Franklin India Growth Fund Class A, C

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1 Franklin India Growth Fund Class A, C Growth Equity Product Profile Product Details 1 Fund Assets $142,820, Fund Inception Date 01/31/2008 Number of Issuers 45 Investment Style Benchmark Lipper Classification Morningstar Category Dividend Frequency Growth India Region Funds India Equity Annually in December Inception Date Class A 01/31/2008 Class C 01/31/2008 CUSIP NASDAQ Symbol Class A F 857 FINGX Class C F 840 FINDX Class A Class C Maximum Sales Charges 5.75% initial sales charge 1.00% contingent deferred sales charge (CDSC) in the first year only Total Annual Operating Expenses With Waiver Without Waiver Class A 1.65% 2.1% Class C 2.4% 2.85% Fund Description The fund seeks long-term capital appreciation by investing primarily in equity securities of companies organized under the laws of, with a principal office in, or for which the principal trading market for their securities is in India, companies that derive 50% or more of their revenues or profits from either goods or services produced or sales made in India, or companies with 50% of more of their assets in India. Performance Data 2 Average Annual Total Returns 3,4 (%) 3 Mths YTD 1 Yr 3 Yrs 5 Yrs 10 Yrs Since Inception Class A - With Sales Charges Class A - Without Sales Charges Class C - With Sales Charges Class C - Without Sales Charges % 20% 0% -20% Mths YTD 1 Yr 3 Yrs 5 Yrs 10 Yrs Since Inception Class A - With Sales Charges Class A - Without Sales Charges Performance data represents past performance, which does not guarantee future results. Current performance may differ from figures shown. The fund s investment return and principal value will change with market conditions, and you may have a gain or a loss when you sell your shares. Please call Franklin Templeton Investments at (800) DIAL BEN/ or visit franklintempleton.com for the most recent month-end performance. The fund has an expense reduction contractually guaranteed through 02/28/2019. Fund investment results reflect the expense reduction; without this reduction, the results would have been lower. Calendar Year Returns (% Without Sales Charges) Class A Class C If the sales charge had been included, the returns would have been lower. 1. All holdings are subject to change. Holdings of the same issuers have been combined. 2. Source for Index: FactSet. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. 3. Periods shorter than one year are shown as cumulative total returns. 4. Since inception return for the benchmark is calculated to the fund inception date. Not FDIC Insured May Lose Value No Bank Guarantee

2 Portfolio Manager Insight 5 Performance Review QUARTERLY KEY PERFORMANCE DRIVERS HELPED HURT Stocks Kotak Mahindra Bank Limited Infosys Limited HDFC Bank Limited Trent Limited Voltas Limited Idea Cellular Limited Among industrials, electric appliance manufacturer Voltas corrected over the quarter due to unfavorable weather conditions (a bad summer) and weak industry-wide sales of air conditioners, one of its key products. Idea Cellular lost ground as it reported a quarterly net loss and struggled in the competitive mobile telecommunications market. In addition, its proposed merger with Vodafone (not a fund holding) was halted by its industry regulator in June on grounds that the company had not yet paid an outstanding fee related to spectrum charges. In financials, off-benchmark positions in Kotak Mahindra Bank and HDFC Bank were lifted by a rally across the industry driven by easing worries about asset quality. In addition, India s central bank raised policy rates by 25 basis points in June. Outlook & Strategy Looking ahead, we believe India s economic growth remains on a recovery path and the bottom-up corporate earnings trend has improved. We also see definite signs of a recovery in economic growth after the recent softening trend led by the disruptive effect of one-off events, such as demonetization and the implementation of the Goods and Sales Tax (GST). Moreover, India benefits from several secular growth drivers, including favorable demographics, infrastructure investment, urban consumption growth and increasing income levels, as well as the impressive reform agenda being pursued by the government. Many of the changes currently taking place in the country could serve as positive catalysts, spurring future growth, in our view. While the election calendar may distract investors, ultimately, regardless of which party wins the 2019 general election, we do not believe the election result will change the course of the economy. The pillars of economic growth are moving in the right direction: rural consumption, urban consumption and public capital expenditure (capex) have been in positive trends for a while, while private capex has showed signs of picking up, and we also expect exports to improve. In addition, although concerns have emerged around macroeconomic stability due to rising oil prices and the potential impact on the current account deficit, inflation and fiscal situation, we believe the government is committed to staying on the path to fiscal consolidation and managing government finances prudently. Meanwhile, inflation targeting by the central bank should also help keep inflation in check. It is important to note that not all industries would be equally affected, and while lower crude prices were a tailwind, we believe India benefits from a variety of cyclical and structural growth catalysts that preserve its growth potential. In such market conditions, we believe investors should use a fundamental bottom-up approach in stock selection. Our investment team has been actively focusing on names with superior sustainability and high-quality characteristics to increase portfolio resilience against macroeconomic uncertainty. At the micro level, we are encouraged by positive feedback from companies on the ground seeing strong demand. All in all, the case for investing in India remains strong while Indian equities may not consistently generate returns at the level they did in 2017, we believe they offer healthy performance potential. 5. 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. Sectors Financials (Stock Selection) Materials (Stock Selection) Utilities (Lack of Exposure) Consumer Discretionary (Stock Selection) Industrials (Stock Selection, Overweight) Telecommunication Services (Overweight) franklintempleton.com 2

