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2 December 2012 Edwin Lugo, II, CFA Senior Vice President Portfolio Manager A SUB-FUND OF THE LUXEMBOURG REGISTERED SICAV, FRANKLIN TEMPLETON INVESTMENT FUNDS (FTIF) FRANKLIN TEMPLETON INVESTMENTS FTIF Franklin Global Small-Mid Cap Growth Fund

3 3 Agenda Introduction to Franklin Templeton Organization and Team Overview Investment Philosophy and Process FTIF Franklin Global Small-Mid Cap Growth Fund

4 Introduction to Franklin Templeton

5 5 Franklin Templeton Investments Experience of Many, The Strength of One Over 65 years of experience 3 internationally recognized investment brands US$ billion in assets under management * 580 research analysts and PM s globally researching bottom-up research analysts with an average of 6 years with the firm portfolio manager/analysts with an average of 12 years with the firm portfolio managers and analysts with CFAs, 16 with a Ph.D 1 15 trading desks worldwide 3 8,563 employees in more than 30 countries million shareholder accounts in 150 countries worldwide 2 * As per 31 December Franklin Templeton Investments, as of 30 September Franklin Templeton Investments, as of 30 June Franklin Templeton Investments, as of 31 December CFA and Chartered Financial Analyst are trademarks owned by CFA Institute

6 6 The Global Network of Franklin Templeton Investments Los Angeles San Mateo Calgary Toronto Fort Lee New York Short Hills Washington DC Edinburgh London Warsaw Istanbul Amsterdam Moscow Seoul Shanghai Tokyo Paris Milan Dubai Mexico Ft. Lauderdale Miami Nassau Rio de Janeiro Madrid Hyderabad Chennai Mumbai Malaysia Singapore Hong Kong Vietnam Buenos Aires Johannesburg Melbourne Sydney 24-hour Global Trading Operations

7 7 Breadth of Resources INVESTMENT MANAGERS Franklin Templeton Mutual Series FOUNDED JOINED CORPORATE OFFICE San Mateo, CA; Fort Lee, NJ; New York, NY Nassau, Bahamas; Ft. Lauderdale, FL; Miami, FL Short Hills, NJ STYLE Small-, Mid- and Large-Cap; Growth, Blend and Value; Global/International Growth (Large-, Small-Cap); Fixed Income Global/International Value; Fixed Income U.S./Global Deep Value STRENGTH Leverage credit and equity research Experienced management team Dedicated to absolute value approach Unsurpassed, global analytical research Opportunistic value discipline Fundamental approach

8 Organization and Team Overview

9 9 Franklin Templeton Investments FRANKLIN TEMPLETON INVESTMENTS, TOTAL AUM $ Billion Franklin Templeton Mutual Series Franklin Templeton Fixed Income Other Asset Management Groups 2 Growth Style / Blend Value Deep Value Fixed Income Franklin Templeton India Formed 1947 Formed 1940 Formed 1949 Formed Franklin Templeton Real Estate Advisors Joined FTI 1992 Joined FTI 1996 Franklin Templeton Korea Franklin Templeton Japan Bisset Darby Source: Franklin Templeton Investments as of 31 December In January 2006, Franklin Advisors and Fiduciary Trust International Fixed Income Teams merged to form the Franklin Templeton Fixed Income Group. Individually the groups each have experience dating back more than 50 years. 2 Not available in all jurisdictions or to certain classes of investor.

10 10 Franklin Equity Group Teams 1. AUM as of September Professionals include portfolio managers and analysts as of December 31, 2012 The above information is not meant to depict the management or investment team of any specific account, fund or composite. CFA and Chartered Financial Analyst are trademarks owned by CFA Institute. AUM includes discretionary and advisory accounts, including pooled investment vehicles, separate accounts and other vehicles, as well as some accounts that may not be eligible for inclusion in composites as defined by the firm s policies. AUM may also include advisory accounts with or without trading authority.

