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Franklin Templeton Investment Funds
SOCIÉTÉ D’INVESTISSEMENT À CAPITAL VARIABLE
AUDITED ANNUAL REPORT
JUNE 30, 2012
R.C.S. B35177
FRANKLIN TEMPLETON INVESTMENT FUNDS
société d’investissement à capital variable
AUDITED ANNUAL REPORT
FOR THE YEAR ENDED JUNE 30, 2012
This report shall not constitute an offer or a solicitation of an offer to buy shares of Franklin Templeton Investment
Funds (the “Company”). Subscriptions are to be made on the basis of the current full prospectus and its addendum as
the case may be, the relevant Key Investor Information Documents (“KIIDs”), a copy of the latest available audited
report and, if published thereafter, the latest unaudited semi-annual report.
The auditor’s report refers only to the full English version of the Annual Report and not to any translated versions.
FRANKLIN TEMPLETON INVESTMENT FUNDS
www.franklintempleton.lu Audited Annual Report 3
Contents
General Information 4
The Board of Directors 6
Report of the Investment Managers 11
Audit Report 13
Fund Performance 14
Statement of Net Assets 16
Statement of Operations and Changes in Net Assets 30
Statistical Information 43
Notes to the Financial Statements 56
Franklin Asian Flex Cap Fund 87
Franklin Biotechnology Discovery Fund 89
Franklin Euroland Core Fund 91
Franklin European Core Fund 93
Franklin European Dividend Fund 96
Franklin European Growth Fund 98
Franklin European Small-Mid Cap Growth Fund 99
Franklin Global Convertible Securities Fund 101
Franklin Global Growth Fund 103
Franklin Global Real Estate Fund 105
Franklin Global Small-Mid Cap Growth Fund 107
Franklin Gold and Precious Metals Fund 109
Franklin High Yield Fund 111
Franklin Income Fund 116
Franklin India Fund 121
Franklin MENA Fund 123
Franklin Natural Resources Fund 125
Franklin Real Return Fund 128
Franklin Strategic Income Fund 130
Franklin Technology Fund 140
Franklin U.S. Dollar Liquid Reserve Fund 142
Franklin U.S. Equity Fund 143
Franklin U.S. Focus Fund 145
Franklin U.S. Government Fund 146
Franklin U.S. Low Duration Fund 147
Franklin U.S. Opportunities Fund 153
Franklin U.S. Small-Mid Cap Growth Fund 156
Franklin U.S. Total Return Fund 159
Franklin World Perspectives Fund 166
Franklin Mutual Beacon Fund 173
Franklin Mutual Euroland Fund 177
Franklin Mutual European Fund 179
Franklin Mutual Global Discovery Fund 182
Franklin Templeton Global Allocation Fund 186
Franklin Templeton Global Equity Strategies Fund 192
Franklin Templeton Global Fundamental Strategies Fund 197
Franklin Templeton Global Growth and Value Fund 205
Franklin Templeton Japan Fund 209
Templeton Africa Fund 211
Templeton Asian Bond Fund 213
Templeton Asian Growth Fund 215
Templeton Asian Smaller Companies Fund 217
Templeton BRIC Fund 219
Templeton China Fund 221
Templeton Eastern Europe Fund 224
Templeton Emerging Markets Fund 226
Templeton Emerging Markets Balanced Fund 229
Templeton Emerging Markets Bond Fund 231
Templeton Emerging Markets Smaller Companies Fund 235
Templeton Euro Government Bond Fund 238
Templeton Euro High Yield Fund 239
Templeton Euro Liquid Reserve Fund 242
Templeton Euro Short-Term Money Market Fund 243
Templeton Euroland Fund 244
Templeton European Fund 246
Templeton European Corporate Bond Fund 249
Templeton European Total Return Fund 251
Templeton Frontier Markets Fund 253
Templeton Global Fund 256
Templeton Global (Euro) Fund 259
Templeton Global Aggregate Bond Fund 262
Templeton Global Aggregate Investment Grade Bond Fund 264
Templeton Global Balanced Fund 265
Templeton Global Bond Fund 269
Templeton Global Bond (Euro) Fund 273
Templeton Global Equity Income Fund 275
Templeton Global High Yield Fund 277
Templeton Global Income Fund 282
Templeton Global Smaller Companies Fund 288
Templeton Global Total Return Fund 291
Templeton Growth (Euro) Fund 299
Templeton Korea Fund 302
Templeton Latin America Fund 303
Templeton Thailand Fund 305
Annex – Unaudited Additional Disclosures 307
Franklin Templeton Investments Office Directory 309
4 Audited Annual Report www.franklintempleton.lu
FRANKLIN TEMPLETON INVESTMENT FUNDS
société d’investissement à capital variable
26, boulevard Royal, L-2449 Luxembourg, Grand-Duchy of Luxembourg
(Registered with the registre de commerce et des sociétés, Luxembourg, under number B 35 177)
General Information (as at June 30, 2012)
BOARD OF DIRECTORS
Chairman
The Honorable Nicholas F. Brady
CHOPTANK PARTNERS, INC.
16 North Washington Street
Easton, MD 21601, U.S.A.
Directors
Duke of Abercorn KG
Director
TITANIC QUARTER
Barons Court
Omagh BT78 4EZ, Northern Ireland, U.K.
Vijay C. Advani
Executive Vice President-Global Advisory Services
FRANKLIN RESOURCES, INC.
One Franklin Parkway
San Mateo, CA 94403-1906, U.S.A.
Richard H. Frank
DARBY OVERSEAS INVESTMENTS, LTD
1133 Connecticut Avenue, NW, Suite 400
Washington DC 20036, U.S.A.
Mark G. Holowesko
President
HOLOWESKO PARTNERS LTD
Shipston House
Box N-7776, West Bay Street, Lyford Cay,
Nassau, Bahamas
James J. K. Hung
President and Chief Executive Officer
ASIA SECURITIES GLOBAL LTD
Room 63, 21st floor, New World Tower 1
18 Queen’s Road, Central
Hong Kong
Gregory E. Johnson
President and Chief Executive Officer
FRANKLIN RESOURCES, INC.
One Franklin Parkway
San Mateo, CA 94403-1906, U.S.A.
Geoffrey A. Langlands
Managing Partner
LANGLANDS CONSULTORIA Ltda
Avenida das Américas 500
Bloco 6, Sala 227 (Downtown)
Rio de Janeiro – RJ
CEP 22640-100, Brazil
Gregory E. McGowan
Executive Vice President and General Counsel
TEMPLETON WORLDWIDE, INC.
