FINANCIAL REPORT FRANKLIN TEMPLETON INVESTMENT FUNDS

Transcription

1 FINANCIAL REPORT FRANKLIN TEMPLETON INVESTMENT FUNDS FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE

2 Financial report for the year ended Templeton Global Trust Fund ARSN Templeton Global Equity Fund ARSN Franklin Global Growth Fund ARSN Franklin Templeton Australian Equity Fund ARSN Franklin Templeton Multisector Bond Fund ARSN Templeton Global Bond Plus Fund ARSN Franklin Templeton Global Aggregate Bond Fund ARSN Franklin Australian Absolute Return Bond Fund ARSN

3 Financial report for the year ended CONTENTS PAGE DIRECTORS REPORT 1 4 AUDITOR S INDEPENDENCE DECLARATION 5 STATEMENTS OF COMPREHENSIVE INCOME 6 7 BALANCE SHEETS 8 9 STATEMENTS OF CHANGES IN EQUITY STATEMENTS OF CASH FLOWS DIRECTORS DECLARATION 88 INDEPENDENT AUDITOR S REPORT TO THE UNITHOLDERS OF FRANKLIN TEMPLETON INVESTMENT FUNDS These financial statements cover Franklin Templeton Investment Funds. The Responsible Entity of Franklin Templeton Investment Funds is Franklin Templeton Investments Australia Limited. The Responsible Entity s registered office is Level 19, 101 Collins Street, Melbourne VIC 3000.

4 Financial report for the year ended DIRECTORS REPORT The Responsible Entity of Franklin Templeton Investment Funds (the Funds ) for the year ended was Franklin Templeton Investments Australia Limited (the Responsible Entity ). The directors of Franklin Templeton Investments Australia Limited, the Responsible Entity and Manager of Franklin Templeton Investment Funds, present their report together with the financial statements of the Funds for the year ended. Templeton Global Trust Fund Templeton Global Equity Fund Franklin Global Growth Fund Franklin Templeton Australian Equity Fund Franklin Templeton Multisector Bond Fund Templeton Global Bond Plus Fund Franklin Templeton Global Aggregate Bond Fund Franklin Australian Absolute Return Bond Fund DIRECTORS The following persons held office as directors of the Responsible Entity during the year or since the end of the year and up to the date of this report: M A Harrison Chairperson (Appointed 15 January ) M B Browning (Resigned 22 May ) S E Grundlingh (Appointed 22 May ) J A Plafker (Resigned 22 May ) G L Shaneyfelt (Appointed 22 May ) P M Wilmshurst M L Wilton (Resigned 15 January ) REVIEW AND RESULTS OF OPERATIONS The Funds continued to invest funds in accordance with the provisions of the Funds Constitution. 1

5 Financial report for the year ended DIRECTORS REPORT CONTINUED REVIEW AND RESULTS OF OPERATIONS (CONTINUED) The performance of the Funds, as represented by the results of their operations, was as follows: TEMPLETON GLOBAL TRUST FUND TEMPLETON GLOBAL EQUITY FUND FRANKLIN GLOBAL GROWTH FUND FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND Operating profit/(loss) before finance costs attributable to unitholders ($'000) 17,181 30,384 15,651 27,111 30,915 17,429 6,967 11,367 Distributions - Ordinary Class Distribution paid and payable ($'000) 18,864 16,953 18,612 12,868 Distributions (cents per unit) Distributions - I Class Distribution paid and payable ($'000) 2,977 3,774 5,114 5,064 Distributions (cents per unit) Distributions - W Class Distribution paid and payable ($'000) 2,968 2,448 1, Distributions (cents per unit) Distributions - X Class Distributions paid and payable ($'000) Distributions (cents per unit) 2

6 Financial report for the year ended DIRECTORS REPORT CONTINUED FRANKLIN TEMPLETON MULTISECTOR BOND FUND TEMPLETON GLOBAL BOND PLUS FUND FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND Operating profit/(loss) before finance costs attributable to unitholders ($'000) (14,639) 45,316 (2,433) 14,817 (1,894) (6,404) 2,237 2,118 Distributions - I Class Distribution paid and payable ($'000) 844 2,386 5,608 4,794 1,769 4,178 1,007 1,239 Distributions (cents per unit) Distributions - W Class Distribution paid and payable ($'000) 3,527 9, ,319 6,715 1, Distributions (cents per unit) Distributions - X Class Distributions paid and payable ($'000) 125 Distributions (cents per unit)

7 Financial report for the year ended DIRECTORS REPORT CONTINUED SIGNIFICANT CHANGES IN STATE OF AFFAIRS Maria Wilton resigned as a director of Franklin Templeton Investments Australia Limited on 15 January. Matthew Harrison was appointed as a director of Franklin Templeton Investments Australia Limited on 15 January. Mark Browning resigned as a director of Franklin Templeton Investments Australia Limited on 22 May. Stephen Grundlingh was appointed as a director of Franklin Templeton Investments Australia Limited on 22 May. Jed Plafker resigned as a director of Franklin Templeton Investments Australia Limited on 22 May. Gwen Shaneyfelt was appointed as a director of Franklin Templeton Investments Australia Limited on 22 May. The Funds (except Franklin Templeton Australian Equity Fund) have amended their constitution to change the obligation to distribute trust income to unitholders effective 1 July as part of a process to become eligible to elect into the new AMIT tax regime. In the opinion of the directors, there were no other significant changes in the state of affairs of the Funds that occurred during the financial year. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR No matter or circumstance has arisen since that has significantly affected, or may significantly affect: (i) the operations of the Funds in future financial years, or (ii) the results of those operations in future financial years, or (iii) the state of affairs of the Funds in future financial years. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS The Funds will continue to be managed in accordance with the investment objectives and guidelines as set out in the governing documents of the Funds and in accordance with the provisions of the Funds Constitution. The results of the Funds operations will be affected by a number of factors, including the performance of investment markets in which the Funds invests. Investment performance is not guaranteed and future returns may differ from past returns. As investment conditions change over time, past returns should not be used to predict future returns. INDEMNITY AND INSURANCE OF OFFICERS AND AUDITORS No insurance premiums were paid for out of the assets of the Funds in regards to insurance cover provided to either the officers of the Responsible Entity or the auditors of the Funds. So long as the officers of the Responsible Entity act in accordance with the Funds Constitution and the Law, the Responsible Entity remain indemnified out of the assets of the Funds against losses incurred while acting on behalf of the Funds. The auditors of the Funds are in no way indemnified out of the assets of the Funds. FEES PAID TO AND INTERESTS HELD IN THE FUNDS BY THE RESPONSIBLE ENTITY OR ITS ASSOCIATES Fees paid to the Responsible Entity and its associates out of the Funds property during the year are disclosed in note 15 of the financial statements. No fees were paid out of the Funds property to the directors of the Responsible Entity during the year (: Nil). The number of interests in the Funds held by the Responsible Entity or its associates as at the end of the financial year are also disclosed in note 15 to the financial statements. INTERESTS IN THE FUNDS The movement in units on issue in the Funds during the year is disclosed in note 10 to the financial statements. The value of the Funds assets and liabilities is disclosed on the balance sheet and derived using the basis set out in note 2 to the financial statements. ENVIRONMENTAL REGULATION The operations of the Funds are not subject to any particular or significant environmental regulations under a Commonwealth, State or Territory law. ROUNDING OF AMOUNTS TO THE NEAREST THOUSAND DOLLARS Amounts in the directors report have been rounded to the nearest thousand dollars in accordance with ASIC Corporations (Rounding in Financial/Directors Report) Instrument 2016/191, unless otherwise indicated. AUDITOR S INDEPENDENCE DECLARATION A copy of the Auditor s independence declaration as required under Section 307C of the Corporations Act 2001 is set out on page 5. This report is made in accordance with a resolution of the directors. Director Matthew Harrison Melbourne 19 September 4

8 Financial report for the year ended AUDITOR S INDEPENDENCE DECLARATION Auditor s Independence Declaration As lead auditor for the audit of Franklin Templeton Investment Funds (the Funds ) for the year ended, I declare that to the best of my knowledge and belief, there have been a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of the following Schemes: Templeton Global Trust Fund Templeton Global Equity Fund Franklin Global Growth Fund Franklin Templeton Australian Equity Fund Franklin Templeton Multisector Bond Fund Templeton Global Bond Plus Fund Franklin Templeton Global Aggregate Bond Fund Franklin Australian Absolute Return Bond Fund David Coogan Melbourne Partner 19 September PricewaterhouseCoopers 5

9 Financial report for the year ended STATEMENTS OF COMPREHENSIVE INCOME Investment income Notes TEMPLETON GLOBAL TRUST FUND TEMPLETON GLOBAL EQUITY FUND FRANKLIN GLOBAL GROWTH FUND FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Interest income Dividend income 3,752 3,831 2,120 1,848 3,014 2,837 Distribution income 18,187 15, Net gains/(losses) on financial instruments held at fair value through profit or loss 6 15,040 28,176 (2,275) 11,782 30,357 16,598 4,054 8,666 Other operating income Total net investment income/(loss) 18,846 32,093 15,912 27,369 32,606 18,482 7,347 11,729 Expenses Management costs 15 1,583 1, ,597 1, Transaction costs Other operating expenses Total operating expenses 1,665 1, ,691 1, Operating profit/(loss) 17,181 30,384 15,651 27,111 30,915 17,429 6,967 11,367 Finance costs attributable to unitholders Distributions to unitholders 11 (16,953) (12,868) (5,945) (6,222) (6,200) (5,867) (Increase)/decrease in net assets attributable to unitholders 10 (13,431) (14,243) (24,970) (11,207) (767) (5,500) Profit/(loss) for the year 17,181 15,651 Other comprehensive income Total comprehensive income for the year* 17,181 15,651 * Effective from 1 July, Templeton Global Trust Fund and Templeton Global Equity Fund units have been reclassified from financial liability to equity. Refer to note 1 for further details. As a result, equity transactions, including distributions have been disclosed in the statement of changes in equity for the year ended. The above statements of comprehensive income should be read in conjunction with the accompanying notes. 6

10 Financial report for the year ended STATEMENTS OF COMPREHENSIVE INCOME Notes FRANKLIN TEMPLETON MULTISECTOR BOND FUND TEMPLETON GLOBAL BOND PLUS FUND FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Investment income Interest income 18,546 19,362 5,999 6,568 11,652 9,429 3,756 2,249 Dividend income Distribution income Net gains/(losses) on financial instruments held at fair value through profit or loss 6 (29,054) 29,798 (7,478) 9,296 (11,577) (14,001) (901) 212 Other operating income Total net investment income/ (loss) (10,506) 49,160 (1,479) 15, (4,572) 2,864 2,461 Expenses Management costs 15 4,132 3, ,047 1,957 1, Transaction costs Other operating expenses Total operating expenses 4,133 3, ,047 1,974 1, Operating profit/(loss) (14,639) 45,316 (2,433) 14,817 (1,894) (6,404) 2,237 2,118 Finance costs attributable to unitholders Distributions to unitholders 11 (4,371) (11,819) (5,673) (4,811) (5,213) (10,893) (2,768) (2,038) (Increase)/decrease in net assets attributable to unitholders 10 19,010 (33,497) 8,106 (10,006) 7,107 17, (80) Profit/(loss) for the year Other comprehensive income Total comprehensive income for the year The above statements of comprehensive income should be read in conjunction with the accompanying notes. 7

11 Financial report for the year ended BALANCE SHEETS Assets Notes TEMPLETON GLOBAL TRUST FUND TEMPLETON GLOBAL EQUITY FUND FRANKLIN GLOBAL GROWTH FUND FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Cash and cash equivalents 12 3,536 3, ,084 3,890 2,766 1,342 Margin accounts Receivables Accrued income ,515 14, Due from brokers - receivable for securities sold , Financial assets held at fair value through profit or loss 7 148, , , , , ,272 73,059 66,799 Total assets 152, , , , , ,463 76,567 69,235 Liabilities Margin accounts 2,782 2,405 Distribution payable 11 18,132 16,118 18,072 12,222 5,383 5,761 4,279 3,965 Payables Due to brokers - payable for securities purchased Financial liabilities held at fair value through profit or loss Total liabilities (excluding net assets attributable to unitholders) 18,910 16,684 18,586 12,816 6,280 6,874 7,523 6,767 Net assets attributable to unitholders - equity* , ,735 Net assets attributable to unitholders - liability* , , , ,589 69,044 62,468 * Effective from 1 July, Templeton Global Trust Fund and Templeton Global Equity Fund units have been reclassified from financial liability to equity. Refer to note 1 for further details. The above balance sheets should be read in conjunction with the accompanying notes. 8

12 Financial report for the year ended BALANCE SHEETS Assets Notes FRANKLIN TEMPLETON MULTISECTOR BOND FUND TEMPLETON GLOBAL BOND PLUS FUND FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Cash and cash equivalents 12 98, ,141 40,746 54,831 20,710 26,368 4,505 4,205 Margin accounts 6,031 9,675 8,682 4,500 4,967 3,324 1, Receivables 365 4, Accrued income Due from brokers - receivable for securities sold 1,036 25,643 Financial assets held at fair value through profit or loss 7 378, , , , , , ,864 56,073 Total assets 484, , , , , , ,717 61,338 Liabilities Margin accounts 3,384 3, ,177 2,531 1, Distribution payable 11 2,871 11,819 4,873 4,811 4,213 5, Payables 2,694 2, ,066 4, Due to brokers - payable for securities purchased ,666-1, Financial liabilities held at fair value through profit or loss 8 8,533 9,732 8,217 5,009 8,483 3,588 1, Total liabilities (excluding net assets attributable to unitholders) 17,482 28,195 14,434 12,389 41,959 14,382 3,221 2,039 Net assets attributable to unitholders - liability , , , , , , ,496 59,299 The above balance sheets should be read in conjunction with the accompanying notes. 9

13 Financial report for the year ended STATEMENTS OF CHANGES IN EQUITY Total equity at the beginning of the year Notes TEMPLETON GLOBAL TRUST FUND TEMPLETON GLOBAL EQUITY FUND FRANKLIN GLOBAL GROWTH FUND FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Reclassification due to AMIT tax regime implementation* , ,660 Comprehensive income for the year Profit/(loss) for the year 17,181 15,651 Other comprehensive income Total comprehensive income for the year 17,181 15,651 Transactions with unitholders Applications 8,228 27,374 Redemptions (30,540) (41,420) Return of Capital Units issued upon reinvestment of distributions 4,638 2,082 Distributions paid and payable (18,864) (18,612) Total transactions with unitholders (36,538) (30,576) Total equity at the end of the year* 133, ,735 * Effective 1 July, Templeton Global Trust Fund and Templeton Global Equity Fund units have been reclassified from financial liability to equity. Refer to note 1 for further details. As a result, equity transactions, including distributions have been disclosed in the above statement for the year ended. The above statements of changes in equity should be read in conjunction with the accompanying notes. 10

14 Financial report for the year ended STATEMENTS OF CHANGES IN EQUITY Total equity at the beginning of the year Notes FRANKLIN TEMPLETON MULTISECTOR BOND FUND TEMPLETON GLOBAL BOND PLUS FUND FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Reclassification due to AMIT tax regime implementation* 10 Comprehensive income for the year Profit/(loss) for the year Other comprehensive income Total comprehensive income for the year Transactions with unit holders Applications Redemptions Return of Capital Units issued upon reinvestment of distributions Distributions paid and payable Total transactions with unitholders Total equity at the end of the year* The above statements of changes in equity should be read in conjunction with the accompanying notes. 11

