Templeton Africa Fund

Franklin Templeton Investment Funds Templeton Africa Fund Equity LU0727123662 30 April 2016 Fund Manager Report Fund Characteristics Base Currency USD Total Net Assets (USD) 87,273,417 Fund Inception Date 04.05.2012 Number of Holdings 36 Primary Benchmark: Dow Jones Africa Titans 50 Index Bloomberg Code - A(acc) FTAFAAU LX Fund Management Mark Mobius, PhD: Hong Kong Overview African equity markets rose sharply over the month, outperforming developed, emerging and frontier markets thanks to considerable gains for commodity stocks. The fund recorded a solid gain in April. Most markets contributed to absolute performance, led by Zimbabwe, South Africa, Nigeria and Egypt. Tunisia and Malawi were the only detractors, with a negligible impact from both markets. In sector terms, financials and consumer staples were the strongest contributors to absolute performance, followed by telecommunication services, health care and consumer discretionary. While industrials and materials detracted, the impact was relatively small. Performance (%) (As of 30 April 2016) Cumulative Performance 1 Yr 3 Yrs Since Incept (04.05.12) Templeton Africa Fund - A(acc) USD NAV -23.67-30.14-16.80 Dow Jones Africa Titans 50 Index -18.34-19.66-16.52 Annualized Performance (%) Net Of Sales Charge^ (As of 30 April 2016) Historical Performance 1 Yr 3 Yrs 5 Yrs 10 Yrs Since Incept (04.05.12) Templeton Africa Fund - A(acc) USD NAV -27.49-12.77 N/A N/A -5.73 Portfolio Allocation (%) Geographic Breakdown (%) Sector Breakdown (%) Equity 91.24 Cash and Cash Equivalents 8.76 Egypt 18.93 South Africa 17.57 Kenya 16.25 Nigeria 13.57 Botswana 7.49 Other 26.19 Consumer Staples 37.41 Financials 24.93 Telecommunication Services 14.00 Industrials 8.78 Consumer Discretionary 7.44 Health Care 5.19 Energy 2.16 Materials 0.11 For information related to the headings Fund Characteristics, Portfolio Allocation, Sector Breakdown, Geographic Breakdown, Templeton Africa Fund A(acc) - USD NAV, please see note regarding Fund Characteristics data and Fund Ratings on back page. Source: Franklin Templeton Investments, 30 April 2016. Past performance is not an indicator or a guarantee of future performance. The fund offers other share classes subject to different fees and expenses, which will affect their performance. Please see the prospectus for details. Source for benchmark returns: FactSet Research System, Inc., as of 30 April 2016. Performance calculated as at 30 April 2016 in USD; NAV-NAV; dividend reinvested. Past performance is not indicative of future performance. ^Initial sales charge of 5%. For Broker/Dealer and Professional Use Only. Not for public distribution. 1

Market Review Equity markets globally benefited from a return of investor confidence in April. Investor sentiment was buoyed by the U.S. Federal Reserve s continued dovish stance regarding interest rates. Oil prices rallied sharply over the month, with the price of Brent crude oil ending the month more than 20% higher. African equity markets rose sharply over the month, outperforming developed, emerging and frontier markets thanks to considerable gains for commodity stocks. Within the benchmark index, Zambia is represented by a single mining stock that rose substantially over the month. Egypt and Nigeria were among larger markets to record robust performance. Strength in banking stocks drove Nigeria s advance, while Egypt was one of the strongest performing markets globally, buoyed as the economy continued to receive financial support from several quarters, including Saudi Arabia, the United Arab Emirates and the World Bank. Morocco s market was also notably robust, and South Africa gained as mining stocks rebounded sharply with the rise in commodity prices. Nearly all sectors in the benchmark index advanced over the month. The energy and materials sectors were by far the strongest performers, rising more than 25% thanks to strength in commodity prices. Health care, financials and telecommunication services also performed well, albeit to a lesser extent. Consumer discretionary was the only sector to decline. Performance Review and Contributors to Performance The fund recorded a solid gain in April. Nearly all markets and sectors contributed to the fund s performance for the month. In terms of markets, the largest contributor was Zimbabwe, driven by a position in brewing company Delta Corporation, which recovered from earlier weakness after first-quarter results demonstrated the company s resilience in a difficult market environment. To combat generally weak consumer demand, the company plans to adopt strategies to address affordability and to stimulate volume through price reductions and streamlined costs. The fund s positions in South Africa also aided absolute returns, primarily an investment in wireless operator MTN Group, which provides services across the continent. MTN continued its