300 S.E. 2nd Street, 11th Floor
Fort Lauderdale, FL 33301-1923, U.S.A.
Dr J. B. Mark Mobius
Executive Chairman
TEMPLETON EMERGING MARKETS GROUP
7 Temasek Boulevard, # 38-03 Suntec Tower One
Singapore 038987
David E. Smart
Director and Co-Chief Executive Officer
FRANKLIN TEMPLETON INVESTMENT MANAGEMENT LIMITED
The Adelphi Building, 1-11 John Adam Street
London WC2N 6HT, England, U.K.
The Honourable Trevor G. Trefgarne
Chairman
ENTREPRISE GROUP LIMITED
11 High Street
Accra, Ghana
CONDUCTING OFFICERS:
William Lockwood
26, boulevard Royal, L-2449 Luxembourg
Grand-Duchy of Luxembourg
Denise Voss
26, boulevard Royal, L-2449 Luxembourg
Grand-Duchy of Luxembourg
REGISTERED OFFICE:
26, boulevard Royal, L-2449 Luxembourg
Grand-Duchy of Luxembourg
PRINCIPAL DISTRIBUTOR:
TEMPLETON GLOBAL ADVISORS LIMITED
P.O. Box N-7759, Lyford Cay, Nassau, Bahamas
INVESTMENT MANAGERS:
FRANKLIN TEMPLETON INVESTMENT MANAGEMENT LIMITED
5 Morrison Street
Edinburgh EH3 8BH, Scotland
U.K.
Franklin Templeton Investment Management Limited manages the following Funds:
Franklin Euroland Core Fund;
Franklin European Core Fund;
Franklin European Dividend Fund;
Franklin European Growth Fund;
Franklin World Perspectives Fund***;
Franklin Templeton Global Allocation Fund¶;
Franklin Templeton Global Equity Strategies Fund**;
Franklin Templeton Global Fundamental Strategies Fund†;
Templeton Euro Government Bond Fund;
Templeton Euro High Yield Fund*;
Templeton Euro Liquid Reserve Fund;
Templeton Euro Short-Term Money Market Fund;
Templeton Euroland Fund;
Templeton European Fund;
Templeton European Corporate Bond Fund‡;
Templeton European Total Return Fund*;
Templeton Global Fund;
Templeton Global (Euro) Fund;
Templeton Global Aggregate Bond Fund;
Templeton Global Aggregate Investment Grade Bond Fund;
Templeton Global Balanced Fund*; and
Templeton Global Equity Income Fund.
* Franklin Templeton Investment Management Limited has been appointed as CoInvestment Manager of these Funds, together with Franklin Advisers, Inc.
** Franklin Templeton Investment Management Limited has been appointed as CoInvestment Manager of this Fund, together with (i) Franklin Advisers, Inc., (ii) Franklin
Mutual Advisers, LLC (iii) Templeton Asset Management Limited and (iv) Templeton
Global Advisors Limited.
*** Franklin Templeton Investment Management Limited has been selected and
appointed by the lead Investment Manager Franklin Advisers, Inc. as Co-Investment
Manager of this Fund together with (i) Franklin Templeton Investments Corp., (ii)
Franklin Templeton Investments Japan Limited, (iii) Franklin Templeton Investimentos
(Brasil) Ltda.and (iv) Franklin Templeton Investment Trust Management Co. Limited.
‡ Franklin Templeton Investment Management Limited has been appointed as CoInvestment Manager for this Fund, together with (i) Franklin Templeton Institutional
LLC and (ii) Franklin Advisers, Inc.
¶ Franklin Templeton Investments Management Limited has been appointed as CoInvestment Manager of this Fund, together with (i) Franklin Mutual Advisers LLC, (ii)
Franklin Templeton Institutional LLC, (iii) Templeton Asset Management Limited, (iv)
Templeton Global Advisors Limited, (v) Templeton Investment Counsel LLC and (vi)
Franklin Advisers, Inc.
† Franklin Templeton Investment Management Limited has been appointed as CoInvestment Manager for this Fund, together with (i) Franklin Advisers, Inc., (ii)
Templeton Global Advisors Limited and (iii) Franklin Mutual Advisers, LLC.
TEMPLETON ASSET MANAGEMENT LIMITED
7 Temasek Boulevard
# 38-03 Suntec Tower One
Singapore 038987
Templeton Asset Management Limited manages the following Funds:
Franklin Templeton Global Allocation Fund*
Franklin Templeton Global Equity Strategies Fund**;
Templeton Africa Fund;
Templeton Asian Growth Fund;
Templeton Asian Smaller Companies Fund;
Templeton BRIC Fund;
Templeton China Fund;
Templeton Eastern Europe Fund;
Templeton Emerging Markets Fund;
Templeton Emerging Markets Balanced Fund†;
Templeton Emerging Markets Smaller Companies Fund;
Templeton Frontier Markets Fund;
Templeton Korea Fund;
Templeton Latin America Fund; and
Templeton Thailand Fund.
* Templeton Asset Management Limited has been appointed as Co-Investment
Manager of this Fund, together with (i) Franklin Mutual Advisers LLC, (ii) Franklin
Templeton Institutional LLC, (iii) Franklin Advisers, Inc, (iv) Templeton Global
Advisors Limited, (v) Templeton Investment Counsel LLC and (vi) Franklin Templeton
Investment Management Limited.
** Templeton Asset Management Limited has been appointed as Co-Investment
Manager of this Fund, together with (i) Franklin Advisers, Inc., (ii) Franklin Mutual
Advisers, LLC, (iii) Franklin Templeton Investment Management Limited and (iv)
Templeton Global Advisors Limited.
† Templeton Asset Management Limited has been appointed as Co-Investment
Manager of this Fund, together with Franklin Advisers, Inc.
FRANKLIN ADVISERS, INC.
One Franklin Parkway
San Mateo, CA 94403-1906, U.S.A.