15 Financial report for the year ended STATEMENTS OF CASH FLOWS Cash flows from operating activities Notes TEMPLETON GLOBAL TRUST FUND TEMPLETON GLOBAL EQUITY FUND FRANKLIN GLOBAL GROWTH FUND FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Proceeds from sale of financial instruments held at fair value through profit or loss 67,397 84,521 21,173 31,611 43,413 29,795 28,004 28,024 Purchase of financial instruments held at fair value through profit or loss (35,651) (30,135) (12,189) (4,540) (101,434) (43,158) (28,752) (25,383) Transaction costs on purchases of financial assets held at fair value through profit or loss (78) (97) (89) (50) (45) (53) Dividends received 3,673 3,840 2,018 1,301 2,370 2,775 Distributions received 15,486 10, Interest received Other income received Management costs paid (1,605) (1,704) (243) (274) (1,332) (906) (322) (286) Payment of other expenses (5) (166) (1) (20) (64) (1) Net cash inflow/(outflow) from operating activities 13(a) 33,788 56,356 24,226 37,412 (57,319) (13,048) 1,505 5,295 Cash flows from financing activities Proceeds from applications by unitholders 8,440 4,760 27,621 23,809 79,879 27,643 5,611 3,909 Payments for redemptions by unitholders (30,306) (45,733) (41,306) (41,811) (15,688) (8,785) (1,627) (6,030) Distributions paid from operating activities (12,212) (12,838) (10,680) (19,123) (3,652) (4,014) (4,065) (2,908) Net cash (outflow)/inflow from financing activities (34,078) (53,811) (24,365) (37,125) 60,539 14,844 (81) (5,029) Net increase/(decrease) in cash and cash equivalents (290) 2,545 (139) 287 3,220 1,796 1, Cash and cash equivalents at the beginning of the year 3,676 1, ,890 2,066 1,342 1,076 Effects of foreign currency exchange rate changes on cash and cash equivalents 150 (341) (26) 28 Cash and cash equivalents at the end of the year 12 3,536 3, ,084 3,890 2,766 1,342 Non-cash financing activities 13(b) 4,638 3,541 2,082 3,534 2,671 3,672 1,821 1,444 The above statements of cash flows should be read in conjunction with the accompanying notes. 12

16 Financial report for the year ended STATEMENTS OF CASH FLOWS Cash flows from operating activities Notes FRANKLIN TEMPLETON MULTISECTOR BOND FUND TEMPLETON GLOBAL BOND PLUS FUND FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Proceeds from sale of financial instruments held at fair value through profit or loss 8,216,809 4,654,483 6,836,757 7,293, , ,562 22,205 30,826 Purchase of financial instruments held at fair value through profit or loss (8,302,414) (4,522,101) (6,854,057) (7,177,601) (220,208) (175,594) (93,784) (29,982) Transaction costs on purchases of financial assets held at fair value through profit or loss (21) (12) Dividends received Distributions received Interest received 17,795 22,112 5,960 8,337 10,519 9,181 3,289 2,276 Other income received Management costs paid (3,992) (3,983) (936) (1,208) (2,067) (1,672) (469) (330) Payment of other expenses (16) (95) (4) (17) (6) (7) Net cash inflow/(outflow) from operating activities 13(a) (71,816) 150,533 (12,280) 122,627 (19,464) (24,529) (68,778) 2,780 Cash flows from financing activities Proceeds from applications by unitholders 164, ,092 1, , ,883 98,681 33,074 Payments for redemptions by unitholders (102,216) (208,871) (178) (138,560) (75,755) (64,761) (27,197) (35,051) Distributions paid from operating activities (8,944) (4,713) (9,114) (3,747) (8,588) (2,403) (1,112) Net cash (outflow)/inflow from financing activities 53,727 (102,779) (3,060) (147,594) 13,527 40,534 69,081 (3,089) Net increase/(decrease) in cash and cash equivalents (18,089) 47,754 (15,340) (24,967) (5,937) 16, (309) Cash and cash equivalents at the beginning of the year 113,141 69,847 54,831 80,440 26,368 10,324 4,205 4,525 Effects of foreign currency exchange rate changes on cash and cash equivalents 3,220 (4,460) 1,255 (642) (3) (11) Cash and cash equivalents at the end of the year 12 98, ,141 40,746 54,831 20,710 26,368 4,505 4,205 Non-cash financing activities 13(b) 4, ,669 2,865 7, The above statements of cash flows should be read in conjunction with the accompanying notes.

17 Financial report for the year ended 1. GENERAL INFORMATION These financial statements cover Franklin Templeton Investment Funds (the Funds ) as registered managed investment schemes. The respective constitution dates are as follows: Templeton Global Trust Fund 17 October 1995; Templeton Global Equity Fund 31 March 2003; Franklin Global Growth Fund 11 July 2008; Franklin Templeton Australian Equity Fund 1 August 2011; Franklin Templeton Multisector Bond Fund 20 May 2009; Templeton Global Bond Plus Fund 7 September 2007; Franklin Templeton Global Aggregate Bond Fund 18 October 2012; Franklin Australian Absolute Return Bond Fund 22 December 2014 The Responsible Entity of the Funds is Franklin Templeton Investments Australia Limited (the Responsible Entity ). The Responsible Entity s registered office is Level 19, 101 Collins Street, Melbourne VIC The financial statements are presented in the Australian currency. The Funds invest in equity securities, listed unit trusts, listed property trusts, unlisted unit trusts, fixed interest securities, money market securities, derivatives and cash and cash equivalents. The investment policy of the Funds continues to be in accordance with the provisions of the Funds Constitution. The financial statements were authorised for issue by the directors on 19 September. The directors of the Responsible Entity have the power to amend and reissue the financial statements. Reclassification of units from financial liability to equity On 5 May 2016, a new tax regime applying to Managed Investment Trusts ( MITs ) was established under the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act The Attribution Managed Investment Trust ( AMIT ) regime allows MITs that meet certain requirements to make an irrevocable choice to be an AMIT. In order to allow the Funds (with the exception of Franklin Templeton Australian Equity Fund) to elect into the AMIT tax regime, their respective Constitutions have been amended and the other conditions to adopt the AMIT tax regime have been met effective 1 July. The Responsible Entity is therefore no longer contractually obligated to pay distributions. Consequently, Templeton Global Trust Fund and Templeton Global Equity Fund units have been reclassified from a financial liability to equity on 1 July. For the remaining Funds that have elected into the AMIT tax regime, their net assets attributable to unitholders remain disclosed as a liability as their multi class structure means they have not met the strict criteria for recognition as equity. Franklin Templeton Australian Equity Fund does not meet the classification of a MIT and is not affected by the AMIT tax regime. See note 2(c) and note 10 for further information. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated in the following text. (a) Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001 in Australia. The Funds are for profit unit trusts for the purpose of preparing the financial statements. The financial statements are prepared on the basis of fair value measurement of assets and liabilities except where otherwise stated. The balance sheet is presented on a liquidity basis. Assets and liabilities are presented in decreasing order of liquidity and do not distinguish between current and non-current. All material balances are expected to be recovered or settled within twelve months, except for investments in financial assets and net assets attributable to unitholders. The amount expected to be recovered or settled within twelve months after the end of each reporting period cannot be reliably determined. The Funds manage financial assets at fair value through profit or loss based on the economic circumstances at any given point in time, as well as to meet any liquidity requirements. As such, it is expected that a portion of the portfolio will be realised within 12 months, however, an estimate of that amount cannot be determined as at balance date. In the case of net assets attributable to unitholders, the units are redeemed on demand at the unitholders option. However, holders of these instruments typically retain them for the medium to long term. As such, the amount expected to be settled within 12 months cannot be reliably determined. (i) Compliance with International Financial Reporting Standards The financial statements of the Funds also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. (ii) New and amended standards adopted by the Funds There are no standards, interpretations or amendments to existing standards that are effective for the first time for the financial year beginning 1 July that have a material impact on the Funds. The amendments made by AASB Amendments to Australian Accounting Standard - Disclosure Initiative: Amendments to AASB 107 require disclosure of changes in liabilities arising from financing activities. The relevant information is provided in note

18 Financial report for the year ended (b) Financial instruments (i) Classification The Funds investments are categorised as at fair value through profit or loss. They comprise: Financial instruments held for trading Derivative financial instruments such as futures, forward currency contracts, swaps and options are included under this classification. The Funds do not designate any derivatives as hedges in a hedging relationship. Financial instruments designated at fair value through profit or loss upon initial recognition These include financial assets and financial liabilities that are not held for trading purposes and which may be sold. These are investments in equity securities, listed unit trusts, unlisted unit trusts, fixed interest securities and money market securities. Financial assets and financial liabilities designated at fair value through profit or loss at inception are those that are managed and their performance evaluated on a fair value basis in accordance with the documented investment strategy. The Funds policy is for the Responsible Entity to evaluate the information about these financial instruments on a fair value basis together with other related financial information. (ii) Recognition / derecognition The Funds recognise financial assets and financial liabilities on the date they become party to the contractual agreement (trade date) and recognise changes in fair value of the financial assets or financial liabilities from this date. Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Funds have transferred substantially all risks and rewards of ownership. (iii) Measurement Financial assets and liabilities held at fair value through profit or loss At initial recognition, the Funds measure a financial asset at its fair value. Transaction costs of financial assets carried at fair value through profit or loss are expensed in the statement of comprehensive income. Subsequent to initial recognition, all financial assets and financial liabilities at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of the financial assets or financial liabilities at fair value through profit or loss category are presented in the statement of comprehensive income within net gains/(losses) on financial instruments held at fair value though profit or loss in the period in which they arise. For further details on how the fair values of financial instruments are determined please see note 5 to the financial statements. (c) Net assets attributable to unitholders Units are redeemable at the unitholders option, however, applications and redemptions may be suspended by the Responsible Entity if it is in the best interests of the unitholders. The units can be put back to the Funds at any time for cash based on the redemption price, which is equal to a proportionate share of the Funds net asset value attributable to the unitholders. The units are carried at the redemption amount that is payable at balance sheet date if the holder exercises the right to put the unit back to the Funds. This amount represents the expected cash flows on redemption of these units. Units are classified as equity when they satisfy the following criteria under AASB 132 Financial instruments: Presentation: the puttable financial instrument entitles the holder to a pro-rata share of net assets in the event of the Funds liquidation the puttable financial instrument is in the class of instruments that is subordinate to all other classes of instruments and class features are identical the puttable financial instrument does not include any contractual obligations to deliver cash or another financial asset, or to exchange financial instruments with another entity under potentially unfavourable conditions to the Funds, and it is not a contract settled in the Funds own equity instruments; and the total expected cash flows attributable to the puttable financial instrument over the life are based substantially on the profit or loss. Effective from 1 July, Templeton Global Trust Fund and Templeton Global Equity Fund units have been reclassified from financial liability to equity as they satisfied all the above criteria. (d) Cash and cash equivalents For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short term, highly liquid investments with original maturities of three months or less from the date of acquisition that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Payments and receipts relating to the purchase and sale of investment securities are classified as cash flows from operating activities, as movements in the fair value of these securities represent the Funds main income generating activity. (e) Margin accounts Margin accounts comprise cash held as collateral for derivative transactions. The cash is held by the broker and is only available to meet margin calls. 15

19 Financial report for the year ended (f) Investment income Interest income is recognised in profit or loss for all financial instruments that are held at fair value through profit or loss using the effective interest method. Interest income on assets held at fair value through profit or loss is included in the net gains/(losses) on financial instruments. Other changes in fair value for such instruments are recorded in accordance with the policies described in note 2(b). The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or a shorter period where appropriate, to the net carrying amount of the financial asset or liability. When calculating the effective interest rate, the Funds estimate cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all fees paid or received between the parties to the contract that are an integral part of the effective interest rate, including transaction costs and all other premiums or discounts. Dividend income is recognised on the ex-dividend date with any related foreign withholding tax recorded as an expense. The Funds currently incur withholding tax imposed by certain countries on investment income. Trust distributions are recognised on an entitlement basis. (g) Expenses All expenses, including management costs, are recognised in the statement of comprehensive income on an accruals basis. (h) Income tax Under current legislation, Funds that have elected into the AMIT tax regime are not subject to income tax provided they attribute the entirety of their taxable income to their unitholders. Franklin Templeton Australian Equity Fund does not meet AMIT tax regime qualification and is not subject to income tax as its unitholders are presently entitled to the income of the Fund. (i) Distributions Distributions are payable as set out in the Fund s product disclosure statement. Such distributions are determined by the responsible entity of the Funds. Distributable income includes capital gains arising from the disposal of financial assets and liabilities held for trading. Unrealised gains and losses on financial assets and liabilities held for trading that are recognised as income are transferred to net assets attributable to unitholders and are not assessable and distributable until realised. Capital losses are not distributed to unitholders but are retained to be offset against any realised capital gains. (j) Increase/decrease in net asset attributable to unitholders Income not distributed is included in net assets attributable to unitholders. Where the Funds units are classified as liabilities, movements in net assets attributable to unitholders are recognised in the statement of comprehensive income as finance costs. (k) Foreign currency translation (i) Functional and presentation currency Items included in the Funds financial statements are measured using the currency of the primary economic environment in which it operates (the functional currency ). This is the Australian dollar, which reflects the currency of the economy in which the Funds compete for funds and is regulated. The Australian dollar is also the Funds presentation currency (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translations at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported in the statement of comprehensive income on a net basis within gains/ (losses) on financial instruments held at fair value through profit or loss. (l) Due from/to brokers Amounts due from/to brokers represent receivables for securities sold and payables for securities purchased that have been contracted for but not yet delivered by the end of the year. Trades are recorded on trade date, and for equities normally settled within three business days. A provision for impairment of amounts due from brokers is established when there is objective evidence that the Funds will not be able to collect all amounts due from the relevant broker. Indicators that the amount due from brokers is impaired include significant financial difficulties of the broker, probability that the broker will enter bankruptcy or financial reorganisation and default in payments. (m) Receivables and accrued income Receivables may include amounts for dividends, interest and trust distributions. Dividends and trust distributions are accrued when the right to receive payment is established. Interest is accrued at the end of each reporting period from the time of last payment in accordance with the policy set out in Note 2(f) above. Amounts are generally received within 30 days of being recorded as receivables. 16

