AUDITED ANNUAL REPORT FRANKLIN TEMPLETON INVESTMENT FUNDS Société d’investissement à capital variable June 30, 2019 R.C.S. B35177 FRANKLINTEMPLETON INVESTMENT FUNDS société d’investissement à capital variable AUDITED ANNUAL REPORT For the year ended June 30, 2019 This report shall not constitute an offer or a solicitation of an offer to buy shares of Franklin Templeton Investment Funds (the “Company”). Subscriptions are to be made on the basis of the current prospectus and its addendum as the case may be, where available the relevant Key Investor Information Documents (“KIIDs”), a copy of the latest available audited annual report and, if published thereafter, the latest unaudited semi-annual report. The auditor’s report refers only to the full English version of the Annual Report and not to any translated versions. FRANKLIN TEMPLETON INVESTMENT FUNDS Contents General Information ................................ 4 Franklin NextStep Balanced Growth Fund...................333 The Board of Directors .............................. 5 Franklin NextStep Conservative Fund .....................334 Report of the Investment Managers ..................... 8 Franklin NextStep Dynamic Growth Fund ...................335 Audit Report ..................................... 9 Franklin NextStep Growth Fund .........................336 Fund Performance ................................. 12 Franklin NextStep Moderate Fund........................337 Statement of Net Assets ............................. 14 Franklin NextStep Stable Growth Fund. ....................338 Statement of Operations and Changes in Net Assets ......... 30 Franklin Select U.S. Equity Fund.........................339 Statistical Information .............................. 46 Franklin Strategic Income Fund .........................341 Notes to the Financial Statements ...................... 65 Franklin Technology Fund .............................352 Schedule of Investments ............................203 Franklin U.S. Dollar Short-Term Money Market Fund . ...........355 Franklin Asia Credit Fund .............................203 Franklin U.S. Government Fund . ........................356 Franklin Biotechnology Discovery Fund ....................204 Franklin U.S. Low Duration Fund . .....................357 Franklin Brazil Opportunities Fund........................207 Franklin U.S. Opportunities Fund . ......................366 Franklin Diversified Balanced Fund .......................209 Franklin World Perspectives Fund. ....................369 Franklin Diversified Conservative Fund.....................217 Franklin Mutual European Fund . ......................376 Franklin Diversified Dynamic Fund .......................225 Franklin Mutual Global Discovery Fund . ...................379 Franklin Emerging Markets Debt Opportunities Hard Currency Fund . 233 Franklin Mutual U.S. Value Fund.........................383 Franklin Euro Government Bond Fund .....................235 Templeton Asian Bond Fund ...........................387 Franklin Euro High Yield Fund ..........................236 Templeton Asian Growth Fund . .......................388 Franklin Euro Short Duration Bond Fund....................240 Templeton Asian Smaller Companies Fund ..................390 Franklin Euro Short-Term Money Market Fund ................242 Templeton BRIC Fund ...............................393 Franklin European Corporate Bond Fund ...................243 Templeton China Fund ...............................395 Franklin European Dividend Fund ........................245 Templeton Eastern Europe Fund.........................397 Franklin European Growth Fund .........................247 Templeton Emerging Markets Fund . ....................399 Franklin European Income Fund .........................249 Templeton Emerging Markets Balanced Fund ................402 Franklin European Small-Mid Cap Fund ....................251 Templeton Emerging Markets Bond Fund ...................407 Franklin European Total Return Fund......................253 Templeton Emerging Markets Local Currency Bond Fund.........410 Franklin Flexible Alpha Bond Fund .......................255 Templeton Emerging Markets Smaller Companies Fund..........412 Franklin GCC Bond Fund .............................260 Templeton Euroland Fund .............................416 Franklin Global Aggregate Bond Fund .....................262 Templeton Frontier Markets Fund . .......................418 Franklin Global Convertible Securities Fund .................264 Templeton Global Fund...............................420 Franklin Global Corporate Investment Grade Bond Fund .........266 Templeton Global Balanced Fund . ......................423 Franklin Global Fundamental Strategies Fund ................268 Templeton Global Bond