For Professional Investor Use Only. Not for Distribution to Retail Investors.For Financial Professional Use Only / Not for Distribution to the PublicFor Professional Investor Use Only. Not for Distribution to Retail Investors.

EMERGING MARKETS:NEW ECONOMY OPPORTUNITIES

Alistair J. MacDonald, CFAVice PresidentInstitutional Portfolio ManagerTempleton Emerging Markets Group

CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

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Emerging Markets:Why Now?

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Politics......and Populism

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Source: Boris Johnson: http://snappa.static.pressassociation.io/assets/2015/06/17124034/1434541231-dcf7a33bc96928df154a7685e03afadb-600x800.jpgDonald Trump: http://thehustle.co/donald-trump-technology

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Energy/Materials Technology Consumer

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Technology: Secular Long Term GrowthEmerging Markets Most Tech Dominated Index

For illustrative and discussion purposes only. Past performance is not an indicator or a guarantee of future performance.Source: FactSet, MSCI, as of March 2018. 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. See www.franklintempletondatasources.com for additional data provider information.

MSCI EM Index Sector EvolutionJanuary 2008 – March 2018

IT Sector Weighting: MSCI IndicesMarch 2018

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Technology: SemiconductorsProfitability Supported by Market Consolidation

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DRAM Market Share by Company2005–2016

26% 25% 24% 27% 32% 37% 39% 41% 42% 47% 49% 52%16% 17% 23% 21%

23% 22% 23%29% 31%

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

OthersQimondaElpidaMicronHynixSamsungDR

AM M

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For illustrative and discussion purposes only. Past performance is not an indicator or a guarantee of future performance.Source: Gartner, IC insight, J.P. Morgan estimate, as of December 2016. See www.franklintempletondatasources.com for additional data provider information.

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Technology: eCommerce DominanceSingles Day Biggest Retail Event Globally

For illustrative and discussion purposes only. Source: Bloomberg; Techcrunch, adobe analytics Black Friday online sales US$5.03B, Cyber Monday; US$6.59bn and Thanksgiving US$2.87bn Total was for the period from 23-27 November 2017. Total sales in 2017 reached US$25 billion for Alibaba.

$25.3bn

Alibaba Singles Day Sales2017

$19.6bnAll Retailers in U.S.

Thanksgiving, Black Friday, & Cyber Monday Online Sales2017

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For Professional Investor Use Only. Not for Distribution to Retail Investors.

For illustrative and discussion purposes only. Past performance is not an indicator or a guarantee of future performance.As of March 2018. This is an example of an investment made by the Templeton Emerging Markets Group; the investment may or may not be currently held by a fund or any investment vehicle advised by Templeton Emerging Markets Group. This is not a complete analysis of every material fact regarding any industry, security or investment and should not be viewed as an investment recommendation. This is intended to provide insight into the advisor’s portfolio selection process. The actions taken with respect to this investment and its performance may not be representative of other advice or investments made by the advisor. 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 as an offer for a particular security or as an indication of trading intent for any Franklin Templeton fund. All portfolio holdings are subject to change. In addition, it should not be assumed that any securities transactions discussed were or will prove to be profitable.

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Technology: How Small Caps SucceedCompete or Complement?

Baozun: Chinese eCommerce Service Provider

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Company IPO at $110mn; priced below indicative range. 10% Alibaba stake. 2015 challenging year for broader market and company profitability

Initiated exposure on growth expectations, shift in business model, greater client integration; client channel checks strong

2016: Strategic shift in company’s service model; increasing recognition of value-add from foreign brands. Rising GMV and profitability

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For illustrative and discussion purposes only. Past performance is not an indicator or a guarantee of future performance.Source: International Energy Agency, BAAM, InsideEVs, ACEA; June 30, 2017. US FDA as of July 31, 2017.

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US FDA Approved Manufacturing PlantsJuly 31, 2017

New Electric Vehicle Registrations2010–2016

Technology: EVs and HealthcareEmerging Market Leadership

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For illustrative and discussion purposes only. Past performance is not an indicator or a guarantee of future performance.Source: Tesla Motors, BYD annual reports.

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Technology: Electric VehiclesChina Outpacing U.S. in 2017 Sales

BYD: 108,612Tesla: 103,181

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Consumer: PremiumisationBrilliance China: Then…:

Source: CarNewsChina.com, ChinaCarForums.com.