20 Financial report for the year ended (n) Payables Payables include liabilities and accrued expenses owing by the Funds which are unpaid as at the end of the reporting period. As the Funds have a contractual obligation to distribute their distributable income, a separate distribution payable is recognised in the balance sheet as at the end of each reporting period where this amount remains unpaid as at the end of the reporting period. (o) Applications and redemptions Applications received for units in the Funds are recorded net of any entry fees payable prior to the issue of units in the Funds. Redemptions from the Funds are recorded gross of any exit fees payable after the cancellation of units redeemed. (p) Goods and Services Tax (GST) Management fees, custody fees and other expenses are recognised net of the amounts of goods and services tax ( GST ) recoverable from the Australian Taxation Office ( ATO ) as a reduced input tax credit ( RITC ). Payables are stated with the amount of GST included. The net amount of GST recoverable from the ATO is included in receivables in the balance sheet. Cash flows are included in the statement of cash flows on a gross basis. The GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the ATO is classified as part of operating cash flows. (q) Comparative revisions Comparative information has been revised where appropriate to enhance comparability. Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year. (r) Use of estimates The Funds make estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. For the majority of the Funds financial instruments, quoted market prices are readily available. However, certain financial instruments, for example over the counter derivatives or unquoted securities, are fair valued using valuation techniques. Where valuation techniques (for example, pricing models) are used to determine fair values, they are validated and periodically reviewed by experienced personnel of the Responsible Entity, independent of the area that created them. Models use observable data, to the extent practicable. However, areas such as credit risk (both own and counterparty), volatilities and correlations require management to make estimates. Changes in assumptions about these factors could affect the reported fair value of financial instruments. For certain other financial instruments, including amounts due from/to brokers and payables, the carrying amounts approximate fair value due to short term nature of these financial instruments. (s) Investment entity exception AASB 10 Consolidated Financial Statements for investment entities includes an exception to the consolidation rules for those entities qualifying as investment entities. Subsidiaries of investment entities will be accounted for at fair value through profit or loss, in accordance with AASB 139 Financial Instruments: Recognition and Measurement. A parent entity will need to make an assessment of whether it meets the definition of an investment entity. An investment entity is defined as an entity that: (a) obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services; (b) commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and (c) measures and evaluates the performance of substantially all of its investments on a fair value basis. Certain Funds have multiple investments that they control. However, these Funds have determined that they are investment entities under the definition in AASB 10, as they meet the following criteria: (a) These Funds have obtained funds from unitholders for the purpose of providing them with investment management services (b) These Funds business purpose, which is communicated directly to unitholders, is investing solely for returns from capital appreciation and investment income; and (c) The performance of investments made by these funds are measured and evaluated on a fair value basis. These Funds also meet all of the typical characteristics of an investment entity, including: (a) holding more than one investment; (b) having more than one investor; (c) having investors that are not related parties of the entity; and (d) having ownership interests in the form of equity or similar interests. As these Funds measure all of their controlled entities at fair value through profit or loss, they only present separate financial statements. 17

21 Financial report for the year ended (t) New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for the reporting period and have not been early adopted by the Funds. The director s assessment of the impact of these new standards (to the extent relevant to the Funds) and interpretations is set out below: (i) AASB 9 Financial Instruments (and applicable amendments), (effective from 1 January ) AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. It has now also introduced revised rules around hedge accounting and impairment. The standard is not applicable until 1 January but is available for early adoption. The directors have assessed the impact of AASB 9 on the Funds financial statements. Given no debt instruments are held by the Fund, which could result in a reclassification of the financial instruments to amortised cost or fair value through other comprehensive income ( FVOCI ), the adoption of AASB 9 is not expect to have a significant impact on the recognition and measurement of the Fund s financial instruments. The derecognition rules have not been changed from the previous requirements, and the Funds do not apply hedge accounting. (ii) AASB 15 Revenue from Contracts with Customers, (effective from 1 January ) The AASB has issued a new standard for the recognition of revenue. This will replace AASB 118 which covers contracts for goods and services and AASB 111 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer so the notion of control replaces the existing notion of risks and rewards. The Funds main sources of income are interest, dividends, distributions and gains on financial instruments held at fair value. All of these are outside the scope of the new revenue standard. As consequence, the directors do not expect the adoption of the new revenue recognition rules to have a significant impact on the Funds accounting policies or the amounts recognised in the financial statements. (iii) AASB 16 Leases, (effective from 1 January 2019) The AASB has issued a new standard for the recognition of leases. It will result in almost all leases being recognized on the balance sheet as the distinction between operating and financing leases has been removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognized. The only exceptions are short term and low value leases. The accounting of lessors will not significantly change. The Funds do not have any non cancellable operating leases and therefore does not expect to be affected by the adoption of AASB 16. (u) Rounding of amounts The Funds are entities of the kind referred to in ASIC Corporations (Rounding in Financial/Directors Reports) Instrument 2016/191, relating to the rounding off amounts in the financial statements. Amounts in the financial statements have been rounded off to the nearest thousand dollars unless otherwise indicated. 3 FINANCIAL RISK MANAGEMENT The Funds activities expose them to a variety of financial risks: market risk (including price risk, foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Funds overall risk management programme focus on ensuring compliance with the Funds Product Disclosure Statement and seeks to maximise the returns derived for the level of risk to which the Funds are exposed. The Funds use derivative financial instruments to moderate and create certain risk exposures. Financial risk management is carried out by the investment management department of the Responsible Entity under policies approved by the Board of Directors of the Responsible Entity (the Board ). The Funds use different methods to measure different types of risks to which it is exposed. These methods include Value at Risk ( VaR ) analysis in the case of interest rate, foreign exchange and other price risks, and ratings analysis for credit risk. VaR analysis is explained in note 3(b). (a) Market risk (i) Foreign exchange risk The Funds have exposure to foreign assets and holds both monetary and non-monetary assets denominated in currencies other than the Australian dollar. Foreign exchange risk arises as the value of monetary securities denominated in other currencies will fluctuate due to changes in exchange rates. The foreign exchange risk relating to non-monetary assets and liabilities is a component of price risk not foreign exchange risk. The foreign exchange risk disclosures have been prepared on the basis of the Funds direct investments and not on a look through basis to investments held via interposed investment funds. In addition, any currency hedging to minimise the impact of foreign exchange risk has not been incorporated into the disclosures unless the derivatives are held directly in these funds. In accordance with the Funds policy, the Investment Manager monitors the Funds foreign exchange exposure on a daily basis. The tables below summarise the Funds assets and liabilities that are denominated in a currency other than the Australian dollar. 18

22 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Market risk (continued) (i) Foreign exchange risk (continued) The tables below summarise the Funds assets and liabilities that are denominated in a currency other than the Australian dollar. 30 JUNE Assets TEMPLETON GLOBAL TRUST FUND US British Japanese Honk Kong Other Dollars Euros Pounds Yen Dollar Currencies $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Receivables Accrued income Financial assets held at fair value through profit or loss 58,823 30,163 20,538 12,180 10,167 16,769 Total assets 58,888 30,449 20,642 12,195 10,294 16,845 Net increase/(decrease) in exposure from foreign currency forward contracts - Buy foreign currency - Sell foreign currency Net exposure including foreign currency forward contracts 58,888 30,449 20,642 12,195 10,294 16, JUNE Assets Receivables Accrued income Due from brokers - receivable for securities sold Financial assets held at fair value through profit or loss 68,601 31,332 17,882 12,192 11,345 23,928 Total assets 68,621 31,638 17,971 11,493 24,164 Net increase/(decrease) in exposure from foreign currency forward contracts - Buy foreign currency - Sell foreign currency (61) (155) Net exposure including foreign currency forward contracts 68,621 31,577 17,971 12,206 11,493 24,009 19

23 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Market risk (continued) (i) Foreign exchange risk (continued) FRANKLIN GLOBAL GROWTH FUND US British Swiss Japanese Other Dollars Euros Pounds Francs Yen Currencies $ 000 $ 000 $ 000 $ 000 $ 000 $ JUNE Assets Receivables Accrued income Financial assets held at fair value through profit or loss 119,660 23,312 26,396 10,648 10,245 10,737 Total assets 119,755 23,385 26,456 10,764 10,245 10,745 Liabilities Due to brokers - payable for securities purchased Financial liabilities held at fair value through profit or loss Total liabilities (excluding net assets attributable to unitholders) Net increase/(decrease) in exposure from foreign currency forward contracts Buy foreign currency Sell foreign currency Net exposure including foreign currency forward contracts 119,755 23,385 26,456 10,764 10,245 10, JUNE Assets Receivables Accrued income Due from brokers - receivable for securities sold 1, Financial assets held at fair value through profit or loss 62,257 14,604 12,669 7,950 4,859 8,933 Total assets 64,009 14,645 12,686 8,080 4,859 9,219 Liabilities Due to brokers - payable for securities purchased 651 Financial liabilities held at fair value through profit or loss 2 Total liabilities (excluding net assets attributable to unitholders) 653 Net increase/(decrease) in exposure from foreign currency forward contracts Buy foreign currency Sell foreign currency (1,313) (234) Net exposure including foreign currency forward contracts 62,043 14,645 12,686 8,080 4,859 8,985 20

24 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Market risk (continued) (i) Foreign exchange risk (continued) FRANKLIN TEMPLETON MULTISECTOR BOND FUND US South Japanese Mexican Other Dollars Euros Korean Won Yen Peso Currencies $ 000 $ 000 $ 000 $ 000 $ 000 $ JUNE Assets Cash and cash equivalents 54,180 26,061 15,008 Margin accounts 6,031 Accrued income 28 Due from brokers - receivable for securities sold 1,036 Financial assets held at fair value through profit or loss 22, ,647 72, ,049 Total assets 83, ,647 98, ,057 Liabilities Margin accounts 3,384 Financial liabilities held at fair value through profit or loss 8, Total liabilities (excluding net assets attributable to unitholders) 11, Net increase/(decrease) in exposure from foreign currency forward contracts Buy foreign currency 460,871 2,745 12,225 78,951 Sell foreign currency (579,979) (163,804) (65,609) (161,188) (1,048) (14,371) Net exposure including foreign currency forward contracts (47,410) (163,962) 38 (158,455) 109, , JUNE Assets Cash and cash equivalents 86,568 21,663 Margin accounts 9,675 Financial assets held at fair value through profit or loss 18, ,168 67, ,586 Total assets 114, ,168 67, ,249 Liabilities Margin accounts 3,911 Financial liabilities held at fair value through profit or loss 2,825 5, Total liabilities (excluding net assets attributable to unitholders) 6,736 5, Net increase/(decrease) in exposure from foreign currency forward contracts Buy foreign currency 458,632 5,580 39,671 15,168 41,877 Sell foreign currency (535,492) (165,928) (63,655) (188,875) (342) Net exposure including foreign currency forward contracts 31,140 (165,925) (1,510) (149,469) 82, ,784 21

25 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Market risk (continued) (i) Foreign exchange risk (continued) FRANKLIN TEMPLETON GLOBAL BOND PLUS FUND US South Mexican Brazilian Other Dollars Euros Korean Won Peso Real Currencies $ 000 $ 000 $ 000 $ 000 $ 000 $ JUNE Assets Cash and cash equivalents 34,837 4, Margin accounts 8,682 Receivables 115 Financial assets held at fair value through profit or loss 6,605 26,249 30,312 15,081 50,378 Total assets 50,124 26,249 35,179 15,136 51,298 Liabilities Margin accounts 934 Financial liabilities held at fair value through profit or loss 8, Total liabilities (excluding net assets attributable to unitholders) 8, Net increase/(decrease) in exposure from foreign currency forward contracts Buy foreign currency 170,964 4,997 16,350 Sell foreign currency (195,143) (65,407) (26,358) (335) (364) (56,536) Net exposure including foreign currency forward contracts 16,963 (65,532) (109) 34,838 19,769 11, JUNE Assets Cash and cash equivalents 45,611 9, Margin accounts 4,500 Receivables 112 Financial assets held at fair value through profit or loss 5,160 24,766 34,443 15,342 38,859 Total assets 55,271 24,766 43,529 15,348 39,034 Liabilities Margin accounts 2,177 Financial liabilities held at fair value through profit or loss 1,422 2, Total liabilities (excluding net assets attributable to unitholders) 3,599 2, Net increase/(decrease) in exposure from foreign currency forward contracts Buy foreign currency 174,086 7,449 7, ,355 Sell foreign currency (203,914) (68,796) (25,386) (7,791) (57,552) Net exposure including foreign currency forward contracts 21,844 (63,700) (620) 42,797 15,945 (4,351) 22

26 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Market risk (continued) (i) Foreign exchange risk (continued) FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND US British Japanese Polish Other Dollars Euros Pounds Yen Zloty Currencies $ 000 $ 000 $ 000 $ 000 $ 000 $ JUNE Assets Cash and cash equivalents 6, ,407 Margin accounts 4,967 Accrued income 25,643 Financial assets held at fair value through profit or loss 110,701 89,601 6,691 29,219 57,825 Total assets 121, , ,691 29,892 61,232 Liabilities Margin accounts 2,531 Due to brokers - payable for securities purchased 25,666 Financial liabilities held at fair value through profit or loss 4, Total liabilities (excluding net assets attributable to unitholders) 7,141 26, Net increase/(decrease) in exposure from foreign currency forward contracts Buy foreign currency 7,001 86,595 14,993 22,450 Sell foreign currency (122,204) (174,809) (14,961) (8,123) (43,824) (6,584) Net exposure including foreign currency forward contracts (407) (1,443) 8,518 54, JUNE Assets Cash and cash equivalents 7, ,413 3,687 Margin accounts 3,324 Receivables 19 Financial assets held at fair value through profit or loss 123,442 78,051 12,258 6,447 11,113 42,306 Total assets 134,403 78,859 12,659 7,860 11,113 45,993 Liabilities Margin accounts 1,069 Financial liabilities held at fair value through profit or loss 15 2, Total liabilities (excluding net assets attributable to unitholders) 1,084 2, Net increase/(decrease) in exposure from foreign currency forward contracts Buy foreign currency Sell foreign currency (110,837) (77,439) (13,468) (7,951) (9,750) (6,350) Net exposure including foreign currency forward contracts 22,482 (1,326) (1,063) (91) ,515 23

27 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Market risk (continued) (i) Foreign exchange risk (continued) FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND US New Zealand Philippine Other Dollars Euros Dollars Pesos Currencies $ 000 $ 000 $ 000 $ 000 $ JUNE Assets Cash and cash equivalents Margin accounts Financial assets held at fair value through profit or loss 21,017 Total assets 21, Liabilities Margin accounts 127 Due to brokers - payable for securities purchased 572 Financial liabilities held at fair value through profit or loss 1,088 Total liabilities (excluding net assets attributable to unitholders) 1,787 Net increase/(decrease) in exposure from foreign currency forward contracts Buy foreign currency 1,362 Sell foreign currency (19,464) Net exposure including foreign currency forward contracts 1, JUNE Assets Cash and cash equivalents Financial assets held at fair value through profit or loss 7, Total assets 7, Liabilities Margin accounts Financial liabilities held at fair value through profit or loss Total liabilities (excluding net assets attributable to unitholders) Net increase/(decrease) in exposure from foreign currency forward contracts Buy foreign currency 3,997 1, Sell foreign currency (7,834) (476) (582) (3,414) Net exposure including foreign currency forward contracts 3,149 (7) (595) 1,139 (2,921) 24

28 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Market risk (continued) (ii) Cash flow and fair value interest rate risk Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Funds are exposed to cash flow interest rate risk on financial instruments with variable interest rates. Financial instruments with fixed rates expose the Funds to fair value interest rate risk. The Funds interest bearing financial assets and financial liabilities expose it to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. The tables below summarise the Funds year end assets and liabilities that have floating interest rates, fixed interest rates or are non interest bearing. Floating interest rate TEMPLETON GLOBAL TRUST FUND Fixed interest rate Non-interest bearing Total $ 000 $ 000 $ 000 $ 000 At Financial assets Cash and cash equivalents 3,536 3,536 Receivables Accrued income Financial assets held at fair value through profit or loss 148, ,640 Total assets 3, , ,884 Financial liabilities Distribution payable 18,132 18,132 Payables Total liabilities 18,910 18,910 At Financial assets Cash and cash equivalents 3,676 3,676 Receivables Accrued income Due from brokers - receivable for securities sold Financial assets held at fair value through profit or loss 165, ,279 Total assets 3, , ,015 Financial liabilities Distribution payable 16,118 16,118 Payables Total liabilities (excluding net assets attributable to unitholders) 16,684 16,684 Net assets attributable to unitholders - liability 3, , ,331 25