Fund...........................427 Franklin Global Listed Infrastructure Fund...................275 Templeton Global Bond (Euro) Fund ......................430 Franklin Global Multi-Asset Income Fund ...................277 Templeton Global Climate Change Fund....................432 Franklin Global Real Estate Fund ........................284 Templeton Global Currency Fund ........................435 Franklin Global Small-Mid Cap Fund ......................286 Templeton Global Equity Income Fund . ...................436 Franklin Gold and Precious Metals Fund....................288 Templeton Global High Yield Fund........................438 Franklin High Yield Fund ..............................291 Templeton Global Income Fund . ......................444 Franklin Income Fund................................295 Templeton Global Smaller Companies Fund . ..............448 Franklin India Fund .................................299 Templeton Global Total Return Fund . ....................452 Franklin Japan Fund ................................301 Templeton Growth (Euro) Fund..........................455 Franklin K2 Alternative Strategies Fund ....................304 Templeton Latin America Fund ..........................458 Franklin K2 Global Macro Opportunities Fund ................321 Templeton Thailand Fund .............................460 Franklin K2 Long Short Credit Fund.......................323 Additional Information - Unaudited......................462 Franklin MENA Fund ................................328 Franklin Templeton Office Directory .....................474 Franklin Natural Resources Fund ........................330 Audited Annual Report 3 FRANKLIN TEMPLETON INVESTMENT FUNDS société d’investissement à capital variable 8A, rue Albert Borschette, L-1246 Luxembourg, Grand Duchy of Luxembourg (Registered with the registre de commerce et des sociétés, Luxembourg, under number B 35 177) General Information As at June 30, 2019 BOARD OF DIRECTORS: FRANKLIN TEMPLETON INTERNATIONAL SERVICES S.à r.l. Chairman 8A, rue Albert Borschette, L-1246 Luxembourg Gregory E. Johnson Grand Duchy of Luxembourg Chairman and Chief Executive Officer FRANKLIN RESOURCES, INC. FRANKLIN TEMPLETON INVESTMENT MANAGEMENT LIMITED One Franklin Parkway Cannon Place, 78 Cannon Street San Mateo, CA 94403-1906, U.S.A. London EC4N 6HL, United Kingdom Directors FRANKLIN TEMPLETON INVESTMENT TRUST MANAGEMENT CO. LIMITED Jed A. Plafker 12 Youido-dong, Youngdungpo-gu, President and Executive Managing Director Seoul, Korea FRANKLIN TEMPLETON INVESTMENTS One Franklin Parkway FRANKLIN TEMPLETON INVESTIMENTOS (Brasil) Ltda. San Mateo, CA 94403-1906, U.S.A. Avenue Brigadeiro Faria Lima 3311, 5o andar, São Paulo 04538-133, Brazil Mark G. Holowesko President FRANKLIN TEMPLETON INVESTMENTS AUSTRALIA LIMITED HOLOWESKO PARTNERS LTD Level 19, 101 Collins Street Shipston House Melbourne, VIC 3000, Australia P.O. Box N-7776, West Bay Street, Lyford Cay, Nassau, Bahamas FRANKLIN TEMPLETON INVESTMENTS (ASIA) LIMITED 17/F, Chater House JamesJ.K.Hung 8 Connaught Road Central President and Chief Executive Officer Hong Kong ASIA SECURITIES GLOBAL LTD 2704, Block B, Parkway Court, FRANKLIN TEMPLETON INVESTMENTS CORP. No. 4 Parkway Road 200 King Street West, Suite 1500, Hong Kong Toronto, Ontario M5H 3T4, Canada The Honourable Trevor G. Trefgarne K2/D&S MANAGEMENT CO., LLC Chairman 300 Atlantic Street, 12th Floor ENTREPRISE GROUP LIMITED Stamford, CT 06901, U.S.A. 11 High Street FRANKLIN TEMPLETON INVESTMENTS (ME) LIMITED Accra, Ghana The Gate, East Wing, Level 2, (date of resignation September 17, 2018) Dubai International Financial Centre, William C. P.Lockwood P.O. Box 506613, Dubai, United Arab Emirates Independent Director SUMITOMO MITSUI ASSET MANAGEMENT COMPANY LIMITED Poste restante, Avenue du Général de Gaulle 2-5-1 Atago Minato-ku F-57570 Cattenom, France Tokyo 105-6228, Japan MANAGEMENT COMPANY: TEMPLETON ASSET MANAGEMENT LTD. FRANKLIN TEMPLETON INTERNATIONAL SERVICES S.à r.l. 7 Temasek Boulevard 8A, rue Albert Borschette, L-1246 Luxembourg # 38-03 Suntec Tower One Grand Duchy of Luxembourg Singapore 038987 REGISTERED OFFICE: TEMPLETON GLOBAL ADVISORS LIMITED 8A, rue Albert Borschette, L-1246 Luxembourg P.O. Box N-7759 Grand Duchy of Luxembourg Lyford Cay, Nassau, Bahamas PRINCIPAL DISTRIBUTOR: TEMPLETON INVESTMENT COUNSEL, LLC FRANKLIN TEMPLETON INTERNATIONAL SERVICES S.à r.l. 300 S.E. 2nd Street 8A, rue Albert Borschette, L-1246 Luxembourg Fort Lauderdale, FL 33301, U.S.A. Grand Duchy of Luxembourg DEPOSITARY AND LISTING AGENT INVESTMENT MANAGERS: J.P. Morgan Bank LUXEMBOURG S.A. FRANKLIN ADVISERS, INC. European Bank and Business Centre One Franklin Parkway 6C Route de Trèves, L-2633 Senningerberg San Mateo, CA 94403-1906, U.S.A. Grand Duchy of Luxembourg FASA,