Franklin Advisers, Inc. manages the following Funds:
Franklin Asian Flex Cap Fund;
Franklin Biotechnology Discovery Fund;
Franklin Global Convertible Securities Fund;
Franklin Gold and Precious Metals Fund;
Franklin High Yield Fund;
Franklin Income Fund;
Franklin India Fund;
Franklin MENA Fund;
Franklin Natural Resources Fund;
Franklin Real Return Fund;
Franklin Strategic Income Fund;
Franklin Technology Fund;
Franklin World Perspectives Fund¶;
Franklin U.S. Dollar Liquid Reserve Fund;
Franklin U.S. Equity Fund;
Franklin U.S. Focus Fund;
Franklin U.S. Government Fund;
Franklin U.S. Low Duration Fund;
Franklin U.S. Opportunities Fund;
Franklin U.S. Small-Mid Cap Growth Fund;
Franklin U.S. Total Return Fund;
Franklin Templeton Global Allocation Fund;
Franklin Templeton Global Equity Strategies Fund**;
Franklin Templeton Global Fundamental Strategies Fund‡;
Templeton Asian Bond Fund;
Templeton Emerging Markets Balanced Fund****;
Templeton Emerging Markets Bond Fund;
Templeton Euro High Yield Fund*;
Templeton European Corporate Bond Fund***;
Templeton European Total Return Fund*;
www.franklintempleton.lu Audited Annual Report 5
FRANKLIN TEMPLETON INVESTMENT FUNDS
Templeton Global Balanced Fund*;
Templeton Global Bond Fund;
Templeton Global Bond (Euro) Fund;
Templeton Global High Yield Fund;
Templeton Global Income Fund†; and
Templeton Global Total Return Fund.
* Franklin Advisers, Inc. has been appointed as Co-Investment Manager of these
Funds, together with Franklin Templeton Investment Management Limited.
** Franklin Advisers, Inc. has been appointed as Co-Investment Manager of this Fund,
together with (i) Franklin Mutual Advisers, LLC, (ii) Templeton Asset Management
Limited, (iii) Franklin Templeton Investment Management Limited and (iv) Templeton
Global Advisors Limited.
*** Franklin Advisers, Inc. has been appointed as Co-Investment Manager of this
Fund, together with (i) Franklin Templeton Investment Management Limited and (ii)
Franklin Templeton Institutional LLC.
****Franklin Advisers, Inc. has been appointed as Co-Investment Manager of this
Fund, together with Templeton Asset Management Limited.
‡ Franklin Advisers, Inc. has been appointed as Co-Investment Manager of this Fund,
together with (i) Franklin Mutual Advisers, LLC, (ii) Franklin Templeton Investment
Management Limited and (iii) Templeton Global Advisors Limited.
¶ Franklin Advisers, Inc. has been appointed as lead Investment Manager of this
Fund and has selected and appointed as Co-Investment Managers (i) Franklin
Templeton Investments Corp., (ii) Franklin Templeton Investments Japan Limited, (iii)
Franklin Templeton Investimentos (Brasil) Ltda., (iv) Franklin Templeton Investment
Management Limited and (v) Franklin Templeton Investment Trust Management Co.
Limited.
† Franklin Advisers, Inc. has been appointed as Co-Investment Manager of this Fund,
together with Templeton Global Advisors Limited.
Franklin Advisers, Inc. has been appointed as Co-Investment Manager of this
Fund, together with (i) Franklin Mutual Advisers LLC, (ii) Franklin Templeton
Institutional LLC, (iii) Templeton Asset Management Limited, (iv) Templeton Global
Advisors Limited, (v) Templeton Investment Counsel LLC and (vi) Franklin Templeton
Investment Management Limited.
FRANKLIN TEMPLETON INSTITUTIONAL LLC
600 Fifth Avenue,
New York, NY 10020, U.S.A.
Franklin Templeton Institutional LLC manages the following Funds:
Franklin European Small-Mid Cap Growth Fund;
Franklin Global Growth Fund;
Franklin Global Real Estate Fund;
Franklin Global Small-Mid Cap Growth Fund;
Franklin Templeton Global Allocation Fund*
Franklin Templeton Global Growth and Value Fund; and
Templeton European Corporate Bond Fund**.
* Franklin Templeton Institutional LLC has been appointed as Co-Investment
Manager of this Fund, together with (i) Franklin Mutual Advisers LLC, (ii) Franklin
Advisers, Inc., (iii) Templeton Asset Management Limited, (iv) Templeton Global
Advisors Limited, (v) Templeton Investment Counsel LLC and (vi) Franklin Templeton
Investment Management Limited.
** Franklin Templeton Institutional LLC has been appointed as Co-Investment
Manager of this Fund, together with (i) Franklin Templeton Investment Management
Limited and (ii) Franklin Advisers, Inc.
TEMPLETON GLOBAL ADVISORS LIMITED
P.O. Box N-7759
Lyford Cay, Nassau, Bahamas
Templeton Global Advisors Limited manages the following Funds:
Franklin Templeton Global Allocation Fund**;
Franklin Templeton Global Equity Strategies Fund*;
Franklin Templeton Global Fundamental Strategies Fund†;
Templeton Global Income Fund***; and
Templeton Growth (Euro) Fund.
* Templeton Global Advisors Limited has been appointed as Co-Investment Manager
of this Fund, together with (i) Franklin Mutual Advisers, LLC, (ii) Templeton Asset
Management Limited, (iii) Franklin Templeton Investment Management Limited and
(iv) Franklin Advisers, Inc.
** Templeton Global Advisors Limited has been appointed as Co-Investment Manager
of this Fund, together with (i) Franklin Mutual Advisers LLC, (ii) Franklin Advisers,
Inc., (iii) Templeton Asset Management Limited, (iv) Franklin Templeton Institutional
LLC., (v) Templeton Investment Counsel LLC and (vi) Franklin Templeton Investment
Management Limited.
*** Templeton Global Advisers Limited has been appointed as Co-Investment
Manager of this Fund, together with Franklin Advisers Inc.
† Templeton Global Advisors Limited has been appointed as Co-Investment Manager
of this Fund, together with (i) Franklin Mutual Advisers, LLC, (ii) Franklin Templeton
Investment Management Limited and (iii) Franklin Advisers, Inc.
FRANKLIN TEMPLETON INVESTMENTS CORP.
200 King Street West, Suite 1500,
Toronto Ontario M5H 3T4, Canada
Franklin Templeton Investments Corp. manages the following Funds:
Franklin World Perspectives Fund*; and
Templeton Global Smaller Companies Fund.
* Franklin Templeton Investments Corp. has been selected and appointed by the lead
Investment Manager Franklin Advisers, Inc. as Co-Investment Manager of this Fund
together with (i) Franklin Advisers, Inc., (ii) Franklin Templeton Investments Japan
Limited, (iii) Franklin Templeton Investimentos (Brasil) Ltda., (iv) Franklin Templeton
Investment Management Limited and (v) Franklin Templeton Investment Trust
Management Co. Limited.