March rally into April, following a long run of weakness, as concerns regarding a hefty fine levied on its lucrative Nigerian subsidiary were alleviated by news of MTN s negotiating a settlement with Nigerian authorities. Investors hoped that this settlement, if accepted, could eliminate a long, drawn-out dispute and possibly result in a higher dividend payout. Strength in a number of banking stocks drove gains for the fund s holdings in Nigeria, led by Zenith Bank and Guaranty Trust Bank. Zenith Bank s stock price, in particular, recovered from a sharp drop at the end of March after first-quarter earnings released in April exceeded market expectations, even though they were slightly lower than those for the same period a year ago. Among the fund s investments in Egypt, top contributors included Egyptian International Pharmaceutical Industries (EIPICO) and Commercial International Bank (Egypt). After a sharp fall in March, EIPICO s share price rebounded in April, lifted by local market strength, as Egypt s market was one of the strongest performers globally. Investors also reassessed the impact of the devaluation in the Egyptian pound on EIPICO s earnings and took a favourable view of the stock s low valuations following the share price decline in March. The only markets to detract from the fund s absolute performance were Tunisia and Malawi, both of which had a negligible impact. Among individual stocks, top detractors included two Egypt-based stocks, Eastern Tobacco and Arabian Food Industries (Domty). Eastern Tobacco was affected by concerns about an increase in raw material costs due to a 47.5% increase in custom duty (which came into effect in January) and the depreciation of the Egyptian pound. Meanwhile, Domty was subject to profit-taking in the latter part of April following a successful initial public offering in March and strong full-year 2015 corporate results released in early April. Elsewhere, industrial conglomerate UAC of Nigeria fell during the month after the company reported a sharp drop in full-year 2015 earnings, with weakness across all business segments. The company faced a difficult operating year due to slower economic growth in Nigeria, coupled with USdollar shortages in the foreign exchange market following a devaluation of the naira. In sector terms, the financials and consumer staples sectors were the strongest contributors to the fund s absolute performance. Positions in telecommunication services, health care and consumer discretionary also significantly benefited returns. In contrast, the industrials and materials sectors detracted from absolute performance, but the impact was relatively small. Portfolio Positioning We construct portfolios on a stock-by-stock basis, with country and sector weightings an outcome of the process. In April, the largest country positions were in South Africa, Egypt, Kenya and Nigeria, and the largest sector weights were in consumer staples, financials and telecommunication services. For Professional Broker/Dealer investor and use only. Professional Not for distribution Use Only. to retail investors. Not for public distribution. 2

Portfolio Diversification (As of 30 April 2016) Top Sector Contributors Sector Financials Consumer Staples Telecommunication Services Top Sector Detractors Sector Industrials Materials Top Security Contributors Security DELTA CORPORATION LIMITED EGYPTIAN INTERNATIONAL PHARMACEUTICAL INDUSTRIES CO COMMERCIAL INTERNATIONAL BANK (EGYPT) SAE MTN GROUP LIMITED ZENITH BANK PLC GUARANTY TRUST BANK PLC SOCIETE NATIONALE DES TELECOMMUNICATIONS DU SENEGAL EAST AFRICAN BREWERIES LIMITED MR PRICE GROUP LIMITED NIGERIAN BREWERIES PLC Top Security Detractors Security EASTERN TOBACCO CO ARABIAN FOOD INDUSTRIES CO UAC OF NIGERIA PLC CO-OPERATIVE BANK OF KENYA LTD JUHAYNA FOOD INDUSTRIES KCB GROUP LIMITED NEW MAURITIUS HOTELS LIMITED INTEGRATED DIAGNOSTICS HOLDINGS PLC POULINA GROUP HOLDING PRESS CORPORATION LIMITED SPONSORED GDR REGS Top Ten Equity Holdings Security Industry % of Total SONATEL Telecommunication Services 5.79 DELTA CORP LTD Food Beverage & Tobacco 4.98 SECHABA BREWERY HOLDING LTD Food Beverage & Tobacco 4.69 KCB GROUP LTD Banks 4.66 EAST AFRICAN BREWERIES Food Beverage & Tobacco 4.55 POULINA GROUP Capital Goods 4.48 SHOPRITE HOLDINGS LTD Food & Staples Retailing 4.41 MR PRICE GROUP LTD Retailing 4.26 EGYPTIAN INTL PHAR Pharmaceuticals, Biotechnology & Life Sciences 3.79 EASTERN TOBACCO Food Beverage & Tobacco 3.73 Total 45.36 Source for Top Sector Contributors and Top Sector Detractors : FactSet Research System, Inc. as of 30 April 2016. Profile data is calculated as a percentage of total. Holdings of the same issuer have been combined. Source for Top Security Contributors and Top Security Detractors : FactSet Research System, Inc. as of 30 April 2016. Profile data is calculated as a percentage of total. Holdings of the same issuer have been combined. For the Top Ten Equity Holdings above, please note that top ten equity holdings information is historical and may not reflect current or future fund characteristics. All holdings are subject to change. Holdings of the same issuers have been combined. 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 in the top 10 holdings list. For Professional Broker/Dealer investor and use only. Professional Not for distribution Use Only. to retail investors. Not for public distribution. 3