11 11 Franklin Global Small Cap Team Dedicated Team of Experienced Professionals Focused on European Equity Strategies, Supported by the Broader Resources of the Franklin Equity Group Franklin Global Small Cap Investment Team Investment Team Ed Lugo II, CFA Julian Harper Pankaj Nevatia, CFA Oliver Wong, CFA Julie Toran, CFA Five investment professionals Responsibility Portfolio Manager, Analyst Research Analyst Research Analyst Research Analyst Research Analyst Average 10 years industry experience Franklin Global Large Cap Team Additional Resources Franklin European Equity Team Source: Franklin Templeton Investments as of 30 September CFA and Chartered Financial Analyst are trademarks owned by CFA Institute.

12 Investment Philosophy and Process

13 13 Investment Philosophy We believe a concentrated, yet diversified portfolio of high quality companies with sustainable business models has the potential produce above-average risk-adjusted returns over the longer term. We seek companies that, in our view, have: Growth A clear competitive advantage with the potential for sustainable growth and strong absolute returns over the longer term Quality Strong balance sheets and free cash flow supported by a management team focused on the creation of shareholder value Valuation Our investment process includes rigorous valuation analysis to select companies that are attractively priced

14 14 Investment Process Supported by In-depth Fundamental Analysis, Team Discussion and Focus on Downside Risk Identify Ideas and Review Key Attributes Team Roundtable In-depth Fundamental Analysis Team Roundtable Formal Rating and Inclusion in Client Portfolios Team Roundtable Seeks to Ensure Expertise and Insights of All Team Members Are Applied to Each Investment Idea Focus on Downside Risk Helps Manage Risk in Smaller Capitalization Portfolios The above chart is for illustrative and discussion purposes only. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions.

15 15 Investment Process Supported by In-depth Fundamental Analysis, Team Discussion and Focus on Downside Risk Identify Ideas and Review Key Attributes Team Roundtable In-depth Fundamental Analysis Team Roundtable Formal Rating and Inclusion in Client Portfolios Identify ideas Screening Internal proprietary work Company/competitor Investment conferences Franklin Equity Group platform Key attributes We seek companies that have, in our view: Sustainable competitive advantage Strong balance sheet Cash flow generation Attractive valuation Portfolio Manager approval Downside risks Confirm key attributes Team Roundtable Seeks to Ensure Expertise and Insights of All Team Members Are Applied to Each Investment Idea Focus on Downside Risk Helps Manage Risk in Smaller Capitalization Portfolios

16 16 Investment Process Supported by In-depth Fundamental Analysis, Team Discussion and Focus on Downside Risk Identify Ideas and Review Key Attributes Team Roundtable In-depth Fundamental Analysis Team Roundtable Formal Rating and Inclusion in Client Portfolios Qualitative analysis Company strategy Competitive environment Industry dynamics Management Quantitative analysis Five-year financial model and valuation Discount cash flow; dividend discount model Downside risks Scenario analysis Currency Macroeconomic Accounting Team Roundtable Seeks to Ensure Expertise and Insights of All Team Members Are Applied to Each Investment Idea Focus on Downside Risk Helps Manage Risk in Smaller Capitalization Portfolios

17 17 Investment Process Supported by In-depth Fundamental Analysis, Team Discussion and Focus on Downside Risk Identify Ideas and Review Key Attributes Team Roundtable In-depth Fundamental Analysis Team Roundtable Formal rating Detailed review with team Formal research report added to database Downside risks: Buy/sell targets Ongoing monitoring Sell discipline: Fully valued Deteriorating fundamentals Better opportunities Formal Rating and Inclusion in Client Portfolios Team Roundtable Seeks to Ensure Expertise and Insights of All Team Members Are Applied to Each Investment Idea Focus on Downside Risk Helps Manage Risk in Smaller Capitalization Portfolios