FRANKLIN MUTUAL ADVISERS, LLC
101 John F. Kennedy Parkway
Short Hills, NJ 07078-2789, U.S.A
Franklin Mutual Advisers, LLC manages the following Funds:
Franklin Mutual Beacon Fund;
Franklin Mutual Euroland Fund;
Franklin Mutual European Fund;
Franklin Mutual Global Discovery Fund;
Franklin Templeton Global Allocation Fund*;
Franklin Templeton Global Equity Strategies Fund†; and
Franklin Templeton Global Fundamental Strategies Fund‡.
* Franklin Mutual Advisers LLC has been appointed as Co-Investment Manager of
this Fund, together with (i) Franklin Advisers, Inc., (ii) Franklin Templeton Institutional
LLC, (iii) Templeton Asset Management Limited, (iv) Templeton Global Advisors
Limited, (v) Templeton Investment Counsel LLC and (vi) Franklin Templeton
Investment Management Limited.
† Franklin Mutual Advisers, LLC has been appointed as Co-Investment Manager of
this Fund, together with (i) Franklin Advisers, Inc., (ii) Templeton Asset Management
Limited, (iii) Franklin Templeton Investment Management Limited and (iv) Templeton
Global Advisors Limited.
‡ Franklin Mutual Advisers, LLC has been appointed as Co-Investment Manager of
this Fund, together with (i) Franklin Advisers, Inc., (ii) Templeton Global Advisors
Limited and (iii) Franklin Templeton Investment Management Limited.
FRANKLIN TEMPLETON INVESTMENTS JAPAN LIMITED
Kanematsu Building, 6th Floor
14-1, Kyobashi 2 – chome
Chuo-Ku, Tokyo, Japan
Franklin Templeton Investments Japan Limited manages the following Funds:
Franklin World Perspectives Fund*; and
Franklin Templeton Japan Fund.
* Franklin Templeton Investments Japan Limited has been selected and appointed by
the lead Investment Manager Franklin Advisers, Inc. as Co-Investment Manager of this
Fund together with (i) Franklin Templeton Investments Corp., (ii) Franklin Templeton
Investimentos (Brasil) Ltda., (iii) Franklin Templeton Investment Management Limited
and (iv) Franklin Templeton Investment Trust Management Co. Limited.
FRANKLIN TEMPLETON INVESTIMENTOS (Brasil) Ltda.
Avenue Brigadeiro Faria Lima 3311, 5o andar,
São Paulo 04538-133, Brazil
Franklin Templeton Investimentos (Brasil) Ltda manages the following Fund:
Franklin World Perspectives Fund*.
* Franklin Templeton Investimentos (Brasil) Ltda. has been selected and appointed by
the lead Investment Manager Franklin Advisers, Inc. as Co-Investment Manager of this
Fund together with (i) Franklin Templeton Investments Corp., (ii) Franklin Templeton
Investments Japan Limited, (iii) Franklin Templeton Investment Management Limited
and (iv) Franklin Templeton Investment Trust Management Co. Limited.
FRANKLIN TEMPLETON INVESTMENT TRUST MANAGEMENT
CO. LIMITED
12 Youido-dong, Youngdungpo-gu,
Seoul, Korea
Franklin Templeton Investment Trust Management Co. Limited manages the following
Fund:
Franklin World Perspectives Fund*.
* Franklin Templeton Investment Trust Management Co. Limited has been selected and
appointed by the lead Investment Manager Franklin Advisers, Inc. as Co-Investment
Manager of this Fund together with (i) Franklin Templeton Investments Corp., (ii)
Franklin Templeton Investments Japan Limited, (iii) Franklin Templeton Investimentos
(Brasil) Ltda and (iv) Franklin Templeton Investment Management Limited.
TEMPLETON INVESTMENT COUNSEL, LLC
300 Southeast 2nd Street
Ft. Lauderdale, FL33301, U.S.A.
Templeton Investment Counsel, LLC manages the following Fund:
Franklin Templeton Global Allocation Fund*.
* Templeton Investment Counsel LLC has been appointed as Co-Investment Manager
of this Fund, together with (i) Franklin Mutual Advisers LLC, (ii) Franklin Templeton
Institutional LLC, (iii) Templeton Asset Management Limited, (iv) Templeton Global
Advisors Limited, (v) Franklin Advisers, Inc. and (vi) Franklin Templeton Investment
Management Limited.
CUSTODIAN, LISTING AGENT AND PRINCIPAL PAYING AGENT:
J.P. MORGAN BANK LUXEMBOURG S.A.
European Bank and Business Centre
6 Route de Trèves, L-2633 Senningerberg
Grand-Duchy of Luxembourg
REGISTRAR AND TRANSFER, CORPORATE,
DOMICILIARY AND ADMINISTRATIVE AGENT:
FRANKLIN TEMPLETON INTERNATIONAL SERVICES S.A.
26, boulevard Royal, L-2449 Luxembourg
Grand-Duchy of Luxembourg
AUDITOR:
PRICEWATERHOUSECOOPERS, Société coopérative
400, route d’Esch, B.P. 1443, L-1014 Luxembourg
Grand-Duchy of Luxembourg
LEGAL ADVISERS:
ELVINGER, HOSS & PRUSSEN
2, place Winston Churchill, B.P. 425, L-2014 Luxembourg
Grand-Duchy of Luxembourg
General Information (as at June 30, 2012) (continued)
6 Audited Annual Report www.franklintempleton.lu
FRANKLIN TEMPLETON INVESTMENT FUNDS
The Board of Directors
Report of the Board of Directors
At June 30, 2012, Franklin Templeton Investment Funds (“FTIF”, or the “Company”) had assets under management of
USD 135.99 billion, a decline of 8.97% from a year earlier (when they stood at USD 149.40 billion), but 53.82% higher than
assets under management at June 30, 2010 (USD 88.41 billion).
The financial year was marked by the Company’s continued growth. The Company’s offer was expanded and modified in the ways
detailed below.
Fund Launches
The following FTIF Funds were launched during the financial year:
UÊ /ÊÀ>Ê ÕÀ«i>Ê
ÀiÊÕ`
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UÊ /ÊÀ>ÊL>Ê
ÛiÀÌLiÊ-iVÕÀÌiÃÊÕ`
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UÊ /Ê/i«iÌÊL>Ê}}Ài}>ÌiÊÛiÃÌiÌÊÀ>`iÊ `ÊÕ`
Share Class Launches
A number of new share class offerings for existing Funds were launched during the financial year.
For the full list of share classes launched during the financial year please refer to Note 1 of the Financial Statements.
Fund Closures
The following fund was closed during the financial year:
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Share Class Closures
Share classes for a variety of Funds were liquidated during the course of the financial year.