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Consumer: PremiumisationBrilliance China: …And now:

Source: BMWBlog.com

For Professional Investor Use Only. Not for Distribution to Retail Investors.

For illustrative and discussion purposes only. Past performance is not an indicator or a guarantee of future performance.As of March 2018. This is an example of an investment made by the Templeton Emerging Markets Group; the investment may or may not be currently held by a fund or any investment vehicle advised by Templeton Emerging Markets Group. This is not a complete analysis of every material fact regarding any industry, security or investment and should not be viewed as an investment recommendation. This is intended to provide insight into the advisor’s portfolio selection process. The actions taken with respect to this investment and its performance may not be representative of other advice or investments made by the advisor. 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 as an offer for a particular security or as an indication of trading intent for any Franklin Templeton fund. All portfolio holdings are subject to change. In addition, it should not be assumed that any securities transactions discussed were or will prove to be profitable.

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Consumer: PremiumisationBrands Support Earnings Sustainability

Brilliance: BMW’s Joint Venture in China

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HKD

Anti-corruption campaign and auto market weakness impact sentiment; short term marketing costs impact earnings. Shareholdings increased four-fold.

Earnings growth accelerates in 2017 on successful introduction of new models; JV with Renault.

Exposure initiated by previous PM on long term positive earnings outlook

For Professional Investor Use Only. Not for Distribution to Retail Investors.

For illustrative and discussion purposes only. Past performance is not an indicator or a guarantee of future performance.As of March 2018. This is an example of an investment made by the Templeton Emerging Markets Group; the investment may or may not be currently held by a fund or any investment vehicle advised by Templeton Emerging Markets Group. This is not a complete analysis of every material fact regarding any industry, security or investment and should not be viewed as an investment recommendation. This is intended to provide insight into the advisor’s portfolio selection process. The actions taken with respect to this investment and its performance may not be representative of other advice or investments made by the advisor. 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 as an offer for a particular security or as an indication of trading intent for any Franklin Templeton fund. All portfolio holdings are subject to change. In addition, it should not be assumed that any securities transactions discussed were or will prove to be profitable.

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Healthcare: Diversified OpportunitiesIdiosyncratic Returns

Medy Tox: Korean Botox Producer

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Off benchmark, under-researched, under-owned and undervalued company trading at 13x PE with market cap of $106m at purchase. 90 day ADV of $1.5m. Only 5 local research firms cover stock.

Added exposure on weakness during 2016. Dec-2017: Stock now covered by 18 sell side analysts, including international firms. 37x forward PE, 90 day ADV of $18m, market cap of $2.4bn.

Stock added to MSCI EM Small Cap Index in June 2012, trading at 19x forward PE with 90 day ADV of $5m.

Trimmed exposure during 2015. Dec-2015: Re-rated to 63x forward PE, with market cap of $2.3bn.

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Emerging Markets: Under-ownedEM Equities Massively Under-represented in Investor Portfolios

Emerging Markets as a % of:December 2017

For illustrative and discussion purposes only. Past performance is not an indicator or a guarantee of future results.Source: World Bank, FactSet, MSCI, EPFR, Citi Research. As of December 2017. *As of December 2017.

9%

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Global Fund Allocations

MSCI AC World

Global Market Cap

Global GDP*

Patent Applications*

Global GDP Growth*

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Important Disclosures

© 2018 Franklin Templeton Investments. All rights reserved.

Collective Investment Schemes in Securities (CIS) are generally medium to long term investments. The value of participatory interests may go down as well as up and past performance is not necessarily aguide to the future. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down. CIS are traded at ruling prices and can engage inborrowing and scrip lending. A schedule of fees and charges and maximum commissions is available on request from Franklin Templeton International Services S.à r.l., 8A rue Albert Borschette, L-1246Luxembourg. Commission and incentives may be paid and if so, would be included in the overall costs. Franklin Templeton Investment Funds (“FTIF”) are priced on a forward basis and prices arecalculated daily. FTIF does not provide any guarantee either with respect to the capital or the return of a portfolio. FTIF is regulated in Luxembourg and the FTIF sub-funds available for public sale in SouthAfrica are approved by the Financial Services Board. Investments in foreign securities may expose the fund to risks such as potential constraints on liquidity and repatriation of funds, macroeconomic,political, foreign exchange, tax, settlement and potential limitations on the availability of market information. For full information on all the risks applicable to this fund, please refer to the fund’s prospectus.

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