29 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Market risk (continued) (ii) Cash flow and fair value interest rate risk (continued) Floating interest rate TEMPLETON GLOBAL EQUITY FUND Fixed interest rate Non-interest bearing Total $ 000 $ 000 $ 000 $ 000 At Financial assets Cash and cash equivalents Receivables Accrued income 17,515 17,515 Due from brokers - receivable for securities sold Financial assets held at fair value through profit or loss 129, ,415 Total assets , ,981 Financial liabilities Distribution payable 18,072 18,072 Payables 1,174 1,174 Total liabilities 19,246 19,246 At Financial assets Cash and cash equivalents Receivables Accrued income 14,814 14,814 Financial assets held at fair value through profit or loss 140, ,923 Total assets , ,476 Financial liabilities Distribution payable 12,222 12,222 Payables Total liabilities (excluding net assets attributable to unitholders) 12,816 12,816 Net assets attributable to unitholders - liability , ,660 26

30 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Market risk (continued) (ii) Cash flow and fair value interest rate risk (continued) Floating interest rate FRANKLIN GLOBAL GROWTH FUND Fixed interest rate Non-interest bearing Total $ 000 $ 000 $ 000 $ 000 At Financial assets Cash and cash equivalents 7,084 7,084 Receivables Accrued income Financial assets held at fair value through profit or loss 200, ,998 Total assets 7, , ,554 Financial liabilities Distribution payable 5,383 5,383 Payables Total liabilities (excluding net assets attributable to unitholders) 6,280 6,280 Net assets attributable to unitholders - liability 7, , ,274 At Financial assets Cash and cash equivalents 3,890 3,890 Receivables Accrued income Due from brokers - receivable for securities sold 1,975 1,975 Financial assets held at fair value through profit or loss 111, ,272 Total assets 3, , ,463 Financial liabilities Distribution payable 5,761 5,761 Payables Due to brokers - payable for securities purchased Financial liabilities held at fair value through profit or loss 2 2 Total liabilities (excluding net assets attributable to unitholders) 6,874 6,874 Net assets attributable to unitholders - liability 3, , ,589 27

31 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Market risk (continued) (ii) Cash flow and fair value interest rate risk (continued) Floating interest rate FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND Fixed interest rate Non-interest bearing Total $ 000 $ 000 $ 000 $ 000 At Financial assets Cash and cash equivalents 2,766 2,766 Margin accounts Receivables Accrued income Due from brokers - receivable for securities sold Financial assets held at fair value through profit or loss 73,059 73,059 Total assets 2,778 73,789 76,567 Financial liabilities Margin accounts 2,782 2,782 Distribution payable 4,279 4,279 Payables Due to brokers - payable for securities purchased Financial liabilities held at fair value through profit or loss Total liabilities (excluding net assets attributable to unitholders) 2,782 4,741 7,523 Net assets attributable to unitholders - liability (4) 69,048 69,044 At Financial assets Cash and cash equivalents 1,342 1,342 Margin accounts Receivables Accrued income Due from brokers - receivable for securities sold Financial assets held at fair value through profit or loss 66,799 66,799 Total assets 1,516 67,719 69,235 Financial liabilities Margin accounts 2,405 2,405 Distribution payable 3,965 3,965 Payables Financial liabilities held at fair value through profit or loss Total liabilities (excluding net assets attributable to unitholders) 2,405 4,362 6,767 Net assets attributable to unitholders - liability (889) 63,357 62,468 28

32 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Market risk (continued) (ii) Cash flow and fair value interest rate risk (continued) Floating interest rate FRANKLIN TEMPLETON MULTISECTOR BOND FUND Fixed interest rate Non-interest bearing Total $ 000 $ 000 $ 000 $ 000 At Financial assets Cash and cash equivalents 98,272 98,272 Margin accounts 6,031 6,031 Receivables Accrued income Due from brokers - receivable for securities sold 1,036 1,036 Financial assets held at fair value through profit or loss 62, ,309 10, ,406 Total assets 166, ,309 12, ,138 Financial liabilities Margin accounts 3,384 3,384 Distribution payable 2,871 2,871 Payables 2,694 2,694 Financial liabilities held at fair value through profit or loss 1,004 7,529 8,533 Total liabilities (excluding net assets attributable to unitholders) 3,384 1,004 13,094 17,482 Net assets attributable to unitholders - liability 163, ,305 (766) 466,656 Net increase/(decrease) in exposure from International interest rate swaps 111,925 (111,925) Net exposure 275, ,380 (766) 466,656 At Financial assets Cash and cash equivalents 113, ,141 Margin accounts 9,675 9,675 Receivables 4,365 4,365 Financial assets held at fair value through profit or loss 30, ,163 16, ,470 Total assets 153, ,163 21, ,651 Financial liabilities Margin accounts 3,911 3,911 Distribution payable 11,819 11,819 Payables 2,733 2,733 Financial liabilities held at fair value through profit or loss 2,571 7,161 9,732 Total liabilities (excluding net assets attributable to unitholders) 3,911 2,571 21,713 28,195 Net assets attributable to unitholders - liability 149, ,592 (511) 422,456 Net increase/(decrease) in exposure from International interest rate swaps 91,128 (91,128) Net exposure 240, ,464 (511) 422,456 29

33 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Market risk (continued) (ii) Cash flow and fair value interest rate risk (continued) Floating interest rate TEMPLETON GLOBAL BOND PLUS FUND Fixed interest rate Non-interest bearing Total $ 000 $ 000 $ 000 $ 000 At Financial assets Cash and cash equivalents 40,746 40,746 Margin accounts 8,682 8,682 Receivables Financial assets held at fair value through profit or loss 18, ,366 3, ,625 Total assets 67, ,366 3, ,191 Financial liabilities Margin accounts Distribution payable 4,873 4,873 Payables Financial liabilities held at fair value through profit or loss 456 7,761 8,217 Total liabilities (excluding net assets attributable to unitholders) ,044 14,434 Net assets attributable to unitholders - liability 66, ,910 (9,729) 163,757 Net increase/(decrease) in exposure from International interest rate swaps 39,367 (39,367) Net exposure 105,943 67,543 (9,729) 163,757 At Financial assets Cash and cash equivalents 54,831 54,831 Margin accounts 4,500 4,500 Receivables Financial assets held at fair value through profit or loss 10, ,656 5, ,239 Total assets 70, ,656 5, ,701 Financial liabilities Margin accounts 2,177 2,177 Distribution payable 4,811 4,811 Payables Financial liabilities held at fair value through profit or loss 1,345 3,664 5,009 Total liabilities (excluding net assets attributable to unitholders) 2,177 1,345 8,867 12,389 Net assets attributable to unitholders - liability 67, ,311 (2,909) 169,312 Net increase/(decrease) in exposure from International interest rate swaps 36,660 (36,660) Net exposure 104,570 67,651 (2,909) 169,312 30

34 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Market risk (continued) (ii) Cash flow and fair value interest rate risk (continued) Floating interest rate FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND Fixed interest rate Non-interest bearing Total $ 000 $ 000 $ 000 $ 000 At Financial assets Cash and cash equivalents 20,710 20,710 Margin accounts 4,967 4,967 Receivables Accrued income 6 6 Due from brokers - receivable for securities sold 25,643 25,643 Financial assets held at fair value through profit or loss 6, ,351 3, ,806 Total assets 31, ,351 29, ,414 Financial liabilities Margin accounts 2,531 2,531 Distribution payable 4,213 4,213 Payables 1,066 1,066 Due to brokers - payable for securities purchased 25,666 25,666 Financial liabilities held at fair value through profit or loss 8,483 8,483 Total liabilities (excluding net assets attributable to unitholders) 2,531 39,428 41,959 Net assets attributable to unitholders- liability 29, ,351 (10,099) 343,455 Net increase/(decrease) in exposure from International interest rate swaps Net exposure 29, ,351 (10,099) 343,455 At Financial assets Cash and cash equivalents 26,368 26,368 Margin accounts 3,324 3,324 Receivables Financial assets held at fair value through profit or loss ,314 1, ,881 Total assets 29, ,314 1, ,214 Financial liabilities Margin accounts 1,069 1,069 Distribution payable 5,612 5,612 Payables 4,113 4,113 Financial liabilities held at fair value through profit or loss 3,588 3,588 Total liabilities (excluding net assets attributable to unitholders) 1,069 13,313 14,382 Net assets attributable to unitholders - liability 28, ,314 (11,412) 327,832 Net increase/(decrease) in exposure from International interest rate swaps Net exposure 28, ,314 (11,412) 327,832 31

35 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Market risk (continued) (ii) Cash flow and fair value interest rate risk (continued) Floating interest rate FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND Fixed interest rate Non-interest bearing Total $ 000 $ 000 $ 000 $ 000 At Financial assets Cash and cash equivalents 4,505 4,505 Margin accounts 1,940 1,940 Receivables Accrued income Due from brokers - receivable for securities sold Financial assets held at fair value through profit or loss 32,398 95, ,864 Total assets 38,843 95, ,717 Financial liabilities Margin accounts Distribution payable Payables Due to brokers - payable for securities purchased 1,261 1,261 Financial liabilities held at fair value through profit or loss 254 1,042 1,296 Total liabilities (excluding net assets attributable to unitholders) ,840 3,221 Net assets attributable to unitholders - liability 38,716 95,212 (2,432) 131,496 Net increase/(decrease) in exposure from International interest swaps 5,143 (5,143) Net exposure 43,859 90,069 (2,432) 131,496 At Financial assets Cash and cash equivalents 4,205 4,205 Margin accounts Receivables Accrued income Due from brokers - receivable for securities sold Financial assets held at fair value through profit or loss 11,001 44, ,073 Total assets 16,110 44, ,338 Financial liabilities Margin accounts Distribution payable Payables Due to brokers - payable for securities purchased Financial liabilities held at fair value through profit or loss Total liabilities (excluding net assets attributable to unitholders) ,571 2,039 Net assets attributable to unitholders - liability 16,011 44,591 (1,303) 59,299 Net increase/(decrease) in exposure from International interest swaps (15,058) 15,058 Net exposure ,649 (1,303) 59,299 32

36 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Value-at-risk ( VAR ) VaR is a statistical technique that attempts to summarise the exposure of a given portfolio to market risk by making assumptions about the expected probability distribution of future portfolio returns. VaR represents the maximum reasonable loss that an investor could expect during a time period, with a given probability. In order to estimate this future market risk, VaR assumes a normal or bell shaped curve of future portfolio returns and uses the unique characteristics of the normal distribution primarily symmetry of future returns both higher and lower than the average future return to estimate the amount of the possible future losses. To calculate VaR, the Responsible Entity uses the historic price volatility and correlations of current portfolio holdings to calculate both the historic average return and the historic standard deviation of returns around the average. These statistics are then extrapolated into the future using the assumption of normal distribution to calculate an expected loss if the future portfolio return volatility behaves according to these assumptions. The VaR calculation presented here for the Funds use a 99% confidence interval and assumes a 3 month holding period. Assumptions and limitations of VaR The calculation process involves gathering the historical price volatility and correlations of the current portfolio holdings to arrive at an estimate of predicted future volatility and expected risk of loss. These limitations and the nature of the VaR measures mean that the Funds can neither guarantee that losses will not exceed the VaR amounts indicated nor that losses in excess of the VaR amounts will not occur more frequently than is stipulated by the model. VaR represents the probable expected loss that could be experienced during a given period - not the maximum loss that an investor could experience. It must be noted however that while the VaR model is an important and valuable risk management tool, it cannot and does not take account of all possible market conditions and extremities that may impact market price risk. For further information regarding market price risk and other risk factors please refer to the Funds Information Memorandum and Product Disclosure Statement or speak to your financial advisor. The following table summarises the estimated market risk impact to the profitability of the Funds. The estimated impact has been calculated on the basis of a VaR number incorporating market price, currency and interest rate factors into an overall return risk. VaR FACTOR NET ASSETS ATTRIBUTABLE TO UNITHOLDERS ESTIMATED IMPACT OF NET ASSETS ATTRIBUTABLE TO UNITHOLDERS % $ 000 $ 000 Templeton Global Trust Fund ,974 14, ,331 18,476 Templeton Global Equity Fund ,735 13, ,660 17,311 Franklin Global Growth Fund ,274 24, ,589 12,961 Franklin Templeton Australian Equity Fund ,044 7, ,468 8,527 33

37 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Value-at-risk ( VAR ) (continued) Assumptions and limitations of VaR (continued) VaR FACTOR NET ASSETS ATTRIBUTABLE TO UNITHOLDERS ESTIMATED IMPACT OF NET ASSETS ATTRIBUTABLE TO UNITHOLDERS % $ 000 $ 000 Franklin Templeton Multisector Bond Fund ,656 51, ,456 60,496 Templeton Global Bond Plus Fund ,757 18, ,312 24,296 Franklin Templeton Global Aggregate Bond Fund ,455 8, ,832 11,802 Franklin Australian Absolute Return Bond Fund ,496 1, , (c) Credit risk The Funds are exposed to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when they fall due. The main concentration of credit risk, to which the Funds are exposed, arises from the Funds investments in debt securities. The Funds are also exposed to counterparty credit risk on derivative financial instruments, cash and cash equivalents, amounts due from brokers and other receivables. None of these assets are impaired nor past due but not impaired. Credit risk is managed by ensuring that: counterparties with respective credit limits are approved by the Responsible Entity; and transactions are undertaken with a number of counterparties. The Funds invest in fixed interest securities and money market securities which have credit ratings as rated by well known rating agencies. For unrated fixed interest securities a rating is assigned by the Investment Manager using an approach that is consistent with the approach used by rating agencies. The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets. An analysis of directly held fixed interest securities by rating is set out in the table below: 34

38 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (c) Credit risk (continued) FRANKLIN TEMPLETON MULTISECTOR BOND FUND $ 000 $ 000 Rating AA 1,740 1,681 AA- 61,598 28,675 A 8,759 19,262 A- 42,029 15,729 BBB+ 23,078 18,642 BBB 68,804 5,740 BBB- 2,276 55,127 BB 39,619 BB- 39,904 4,734 B+ 3,564 3,506 B 51,530 18,689 B- 3,758 29,567 Not Rated 57,305 66,517 Total 364, ,488 35

39 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (c) Credit risk (continued) TEMPLETON GLOBAL BOND PLUS FUND $ 000 $ 000 Rating AA- 10,849 9,503 A 9,494 16,614 A- 17,498 6,222 BBB+ 7,004 9,711 BBB 22,878 BBB- 21,050 BB+ BB 1,595 10,601 BB- 11,918 1,603 B+ 153 B 9,195 2,904 B- 2,073 9,873 Not Rated 33,030 26,646 Total 124, ,322 36

40 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (c) Credit risk (continued) FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND $ 000 $ 000 Rating AAA 36,331 96,693 AA+ 36,610 44,972 AA 14,805 13,960 AA- 4,340 9,127 A+ 24,573 17,611 A 36,758 30,689 A- 48,404 20,835 BBB+ 46,734 22,562 BBB 38,669 38,125 BBB- 2,012 12,078 BB+ 23, BB 5,738 BB- 4,953 B+ 2, B 1,882 Not Rated 2,863 2,983 Total 330, ,621 37