Portfolio Diversification (Cond.) Geographic Weightings vs. Benchmark (% of Equity) Templeton Africa Fund Sector Weightings vs. Benchmark (% of Equity) Dow Jones Africa Titans 50 Index Investment Outlook We continue to hold a positive outlook for African markets, with a long-term view. These markets have the potential for very strong economic growth, which we believe produces an environment favourable to corporate profitability and earnings growth. Much of this potential, both in terms of natural resources and manpower, has not yet been fully tapped. Many African markets not only boast significant resources of oil, gas and hard commodities, but also provide means to expand the production of soft commodities. In addition, a large proportion of the population in these markets is young and at the most productive stage in their lives. These individuals are also gradually becoming increasingly educated, urbanised and productive, creating a ripe consumer market that could drive domestic economic growth. We believe the opportunity is magnified by market valuations for African corporations that often stand below those of their peers in more developed markets. We are aware, however, that market participants remain highly sensitive to macroeconomic indicators and global monetary policy, and accordingly we expect to see continued bouts of volatility before full confidence returns to investors. Investors tend to have a disproportionately negative reaction to surprises, and often the less well-known African markets bear the brunt of a flight to safety on these occasions. While heightened market volatility can be unsettling, we aim to look beyond the short term to find and invest in well-managed growth leaders at what we believe are attractive valuations. As we look forward, it is important to note that times of stress in financial markets can offer the largest upside potential in the medium term. Investment Objective The Fund s investment objective is to provide long-term capital appreciation by investing principally in equity and equity-related securities of companies across the market capitalisation spectrum which are (i) incorporated or listed in African countries, and/or (ii) listed or incorporated elsewhere in the world but have their principal business activities in African countries. Investment Philosophy The foundation of the Templeton Emerging Markets Team s investment philosophy value-oriented, patient, bottom-up, global investing has remained consistent for several decades. Its strategy is grounded in patience and the belief that on a short-term basis, stocks overreact to news and noise. On a long-term basis, markets are efficient and patience will reward those who have identified undervalued stocks. Through proprietary research, Templeton seeks to identify quality investments in frequently unfashionable and undervalued stocks. Source for the Fund s Geographic Weightings and Sector Weightings above: Franklin Templeton Investments as of 30 April 2016. Holdings of the same issuer have been combined. Weightings as percent of equity. For Professional Broker/Dealer investor and use only. Professional Not for distribution Use Only. to retail investors. Not for public distribution. 4

Explanatory Notes Fund Characteristics: The Price to Earnings, Price to Cash Flow and Price to Book Value calculations shown herein use harmonic means. Values less than 0.01 (i.e. negative value) are excluded and values in excess of 200x are capped at 200x. Yields above 100% are also excluded. For the benchmarks, no limits are applied to these ratios in keeping with the benchmark s calculation methodology. Market capitalization statistics are indicated in the base currency for the portfolio presented. Yield figures quoted should not be used as an indication of the income to be received. Fund Ratings: Copyright - 2016 Morningstar, Inc. All rights reserved. Morningstar Rating as of date indicated above, in the respective Morningstar TM Category relevant to the fund. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) 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. 