18 Case Study: Kuehne & Nagel AG A global freight forwarding company. It has 750 offices worldwide covering all major trade lanes. Kuehne & Nagel AG Daily Price Chart from 28/09/07 to 30/09/10 (Swiss Francs): Buy 40 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Source: Factset, as of 30 September Long term competitive advantage Strong position in a fragmented but consolidating market - #1 in shipping and #4 in airfreight. High barriers to entry given the networking effect. The larger the freight forwarder the more attractive for end-customers and for suppliers of freight capacity. Strong competitive advantage economies of scale, expertise in complex customs regulation globally, asset light. Future growth from continued globalisation of trade and from increased outsourcing of logistics functions by customers Quality Strong balance sheet net cash position equating to just under 10% of the market capitalisation of the company. Valuation / Risk Investors sold off stocks exposed to global trade as the depth of the recession became apparent. K&N fell by 50% in 2008 which provided long term investors such as ourselves with a good entry point into a high quality company. Our in-depth scenario analysis indicated that at CHF60, the valuation was implying negative growth in revenue and earnings for the next five years. Even under such a negative scenario Free cashflow generation and returns remained high. Essentially we were paying for a business expected to decline over the medium term and got the future growth of the company for free. The following case studies shown represent certain examples of the investment managers best performing investments and other investments made by the investment manager which were not as successful or that lost money are not shown. The investments may or may not be currently held by funds managed by the investment manager. The case studies are not representative of the overall performance of the funds managed by the investment manager as is demonstrated by those funds past performance numbers. Past performance does not guarantee future results and results may differ over future time periods. These case studies are being shown only as examples of what the investment manager is seeking to achieve in managing the fund, but are not necessarily indicative of what has actually been achieved with all of the investments or will be achieved going forward. This is not a complete analysis of every material fact regarding an industry, security or investment and should not be viewed as an investment recommendation. The actions taken with respect to these investments, and their performance, may not be representative of other advice or investments. Factual statements are taken from sources considered reliable, but have not been independently verified for completeness or accuracy by the fund s manager or its affiliates. These opinions may not be relied upon as investment advice or an offer for a particular security or as an indication of trading intent for any fund.

19 19 Case Study: Carpetright PLC UK s leading specialist carpet retailer. Carpetright PLC Daily Price Chart from 28/09/07 to 30/09/10 (British Pounds) /31/09 06/03/10 11/04/10 04/07/11 09/08/11 02/09/12 07/12/12 12/13/12 Source: Factset as of 31 December Long term competitive advantage Carpetright dominant 32% market share in the UK gives them buying power over the fragmented carpet manufacturing industry. These economies of scales lead to higher margins and lower prices for consumers driving market share gains. Carpetright has superior service to competitors it controls the majority of the carpet fitters leading to shorter waiting times between ordering and fitting. Quality Strong balance sheet low levels of net debt and strong cash generation means that it can take advantage of competitors under financial stress to take market share. CEO has been in the industry for over 50 years. Return on equity has averaged 75% over the last decade. Valuation / Risk The share price fell from a high of 1200p to under 400p as investors fled from consumer discretionary stocks reliant on the UK housing market. Even with the current weak economy the company should generate 40-60m of free cashflow a year. Combined with the strong competitive position and balance sheet this should protect us from the risk of a prolonged downturn. Ultimately, we believe Carpetright will exit the recession with an even more dominant position. The following case studies shown represent certain examples of the investment managers best performing investments and other investments made by the investment manager which were not as successful or that lost money are not shown. The investments may or may not be currently held by funds managed by the investment manager. The case studies are not representative of the overall performance of the funds managed by the investment manager as is demonstrated by those funds past performance numbers. Past performance does not guarantee future results and results may differ over future time periods. These case studies are being shown only as examples of what the investment manager is seeking to achieve in managing the fund, but are not necessarily indicative of what has actually been achieved with all of the investments or will be achieved going forward. This is not a complete analysis of every material fact regarding an industry, security or investment and should not be viewed as an investment recommendation. The actions taken with respect to these investments, and their performance, may not be representative of other advice or investments. Factual statements are taken from sources considered reliable, but have not been independently verified for completeness or accuracy by the fund s manager or its affiliates. These opinions may not be relied upon as investment advice or an offer for a particular security or as an indication of trading intent for any fund. As of 3/31/12, Carpetright PLC represented 5.25% of FTIF Franklin Global Small-Mid Cap Growth Fund. Holdings are subject to change