For the full list of share classes liquidated during the financial year please refer to Note 1 of the Financial Statements.
Changes in Investment Objectives
Franklin Strategic Income Fund, Franklin U.S. Government Fund and Templeton Emerging Markets Bond Fund investment
objectives have been clarified to add investment in asset-backed securities and mortgage-backed securities.
Templeton Asian Smaller Companies Fund and Templeton Emerging Markets Smaller Companies Fund investment objectives
have been modified to change the definition of the market capitalization to be in line with the US fund range.
Franklin U.S. Low Duration Fund investment objective has been changed to add investment in Asset Backed Securities / Mortgage
Backed Securities, financial derivatives instruments and low-rated or non-investment grade debt securities. In addition, the fund
has changed its name from Franklin U.S. Ultra-Short Bond Fund.
Templeton Euro Short-Term Money Market Fund investment objective has been changed to qualify the Fund as a short-term
money market fund within the meaning of the CESR guidelines 10/049 dated May 19, 2010 on a common definition of European
money market funds. In addition, the Fund has changed its name from Templeton Euro Money Market Fund.
Franklin Real Return Fund investment objective has been changed to reflect the reduction of the scope of investment in financial
derivatives instruments to hedging and efficient portfolio management.
Franklin U.S. Total Return Fund investment objective has been changed to reflect the increase of the scope of investment in
financial derivatives instruments for investment purposes.
Templeton Emerging Markets Balanced Fund investment objective has been changed to reflect deletion of wording on currency
gains and adoption of various clarifications to be in line with Hong Kong requirements.
Templeton Frontier Markets Fund and Templeton Global Aggregate Bond Fund investment objectives have been changed to
reflect the reduction of the scope of investment in financial derivatives instruments to hedging and efficient portfolio management.
Name changes
The names of the following Funds were changed during the course of the year:
UÊ /Ê/i«iÌÊ ÕÀÊ iÞÊ >ÀiÌÊÕ`ÊLiV>iÊ/Ê/i«iÌÊ ÕÀÊ- ÀÌ/iÀÊ iÞÊ >ÀiÌÊÕ`
UÊ /ÊÀ>Ê1-Ê1ÌÀ>- ÀÌÊ `ÊÕ`ÊLiV>iÊ/ÊÀ>Ê1°-°Ê ÜÊ ÕÀ>ÌÊÕ`
Other changes
The Canadian Dollar (CAD) and Czech Koruna (CZK) were added to FTIF currency share classes.
A new W Share class has been created as a result of the upcoming regulatory changes under the UK Retail Distribution Review
(RDR).
The Company will continue to make changes to the range of Funds when this is in the best interest of investors. We remain
committed to retaining investment techniques that have been shown, over time, to increase shareholder value.
www.franklintempleton.lu Audited Annual Report 7
FRANKLIN TEMPLETON INVESTMENT FUNDS
The Board of Directors (continued)
Report of the Board of Directors (continued)
Corporate Governance
The Company is committed to high standards of corporate governance. The Board of Directors of the Company (the “Board”)
has adopted the ALFI Code of Conduct issued in September 2009, which sets out the principles of good governance, and considers
that the Company has been in compliance with it in all material respects throughout the financial year ended June 30, 2012. Any
subsequent amendment to the ALFI Code of Conduct will be considered by the Board prior to adoption and necessary disclosures
will be made in the audited annual report.
Thank you for investing with Franklin Templeton Investments. Please be advised that the full prospectus, the Key Investor
Information Documents (KIIDs) and all Funds and share classes of FTIF may not be available in your jurisdiction.
If you have any queries, comments or suggestions about your investments with us please contact your financial adviser or your
local Franklin Templeton Investments office using the contact details on the last page of the report.
THE BOARD OF DIRECTORS
Luxembourg, July 2012
8 Audited Annual Report www.franklintempleton.lu
FRANKLIN TEMPLETON INVESTMENT FUNDS
The Board
Chairman
The Honorable Nicholas F. Brady
The Honorable Nicholas Brady (82) was appointed to the Board on 30 November 1994. He is founder and chairman of Darby
Overseas Investments, Ltd. as well as a founding partner and current participant in Holowesko Partners Ltd. In addition, he serves
as a Director of the Hess Corporation and Weatherford International Ltd. In 1988 Mr. Brady was appointed by President Reagan
as the 68th Secretary of the Treasury of the United States, a post he held through the elder President Bush’s administration. In
1982 Mr. Brady was appointed a U.S. senator from the State of New Jersey. He went on to serve on five presidential commissions,
chairing the Presidential Task Force on Market Mechanisms, commonly called the Brady Commission, which investigated the
causes of the 1987 stock market crash and recommended a number of reforms that were subsequently adopted. In 1954, he joined
Dillon, Read & Co. Inc., starting a thirty-four year career in investment banking with the firm, during which time he rose to
become president, chairman of the board and for seventeen years, its chief executive officer.
Directors
Duke of Abercorn KG
His Grace, the Duke of Abercorn KG (78) was appointed to the Board on 30 November 1994. His Grace, the Duke of Abercorn
KG is presently a Director of Titanic Quarter which is Europe’s biggest waterfront redevelopment. He was formerly a Director
of Northern Bank Ltd, Chairman of Laganside Corporation, Chairman of Calor Teoranta (Ireland) and a Director of Belfast
International Airport Ltd. He has also previously been a Director of The Industrial Development Board for Northern Ireland as
well as a Director of Balcas Timber Ltd.
Vijay C. Advani
Vijay Advani (51) was appointed to the Board on 25 February 2008. He is an executive vice president of Franklin Templeton Global
Advisory Services. He is responsible for Franklin Templeton’s global retail and institutional distribution strategies and initiatives,
including sales, marketing, client service and product development. He is an officer of Franklin Resources, Inc., a member of
several Franklin Templeton committees and a board member of various Franklin Templeton subsidiaries. Mr. Advani joined the
Templeton organization in 1995 as the president of Templeton Asset Management (India) Pvt. Ltd., in Mumbai (Bombay). In
2000, he moved to Singapore as the regional managing director, Product Development, Sales and Marketing for Asia, Eastern
Europe and Africa. In 2002, he relocated to California and was appointed executive managing director of International Retail
Development. In 2005, he took responsibility for global retail distribution and in 2008 assumed his current role. Prior to joining
Franklin Resources, Mr. Advani worked at the World Bank Group in Washington, DC. His primary responsibility was providing
advisory and technical assistance to government authorities on the development of securities and financial markets; structuring,
establishing and financing specialized financial institutions; and mobilizing equity, quasi equity and debt financing. He worked in
several emerging economies in the former Soviet Union, Asia, Middle East and Africa.
