Templeton Emerging Markets Fund Fund Manager Report

Franklin Templeton Investment Funds Templeton Emerging Markets Fund Fund Manager Report Equity LU0029874905 31 January 2016 Fund Characteristics Base Currency USD Total Net Assets (USD) 464,934,127 Fund Inception Date 28.02.1991 Number Of Issuers 76 Primary Benchmark MSCI Emerging Markets Index Bloomberg Code - A(Ydis) TEMEMKI LX Fund Management Mark Mobius, PhD: Hong Kong Dennis Lim: Singapore Tom Wu: Hong Kong Overview Emerging equity markets started off the year on a somber note as signs of slowing economic growth, especially in Europe and China, led to a rise in risk aversion. The fund lost ground over the month. The information technology and consumer discretionary sectors were the largest detractors from absolute performance, with additional impacts from financials and energy. Industrials made the only substantial contribution to absolute returns. Regionally, China weighed the most on absolute performance, with further impacts from India, South Korea and South Africa. Indonesia and Thailand were the strongest contributors. Performance (%) (As of 31 January 2016) Cumulative Performance 1 Yr 3 Yrs 5 Yrs 10 Yrs Since Incept (28.02.91) Templeton Emerging Markets Fund - A(Ydis) USD NAV -23.98-33.50-32.14-9.37 141.76 MSCI Emerging Markets Index USD -20.62-24.42-23.55 23.83 496.66 Annualized Performance (%) Net Of Sales Charge^ (As of 31 January 2016) Historical Performance 1 Yr 3 Yrs 5 Yrs 10 Yrs Since Incept (28.02.91) Templeton Emerging Markets Fund - A(Ydis) USD NAV -27.78-14.19-8.40-1.49 3.39 Portfolio Allocation (%) Sector Breakdown(%) Geographic Breakdown (%) Equity 89.42 Cash & Cash Equivalents 10.58 Information Technology 29.43 Consumer Discretionary 19.81 Financials 17.08 Consumer Staples 15.03 Telecommunication Services 4.82 Energy 4.43 Health Care 4.30 Industrials 3.59 Materials 1.52 Utilities 0.00 Asia 70.19 Mid-East/Africa 11.30 Europe 11.20 Latin America/Caribbean 7.31 For information related to the headings Fund Characteristics, Portfolio Allocation, Sector Breakdown, Geographic Breakdown, Templeton Emerging Markets Fund A(Ydis) - USD NAV, please see note regarding Fund Characteristics data and Fund Ratings on back page. Source: Franklin Templeton Investments, 31 January 2016. Past performance is not an indicator or a guarantee of future performance. Source for MSCI benchmark returns: FactSet Research System, Inc., as of 31 January 2016. Performance calculated as at 31 January 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 Emerging equity markets started off the year on a somber note, as signs of slowing global economic growth, particularly in Europe and China, led to a rise in risk aversion. The oil price continued to fall as demand data fell short of expectations and investors anticipated a glut of supply. Asian markets were the worst performers, dragged down by substantial weakness in China, as the impact of growth concerns was compounded by uncertainty about the country s foreign-exchange policy and authorities intervention in equity markets. However, Southeast Asian markets such as Thailand, Malaysia and Indonesia posted solid gains, outperforming their regional and global peers. In Africa and the Middle East, Egypt was by far the weakest market, and a number of Gulf markets fell on concerns about the drop in oil prices. However, South Africa was more resilient than its regional peers, as investors favored several materials stocks in light of a brief rally in select metal prices and the rand s depreciation against the U.S. dollar. Markets in Latin America and Europe fared much better than their emerging-market peers. Peru and Chile were among the strongest performers in Latin America. In contrast, Brazil declined on concerns about disappointing economic data and persistently high inflation. Emerging European markets saw a sharp divergence in performance, with Greece posting a double-digit decline, and Poland and Romania were also weak. In contrast, Hungary and Turkey recorded gains, the former buoyed by improving consumer confidence, and the latter supported by positive sentiment for a potentially strong fourth-quarter results season. Russia and the Czech Republic were also relatively resilient. No sector within the benchmark index gained ground during the month. Financials, consumer discretionary and information technology (IT) saw the largest percentage falls, while telecommunication serves, consumer staples and energy were more resilient. Performance Review and Contributors to Performance The fund lost ground over the month. The IT and consumer discretionary sectors were the largest detractors from absolute performance, with additional impacts from financials and energy. Returns in IT were weighed down primarily by China-based Internet software and services companies that were pulled