3 Portfolio Characteristics 6,7,8 Portfolio Price to Earnings (12 Month Trailing) 26.83x 22.77x Price to Book Value 3.59x 3.19x Price to Cash Flow 16.56x 13.92x Market Capitalization (Millions in USD) 21,385 58,943 Return on Equity 18.71% 20.53% 3-Year Sales Growth 9.21% 9.10% Estimated 3-5 Yr EPS Growth 21.42% 16.19% Operating Margin 17.93% 17.67% Net Margin 12.89% 13.84% Price to Earnings (12 Month Forward) 23.31x 18.69x Enterprise Value / EBIDTA (Millions in USD) Portfolio Diversification Top Ten Holdings 9 Equity as a Percent of Total Top Holdings Sector % INFOSYS LTD Software & Services 9.77 KOTAK MAHINDRA Banks 5.92 BANK LTD HDFC BANK LTD Banks 5.66 COGNIZANT Software & Services 3.76 TECHNOLOGY SOLUTIONS CORP YES BANK LTD Banks 3.56 HINDUSTAN UNILEVER Household & Personal 3.50 LTD Products LARSEN & TOUBRO Capital Goods 3.39 LTD TATA MOTORS LTD Automobiles & 3.16 Components ASIAN PAINTS LTD Materials 2.85 GODREJ CONSUMER PRODUCTS LTD Household & Personal Products 2.77 Sector Weightings vs. 10,11 Percent of Total Financials Information Technology Consumer Discretionary Industrials Materials Consumer Staples Telecommunication Services Health Care Real Estate Utilities Energy Cash & Cash Equivalents % 5% 10% 15% 20% 25% 30% 35% Franklin India Growth Fund 6. The portfolio characteristics listed are based on the fund s underlying holdings, and do not necessarily reflect the fund s characteristics. Due to data limitations all equity holdings are assumed to be the primary equity issue (usually the ordinary or common shares) of each security s issuing company. This methodology may cause small differences between the portfolio s reported characteristics and the portfolio s actual characteristics. In practice, Franklin Templeton s portfolio managers invest in the class or type of security which they believe is most appropriate at the time of purchase. The market capitalization figures for both the portfolio and the benchmark are at the security level, not aggregated up to the main issuer. Source: Factset. Price ratio calculations for weighted average use harmonic means. Any exceptions to this are noted. The Return on Equity calculation uses simple weighted average means. The Estimated 3-5 Year EPS Growth uses simple weighted average means. There can be no assurance that the Estimated 3-5 Year EPS Growth will be realized. Information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change. 7. Source: FactSet. Price ratio calculations for weighted average use harmonic means. Any exceptions to this are noted. 8,11. Source for Index: FactSet. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. 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 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. franklintempleton.com 3

4 Supplemental Performance Statistics Supplemental Risk Statistics 12,13 Class A 3 Yrs 5 Yrs 10 Yrs Standard Deviation (%) Tracking Error (%) Information Ratio Beta Sharpe Ratio Performance data represents past performance, which does not guarantee future results. Current performance may differ from figures shown. The fund s investment return and principal value will change with market conditions, and you may have a gain or a loss when you sell your shares. Please call Franklin Templeton Investments at (800) DIAL BEN/ or visit franklintempleton.com for the most recent month-end performance. Investment Philosophy We view our primary strengths as the Franklin India Equity team s presence on the ground and in-depth approach to fundamental research, its expertise in India equity investing, its investment process and its ability to think independently. Our bottom-up approach to investing is focused on the fundamental analysis of individual companies, based on internal research. It is the foundation of our investment process, aimed at identifying and selecting companies that combine growth, quality and sustainability characteristics at a sensible price. Stock Selection Philosophy Growth Quality Sustainability of Results Use of financial analysis to evaluate: Capital return and management analysis to determine: Analysis of a company s long-term ability to: potential to generate positive cash flows or earnings that appear to be increasing at a rate faster than that of the industry/economy profitable reinvestment opportunities potential to sustain high return on capital in the long term company management s strategic thinking and execution abilities integrity, depth, capital allocation and corporate governance standards sustain its competitive product/service brand/cost advantage create sustainable shareholder value Investment Process 1. Develop Universe 2. Fundamental Research 3. Valuations 4. Stock Recommendations 5. Portfolio Construction Shortlist companies from the universe of over 5,500 companies. Identify companies with sound business models, strong growth opportunities, sustainable competitive advantages, and quality management. 360-degree, in-depth analysis based on regular interactions with management, employees, customers, competitors & independent industry professionals as well as study reports/news. Financial Analysis and forecasts. Flexible approach use suitable valuation tools depending on the industry & market situation. Focus on the long-term strategic view in the valuation approach. Conduct rigorous team discussion and debate between analysts and managers on potential companies entry onto a buy, hold or sell list. Stocks rated buy, sell or hold based on growth, quality and valuation. Model Portfolio constructed from the analysts buy and hold lists. Final Portfolio: Security sizing determined by stock conviction as well as risk alignment. Portfolio Manager has discretion over exposure to stocks outside the model portfolio. 12. Beta, Information Ratio and Tracking Error information are measured against the. 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). franklintempleton.com 4