Richard H. Frank
Richard Frank (71) was appointed to the Board on 30 November 2000. Mr. Frank is President & Chief Executive Officer of Darby
Investments/Franklin Templeton. Darby Investments is Franklin Templeton’s Private Equity arm and is a leader in private equity
investment in Latin America, Asia and Central and Eastern Europe.
Mr. Frank is responsible for management of firm-wide activities and Chairman on the firm’s Private Equity, Mezzanine Finance
and Venture Capital Investment Committees.
Mr. Frank joined Darby in July 1997 after a long and distinguished career at the World Bank and International Finance Corporation
(IFC) in Washington, DC. In his last assignment he chaired the Private Sector Group, coordinating the private sector activities of
the World Bank, IFC, and the Multilateral Investment Guarantee Agency (MIGA). During his career at the World Bank Group as
Managing Director, Mr. Frank oversaw the South Asia and Latin America operations and chaired the Banks Finance Committee.
At the IFC, Mr. Frank served as CFO leading the Corporation to become an AAA borrower and securing two capital increases.
Earlier in his Bank Group career, he managed project and corporate investment operations in Latin America, Asia, Middle East
and Eastern Europe.
Mr. Frank is a Director of Templeton International Funds and member of Franklin Templeton Alternative Strategies Group. He
has also served on the Boards of several Latin American companies and banks.
Mr. Frank has served on the Board of Georgetown University and is a member of the International Strategic Board of Banco
Finantia, S.A. (Portugal); Inter-American Dialogue; Institute of International Finance; Bretton Woods Committee and IBM Venture
Capital Advisory Council.
He holds a B.S. in mechanical engineering from the S. D. School of Mines and Technology and an M.S. from the Sloan School
of Management at the Massachusetts Institute of Technology. Post graduate studies, he spent two years in Colombia as an MIT
Fellow. Mr. Frank earned a Bronze Star for his service as Captain in Vietnam.
The Board of Directors (continued)
www.franklintempleton.lu Audited Annual Report 9
FRANKLIN TEMPLETON INVESTMENT FUNDS
Mark G. Holowesko
Mark Holowesko (52) was appointed to the Board on 30 November 1994. Mark Holowesko is the founding Partner and Chief
Executive Officer of Holowesko Partners Ltd (HPL). Mark launched the firm in the fall of 2000, under the name of Templeton
Capital Advisors, to serve the needs of institutional and high-net-worth investors. Subsequently renamed Holowesko Partners,
under Mark’s leadership HPL has enjoyed steady and consistent growth and now stands as one of the premier global equity hedge
firms in the industry.
Mark’s investment career began in 1985 when he joined Templeton Global Advisors as a research analyst. By 1987, he had assumed
the day-to-day management of all portfolios previously managed by Sir John Templeton, including the Templeton Growth Fund
and the Templeton Foreign Fund. In 1989, Mark became the Director of Research of the Templeton Global Equity Funds and
later, in 1996, assumed the role of Chief Investment Officer.
Mark served as a member of the Executive Committee of Templeton, Galbraith & Hansberger from 1987 to 1992 and as
a member of the Executive Committee of Franklin Resources from 1992 to 2000. Mark was Director, President & Head of
Investments of Templeton Global Advisors Ltd. from 1992 to 2000.
Currently, Mark is Chairman of the Investment Committee of First Trust Bank, an offshore entity responsible for managing the
assets of two of Sir John Templeton’s Foundations.
James J.K. Hung
James Hung (65) was appointed to the Board on 29 November 2002. He is the Chairman and Chief Executive Officer (“CEO”)
of Xinya Investment Group, China, a real estate development and investment group in Mainland China, Hong Kong and Taiwan.
He is also a director and major shareholder of Security Bank in the Philippines and the director of Franklin Templeton Fund
Management Company in Shanghai, a joint venture of Franklin Templeton and the Sealand Securities Company, China. His
previous experience includes working for Asia Securities Inc. (Taiwan) as the Chairman and CEO. He has also previously been the
director of Yi-Min Fund Management Co., (China), H&Q Venture Capital Inc., (Taiwan), Taiwan Index Fund Inc. (Luxembourg)
and Vietnam Fund Inc. (Guernsey).
Gregory E. Johnson
Gregory Johnson (51) was appointed to the Board on 28 November 2003. He is President and Chief Executive Officer of Franklin
Resources, Inc. and serves on the Board of Directors. He is also President of Templeton Worldwide, Inc., Chief Executive Officer
and President of Templeton International, Inc. and serves as a Director for a number of subsidiaries of Franklin Resources, Inc. He
is a member of a number of Franklin Templeton’s international fund boards. Mr Johnson joined Franklin in 1986 after working
as a senior accountant for Coopers & Lybrand. He has served as President and Chairman of the Board for Franklin Templeton
Distributors, Inc., President of Franklin Investment Advisory, LLC, President of FT Trust Company, Vice President of Franklin
Advisers, Inc., co-portfolio manager of Franklin Income Fund and Franklin Utilities Fund and as an investment analyst.
Geoffrey A. Langlands
Geoffrey Langlands (76) was appointed to the Board on 27 September 2005. He is a resident of Rio de Janeiro, Brazil, where he
is currently Managing Partner of Langlands Consultoria Ltda., and a partner in Horto Consultoria Ltda., as well as participating
in the Boards of Fundação Flora de Apoio à Botânica and Ser Cidadão, two non profit making institutions. He was a Director of
Templeton Emerging Markets Investment Trust (1994/2005, having been Chairman 2003/4). He was an Executive Director of
Santander Brasil Asset Management S/A (2000/1), Banco Bozano, Simonsen S/A (1969/2000) and Banco Geral de Investimentos S/A
(1968/9). Previously, he was a Managing Partner of Organização S/N Ltda. (1960/1968) and an employee of the Schroder Group
in London and Rio de Janeiro (1957/60). At Banco Bozano, Simonsen a leading Brazilian investment institution, he organized, set
up and managed the bank’s asset management, stock broking, corporate finance, investment research and private equity activities.
He was also a director of several companies in the Bozano, Simonsen Group. He also served on the Capital Markets Advisory
Committees of the Brazilian Central Bank and the Inter-American Investment Corporation. He was a board member of ANBID
(Brazilian Investment Bankers’ Association), General Accident Companhia de Seguros, and Atlantica Hotels International.