20 FTIF Franklin Global Small-Mid Cap Growth Fund Portfolio Construction and Performance

21 21 Fund Overview FTIF Franklin Global Small-Mid Cap Growth Fund Manager Edwin Lugo, II, CFA New York David Glatzer New York Investment Universe S&P Fund Sector Global Small-Mid Cap Equity Global Smaller Companies Launch Date April 15, 2002 Portfolio Size/Asset Allocation USD 91.5 million Number of holdings: 35 Equity 87.0% - Fixed Income 0.0% - Cash 13.0% Source: Franklin Templeton Investments as of 30 November Portfolio allocations are subject to change and are not indicative of future allocations.

22 22 Investment Process Portfolio Construction & Risk Management Bottom-up stock picking approach focused on small and mid-size companies Focus on companies between $100 million - $8.0 billion market capitalization Commitment to diversification Target of companies in the portfolio Typically no individual industry will represent more than 35% of the portfolio, at cost Typically no individual security will represent more than 5% of the portfolio, at cost Risk management Ongoing review of account holdings Monthly review of detailed performance attribution Focus on downside risk

23 Industrial Allocations Industrial Allocation against vs. MSCI World Small Cap Index Result of Bottom-up Stock Selection Process and Risk Control Measures Industrials Financials Consumer Discretionary Consumer Staples Information Technology Utilities Telecommunication Services Materials Health Care Energy 0% 8% 16% 24% 32% 40% Franklin Global Small Mid Cap Growth Fund MSCI World Small Cap Index Portfolio % Index % Over/Under Industrials Capital Goods Commercial & Professional Services Transportation Financials Insurance Diversified Financials Real Estate Banks Consumer Discretionary Retailing Consumer Durables & Apparel Media Automobiles & Components Consumer Services Consumer Staples Household & Personal Products Food Beverage & Tobacco Food & Staples Retailing Information Technology Software & Services Technology Hardware & Equipment Semiconductors & Semiconductor Equipment Utilities Utilities Telecommunication Services Telecommunication Services Materials Materials Health Care Health Care Equipment & Services Pharmaceuticals Biotechnology & Life Sciences Energy Energy Data as of 30 November Weightings as percent of equity. Percentage may not equal 100% due to rounding. Information is historical and may not reflect current or future portfolio characteristics. All portfolio holdings are subject to change. All MSCI data is provided as is. The portfolio described herein is not sponsored or endorsed by MSCI. In no event shall MSCI, its affiliates or any MSCI data provider have any liability of any kind in connection with the MSCI data or the portfolio described herein. Copying or redistributing the MSCI data is strictly prohibited. Indexes are unmanaged and one cannot invest directly in an index. 23

24 24 Geographical Allocations Geographic Allocations vs. MSCI World Small Cap Index Result of Bottom-up Stock Selection Process and Risk Control Measures Europe United Kingdom Japan North America Asia/Pacific Ex Japan Emerging Markets 0% 14% 28% 42% 56% 70% Franklin Global Small Mid Cap Growth Fund MSCI World Small Cap Index Portfolio % Index % Over/Under Europe Ireland France Greece Belgium Finland Italy Spain Netherlands Austria Germany Sweden Switzerland Other United Kingdom United Kingdom Japan Japan North America United States Canada Asia/Pacific Ex Japan Singapore Australia Hong Kong Other Emerging Markets Thailand Data as of 30 November Weightings as percent of equity. Percentage may not equal 100% due to rounding. Information is historical and may not reflect current or future portfolio characteristics. All portfolio holdings are subject to change. All MSCI data is provided as is. The portfolio described herein is not sponsored or endorsed by MSCI. In no event shall MSCI, its affiliates or any MSCI data provider have any liability of any kind in connection with the MSCI data or the portfolio described herein. Copying or redistributing the MSCI data is strictly prohibited. Indexes are unmanaged and one cannot invest directly in an index.