41 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (c) Credit risk (continued) FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND 2016 $ 000 $ 000 Rating AAA 11,793 3,527 AA+ 247 AA 7,429 2,333 AA- 4,955 2,464 A+ 5,604 2,538 A 14,736 3,125 A- 26,722 11,915 BBB+ 24,922 8,521 BBB 17,903 11,581 BBB- 11,306 7,300 BB+ 2,149 2,497 Total 127,766 55,801 (d) Liquidity risk Liquidity risk is the risk that the Funds may not be able to generate sufficient cash resources to settle their obligations in full as they fall due or can only do so on terms that are materially disadvantageous. The Funds are exposed to daily cash redemptions of redeemable units. The Funds primarily hold investments that are traded in active markets and can be readily disposed. Only a limited proportion of its assets are held in investments not actively traded on a stock exchange. The Responsible Entity monitors liquidity of the Funds on a daily basis. In order to manage the Funds overall liquidity, the Funds have the ability to suspend unit pricing and hence suspend redemption requests. The Funds did not suspend redemptions as a result of suspending unit pricing in the current or prior year. The tables below analyse the Funds financial liabilities into relevant maturity groupings based on the remaining period at the end of the reporting period. The amounts in the table are contractual undiscounted cash flows. 38

42 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (d) Liquidity risk (continued) 30 JUNE Less than 1 month TEMPLETON GLOBAL TRUST FUND 1-6 months 6-12 months Over 12 months Total $ 000 $ 000 $ 000 $ 000 $ 000 Distribution payable 18,132 18,132 Payables Total 18,910 18, JUNE Distribution payable 16,118 16,118 Payables Net assets attributable to unitholders 153, ,331 Total 170, , JUNE Less than 1 month TEMPLETON GLOBAL EQUITY FUND 1-6 months 6-12 months Over 12 months Total $ 000 $ 000 $ 000 $ 000 $ 000 Distribution payable 18,072 18,072 Payables 1,174 1,174 Total 19,246 19, JUNE Distribution payable 12,222 12,222 Payables Net assets attributable to unitholders 143, ,660 Total 156, ,476 39

43 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (d) Liquidity risk (continued) 30 JUNE Less than 1 month FRANKLIN GLOBAL GROWTH FUND 1-6 months 6-12 months Over 12 months Total $ 000 $ 000 $ 000 $ 000 $ 000 Derivatives Distribution payable 5, ,383 Payables Net assets attributable to unitholders 202, ,274 Total 208, , JUNE Derivatives 2 2 Distribution payable 5,761 5,761 Payables Due to brokers - payable for securities purchased Net assets attributable to unitholders 110, ,589 Total 117, , JUNE Less than 1 month FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND 1-6 months 6-12 months Over 12 months Total $ 000 $ 000 $ 000 $ 000 $ 000 Derivatives Margin accounts 2,782 2,782 Distribution payable 4,279 4,279 Payables Due to brokers - payable for securities purchased Net assets attributable to unitholders 69,044 69,044 Total 76, , JUNE Derivatives Margin accounts 2,405 2,405 Distribution payable 3,965 3,965 Payables Net assets attributable to unitholders 62,468 62,468 Total 69, ,235 40

44 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (d) Liquidity risk (continued) 30 JUNE Less than 1 month FRANKLIN TEMPLETON MULTISECTOR BOND FUND 1-6 months 6-12 months Over 12 months Total $ 000 $ 000 $ 000 $ 000 $ 000 Derivatives 2,642 4, ,004 8,533 Margin accounts 3,384 3,384 Distribution payable 2,871 2,871 Payables 2,694 2,694 Net assets attributable to unitholders 466, ,656 Total 478,247 4, , , JUNE Derivatives 1,897 4, ,571 9,732 Margin accounts 3,911 3,911 Distribution payable 11,819 11,819 Payables 2,733 2,733 Net assets attributable to unitholders 422, ,456 Total 442,816 4, , , JUNE Less than 1 month TEMPLETON GLOBAL BOND PLUS FUND 1-6 months 6-12 months Over 12 months Total $ 000 $ 000 $ 000 $ 000 $ 000 Derivatives 5,583 2, ,217 Margin accounts Distribution payable 4,873 4,873 Payables Net assets attributable to unitholders 163, ,757 Total 175,557 2, , JUNE Derivatives 1,510 1, ,345 5,009 Margin accounts 2,177 2,177 Distribution payable 4,811 4,811 Payables Net assets attributable to unitholders 169, ,312 Total 178,202 1, , ,701 41

45 Financial report for the year ended 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (d) Liquidity risk (continued) 30 JUNE Less than 1 month FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND 1-6 months 6-12 months Over 12 months Total $ 000 $ 000 $ 000 $ 000 $ 000 Derivatives 7, ,483 Margin accounts 2,531 2,531 Distribution payable 4,213 4,213 Payables 1,066 1,066 Due to brokers - payable for securities purchased 25,666 25,666 Net assets attributable to unitholders 343, ,455 Total 384, , JUNE Derivatives 3,588 3,588 Margin accounts 1,069 1,069 Distribution payable 5,612 5,612 Payables 4,113 4,113 Net assets attributable to unitholders 327, ,832 Total 342, , JUNE Less than 1 month FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND 1-6 months 6-12 months Over 12 months Total $ 000 $ 000 $ 000 $ 000 $ 000 Derivatives 1, ,296 Margin accounts Distribution payable Payables Due to brokers - payable for securities purchased 1,261 1,261 Net assets attributable to unitholders 131, ,496 Total 134, , JUNE Derivatives Margin accounts Distribution payable Payables Due to brokers - payable for securities purchased Net assets attributable to unitholders 59,299 59,299 Total 60, ,338 42

46 Financial report for the year ended 4. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The gross and net positions of financial assets and liabilities that have been offset in the balance sheet are disclosed in the first three columns of the tables below. FRANKLIN GLOBAL GROWTH FUND Effects of offsetting on the balance sheet Gross amounts of financial assets and liabilities Gross amounts set off in the balance sheet Net amount of financial assets presented in the balance sheet Related amounts not offset Amounts subject to enforceable netting arrangements Net amount $'000 $ 000 $ 000 $ 000 $ JUNE Financial assets Derivatives financial instruments Total Financial liabilities Derivatives financial instruments Total JUNE Financial assets Derivatives financial instruments Total Financial liabilities Derivatives financial instruments Total

47 Financial report for the year ended 4. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED) 30 JUNE Financial assets FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND Effects of offsetting on the balance sheet Gross amounts of financial assets and liabilities Gross amounts set off in the balance sheet Net amount of financial assets presented in the balance sheet Related amounts not offset Amounts subject to enforceable netting arrangements Net amount $'000 $ 000 $ 000 $ 000 $ 000 Derivatives financial instruments 2,888 2,888 2,888 Total 2,888 2,888 2,888 Financial liabilities Derivatives financial instruments Total JUNE Financial assets Derivatives financial instruments 2,528 2,528 2,528 Total 2,528 2,528 2,528 Financial liabilities Derivatives financial instruments Total

48 Financial report for the year ended 4. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED) 30 JUNE Financial assets FRANKLIN TEMPLETON MULTISECTOR BOND FUND Effects of offsetting on the balance sheet Gross amounts of financial assets and liabilities Gross amounts set off in the balance sheet Net amount of financial assets presented in the balance sheet Related amounts not offset Amounts subject to enforceable netting arrangements Net amount $'000 $ 000 $ 000 $ 000 $ 000 Derivatives financial instruments 14,011 14,011 14,011 Total 14,011 14,011 14,011 Financial liabilities Derivatives financial instruments 8,533 8,533 8,533 Total 8,533 8,533 8, JUNE Financial assets Derivatives financial instruments 15,954 15,954 15,954 Total 15,954 15,954 15,954 Financial liabilities Derivatives financial instruments 9,732 9,732 9,732 Total 9,732 9,732 9,732 45

49 Financial report for the year ended 4. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED) 30 JUNE Financial assets TEMPLETON GLOBAL BOND PLUS FUND Effects of offsetting on the balance sheet Gross amounts of financial assets and liabilities Gross amounts set off in the balance sheet Net amount of financial assets presented in the balance sheet Related amounts not offset Amounts subject to enforceable netting arrangements Net amount $'000 $ 000 $ 000 $ 000 $ 000 Derivatives financial instruments 4,533 4,533 4,533 Total 4,533 4,533 4,533 Financial liabilities Derivatives financial instruments 8,217 8,217 8,217 Total 8,217 8,217 8, JUNE Financial assets Derivatives financial instruments 5,917 5,917 5,917 Total 5,917 5,917 5,917 Financial liabilities Derivatives financial instruments 5,009 5,009 5,009 Total 5,009 5,009 5,009 46

50 Financial report for the year ended 4. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED) 30 JUNE Financial assets FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND Effects of offsetting on the balance sheet Gross amounts of financial assets and liabilities Gross amounts set off in the balance sheet Net amount of financial assets presented in the balance sheet Related amounts not offset Amounts subject to enforceable netting arrangements Net amount $'000 $ 000 $ 000 $ 000 $ 000 Derivatives financial instruments 3,398 3,398 3,398 Total 3,398 3,398 3,398 Financial liabilities Derivatives financial instruments 8,483 8,483 8,483 Total 8,483 8,483 8, JUNE Financial assets Derivatives financial instruments 1,260 1,260 1,260 Total 1,260 1,260 1,260 Financial liabilities Derivatives financial instruments 3,588 3,588 3,588 Total 3,588 3,588 3,588 47

51 Financial report for the year ended 4. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED) 30 JUNE Financial assets FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND Effects of offsetting on the balance sheet Gross amounts of financial assets and liabilities Gross amounts set off in the balance sheet Net amount of financial assets presented in the balance sheet Related amounts not offset Amounts subject to enforceable netting arrangements Net amount $'000 $ 000 $ 000 $ 000 $ 000 Derivatives financial instruments Total Financial liabilities Derivatives financial instruments 1,296 1,296 1,296 Total 1,296 1,296 1, JUNE Financial assets Derivatives financial instruments Total Financial liabilities Derivatives financial instruments Total (i) Master netting arrangement not currently enforceable Agreements with derivative counterparties are based on the ISDA Master Agreement. Under the terms of these arrangements, only where certain credit events occur (such as default), the net position owing/receivable to a single counterparty in the same currency will be taken as owing and all the relevant arrangements terminated. As the Funds do not presently have a legally enforceable right of set off, these amounts have not been offset in the balance sheet, but have been presented separately in the above table. 48

52 Financial report for the year ended 5. FAIR VALUE MEASUREMENT The Funds measure and recognise the following assets and liabilities at fair value on a recurring basis Financial assets / liabilities designated at fair value through profit or loss (FVPL) (see note 7 and 8) Financial assets / liabilities held for trading (see note 7 and 8) Derivative financial instruments (see note 9) The Funds have no assets or liabilities measured at fair value on a non-recurring basis in the current reporting period. AASB 13 requires disclosure of fair value measurements by level of the following fair value hierarchy; (a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1) (b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly (level 2); and (c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3) (i) Fair value in an active market (level 1) The fair value of financial assets and liabilities traded in active markets is based on their quoted market prices at the end of the reporting period without any deduction for estimated future selling costs. The Funds value their investments in accordance with the accounting policies set out in note 2. For the majority of their investments, the Funds rely on information provided by independent pricing services for the valuation of their investments. The quoted market price used for financial assets and financial liabilities held by the Funds is the last traded market price. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm s length basis. (ii) Fair value in an inactive or unquoted market (level 2 and level 3) The fair value of financial assets and liabilities that are not traded in an active market is determined using valuation techniques. These include the use of recent arm s length market transactions, reference to the current fair value of a substantially similar other instrument, discounted cash flow techniques, option pricing models or any other valuation technique that provides a reliable estimate of prices obtained in actual market transactions. Where discounted cash flow techniques are used, estimated future cash flows are based on management s best estimates and the discount rate used is a market rate at the end of the reporting period applicable for an instrument with similar terms and conditions. For other pricing models, inputs are based on market data at the end of the reporting period. Fair values for unquoted equity investments are estimated, if possible, using applicable price/ earnings ratios for similar listed companies adjusted to reflect the specific circumstances of the issuer. The fair value of derivatives that are not exchange traded is estimated at the amount that the Funds would receive or pay to terminate the contract at the end of the reporting period taking into account current market conditions (volatility and appropriate yield curve) and the current creditworthiness of the counterparties. The fair value of a forward contract is determined as a net present value of estimated future cash flows, discounted at appropriate market rates as at the valuation date. Investments in other unlisted unit trusts are recorded at the net asset value per unit as reported by the investment managers of such funds. Some of the inputs to these models may not be market observable and are therefore estimated based on assumptions. The output of a model is always an estimate or approximation of a value that cannot be determined with certainty, and valuation techniques employed may not fully reflect all factors relevant to the positions the Funds hold. Valuations are therefore adjusted, where appropriate, to allow for additional factors including liquidity risk and counterparty risk. The carrying value less impairment provision of other receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Funds for similar financial instruments. Recognised fair value measurements The tables below set out the Funds financial assets and financial liabilities (by class) measured at fair value according to the fair value hierarchy at and. 49

53 Financial report for the year ended 5. FAIR VALUE MEASUREMENT (CONTINUED) Recognised fair value measurements (continued) TEMPLETON GLOBAL TRUST FUND Level 1 Level 2 Level 3 Total $ 000 $ 000 $ 000 $ 000 At Financial assets Financial assets designated at fair value through profit or loss: Equity securities 148, ,640 Total 148, ,640 At Financial assets Financial assets designated at fair value through profit or loss: Equity securities 165, ,279 Total 165, ,279 TEMPLETON GLOBAL EQUITY FUND At Financial assets Financial assets designated at fair value through profit or loss: Level 1 Level 2 Level 3 Total $ 000 $ 000 $ 000 $ 000 Unlisted unit trusts 129, ,415 Total 129, ,415 At Financial assets Financial assets designated at fair value through profit or loss: Unlisted unit trusts 140, ,923 Total 140, ,923 50

54 Financial report for the year ended 5. FAIR VALUE MEASUREMENT (CONTINUED) Recognised fair value measurements (continued) FRANKLIN GLOBAL GROWTH FUND Level 1 Level 2 Level 3 Total $ 000 $ 000 $ 000 $ 000 At Financial assets Financial assets designated at fair value through profit or loss: Equity securities 193, ,143 Listed unit trusts 7,855 7,855 Total 200, ,998 Financial liabilities: Financial liabilities held for trading: Derivatives Forward currency contracts Total At Financial assets Financial assets designated at fair value through profit or loss: Equity securities 111, ,272 Total 111, ,272 Financial liabilities: Financial liabilities held for trading: Derivatives Forward currency contracts 2 2 Total

55 Financial report for the year ended 5. FAIR VALUE MEASUREMENT (CONTINUED) Recognised fair value measurements (continued) FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND Level 1 Level 2 Level 3 Total $ 000 $ 000 $ 000 $ 000 At Financial assets Financial assets held for trading: Derivatives Share price index futures 1 1 Exchange traded options 2,887 2,887 Financial assets designated at fair value through profit or loss: Equity securities 66,563 66,563 Listed unit trusts 3,608 3,608 Total 70,172 2,887 73,059 Financial liabilities Financial liabilities held for trading: Derivatives Exchange traded options Total At Financial assets Financial assets held for trading: Derivatives Share price index futures Exchange traded options 2,513 2,513 Financial assets designated at fair value through profit or loss: Equity securities 60,680 60,680 Listed unit trusts 3,591 3,591 Total 64,286 2,513 66,799 Financial liabilities Financial liabilities held for trading: Derivatives Exchange traded options Total