Gregory E. McGowan
Gregory McGowan (62) was appointed to the Board on 20 May 1994. He is executive vice president, director and general counsel
of Templeton International, Inc., the organization responsible for the development and operation of Templeton businesses outside
of North America and for Templeton Worldwide, Inc., the holding company of all the Templeton subsidiaries. Mr. McGowan
joined the Franklin Templeton organization in 1986 and also serves as an executive vice president of Templeton Global Advisors
Limited (a Bahamas corporation).
Mr. McGowan serves on various Franklin Templeton boards of directors, including: Templeton Investment Counsel, L.L.C.,
Franklin Templeton Management Luxembourg S.A. (a Luxembourg corporation), Franklin Templeton Investments (Asia) Limited
(a Hong Kong corporation), Templeton Asset Management Ltd. (a Singapore corporation), Franklin Templeton Holding Limited
(a Mauritius corporation), Franklin Templeton Services Limited (an Ireland corporation) and Franklin Templeton Asset Strategies,
Inc. (a U.S. corporation). Prior to joining Franklin Templeton Investments, Mr. McGowan was a senior attorney for the United
States Securities and Exchange Commission.
The Board of Directors (continued)
The Board (continued)
10 Audited Annual Report www.franklintempleton.lu
FRANKLIN TEMPLETON INVESTMENT FUNDS
The Board of Directors (continued)
The Board (continued)
Dr. J.B. Mark Mobius
Dr. Mark Mobius, Ph.D. (76) was appointed to the Board at inception. He is Executive Chairman of Templeton Emerging Markets
Group, currently directs analysts based in Templeton’s 18 emerging markets offices and manages the emerging markets portfolios.
Dr. Mobius has spent more than 40 years working in emerging markets all over the world. He joined Franklin Templeton
Investments in 1987 as president of the Templeton Emerging Markets Fund, Inc. Dr. Mobius was named by Asiamoney magazine
in 2006 as one of their “Top 100 Most Powerful and Influential People.” Asiamoney said, he “...boasts one of the highest profiles
of any investor in the region and is regarded by many in the financial industry as one of the most successful emerging markets
investors over the last 20 years. Despite tough times during the financial crisis nine years ago, he still commands a strong following
in the investment world and is influencing the direction of billions of investment dollars.” Other awards include: (1) “2010 Africa
Investor Index Series Awards” by African Investor, (2) “Emerging Markets Equity Manager of the Year 2001” by International
Money Marketing, (3) “Ten Top Money Managers of the 20th Century” in a survey by the Carson Group in 1999, (4) “Number
One Global Emerging Market Fund” in the 1998 Reuters Survey, (5) “1994 First in Business Money Manager of the Year” by
CNBC, (6) “Closed-End Fund Manager of the Year” in 1993 by Morningstar and, (7) “Investment Trust Manager of the Year
1992” by Sunday Telegraph.
Dr. Mobius is also the author of the following books: Trading with China, The Investor’s Guide to Emerging Markets, Mobius on
Emerging Markets, Passport to Profits, Equities – An Introduction to the Core Concepts, Mutual Funds – An Introduction to the
Core Concepts, Foreign Exchange – An Introduction to the Core Concepts and Mark Mobius – An Illustrated Biography – The
little Book of Emerging Markets.
David E. Smart
David Smart (51) was appointed to the Board on 29 November 2002. He joined the Group in 1988 as Senior Vice President
and Head of Fixed Income with Fiduciary Trust in London, subsequently taking on responsibility for all fund management and
institutional marketing initiatives in Europe, Middle East & Africa. In August 2008, Mr. Smart was appointed to his current
position spearheading the Group’s global efforts in the sovereign fund and supranational area using his strong investment
background and experience of providing strategic asset allocation advice to institutional clients. Mr. Smart also sits on a number
of the Group’s subsidiary Boards. In November 2008, Mr. Smart was appointed Chairman of the National Trust Investment
Committee, which oversees the $1.6 billion endowment fund of the charity which preserves many of Britain’s historic buildings
and in March 2010 Mr. Smart was appointed External Advisor to Beazley plc, a publicly quoted Lloyds of London specialist
insurer. Prior to joining, Mr. Smart had six years experience as an international bond manager with Baring Brothers & Company
Ltd and County NatWest Investment Management.
The Honourable Trevor G. Trefgarne
The Honourable Trevor Trefgarne (68) was appointed to the Board of Franklin Templeton Investment Funds on 29 November
2002. He is Chairman of Enterprise Group Limited, Ghana, and has been director of a number of UK listed investment funds
including Templeton Emerging Markets Investment Trust, Recovery Trust (chairman) and Gartmore High Income Trust. He has
extensive experience of the management of listed companies in the UK and Africa.
www.franklintempleton.lu Audited Annual Report 11
FRANKLIN TEMPLETON INVESTMENT FUNDS
Report of the Investment Managers – Year to June 30, 2012
The year under review was marked by the sovereign debt crisis in the eurozone, by fitful growth in the US, and fears of a slowdown
in China, all of which hurt risk appetite and brought the yields of a small number of so-called “safe haven” instruments like US
and German government bonds to multiyear lows.
European growth—already low—petered out as the year progressed, with a number of countries plunging back into recession.
Across the Atlantic, growth in the US has been hampered by prolonged, post-financial crisis deleveraging by households,
governments and corporations alike. In light of ultra-low benchmark rates, various forms of quantitative easing, and various
fiscal stimulus packages, it is indeed somewhat disappointing to see that annualized growth in the US slowed to just 1.9% in the
first three months of calendar 2012, compared with 3% in the previous quarter.
Nevertheless, with US corporations continuing to display strong earnings and cash balances, the US has remained comparatively
more attractive to most investors than other regions. During the reporting period, US stocks outperformed not only European
stocks but also emerging-market equities, as concerns about the extent and impact of the slowdown in China added to investor
preference for apparently lower-risk assets in a period of continued uncertainty. Stock indexes in countries with large exposure to
China were especially affected, but concerns about the adequacy of domestic policy in some countries, including Brazil and India,
also played a role.
Commodities proved volatile over the year under review. Oil prices rose rapidly in the first four months of calendar 2012, in part
because of geopolitical tensions in the Middle East. But by the end of the reporting period, Brent crude oil prices were back to
where they were in the fourth quarter of 2010. Recession in Europe, sluggish growth in the US, and a slowdown in Asia meant
that the prices of many other commodities were moving broadly lower by the end of the review period as well. Gold prices
reached record highs in September 2011, but somewhat paradoxically in light of continuing market jitters, interest in gold ebbed
considerably thereafter. This trend suggests a breakdown in the traditional link between gold and inflation-adjusted interest
rates—usually, as interest rates fall, so does the opportunity cost of holding gold.