lower by a weak overall market. In addition, a search engine provider saw a degree of profit-taking after recent strength as investors were concerned about its position in the mobile search business and rising competition on other fronts. An Internet services firm declined amid the general market selloff rather than due to any stock-specific factors. South-Korea based IT stocks also weighed on absolute performance, including a consumer electronics giant and a semiconductor manufacturer, both of which reported lowerthan-expected fourth-quarter results, the latter impacted by weak demand for smartphones and personal computers. Performance in the consumer discretionary sector was impacted by a position in a major China-based automobile manufacturer, which saw its share price decline as December monthly retail sales fell and sales for the full year showed relatively muted growth, although wholesale shipments fared somewhat better as distributors replenished inventories. An Internet and media conglomerate based in South Africa also traded lower in line with the weakness in the previously mentioned China-based Internet services firm, in which it has a considerable stake. Conversely, some of the negative effects in the sector were offset by the strong performance of an Indonesia-based automotive conglomerate that was supported by local market strength and hopes that vehicle demand would continue to improve in 2016. Among financial stocks, shares of a major China-based insurer were weak, impacted not only by the local market selloff but also by preliminary fourth-quarter results that were well below market expectations. Several banking stocks held back absolute performance as well, including a major Indiabased bank that reported disappointing quarterly earnings as asset quality deteriorated amid a challenging macroeconomic environment, while a Pakistan-based bank was pressured by concerns about lower spreads amid reduced interest rates and changes to the minimum deposit rate in Pakistan. However, the negative impact was mitigated by several banking stocks that performed well, notably an Indonesia-based bank that was boosted not only by the central bank s rate cut but also by news that it planned to streamline its operations, increase efficiency and restructure its business model to focus more on lending to small and medium enterprises (SMEs). Thailandbased banks were also notable contributors, buoyed by local market strength, with one bank further benefiting from quarterly results that indicated a significant improvement in credit quality, rising loan growth and better net interest margins thanks to lower funding costs. The industrials sector was the only significant contributor to absolute performance, thanks to positions in two South Korea-based construction and engineering firms. One company focused on residential housing projects gained on significantly better-than-expected quarterly results that pointed to strong cash flow generation and improved profitability supported by its construction business, while another firm rose sharply toward month-end as fourthquarter operating results, although slightly below market expectations, were significantly better than those reported in previous years, marking the second consecutive quarter of record earnings since 2010. Investors also anticipated improving results in 2016, supported by record-high housing sales and lucrative orders for domestic plants. Regionally, China weighed the most on absolute performance, followed by India and South Korea. Further negative impacts came from South Africa and Brazil. In contrast, Indonesia was the top contributor to absolute performance, followed by Thailand. Portfolio Positioning We construct portfolios on a stock-by-stock basis, with country and sector weightings an outcome of the process. In January, the largest country positions were in China, India and Taiwan. The largest sector weights were in IT, consumer discretionary, financials and consumer staples. 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 31 January 2016) Top Sector Contributors Sector Industrials Telecommunication Services Top Security Contributors Security HYUNDAI DEVELOPMENT CO UNILEVER PLC KASIKORNBANK PUBLIC CO LTD PT BANK DANAMON INDONESIA TBK CLASS A PT ASTRA INTERNATIONAL TBK DAELIM INDUSTRIAL CO LTD KIATNAKIN BANK PUBLIC CO LTD INFOSYS LIMITED SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED MTN GROUP LIMITED Top Sector Detractors Sector Information Technology Consumer Discretionary Financials Top Security Detractors Security BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED NASPERS LIMITED CLASS N BAIDU INC SPONSORED ADR CLASS A CHINA LIFE INSURANCE CO LTD CLASS H SAMSUNG ELECTRONICS CO LTD SK HYNIX INCORPORATED ICICI BANK LIMITED TENCENT HOLDINGS LTD HABIB BANK LIMITED UNI-PRESIDENT CHINA