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. Disclaimers: 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 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 capitalisation figures for both the portfolio and the benchmark are the security level, not aggregated up to the main issuer. The dividend yield quoted here should not be used as an indication of the income to be received from this portfolio. Top Security Contributors and Top Security Detractors are holdings based on the last one month period for rolling months or on the last three months period for quarter end months. These securities do not represent all the securities purchased, sold or recommended for advisory clients, and the reader should not assume that investment in the security listed was or will be profitable. Holdings are subject to change, holdings of the same issuer have been combined. The information provided is not a recommendation to purchase, sell or hold any particular security. The security identified does not represent the composite s entire holdings and in the aggregate, may represent a small percentage of such holdings. There is no assurance that security purchased will remain in the composite, or that security sold will not be repurchased. Securities mentioned in this report are not a solicitation to purchase those securities, and are examples of some securities which performed well. Not all securities in the portfolio performed well. These securities do not represent all the securities purchased, sold or recommended for advisory clients, and the reader should not assume that investment in the security listed was or will be profitable. Holdings are subject to change, holdings of the same issuer have been combined. The information provided is not a recommendation to purchase, sell or hold any particular security. The security identified does not represent the composite s entire holdings and in the aggregate, may represent a small percentage of such holdings. There is no assurance that security purchased will remain in the composite, or that security sold will not be repurchased. 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. The indices are provided only to show the investment environment during the specific periods shown. The performance of each index does not include the deduction of expenses and does not represent the performance of any Franklin Templeton fund. 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. Past performance is no guarantee of future results. In addition, it should not be assumed that any securities mentioned were or will prove to be profitable. For the most current information on the fund, please contact your Franklin Templeton marketing representative. 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 Professional investor use only. Not for distribution to 2016 retail Franklin investors. Templeton Investments. All rights reserved. 5

This document is for information only and does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. Any research and analysis contained in this presentation has been procured by Franklin Templeton Investments for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Any views expressed are the views of the fund manager and do not constitute investment advice. The underlying assumptions and these views are subject to change. Franklin Templeton Investments accepts no liability whatsoever for any direct or indirect consequential loss arising from the use of any information, opinion or estimate herein. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets is not necessarily indicative of the future or likely performance. Past performance or any prediction or forecast is not necessarily indicative of future performance of the Fund. Subscriptions may only be made on the basis of the most recent Prospectus and Product Highlights Sheet which is available at Templeton Asset Management Ltd or our authorised distributors. Potential investor should read the details of the Prospectus and Product Highlights Sheet before deciding to subscribe for or purchase the Fund. This shall not be construed as the making of any offer or invitation to anyone in any jurisdiction in which such offer is not authorised or in which the person making such offer is not qualified to do so or to anyone to whom it is unlawful to make such an offer. In particular, this Fund is not available to U.S. Persons and Canadian residents. Opinions expressed within the promotion are subject to change without prior notice. The Fund may use financial derivative instruments which entail specific risks more fully described in the Fund s Prospectus. Investors may wish to seek advice from a financial adviser before making a commitment to invest in shares of the Fund. In the event an investor chooses not to seek advice from a financial adviser, he/she should consider whether the Fund is suitable for him/her. Copyright 2016 Franklin Templeton Investments. All rights reserved. Issued by Templeton Asset Management Ltd. Registration No. (UEN) 199205211E For Professional investor use only. Not for distribution to 2016 retail Franklin investors. Templeton Investments. All rights reserved. 6