5 Investment Team Portfolio Manager Years with Firm Years Experience Sukumar Rajah, Senior Managing Director, Director of Portfolio Management, Emerging Market Stephen Dover, CFA Purav Jhaveri, CFA Additional Resources Franklin US Equity Team Global Portfolio Compliance Investment Risk Management Group Group Beta: A measure of the magnitude of a portfolio s past share-price fluctuations in relation to the ups and downs of the overall market (or appropriate market index). The market (or index) is assigned a beta of 1.00, so a portfolio with a beta of 1.20 would have seen its share price rise or fall by 12% when the overall market rose or fell by 10%. Enterprise Value/EBITDA: A ratio used to determine the value of a company and is calculated as the enterprise value divided by EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). Estimated 3-5 Year EPS Growth: An estimated measure of the growth of earnings per share over a forward-looking period. For a portfolio, the value represents a weighted average of the stocks it holds. Historical 3 Yr Sales Growth: The rate at which sales have increased for the fund s underlying holdings over the last three years. Information Ratio: In investing terminology, the ratio of expected return to risk. Usually, this statistical technique is used to measure a manager s performance against a benchmark. This measure explicitly relates the degree by which an investment has beaten the benchmark to the consistency by which the investment has beaten the benchmark. Market Capitalization: A determination of a company s value, calculated by multiplying the total number of company stock shares outstanding by the price per share. Market capitalization is expressed in millions of USD. Net Margin: The ratio of net profits to revenues for a company or business segment that shows how much of each dollar earned by the company is translated into profits. Operating Margin: A measurement of what proportion of a company s revenue is left over after paying for variable costs of production such as wages, raw materials, etc. Price to Book Value: The price per share of a stock divided by its book value (i.e., net worth) per share. For a portfolio, the value represents a weighted average of the stocks it holds. Price to Cash Flow: Supplements price/earnings ratio as a measure of relative value for a stock. For a portfolio, the value represents a weighted average of the stocks it holds. Price to Earnings (12-mo Forward): A measure of the price to earnings ratio (P/E) using the forecasted earnings for the next 12 months. Price to Earnings (12-mo Trailing): The share price of a stock, divided by its per-share earnings over the past year. For a portfolio, the value represents a weighted average of the stocks it holds. Return on Equity: A measure of a corporation s profitability that reveals how much profit a company generates with the money shareholders have invested. For a portfolio, the value represents a weighted average of the stocks it holds. Sharpe Ratio: To calculate a Sharpe ratio, an asset s excess returns (its return in excess of the return generated by risk-free assets such as Treasury bills) are divided by the asset s standard deviation. Standard Deviation: A measure of the degree to which returns vary from the average of its previous returns. The larger the standard deviation, the greater the likelihood (and risk) that performance will fluctuate from the average return. Tracking Error: Measure of the deviation of the return of a product compared to the return of a benchmark over a fixed period of time. Expressed as a percentage. The more passively the investment is managed, the smaller the tracking error. franklintempleton.com 5

6 What Are The Risks? All investments involve risks, including possible loss of principal. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in developing markets involve heightened risks related to the same factors, in addition to risks associated with these companies smaller size, lesser liquidity and the potential lack of established legal, political, business and social frameworks to support securities markets in the countries in which they operate. The fund relies on the income tax treaty between India and the Republic of Mauritius for relief from certain Indian taxes. As a result of recent treaty renegotiations, effective April 1, 2017, India began imposing taxes on short-term capital gains realized from the alienation of shares in an Indian company acquired on or after that date. The imposition of taxes by India as a result of the recent treaty renegotiations, or for any other reason, such as legislative changes or changes in the requirements to establish a residency in Mauritius will result in higher taxes and lower returns for the fund. Because the fund invests its assets primarily in companies in a specific country or region, the fund may also experience greater volatility than a fund that is more broadly diversified geographically. The fund is designed for the aggressive portion of a welldiversified portfolio. Risks are detailed in the fund s prospectus. Important Legal Information Investors should carefully consider a fund s investment goals, risks, charges and expenses before investing. To obtain a summary prospectus and/or prospectus, which contains this and other information, talk to your financial advisor, call us at (800) DIAL BEN/ or visit franklintempleton.com. Please carefully read a prospectus before you invest or send money. 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: Franklin Templeton Distributors, Inc. One Franklin Parkway San Mateo, CA (800) DIAL BEN/ franklintempleton.com 2018 Franklin Templeton Investments. All rights reserved. 141 PP 06/18