25 25 Why the Franklin Global Small-Mid Cap Growth Fund? Market Capitalization Analysis (figures in USD) Top 10 Holdings Grafton Group PLC 3.55% JUMBO SA 3.52% > 5 Billion 11.9 % C&C Group PLC 3.48% Euler Hermes SA 3.48% 1.5 Billion - 5 Billion 14.9 % Aderans Co. Ltd. 3.39% RHJ International 3.31% Carpetright PLC 3.22% < 1.5 Billion 60.3 % DCC PLC 3.16% Uponor OYJ 3.08% Prysmian SpA 3.04% Equity: 86.96% Fixed income: 0.00% Cash: 13.04% The 10 Largest Holdings represent the 10 largest holdings of FTIF Franklin Global Small-Mid Cap Growth Fund, a sub-fund of Franklin Templeton Investment Funds, 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. Source: Franklin Templeton Investments as of 30 November The portfolio manager for the Fund reserves the right to withhold release of information with respect to holdings that would otherwise be included in the top 10 holdings list. Equity

26 26 Why the Franklin Global Small-Mid Cap Growth Fund? Cumulative Performance YTD 1 Year 3 Years 5 Years 10 Years Franklin Global Small-Mid Cap Growth Fund MSCI World Small Cap Index Independent Recognition Total Net Assets (USD) Million Fund Inception Date 15/04/2002 Lead Portfolio Manager Edwin Lugo Primary Benchmark MSCI World Small Cap Index Source: Morningstar, Standard & Poor s and Franklin Templeton Investments. NAV-NAV,USD, gross of tax, net of management fees, net income reinvested as at 30 Nov Past performance is not a guide to future performance.

27 27 Why the Franklin Global Small-Mid Cap Growth Fund? Generate Alpha through the economic cycle Overlooked and undervalued growth companies Focus on downside risk Absolute and relative valuation for growth companies Long term focus Small growth companies become large companies Sustainable competitive advantage Building on successful long term track record Diversification Complements asset allocation strategies for improved return/risk characteristics

28 Appendix

29 Franklin Global Large Cap Team Team of Experienced Professionals Focused on Global Growth Strategies, Supported by the Broader Resources of the Franklin Equity Group 29 Franklin Global Large Cap Investment Team John P. Remmert Lead Portfolio Manager Coleen F. Barbeau Senior Portfolio Manager Investment Team Responsibility Sector Donald Huber, CFA Portfolio Manager Mary Killian Analyst Consumer Maria Lernerman, CFA Analyst Consumer Jim Battaglia, CFA Analyst Cyclicals Yan Lager Analyst Cyclicals M. Par Rostom, CFA Portfolio Manager/Analyst Financials Francyne Mu, CFA Analyst Financials Jenny Chang, CPA Analyst Health Care and Technology Brian DeChristopher, CFA Analyst Health Care and Technology Nam Hoang, CFA Analyst Technology & Telecommunications 12 investment professionals Average 17 years industry experience Average 9 years firm experience Additional Resources Franklin Global Small Cap Team Franklin European Equity Team Franklin U.S. Growth Team Source: Franklin Templeton Investments, as of 30 September CFA and Chartered Financial Analyst are trademarks owned by CFA Institute.

30 30 Biographies Ed Lugo, II, CFA Fund Manager Edwin Lugo, CFA, portfolio manager, analyst, and leader of the Global Small Cap Growth Equity team, joined Franklin in June Mr. Lugo, who has 19 years of investment experience, joined Fiduciary from Brown Capital where he was an equity owner and vice president, leading the Brown Capital international division focusing on growth investing. His responsibilities included managing the Brown Capital international mutual fund and separate institutional accounts. This is in addition to generalist analyst responsibilities. He was also a vice president, research analyst, and portfolio manager with Templeton from He holds an M.B.A. in finance from Columbia University and is a Chartered Financial Analyst (CFA) Charterholder. Currently, he is a board member of the CollegeBound Foundation and an alumnus of the Robert A. Toigo Foundation. Julian Harper Research Analyst Julian Harper is a research analyst with Franklin Equity Group, focusing on global small and mid-capitalization stocks. Mr. Harper joined the firm in April Prior to joining Franklin Templeton Investments Mr. Harper worked with AXA Private Equity, where he evaluated a number of secondary private equity, mezzanine and co-investment transactions. Mr. Harper holds a B.A. in economics and political science from Swarthmore College. He is a Christian B. Anfinsen scholar and graduated Phi Beta Kappa with honors. Mr. Harper is fluent in English, French and Spanish. CFA and Chartered Financial Analyst are trademarks owned by CFA Institute.

