Services Materials Supranational % 0% 20% 40% 60% 80% 100% Consumer Staples 3.82 Real Estate 2.14 Utilities % 5% 10% 15% 20% 25% franklintempleton.lu 6

7 Currency Allocation 2 Percent of Fixed Income Credit Quality Ratings 11 Percent of Fixed Income Mexican Peso AAA 2.46 Indian Rupee AA Brazilian Real A US Dollar BBB 9.74 Colombian Peso 7.94 BBB Argentine Peso 3.14 BB Philippine Peso 1.82 B 3.13 South Korean Won 0.71 B Ghanaian Cedi-New % 5% 10% 15% 20% 25% 30% 35% 40% 0% 20% 40% 60% Investment Grade Non-Investment Grade Supplemental Performance Statistics 3 Yrs 5 Yrs 10 Yrs Since Inception Standard Deviation (%) Templeton Global Balanced Fund Custom 65% MSCI ACWI + 35% JP Morgan Global Government Bond Index Tracking Error (%) Information Ratio Beta Sharpe Ratio Templeton Global Balanced Fund Custom 65% MSCI ACWI + 35% JP Morgan Global Government Bond Index Investment Team Portfolio Manager Years with Firm Years Experience Peter Wilmshurst, CFA, EVP, Portfolio Manager, Research Analyst Michael Hasenstab, Ph. D., Executive VP & Chief Investment Officer Sonal Desai, Ph. D., Senior VP, Portfolio Manager, Director of 8 24 Research Alan Chua, CFA, EVP, Portfolio Manager, Research Analyst Tian Qiu, CFA, SVP, Portfolio Manager, Research Analyst 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 invests mainly in equity, equity-related and debt securities around the world. Such securities have historically been subject to significant price movements that may occur suddenly due to equity and bond market or company-specific factors. As a result, the performance of the Fund can fluctuate considerably 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, currency risk, emerging markets risk, liquidity risk, derivatives risk. For full 12. Beta, Information Ratio and Tracking Error information are measured against the Custom 65% MSCI ACWI + 35% JP Morgan Global Government Bond Index. franklintempleton.lu 7

8 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. franklintempleton.lu 8

9 Important Legal Information This document does not constitute legal or tax advice nor is it investment advice or an offer for shares of Franklin Templeton Investment Funds (the Fund ). Subscriptions to shares of the Fund can only be made on the basis of the current prospectus and, where available, the relevant Key Investor Information Document, accompanied by the latest available audited annual report and the latest semi-annual report accessible on our website or which can be obtained, free of charge, from Franklin Templeton International Services, S.à r.l. - 8A, rue Albert Borschette, L-1246 Luxembourg. 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. 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. Shares of the Fund are not available for distribution in all jurisdictions and prospective investors should confirm availability with their local Franklin Templeton Investments representative before making any plans to invest. 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. In addition, it should not be assumed that any securities mentioned were or will prove to be profitable. Stocks mentioned in this report are not a solicitation to purchase those stocks, and are examples of some stocks which performed well. Not all stocks in the portfolio performed as well. For the most current information on the fund, please contact your Franklin Templeton marketing representative. Performance figures are not based on audited financial statements and assume reinvestment of interest and dividends. When comparing the performance of Franklin Templeton Investment Funds (the Fund ) with a benchmark index, it is important to note that the securities in which Franklin Templeton Investment Funds invests may be substantially different than those represented by the benchmark index. Furthermore, an investment in Franklin Templeton Investment Funds represents an investment in a managed investment company in which certain charges and expenses, including management fees, are applicable. These charges and expenses are not applicable to indices. Lastly, please note that indices are unmanaged and are not available for direct investment. Certain data and other information shown have been supplied by outside sources. While we consider that information to be reliable, we give no assurance that such data and information is accurate or complete. References to indexes are made for comparative purposes only and are provided to represent the investment environment existing during the time periods shown. The indices include a greater number of securities than those held in the Fund. 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. Past performance is not an indicator or a guarantee of future performance. CFA and Chartered Financial Analyst are trademarks owned by CFA Institute. 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. Important data provider notices and terms available at: 2. Figures reflect certain derivatives held in the portfolio (or their underlying reference assets) and may not total 100% or may be negative due to rounding, use of derivatives, unsettled trades or other factors. Information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change Morningstar, Inc. All rights reserved. The information contained herein is proprietary to Morningstar and/or its content providers; may not be copied or distributed; and is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. 4. 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. Periods greater than one year are shown as average annual total returns. Fund performance data include reinvested dividends, and is net of management fees. Sales charges, other commissions, taxes and other relevant costs to be paid by the investor are not included. The fund offers other share classes subject to different fees and expenses, which will affect their performance. Please see the prospectus for details. 5. Source: FactSet. Price ratio calculations for weighted average use harmonic means. Any exceptions to this are noted. 6. The dividend yield quoted here is the yield on securities within the portfolio and should not be used as an indication of the income received from this portfolio. 7. Yield to Maturity, Yield to Worst, Average Duration and Average Weighted Maturity reflect certain derivatives held in Portfolio (or their underlying reference assets). 9. Holdings of the same issuers have been combined. Top ten holdings information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change. 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 repurchased. The portfolio manager for the fund reserves the right to withhold release of information with respect to holdings that would otherwise be included. 10. Information is historical and may not reflect current or future portfolio characteristics. Percentage may not equal 100% due to rounding. All holdings are subject to change. 11. Ratings shown are assigned by one or more Nationally Recognized Statistical Rating Organizations ( NRSRO ), such as Standard & Poor s, Moody s and Fitch. The ratings are an indication of an issuer s creditworthiness and typically range from AAA or Aaa (highest) to D (lowest). When ratings from all three agencies are available, the middle rating is used; when two are available, the lowest rating is used; and when only one is available, that rating is used. Foreign government bonds without a specific rating are assigned the country rating provided by an NRSRO, if available. If listed, the NR category consists of rateable securities that have not been rated by an NRSRO. The N/A category consists of nonrateable securities (e.g., equities). Cash includes equivalents, which may be rated. Derivatives are excluded from this breakdown. Information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to Franklin Templeton International Services, S.à r.l. 8A, rue Albert Borschette L-1246 Luxembourg franklintempleton.lu 2018 Franklin Templeton Investments. All rights reserved.

10 change. 13. 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). Franklin Templeton International Services, S.à r.l. 8A, rue Albert Borschette L-1246 Luxembourg franklintempleton.lu 2018 Franklin Templeton Investments. All rights reserved.