56 Financial report for the year ended 5. FAIR VALUE MEASUREMENT (CONTINUED) Recognised fair value measurements (continued) FRANKLIN TEMPLETON MULTISECTOR BOND FUND Level 1 Level 2 Level 3 Total $ 000 $ 000 $ 000 $ 000 At Financial assets Financial assets held for trading: Derivatives Forward currency contracts 10,849 10,849 Swaps 3,162 3,162 Financial assets designated at fair value through profit or loss: Equity securities Fixed interest securities 307, ,836 Money market securities 55,278 55,278 Convertible notes 1,231 1,231 Total 378, ,406 Financial liabilities Financial liabilities held for trading: Derivatives Forward currency contracts 7,529 7,529 Swaps 1,004 1,004 Total 8,533 8,533 At Financial assets Financial assets held for trading: Derivatives Forward currency contracts 15,575 15,575 Swaps Financial assets designated at fair value through profit or loss: Equity securities Fixed interest securities 275, ,784 Money market securities 30,470 30,470 Convertible notes 1,234 1,234 Total , ,470 Financial liabilities Financial liabilities held for trading: Derivatives Forward currency contracts 7,161 7,161 Swaps 2,571 2,571 Total 9,732 9,732 53

57 Financial report for the year ended 5. FAIR VALUE MEASUREMENT (CONTINUED) Recognised fair value measurements (continued) TEMPLETON GLOBAL BOND PLUS FUND Level 1 Level 2 Level 3 Total $ 000 $ 000 $ 000 $ 000 At Financial assets Financial assets held for trading: Derivatives Forward currency contracts 3,177 3,177 Swaps 1,356 1,356 Financial assets designated at fair value through profit or loss: Fixed interest securities 109, ,574 Money market securities 14,518 14,518 Total 128, ,625 Financial liabilities Financial liabilities held for trading: Derivatives Forward currency contracts 7,761 7,761 Swaps Total 8,217 8,217 At Financial assets Financial assets held for trading: Derivatives Forward currency contracts 5,827 5,827 Swaps Financial assets designated at fair value through profit or loss: Fixed interest securities 105, ,566 Money market securities 10,756 10,756 Total 122, ,239 Financial liabilities Financial liabilities held for trading: Derivatives Forward currency contracts 3,664 3,664 Swaps 1,345 1,345 Total 5,009 5,009 54

58 Financial report for the year ended 5. FAIR VALUE MEASUREMENT (CONTINUED) Recognised fair value measurements (continued) FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND Level 1 Level 2 Level 3 Total $ 000 $ 000 $ 000 $ 000 At Financial assets Financial assets held for trading: Derivatives Forward currency contracts 3,398 3,398 Financial assets designated at fair value through profit or loss: Fixed interest securities 324, ,351 Money market securities 6,057 6,057 Total 333, ,806 Financial liabilities Financial liabilities held for trading: Derivatives Forward currency contracts 8,483 8,483 Total 8,483 8,483 At Financial assets Financial assets held for trading: Derivatives Forward currency contracts 1,260 1,260 Financial assets designated at fair value through profit or loss: Fixed interest securities 310, ,314 Money market securities Total 311, ,881 Financial liabilities Financial liabilities held for trading: Derivatives Forward currency contracts 3,588 3,588 Total 3,588 3,588 55

59 Financial report for the year ended 5. FAIR VALUE MEASUREMENT (CONTINUED) Recognised fair value measurements (continued) FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND Level 1 Level 2 Level 3 Total $ 000 $ 000 $ 000 $ 000 At Financial assets Financial assets held for trading: Derivatives Forward currency contracts Fixed interest futures Fixed interest options Swaps Financial assets designated at fair value through profit or loss: Fixed interest securities 97,194 97,194 Money market securities 30,572 30,572 Total 127, ,864 Financial liabilities Financial liabilities held for trading: Derivatives Forward currency contracts 1,042 1,042 Fixed interest futures Total 254 1,042 1,296 At Financial assets Financial assets held for trading: Derivatives Forward currency contracts Fixed interest futures Fixed interest options 1 1 Financial assets designated at fair value through profit or loss: Fixed interest securities 44,800 44,800 Money market securities 11,001 11,001 Total ,914 56,073 Financial liabilities Financial liabilities held for trading: Derivatives Forward currency contracts Fixed interest futures Swaps Total

60 Financial report for the year ended 5. FAIR VALUE MEASUREMENT (CONTINUED) Recognised fair value measurements (continued) The Funds policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period. Transfers between levels The following tables present the transfers between levels: FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND Level 1 Level 2 Level 3 $ 000 $ 000 $ 000 At Financial assets Transfers between levels 1 and 3: Equity securities (15) 15 At Transfers between levels 1 and 3: Equity securities The transfer from level 1 to 3 from Franklin Templeton Multisector Bond Fund relates to an equity security that is infrequently traded. Movement in level 3 financial instruments The following table presents the movement in level 3 financial instruments: Opening balance 1 July Purchases Sales FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND $ 000 $ 000 Transfer into level 3 15 Transfer out of level 3 Gains and losses recognised in profit or loss* 3 * Includes unrealised gains/(losses) recognised in profit or loss attributable to balances held at the end of the reporting year Closing balance 18 Total gains or losses for the year included in the statement of comprehensive income for financial assets and liabilities held at the balance sheet date 3 57

61 Financial report for the year ended 6. NET GAINS/(LOSSES) ON FINANCIAL INSTRUMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS Net gains/(losses) recognised in relation to financial assets and financial liabilities held at fair value through profit or loss: TEMPLETON GLOBAL TRUST FUND TEMPLETON GLOBAL EQUITY FUND FRANKLIN GLOBAL GROWTH FUND FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Net unrealised gain/(loss) on financial instruments held for trading 1 (2) (75) 145 Net unrealised gain/(loss) on financial instruments designated at fair value through profit or loss (1,668) 13,766 (4,718) 10,623 25,243 11,412 1,424 5,539 Net realised gain/(loss) on financial instruments held for trading (118) (59) Net realised gain/(loss) on financial instruments designated at fair value through profit or loss 16,826 14,108 2,443 1,159 5,054 5,247 2,054 2,786 Total net gain/(loss) on financial instruments held at fair value through profit or loss 15,040 28,176 (2,275) 11,782 30,357 16,598 4,054 8,666 FRANKLIN TEMPLETON MULTISECTOR BOND FUND TEMPLETON GLOBAL BOND PLUS FUND FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Net unrealised gain/(loss) on financial instruments held for trading (743) 30,746 (4,592) 15,176 (2,758) (981) (1,044) 100 Net unrealised gain/(loss) on financial instruments designated at fair value through profit or loss (15,181) (7,664) (4,190) (4,965) (4,604) (18,075) 320 (145) Net realised gain/(loss) on financial instruments held for trading (16,890) 8,969 (285) (2,365) (7,750) 7, Net realised gain/(loss) on financial instruments designated at fair value through profit or loss 3,760 (2,253) 1,589 1,450 3,535 (2,376) (222) (106) Total net gain/(loss) on financial instruments held at fair value through profit or loss (29,054) 29,798 (7,478) 9,296 (11,577) (14,001) (901)

62 Financial report for the year ended 7. FINANCIAL ASSETS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS TEMPLETON GLOBAL TRUST FUND TEMPLETON GLOBAL EQUITY FUND FRANKLIN GLOBAL GROWTH FUND FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Held for trading Derivatives 2,888 2,528 Total held for trading 2,888 2,528 Designated at fair value through profit or loss Equity securities 148, , , ,272 66,563 60,680 Unlisted unit trusts 129, ,923 Listed unit trusts 7,855 3,608 3,591 Total designated at fair value through profit or loss 148, , , , , ,272 70,171 64,271 Total financial assets held at fair value through profit or loss 148, , , , , ,272 73,059 66,799 Comprising: Derivatives Australian share price index futures 1 15 Australian exchange traded options 2,887 2,513 Total derivatives 2,888 2,528 Equity securities Australian equity securities listed on a prescribed stock exchange 66,563 60,680 International equity securities listed on a prescribed stock exchange 148, , , ,272 Total equity securities 148, , , ,272 66,563 60,680 Unlisted unit trusts Australian unlisted fixed interest trusts 129, ,923 Total unlisted unit trusts 129, ,923 Listed unit trusts Australian listed trusts 2,495 1,883 Australian listed property trusts 1,113 1,708 International listed property trusts 7,855 Total listed unit trusts 7,855 3,608 3,591 Total financial assets held at fair value through profit or loss 148, , , , , ,272 73,059 66,799 59

63 Financial report for the year ended 7. FINANCIAL ASSETS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) FRANKLIN TEMPLETON MULTISECTOR BOND FUND TEMPLETON GLOBAL BOND PLUS FUND FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Held for trading Derivatives 14,011 15,954 4,533 5,917 3,398 1, Total held for trading 14,011 15,954 4,533 5,917 3,398 1, Designated at fair value through profit or loss Equity securities Fixed interest securities 307, , , , , ,314 95,436 44,800 Money market securities 55,278 30,470 14,518 10,756 6, ,330 11,001 Convertible notes 1,231 1,234 Total designated at fair value through profit or loss 364, , , , , , ,766 55,801 Total financial assets held at fair value through profit or loss 378, , , , , , ,864 56,073 Comprising: Derivatives Forward currency contracts 10,849 15,575 3,177 5,827 3,398 1, Australian fixed interest futures 147 International fixed interest futures 12 International fixed interest options 30 1 Swaps 3, , Total derivatives 14,011 15,954 4,533 5,917 3,398 1, Equity securities International equity securities listed on a prescribed stock exchange Total equity securities Fixed interest securities Australian government bonds 6,955 International government bonds 307, , , , , ,281 Australian other public sector bonds 36,610 30,049 10,204 2,333 International other public sector bonds 7,368 12,625 Australian corporate bonds 61,588 32,456 International corporate bonds ,760 40,163 17,547 7,526 International commercial mortgages 15,889 17,689 Australian other fixed interest securities 6,097 2,485 International other fixed interest securities 552 Total fixed interest securities 307, , , , , ,314 95,436 44,800 60

64 Financial report for the year ended 7. FINANCIAL ASSETS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) FRANKLIN TEMPLETON MULTISECTOR BOND FUND TEMPLETON GLOBAL BOND PLUS FUND FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Money market securities Australian money market securities 28,958 11,001 International money market securities 55,278 30,470 14,518 10,756 6, ,372 Total money market securities 55,278 30,470 14,518 10,756 6, ,330 11,001 Convertible notes International convertible notes 1,231 1,234 Total convertible notes 1,231 1,234 Total financial assets held at fair value through profit or loss 378, , , , , , ,864 56,073 An overview of the risk exposures relating to financial assets held at fair value through profit or loss is included in note 3. 61

65 Financial report for the year ended 8. FINANCIAL LIABILITIES HELD AT FAIR VALUE THROUGH PROFIT OR LOSS Held for trading TEMPLETON GLOBAL TRUST FUND TEMPLETON GLOBAL EQUITY FUND FRANKLIN GLOBAL GROWTH FUND FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Derivatives Total held for trading Total financial liabilities held at fair value through profit or loss Comprising: Derivatives Forward currency contracts 2 Australian exchange traded options Total derivatives Total financial liabilities held at fair value through profit or loss Held for trading FRANKLIN TEMPLETON MULTISECTOR BOND FUND TEMPLETON GLOBAL BOND PLUS FUND FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Derivatives 8,533 9,732 8,217 5,009 8,483 3,588 1, Total held for trading 8,533 9,732 8,217 5,009 8,483 3,588 1, Total financial liabilities held at fair value through profit or loss 8,533 9,732 8,217 5,009 8,483 3,588 1, Comprising: Derivatives Forward currency contracts 7,529 7,161 7,761 3,664 8,483 3,588 1, Australian exchange traded options Australian fixed interest futures International fixed interest futures 54 Swaps 1,004 2, , Total derivatives 8,533 9,732 8,217 5,009 8,483 3,588 1, Total financial liabilities held at fair value through profit or loss 8,533 9,732 8,217 5,009 8,483 3,588 1, An overview of the risk exposures and fair value measurements relating to financial liabilities held at fair value through profit or loss is included in note 4. 62

66 Financial report for the year ended 9 DERIVATIVE FINANCIAL INSTRUMENTS In the normal course of business the Funds enter into transactions in various derivative financial instruments which have certain risks. A derivative is a financial instrument or other contract which is settled at a future date whose value changes in response to a change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable. Derivative financial instruments require no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors. Derivative transactions include many different instruments such as forwards, futures, options and swaps. Derivatives are considered to be part of the investment process and the use of derivatives is an essential part of the Funds portfolio management. Derivatives are not managed in isolation. Consequently, the use of derivatives is multifaceted and includes: hedging to protect an asset or liability of the Funds against a fluctuation in market values or to reduce volatility a substitution for trading of physical securities adjusting asset exposures within the parameters set in the investment strategy, and/or adjusting the duration of fixed interest portfolios or the weighted average maturity of cash portfolios. While derivatives are used for trading purposes, they are not used to gear (leverage) a portfolio. Gearing a portfolio would occur if the level of exposure to the markets exceeds the underlying value of the Funds. The Funds hold the following derivative financial instruments: Forward currency contracts Forward currency contracts are primarily used by the Funds to manage against foreign currency risks on its investments. The Funds agrees to receive or deliver a fixed quantity of foreign currency for an agreed upon price on an agreed future date. Forward currency contracts are valued at the prevailing bid price at the end of each reporting period. The Funds recognise a gain or loss equal to the change in fair value at the end of each reporting period. Futures Futures are contractual obligations to buy or sell financial instruments on a future date at a specified price established in an organised market. The futures contracts are collateralised by cash or marketable securities. Changes in futures contracts values are usually settled net daily with the exchange. Interest rate futures are contractual obligations to receive or pay a net amount based on changes in interest rates at a future date at a specified price, established in an organised financial market. Options An option is a contractual arrangement under which the seller (writer) grants the purchaser (holder) the right, but not the obligation, either to buy (a call option) or sell (a put option) at or by a set date or during a set period, a specific amount of securities or a financial instrument at a predetermined price. The seller receives a premium from the purchaser in consideration for the assumption of future securities price risk. The Funds are exposed to credit risk on purchased options to the extent of their carrying amount, which is their fair value. Swaps Swaps are derivative instruments in which two counterparties agree to exchange one stream of cash flow against another stream. A credit default index swap is a credit derivative used to hedge credit risk or to take a position on a basket or credit entities (index). It is an agreement between two parties whereby one party pays the other a fixed coupon for the specified term of the agreement. The other party makes no payment unless a specified credit event occurs. 63