31 31 Biographies Pankaj Nevatia, CFA Research Analyst Pankaj Nevatia is a research analyst with Franklin Equity Group, focusing on global small and mid-capitalization stocks. Mr. Nevatia joined the firm in May Prior to joining Franklin, Mr. Nevatia worked at AllianceBernstein in the global growth equities division and in equity research at Cowen and Company. Mr. Nevatia holds an M.B.A. from Fordham University in addition to a post graduate diploma in computer applications and B.Com from Bharathiar University in India. He is also a Chartered Financial Analyst (CFA) Charterholder. Oliver Wong, CFA Research Analyst Oliver Wong is a research analyst on the Franklin Global Small Cap team with a focus on global small and midcapitalization companies. Mr. Wong joined Franklin Templeton Investments in June 2012 from ING Investment Management, where he was a research analyst. Prior to that role, he was a wealth management analyst at Morgan Stanley. Mr. Wong earned his B.S. in electrical engineering from Tufts University and holds an M.B.A. in finance from the Columbia Business School at Columbia University. Mr. Wong is a Chartered Financial Analyst (CFA) Charterholder. Julie Toran, CFA Research Analyst Julie M. Toran is a research analyst on the Franklin Global Small Cap team. Ms. Toran joined the firm in October Prior to joining Franklin Templeton Investments, Ms. Toran most recently worked as a research analyst at Para Advisors, LLC, and prior to that was a research analyst at Prentice Capital Management, LP. Ms. Toran earned her bachelor of science degree in operations research and financial engineering at Princeton University. She earned an M.B.A. in finance from Stern School of Business at New York University. Ms. Toran is a Chartered Financial Analyst (CFA) Charterholder. For Broker/Dealer and Professional Use Only. Not for Public Distribution.

32 32 Legal disclaimer This document is intended to be of general interest only and does not constitute legal or tax advice nor is it an offer for shares or invitation to apply for shares of the Luxembourg-domiciled SICAV Franklin Templeton Investment Funds (the Fund ). Nothing in this document should be construed as investment advice. Given the rapidly changing market environment, Franklin Templeton Investments disclaim responsibility for updating this material. Opinions expressed are the author s at publication date and they are subject to change without prior notice. 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 if published thereafter. 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. Past performance is not an indicator nor a guarantee of future performance. 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. An investment in the Fund entails risks which are described in the Fund s prospectus and, where available, in the relevant Key Investor Information Document. In emerging markets, the risks can be greater than in developed markets. Investments in derivative instruments entail specific risks that may increase the risk profile of the fund and are more fully described in the Fund s prospectus and, where available, in the relevant Key Investor Information Document. No shares of the Fund may be directly or indirectly offered or sold to nationals or 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. Any research and analysis contained in this document has been procured by Franklin Templeton Investments for its own purposes and is provided to you only incidentally. References to particular industries, sectors or companies are for general information and are not necessarily indicative of a fund s holding at any one time. Please consult your financial advisor before deciding to invest. A copy of the latest prospectus, the relevant Key Investor Information Document, the annual report and semi-annual report, if published thereafter can be found, on our website or can be obtained, free of charge, from Franklin Templeton International Services S.A. - Professional of the Financial Sector under the supervision of the Commission de Surveillance du Secteur Financier - 8A, rue Albert Borschette L-1246 Luxembourg - Tel: Fax: Issued by Franklin Templeton International Services S.A. For Broker/Dealer and Professional Use Only. Not for Public Distribution.

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