HOLDINGS LTD Geographic Weightings vs. Benchmark (%) Sector Weightings vs. Benchmark (%) Templeton Emerging Markets Fund MSCI Emerging Markets Index Source for Top Sector Contributors and Top Sector Detractors : FactSet Research System, Inc. as of 31 January 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 31 January 2016. Profile data is calculated as a percentage of total. Holdings of the same issuer have been combined. Source for the Fund s Geographic Weightings and Sector Weightings above: Franklin Templeton Investments as of 31 January 2016. Holdings of the same issuer have been combined. Weightings as percent of equity. Source for the benchmark s Geographic Weightings and Sector Weightings above: MSCI, as of 31 January 2016. The above MSCI Index, the primary benchmark for this Fund, is an equity index calculated by Morgan Stanley Capital International (MSCI). The index measures the total return (gross dividends are reinvested) of equity securities available to foreign (nonlocal) investors in the relevant geographic region as reflected in the name of the index or as defined by MSCI. Securities included in the index are weighted according to their Free Float adjusted market capitalization (Price*Shares outstanding*foreign Inclusion Factor). For Professional Broker/Dealer investor and use only. Professional Not for distribution Use Only. to retail investors. Not for public distribution. 3

Portfolio Diversification (continued) Top Ten Equity Holdings Security Industry % of Total UNILEVER PLC Household & Personal Products 6.06 NASPERS LTD Media 5.56 TAIWAN SEMICONDUCTOR MANUFACTURING CO LTD Semiconductors & Semiconductor Equipment 5.41 TENCENT HOLDINGS LTD Software & Services 3.95 TATA CONSULTANCY SERVICES LTD Software & Services 2.86 BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LTD Automobiles & Components 2.69 ANHEUSER-BUSCH INBEV NV Food Beverage & Tobacco 2.57 BAIDU INC Software & Services 2.43 CHINA MOBILE LTD Telecommunication Services 2.43 ITAU UNIBANCO HOLDING SA Banks 2.43 Total 36.38 Portfolio Characteristics Price to Earnings Price to Book Value Price to Cash Flow Dividend Yield Market Cap (USD Millions) Templeton Emerging Markets Fund (Wtd. Avg.) 12.40x 2.02x 7.22x 2.84% 55,549 MSCI Emerging Markets Index (Wtd. Avg.) 12.66x 1.33x 7.58x 2.96% 38,734 Investment Outlook Emerging economies in general have experienced stronger economic growth trends than developed markets, and thus remain a key growth engine for the global economy, especially large and fast-growing emerging economies such as China and India. This has been a consistent long-term theme, one we expect to continue in 2016 and beyond. Despite a slight moderation in growth in China, the economy continues to expand at high rates even as its government manages the transition from an export-driven to a consumption-led economy. Meanwhile, a number of markets that were weak in 2015 could witness a reversal of fortunes. Extensive marketfriendly reforms and infrastructure investment, in many cases thanks to new governments coming to power, should be an important driver of economic performance during 2016. Low commodity prices have helped lower inflation, boost consumer purchasing power and enable governments to implement reforms and accommodative monetary policies, all of which have supported economic growth. The decline in emerging equity markets in 2015 was not broad-based, and performance diverged significantly across markets. From our perspective, though, the upside of the overall market decline is that valuations of emerging equities have become more attractive. Our ground-up investment approach has enabled us to identify what we believe are interesting investment opportunities, with recent corrections in stock prices and currency markets providing a potentially attractive opportunity, we think, to build up or expand exposure to the region. Investment Objective Long-term capital growth by investing mainly in equity securities of emerging market companies, or those companies which derive a significant proportion of their revenues or profits from emerging economies. 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. 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 information related to the heading Portfolio Characteristics above, please see note regarding Fund Characteristics data on back page. Source: Franklin Templeton Investments, 31 January 2016. Past performance is not an indicator or a guarantee of future performance. 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 capitalization 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 12 months period. 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. 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. 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. 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