67 Financial report for the year ended 9. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED) The Funds derivative financial instruments at year end are detailed below: FRANKLIN GLOBAL GROWTH FUND Fair Values Fair Values Contract/Notional Assets Liabilities Contract/Notional Assets Liabilities $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Forward currency contracts (1,547) 2 (1,547) 2 FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND Fair Values Fair Values Contract/Notional Assets Liabilities Contract/Notional Assets Liabilities $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Australian share price index futures (2,152) 1 (3,248) 15 Australian exchange traded options 2, , (2,152) 2, (3,247) 2, FRANKLIN TEMPLETON MULTISECTOR BOND FUND Fair Values Fair Values Contract/Notional Assets Liabilities Contract/Notional Assets Liabilities $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Forward currency contracts (431,207) 10,849 7,529 (393,364) 15,575 7,161 Swaps 3,162 1, ,571 (431,207) 14,011 8,533 (393,364) 15,954 9,732 64

68 Financial report for the year ended 9. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED) TEMPLETON GLOBAL BOND PLUS FUND Fair Values Fair Values Contract/Notional Assets Liabilities Contract/Notional Assets Liabilities $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Forward currency contracts (151,831) 3,177 7,761 (159,166) 5,827 3,664 Swaps 1, ,345 (151,831) 4,533 8,217 (159,166) 5,917 5,009 FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND Fair Values Fair Values Contract/Notional Assets Liabilities Contract/Notional Assets Liabilities $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Forward currency contracts (239,466) 3,398 8,483 (225,795) 1,260 3,588 (239,466) 3,398 8,483 (225,795) 1,260 3,588 FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND 2016 Fair Values Fair Values Contract/Notional Assets Liabilities Contract/Notional Assets Liabilities $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Forward currency contracts (18,102) 1,042 (6,603) Australian fixed interest futures (16,195) , International fixed interest futures (15,926) 54 (6,660) 12 International fixed interest options 13, ,649 1 Swaps (36,959) 98 1,296 9, Risk exposures and fair value measurements Information about the Funds exposure to credit risk, foreign exchange risk, and interest rate risk and about the methods and assumptions used in determining fair values is provided in note 3 to the financial statements. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of derivative financial instruments disclosed above. 65

69 Financial report for the year ended 10. NET ASSETS ATTRIBUTABLE TO UNITHOLDERS Under AASB 132 Financial instruments: Presentation, puttable financial instruments meet the definition of a financial liability to be classified as equity where certain strict criteria are met. The Funds shall classify a financial instrument as an equity instrument from the date when the instrument has all the features and meets the conditions. Prior to 1 July the Funds classified their net assets attributable to unitholders as liabilities in accordance with AASB 132. On 1 July, the Funds (with the exception of Franklin Templeton Australian Equity Fund) have elected into the AMIT tax regime. The Funds respective Constitutions have been amended on the same date and as a result, they no longer have a contractual obligation to pay distributions to unitholders. From 1 July, Templeton Global Trust Fund and Templeton Global Equity units have been reclassified from a financial liability to equity. As a result of the reclassification, the Funds distributions are no longer classified as finance cost in the statement of comprehensive income, but rather as distributions paid in the statement of changes in equity. For the remaining Funds that have elected into the AMIT tax regime, their net assets attributable to unitholders remain disclosed as a liability as their multi class structure means they have not met the strict criteria for recognition as equity. Franklin Templeton Australian Equity Fund does not meet the classification of a MIT and is not affected by the AMIT tax regime. Movement in number of units and net assets attributable to unitholders during the year were as follows: TEMPLETON GLOBAL TRUST FUND No. 000 $ 000 No. 000 $ 000 Ordinary class Opening balance* 130, , , ,705 Applications 6,873 8,228 4,024 4,972 Redemptions (23,943) (30,540) (39,149) (45,318) Units issued upon reinvestment of distributions 3,932 4,638 3,239 3,541 Increase/(decrease) in net assets attributable to unitholders 13,431 Distributions paid and payable (18,864) Profit/(loss) for the year 17,181 Closing balance* 116, , , ,331 Ordinary class TEMPLETON GLOBAL EQUITY FUND No. 000 $ 000 No. 000 $ 000 Opening balance* 132, , , ,219 Applications 24,338 27,374 21,801 24,019 Redemptions (35,989) (41,420) (38,187) (41,355) Units issued upon reinvestment of distributions 1,916 2,082 3,575 3,534 Increase/(decrease) in net assets attributable to unitholders 14,243 Distributions paid and payable (18,612) Profit/(loss) for the year 15,651 Closing balance* 122, , , ,660 * Net assets attributable to unitholders are classified as equity at and as a financial liability at. Refer to note 1 for further details. 66

70 Financial report for the year ended 10. NET ASSETS ATTRIBUTABLE TO UNITHOLDERS (CONTINUED) TEMPLETON GLOBAL GROWTH FUND No. 000 $ 000 No. 000 $ 000 I Class Opening balance 45,442 66,274 36,797 47,671 Applications 14,539 23,994 7,632 10,130 Redemptions (4,451) (7,458) (1,457) (2,042) Units issued upon reinvestment of distributions 1,529 2,247 2,470 3,210 Increase/(decrease) in net assets attributable to unitholders 14,454 7,305 Closing balance 57,059 99,511 45,442 66,274 W Class Opening balance 33,739 44,315 24,683 28,826 Applications 37,116 55,910 13,616 17,484 Redemptions (5,698) (8,402) (4,954) (6,359) Units issued upon reinvestment of distributions Increase/(decrease) in net assets attributable to unitholders 10,516 3,902 Closing balance 65, ,763 33,739 44,315 I Class FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND No. 000 $ 000 No. 000 $ 000 Opening balance 45,372 53,680 46,305 50,089 Applications Redemptions (2,320) (2,862) Units issued upon reinvestment of distributions 1,484 1,784 1,218 1,386 Increase/(decrease) in net assets attributable to unitholders 722 4,859 Closing balance 47,397 56,842 45,372 53,680 W Class Opening balance 7,428 8,788 6,988 7,560 Applications 4,001 4,891 3,063 3,756 Redemptions (1,283) (1,559) (2,674) (3,227) Units issued upon reinvestment of distributions Increase/(decrease) in net assets attributable to unitholders Closing balance 10,177 12,202 7,428 8,788 67

71 Financial report for the year ended 10. NET ASSETS ATTRIBUTABLE TO UNITHOLDERS (CONTINUED) FRANKLIN TEMPLETON MULTISECTOR BOND FUND No. 000 $ 000 No. 000 $ 000 I Class Opening balance 70,241 80, , ,979 Applications 13,095 14,949 8,354 9,477 Redemptions (19,804) (22,848) (74,489) (79,963) Units issued upon reinvestment of distributions 2,076 2,376 Increase/(decrease) in net assets attributable to unitholders (2,843) 7,004 Closing balance 65,608 72,131 70,241 80,497 W Class Opening balance 300, , , ,512 Applications 128, ,923 86,033 96,841 Redemptions (69,615) (79,189) (115,346) (127,887) Units issued upon reinvestment of distributions 1,756 1,999 Increase/(decrease) in net assets attributable to unitholders (16,167) 26,493 Closing balance 360, , , ,959 I Class TEMPLETON GLOBAL BOND PLUS FUND No. 000 $ 000 No. 000 $ 000 Opening balance 159, , , ,249 Applications Redemptions (138,441) (138,272) Units issued upon reinvestment of distributions ,666 1,660 Increase/(decrease) in net assets attributable to unitholders (8,014) 9,960 Closing balance 160, , , ,647 W Class Opening balance Applications 1,767 1, Redemptions (191) (178) (314) (288) Units issued upon reinvestment of distributions Increase/(decrease) in net assets attributable to unitholders (92) 46 Closing balance 2,297 2,

72 Financial report for the year ended 10. NET ASSETS ATTRIBUTABLE TO UNITHOLDERS (CONTINUED) FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND No. 000 $ 000 No. 000 $ 000 I Class Opening balance 111, , , ,494 Applications Redemptions (4,867) (5,247) (10,926) (12,104) Units issued upon reinvestment of distributions 2,031 2,196 5,039 5,699 Increase/(decrease) in net assets attributable to unitholders (2,381) (6,872) Closing balance 108, , , ,354 W Class Opening balance 195, , , ,209 Applications 81,231 86, , ,886 Redemptions (63,766) (67,571) (51,546) (55,575) Units issued upon reinvestment of distributions ,248 1,383 Increase/(decrease) in net assets attributable to unitholders (4,623) (10,425) Closing balance 213, , , ,478 X Class Opening balance Applications 6,500 6,500 Redemptions Units issued upon reinvestment of distributions Increase/(decrease) in net assets attributable to unitholders (103) Closing balance 6,500 6,397 69

73 Financial report for the year ended 10. NET ASSETS ATTRIBUTABLE TO UNITHOLDERS (CONTINUED) FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND No. 000 $ 000 No. 000 $ 000 I Class Opening balance 27,935 28,112 38,494 38,669 Applications 24,708 24,785 7,002 7,098 Redemptions (10,847) (10,877) (17,899) (18,174) Units issued upon reinvestment of distributions Increase/(decrease) in net assets attributable to unitholders (185) 176 Closing balance 42,025 42,065 27,935 28,112 W Class Opening balance 30,995 31,187 22,109 22,204 Applications 73,894 74,137 25,655 26,105 Redemptions (15,786) (15,831) (17,069) (17,330) Units issued upon reinvestment of distributions Increase/(decrease) in net assets attributable to unitholders (346) (96) Closing balance 89,386 89,431 30,995 31,187 70

74 Financial report for the year ended 10. NET ASSETS ATTRIBUTABLE TO UNITHOLDERS (CONTINUED) As stipulated within the Funds Constitution, each unit represents a right to an individual share in the Funds and does not extend to a right in the underlying assets of the Funds. There are four classes of unitholders in the Funds being ordinary class, class I, class W and class X. Capital risk management The Funds consider their net assets attributable to unitholders as capital, notwithstanding net assets attributable to unitholders are classified as a liability. The amount of net assets attributable to unitholders can change significantly on a daily basis as the Funds are subject to daily applications and redemptions at the discretion of unitholders. Daily applications and redemptions are reviewed relative to the liquidity of the Funds underlying assets on a daily basis by the Responsible Entity. Under the terms of the Funds Constitution, the Responsible Entity has the discretion to reject an application for units and to defer or adjust a redemption of units if the exercise of such discretion is in the best interests of unitholders. The Funds investment strategy remains unchanged and they continue to hold direct investments which provide exposure to liquid assets including equity securities, income securities, interest earnings and cash equivalent securities. As such, the Funds will meet any capital requirements from the liquidation of liquid assets, which include cash and cash equivalents. 11. DISTRIBUTIONS TO UNITHOLDERS The distributions during the year were as follows: TEMPLETON GLOBAL TRUST FUND $ 000 CPU $ 000 CPU Ordinary class Distributions paid 30 September December Distributions payable 18, , ,864 16,953 Ordinary class Distributions paid TEMPLETON GLOBAL EQUITY FUND $ 000 CPU $ 000 CPU 30 September December Distributions payable 18, , ,612 12,868 71

75 Financial report for the year ended 11. DISTRIBUTIONS TO UNITHOLDERS (CONTINUED) FRANKLIN GLOBAL GROWTH FUND $ 000 CPU $ 000 CPU I Class Distributions paid 31 December Distributions payable 2, , ,977 3,774 W Class Distributions paid 31 December Distributions payable 2, , ,968 2,448 I Class Distributions paid FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND $ 000 CPU $ 000 CPU 31 December 1, , Distributions payable 3, , W Class Distributions paid 5,114 5, December Distributions payable ,

76 Financial report for the year ended 11. DISTRIBUTIONS TO UNITHOLDERS (CONTINUED) FRANKLIN TEMPLETON MULTISECTOR BOND FUND $ 000 CPU $ 000 CPU I Class Distributions paid 30 September December March Distribution payable , ,386 W Class Distributions paid 30 September December March Distribution payable 2, , ,527 9,433 I Class Distributions paid TEMPLETON GLOBAL BOND PLUS FUND $ 000 CPU $ 000 CPU 30 September December March Distributions payable 4, , W Class Distributions paid 5,608 4, September December March Distributions payable

77 Financial report for the year ended 11. DISTRIBUTIONS TO UNITHOLDERS (CONTINUED) FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND $ 000 CPU $ 000 CPU I Class Distributions paid 30 September 1, December March Distribution payable 1, , ,769 4,178 W Class Distributions paid 30 September 1, December March Distribution payable 2, , ,319 6,715 X Class Distributions paid 30 September 31 December March Distribution payable

78 Financial report for the year ended 11. DISTRIBUTIONS TO UNITHOLDERS (CONTINUED) FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND $ 000 CPU $ 000 CPU I Class Distributions paid 31 July August September October November December January February March April May Distributions payable ,007 1,239 W Class Distributions paid 31 July August September October November December January February March April May Distributions payable ,

79 Financial report for the year ended 12. CASH AND CASH EQUIVALENTS TEMPLETON GLOBAL TRUST FUND TEMPLETON GLOBAL EQUITY FUND FRANKLIN GLOBAL GROWTH FUND FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Domestic cash at bank 3,536 3, ,084 3,890 2,766 1,342 Total cash and cash equivalents 3,536 3, ,084 3,890 2,766 1,342 FRANKLIN TEMPLETON MULTISECTOR BOND FUND TEMPLETON GLOBAL BOND PLUS FUND FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Domestic cash at bank 3,023 4, ,648 12,441 3,886 4,025 Foreign cash at bank 18,173 60,908 7,104 20,533 11,062 13, Money market instruments 77,076 47,323 33,460 34,233 Total cash and cash equivalents 98, ,141 40,746 54,831 20,710 26,368 4,505 4,205 76

80 Financial report for the year ended 13. RECONCILIATION OF OPERATING PROFIT/(LOSS) TO NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES TEMPLETON GLOBAL TRUST FUND TEMPLETON GLOBAL EQUITY FUND FRANKLIN GLOBAL GROWTH FUND FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 (a) Reconciliation of operating profit/ (loss) to net cash inflow/(outflow) from operating activities Operating profit/(loss) for the year 17,181 30,384 15,651 27,111 30,915 17,429 6,967 11,367 Net (gains)/losses on financial instruments held at fair value through profit or loss (15,040) (28,176) 2,275 (11,782) (30,357) (16,598) (4,054) (8,666) Proceeds from sale of financial instruments held at fair value through profit or loss 67,397 84,521 21,173 31,611 43,413 29,795 28,004 28,024 Purchase of financial instruments held at fair value through profit or loss (35,651) (30,135) (12,189) (4,540) (101,434) (43,158) (28,752) (25,383) Net change in accrued income and receivables (74) (23) (2,702) (1,438) (121) (91) (77) 28 Net change in payables (22) (108) 18 (16) Distributions reinvested (3,534) (6) Dividends reinvested (3) (107) (521) (596) (92) Net interest received/(paid) from debt securities Net cash inflow/(outflow) from operating activities 33,788 56,356 24,226 37,412 (57,319) (13,048) 1,505 5,295 (b) Non-cash financing and investing activities During the year, the following distribution payments were satisfied by the issue of units under the distribution reinvestment plan 4,638 3,541 2,082 3,534 2,671 3,672 1,821 1,444 77