It seems that the US dollar, rather than gold, has become the ultimate safe haven for investors, as reflected in its strength in
recent months against a range of other currencies. In turn, the rise in the dollar (and sharp drop in currencies like the Indian
rupee) has made gold much more expensive and has also put pressure on investment strategies based on currency diversification
into emerging markets. Like the US dollar, the Japanese yen and the Swiss franc have benefited from haven demand, forcing the
monetary authorities to intervene to try to curb upward pressure. A further notable development on the currency front over the
past 12 months has been the rise in the role of the Chinese renminbi in global trade, a trend we think is likely to continue.
In the fixed-income arena, the year has been marked by the sovereign debt crisis in peripheral Europe and by large-scale bondbuying by central banks in an effort to boost activity—or at least dampen the crisis. While the price that countries like Spain have
to pay to issue debt has climbed steeply, yields on benchmark government bonds issued by the US, Germany and the UK have
tumbled. In some instances, investors have even been prepared to accept negative real rates of interest in return for the protection
these bonds are supposed to offer. For investors interested in earning income in exchange for reasonable risk exposure, the
corporate sector has offered better prospects. Indeed, there is evidence that some international investors have been favoring bonds
issued by US and multi-national companies with strong balance sheets over eurozone government debt.
While we understand that the events of the past year instill a sense of caution among many investors, we think it is easy to be too
pessimistic. In the first place, the International Monetary Fund (IMF) still projects global gross domestic product (GDP) growth
in calendar-year 2012 at a respectable 3.5%. The Organization for Economic Cooperation and Development (OECD) believes it
will be 3.4%. Both the IMF and OECD are predicting a pick-up in global growth next year, with the IMF believing that growth
will come in at 3.9% in 2013. While there have been fears that Europe is nearing a “Lehman moment”, we think the end result of
the crisis may actually be much closer eurozone integration around fiscal and banking issues rather than imminent disintegration.
Significantly, the European Summit in Brussels at the end of June 2012 opened the way toward a banking union in which eurozone
banks will be supervised by a single regulator. And European banks, while they have been in the news for all the wrong reasons
over the past year, are at least less leveraged than they were at the time of the Lehman Brothers collapse in 2008 and continue to
benefit from the backstop provided by the European Central Bank.
Presidential and congressional elections will take place in the US near the end of 2012, making it difficult to envisage any major
policy initiative there in the months ahead. Yet the US is fast approaching a so-called “fiscal cliff”—in other words, a set of preplanned tax rises and spending cuts due to kick in at the end of 2012 that could weigh heavily on growth. But likely political
agreement on the issues involved could help relieve unease among economic participants and convince them to spend more on
jobs and investment. In the meantime, just like central banks elsewhere, the US Federal Reserve continues to be highly active in
providing liquidity to the markets.
Meanwhile, policy makers in China have been extremely active, and they have the firepower to ensure that growth holds up during
this year’s delicate political transition. Interest rates and banks’ reserve requirements have already been cut and, as in Europe, the
economic challenges that China is undoubtedly facing have had the beneficial effect of accelerating reform. Although Southeast
Asia (ex Japan) is not a homogenous block, indebtedness there has remained very low and credit conditions are generally favorable
for investors. A strong US dollar and falling commodity prices have helped reduce inflation, meaning there is increased scope for
central banks there and in China to loosen monetary policy, as they have already begun to do.
12 Audited Annual Report www.franklintempleton.lu
FRANKLIN TEMPLETON INVESTMENT FUNDS
Report of the Investment Managers – Year to June 30, 2012 (continued)
The information stated in this report represents historical data and is not an indication of future results.
Alongside reasonable valuations across many markets, all or some of these factors could prove to be a catalyst for equities in the
year ahead and could conceivably serve as a signal for a reversal in the fortunes of risk assets. By contrast, US and core European
bonds at present levels do not look attractive to us, and Japanese government bonds even less so. The valuation gap between core
sovereign bonds and equities has seldom been as large as it was at the end of the year under review, and the rise in interest-rate
sensitivity has not done anything to make core government bonds any more attractive to us. We still see, however, pockets of
opportunity in fixed income—for example, in emerging market debt. Even within Europe, a handful of countries that have been
scorned by investors could hold potential, including countries like Ireland, Poland and Hungary. Likewise, in spite of the fall in
corporate bond yield spreads over sovereigns, we believe there are still opportunities in corporate debt, a sector where ratings are
often higher than for the underlying sovereign and where default levels have remained low.
THE INVESTMENT MANAGERS
July, 2012
www.franklintempleton.lu Audited Annual Report 13
Audit Report
To the Shareholders of
Franklin Templeton Investment Funds
We have audited the accompanying financial statements of Franklin Templeton Investment Funds (the “Company”) and of each
of its Funds, which comprise the Statement of Net Assets and the Schedule of Investments as at June 30, 2012 and the Statement
of Operations and Changes in Net Assets for the year then ended, and a summary of significant accounting policies and other
explanatory notes to the financial statements.
Responsibility of the Board of Directors of the Company for the financial statements
The Board of Directors of the Company is responsible for the preparation and fair presentation of these financial statements in
accordance with Luxembourg legal and regulatory requirements relating to the preparation of the financial statements and for
such internal control as the Board of Directors of the Company determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
Responsibility of the “Réviseur d’entreprises agréé”
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance
with International Standards on Auditing as adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier”.
Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the judgment of the “Réviseur d’entreprises agréé”, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the “Réviseur
d’entreprises agréé” considers internal control relevant to the entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by the Board of Directors of the Company, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the financial position of Franklin Templeton Investment Funds
and of each of its Funds as of June 30, 2012, and of the results of their operations and changes in their net assets for the year then
ended in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the financial statements.
Other matters
Supplementary information included in the annual report has been reviewed in the context of our mandate but has not been
subject to specific audit procedures carried out in accordance with the standards described above. Consequently, we express
no opinion on such information. However, we have no observation to make concerning such information in the context of the
financial statements taken as a whole.
PricewaterhouseCoopers, Société coopérative Luxembourg, September 14, 2012
Represented by
John Parkhouse
PricewaterhouseCoopers, Société coopérative, 400 Route d’Esch, B.P. 1443, L-1014 Luxembourg
T: +352 494848 1, F:+352 494848 2900, www.pwc.lu
Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale no
10028256)
R.C.S. Luxembourg B 65 477 – TVA LU25482518