81 Financial report for the year ended 13. RECONCILIATION OF OPERATING PROFIT/(LOSS) TO NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES (CONTINUED) FRANKLIN TEMPLETON MULTISECTOR BOND FUND TEMPLETON GLOBAL BOND PLUS FUND FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 (a) Reconciliation of operating profit/ (loss) to net cash inflow/(outflow) from operating activities Operating profit/(loss) for the year (14,639) 45,316 (2,433) 14,817 (1,894) (6,404) 2,237 2,118 Net (gains)/losses on financial instruments held at fair value through profit or loss 29,054 (29,798) 7,478 (9,296) 11,577 14, (212) Proceeds from sale of financial instruments held at fair value through profit or loss 8,216,809 4,654,483 6,836,757 7,293, , ,562 22,205 30,826 Purchase of financial instruments held at fair value through profit or loss (8,302,414) (4,522,101) (6,854,057) (7,177,601) (220,208) (175,594) (93,784) (29,982) Net change in accrued income and receivables (43) 268 (7) 41 7 (11) (7) Net change in payables 140 (234) 18 (161) (110) Distribution reinvested Dividends reinvested Net interest received/(paid) from debt securities (723) 2,599 (36) 1,769 (1,127) (254) (463) 36 Net cash inflow/(outflow) from operating activities (71,816) 150,533 (12,280) 122,627 (19,464) (24,529) (68,778) 2,780 (b) Non-cash financing and investing activities During the year, the following distribution payments were satisfied by the issue of units under the distribution reinvestment plan 4, ,669 2,865 7,

82 Financial report for the year ended 14. REMUNERATION OF AUDITORS During the year the following fees were paid or payable for services provided by the auditor of the Funds. TEMPLETON GLOBAL TRUST FUND TEMPLETON GLOBAL EQUITY FUND FRANKLIN GLOBAL GROWTH FUND FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND $ $ $ $ $ $ $ $ PricewaterhouseCoopers Audit and other assurance services Audit and review of financial statements 7,854 9,035 12,903 12,713 12,903 5,423 7,854 6,628 Audit of compliance plan and specified assertions 7,905 7,519 7,905 7,519 7,905 7,519 7,905 7,519 Total remuneration for audit and other assurance services 15,759 16,554 20,808 20,232 20,808 12,942 15,759 14,147 Taxation services Tax compliance services 7,315 7,125 7,315 7,125 7,315 7,125 7,315 7,125 Total remuneration for taxation services 7,315 7,125 7,315 7,125 7,315 7,125 7,315 7,125 Total remuneration of PricewaterhouseCoopers 23,074 23,679 28,123 27,357 28,123 20,067 23,074 21,272 FRANKLIN TEMPLETON MULTISECTOR BOND FUND TEMPLETON GLOBAL BOND PLUS FUND FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND $ $ $ $ $ $ $ $ PricewaterhouseCoopers Audit and other assurance services Audit and review of financial statements 13,464 14,520 8,415 8,434 8,415 9,035 8,415 6,628 Audit of compliance plan and specified assertions 7,905 8,458 7,905 8,458 7,905 8,458 7,905 7,519 Total remuneration for audit and other assurance services 21,369 22,978 16,320 16,892 16,320 17,493 16,320 14,147 Taxation services Tax compliance services 7,315 7,125 7,315 7,125 7,315 7,125 7,315 7,125 Total remuneration for taxation services 7,315 7,125 7,315 7,125 7,315 7,125 7,315 7,125 Total remuneration of PricewaterhouseCoopers 28,684 30,103 23,635 24,017 23,635 24,618 23,635 21,272 79

83 Financial report for the year ended 15. RELATED PARTY TRANSACTIONS Responsible Entity The Responsible Entity of the Franklin Templeton Investment Funds is Franklin Templeton Investments Australia Limited (ABN ). Key management personnel Key management personnel includes persons who were directors of the Responsible Entity at any time during the financial year as follows: M A Harrison Chairperson (Appointed 15 January ) M B Browning (Resigned 22 May ) S E Grundlingh (Appointed 22 May ) J A Plafker (Resigned 22 May ) G L Shaneyfelt (Appointed 22 May ) P M Wilmshurst M L Wilton (Resigned 15 January ) There were no other persons with responsibility for planning, directing and controlling the activities of the Responsible Entity of the Funds, directly or indirectly during the financial year. Related Party Transactions During the year ended, the Responsible Entity was entitled to receive an all inclusive management cost (inclusive of GST, net of RITC available to the Funds) over the Funds average net assets attributable to unitholders for the year as follows TEMPLETON GLOBAL TRUST FUND TEMPLETON GLOBAL EQUITY FUND FRANKLIN GLOBAL GROWTH FUND FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND ICR (%) Ordinary Class Units I Class Units W Class Units FRANKLIN TEMPLETON MULTISECTOR BOND FUND TEMPLETON GLOBAL BOND PLUS FUND FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND ICR (%) I Class Units W Class Units X Class Units 0.13 Management costs include management fees and other expenses or reimbursements deducted in relation to the Funds, but do not include transactional and operational costs such as brokerage. Management costs are not paid directly by the unitholders of the Funds. For X Class Units, no management fee is being charged and it is only for inter fund investment purpose. Where monies are invested into other funds managed by the Responsible Entity, the management fees charged in those funds are rebated to the Funds and offset against the expense in the statement of comprehensive income. 80

84 Financial report for the year ended 15. RELATED PARTY TRANSACTIONS (CONTINUED) All related party transactions are conducted on normal commercial terms and conditions. The transactions during the year and amounts payable at year end between the Funds and the Responsible Entity are as follows: TEMPLETON GLOBAL TRUST FUND TEMPLETON GLOBAL EQUITY FUND FRANKLIN GLOBAL GROWTH FUND FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND $ $ $ $ $ $ $ $ Management costs for the year paid by the Fund to the Responsible Entity 1,583,503 1,596, , ,549 1,596,626 1,001, , ,506 Total fees payable to the Responsible Entity at the year end 519, , , , , , , ,298 FRANKLIN TEMPLETON MULTISECTOR BOND FUND TEMPLETON GLOBAL BOND PLUS FUND FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND $ $ $ $ $ $ $ $ Management costs for the year paid by the Fund to the Responsible Entity 4,131,809 3,747, ,425 1,046,869 1,957,050 1,831, , ,394 Total fees payable to the Responsible Entity at the year end 1,451,540 1,310, , , , , ,228 76,842 Transactions with key management personnel Key management personnel services are provided by Franklin Templeton Investments Australia Limited and included in the management fees disclosed below. There is no separate charge for these services. There was no compensation paid directly by the Funds to any of the key management personnel. 81

85 Financial report for the year ended 15. RELATED PARTY TRANSACTIONS (CONTINUED) Key management personnel unitholdings The key management personnel of the Responsible Entity directly or indirectly through a related party held units or an interest in units in the Funds as follows: 30 JUNE Number of units held opening Number of units held closing Fair value of investments Interest held Number of units held acquired Number of units disposed Distribution paid/payable by the Fund Units Units $ % Units Units $ Templeton Global Trust Fund 400, , , ,150 Templeton Global Equity Fund 384, , , ,184 63,366 Franklin Templeton Australian Equity Fund Class I* 407,072 68,631 15,847 *, key management personnel unitholding in Franklin Templeton Australian Equity Fund Class I is Nil due to the resignation of Maria Wilton as a director of Franklin Templeton Investments Australia Limited on 15 January. 30 JUNE Templeton Global Trust Fund 400, , , ,997 Templeton Global Equity Fund 332, , , ,699 37,283 Franklin Templeton Australian Equity Fund Class I 227, , , ,046 40,482 Key management personnel remuneration Key management personnel are paid by the Responsible Entity. Payments made from the Funds do not include any amounts directly attributable to key management personnel remuneration. Key management personnel loan disclosures The Funds have not made, guaranteed or secured, directly or indirectly, any loans to the key management personnel or their personally related entities at any time during the reporting period. 82

86 Financial report for the year ended 15. RELATED PARTY TRANSACTIONS (CONTINUED) Related party unitholdings Parties related to the Funds including the Responsible Entity, its affiliates or other funds managed by the Responsible Entity held units in the Funds as follows: 30 JUNE Number of units held opening Number of units held closing TEMPLETON GLOBAL TRUST FUND Fair value of investments Interest held Number of units held acquired Number of units disposed Distribution paid/payable by the Fund Units Units $ % Units Units $ Key Management Personnel 400, , , ,150 Templeton Global Equity Fund 119,569, ,975, ,156, ,077,194 16,670,968 18,187, JUNE Key Management Personnel 400, , , ,997 Templeton Global Equity Fund 139,362, ,569, ,641, ,075,516 26,868,552 15,583, JUNE Number of units held opening Number of units held closing TEMPLETON GLOBAL EQUITY FUND Fair value of investments Interest held Number of units held acquired Number of units disposed Distribution paid/payable by the Fund Units Units $ % Units Units $ Key Management Personnel 384, , , ,184 63, JUNE Key Management Personnel 332, , , ,699 37,283 83

87 Financial report for the year ended 15. RELATED PARTY TRANSACTIONS (CONTINUED) Related party unitholdings (continued) 30 JUNE Class I Number of units held opening Number of units held closing FRANKLIN TEMPLETON AUSTRALIAN EQUITY FUND Fair value of investments Interest held Number of units held acquired Number of units disposed Distribution paid/payable by the Fund Units Units $ % Units Units $ Key Management Personnel* 407,072 68,631 15,847 Franklin Templeton Investments Australia Limited 19,087,848 19,087,848 22,859, ,069,791 *, key management personnel unitholding in Franklin Templeton Australian Equity Fund Class I is Nil due to the resignation of Maria Wilton as a director of Franklin Templeton Investments Australia Limited on 15 January. 30 JUNE Class I Key Management Personnel 227, , , ,046 40,482 Franklin Templeton Investments Australia Limited 21,496,076 19,087,848 22,550, ,408,228 2,112,358 84

88 Financial report for the year ended 15. RELATED PARTY TRANSACTIONS (CONTINUED) Related party unitholdings (continued) 30 JUNE Class I Number of units held opening Number of units held closing FRANKLIN AUSTRALIAN ABSOLUTE RETURN BOND FUND Fair value of investments Interest held Number of units held acquired Number of units disposed Distribution paid/payable by the Fund Units Units $ % Units Units $ Franklin Australian Core Plus Bond Fund 3,028,807 3,031, ,028,807 80, JUNE Class I Franklin Templeton Capital Holdings Private Ltd. Singapore 8,169, ,611 8,338, ,223 Class W Franklin Templeton Capital Holdings Private Ltd. Singapore 9,795, ,663 9,908,336 90, JUNE Class X Number of units held opening Number of units held closing FRANKLIN TEMPLETON GLOBAL AGGREGATE BOND FUND Fair value of investments Interest held Number of units held acquired Number of units disposed Distribution paid/payable by the Fund Units Units $ % Units Units $ Franklin Diversified Fixed Income Fund 6,500,000 6,375, ,500, ,639 85

89 Financial report for the year ended 15. RELATED PARTY TRANSACTIONS (CONTINUED) Investments The Funds held investments in the following funds which were also managed by the Responsible Entity or its related parties: 30 JUNE Fair value of investments Interest held TEMPLETON GLOBAL TRUST FUND Distribution received/ receivable Number of units acquired Number of units disposed $ % $ Units Units Templeton China Opportunities Fund 30 JUNE Templeton China Opportunities Fund 40,909 40, JUNE Fair value of investments Interest held TEMPLETON GLOBAL EQUITY FUND Distribution received/ receivable Number of units acquired Number of units disposed $ % $ Units Units Templeton Global Trust Fund 129,156, ,187,078 10,077,194 16,670, ,156,041 18,187,078 10,077,194 16,670, JUNE Templeton Global Trust Fund 140,641, ,583,881 7,075,516 26,868, ,641,163 15,583,881 7,075,516 26,868,552 86

90 Financial report for the year ended 15. RELATED PARTY TRANSACTIONS (CONTINUED) Investments (continued) The fair value of financial assets is included in financial assets at fair value through profit or loss in the balance sheet. Interest held represents the entity s average percentage interest in the total net assets of the investee funds. The Funds maximum exposure to loss from its interest in investee funds is equal to the total fair value of its investments in the investee funds as there are no off balance sheet exposure relating to any of the investee funds. Once the Fund has disposed of its shares in an investee fund, it ceases to be exposed to any risk from that investee fund., distribution receivable by Templeton Global Equity Fund from Templeton Global Trust Fund was $17,514,746 (: $14,813,746) The proportion of ownership interest is equal to the proportion of the voting power held. The Funds did not hold any investments in the Responsible Entity during the year. Other transactions within the Funds 16 EVENTS OCCURRING AFTER THE REPORTING PERIOD No significant events have occurred since the end of the reporting date which would impact on the financial position of the Funds disclosed in the Balance sheet as at or on the results and cash flows of the Funds for the year ended on that date. 17 CONTINGENT ASSETS, LIABILITIES AND COMMITMENTS There are no outstanding contingent assets, contingent liabilities or commitments as at ( : Nil). Apart from those details disclosed in this note, no directors have entered into a material contract with the Funds during the financial year and there were no material contracts involving director s interests subsisting at year end. 87

91 Financial report for the year ended DIRECTOR S DECLARATION In the opinion of the Directors of the Responsible Entity: (a) the financial statements and notes set out on pages 6 to 87 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the Funds financial position as at and of its performance for the financial year ` ended on that date; (b) there are reasonable grounds to believe that the Funds will be able to pay its debts as and when they become due and payable; and (c) Note 2(a) confirms that the financial statements comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. This declaration is made in accordance with a resolution of the Directors. Director Matthew Harrison Melbourne 19 September 88

92 Financial report for the year ended INDEPENDENT AUDITOR S REPORT TO THE UNITHOLDERS OF FRANKLIN TEMPLETON INVESTMENT FUNDS To the unitholders of the Franklin Templeton Investment Funds: Templeton Global Trust Fund Templeton Global Equity Fund Franklin Global Growth Fund Franklin Templeton Australian Equity Fund Franklin Templeton Multisector Bond Fund Templeton Global Bond Plus Fund Franklin Templeton Global Aggregate Bond Fund Franklin Australian Absolute Return Bond Fund Our opinion In our opinion: The accompanying financial report of Franklin Templeton Investment Funds (the Funds) is in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the Funds financial position as at and of their financial performance for the year then ended (b) omplying with Australian Accounting Standards and the Corporations Regulations What we have audited The financial report comprises: the balance sheets as at the statements of comprehensive income for the year then ended the statements of changes in equity for the year then ended the statements of cash flows for the year then ended the notes to the financial statements, which include a summary of significant accounting policies the directors declaration. 89

93 Financial report for the year ended INDEPENDENT AUDITOR S REPORT TO THE UNITHOLDERS OF FRANKLIN TEMPLETON INVESTMENT FUNDS Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor s responsibilities for the audit of the financial report section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Funds in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. Other information The directors of the Responsible Entity are responsible for the other information. The other information obtained at the date of this auditor s report comprises the Directors Report included in the annual report for the year ended, but does not include the financial report and our auditor s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information obtained prior to the date of this auditor s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 90

94 Financial report for the year ended INDEPENDENT AUDITOR S REPORT TO THE UNITHOLDERS OF FRANKLIN TEMPLETON INVESTMENT FUNDS Responsibilities of the directors of the Responsible Entity for the financial report The directors of the Responsible Entity of the Funds are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and Corporations Act 2001 and for such internal control as the directors of the Responsible Entity determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors of the Responsible Entity are responsible for assessing the ability of the Funds to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors of the Responsible Entity either intend to liquidate the Funds or to cease operations, or have no realistic alternative but to do so. Auditor s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: This description forms part of our auditor s report. PricewaterhouseCoopers David Coogan Melbourne Partner 19 September 91