UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-06336
Franklin Templeton International Trust
(Exact name of registrant as specified in charter)
One Franklin Parkway, San Mateo, CA 94403-1906
(Address of principal executive offices) (Zip code)
Craig S. Tyle, One Franklin Parkway, San Mateo, CA 94403-1906
(Name and address of agent for service)
Registrant's telephone number, including area code: 650 312-2000
Date of fiscal year end: 10/31
Date of reporting period: 4/30/15
Item 1. Reports to Stockholders.
Franklin Templeton Investments
Gain From Our Perspective®
At Franklin Templeton Investments, we’re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we’re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world’s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe.
Focus on Investment Excellence
At the core of our firm, you’ll find multiple independent investment teams—each with a focused area of expertise—from traditional to alternative strategies and multi-asset solutions. And because our portfolio groups operate autonomously, their strategies can be combined to deliver true style and asset class diversification.
All of our investment teams share a common commitment to excellence grounded in rigorous, fundamental research and robust, disciplined risk management. Decade after decade, our consistent, research-driven processes have helped Franklin Templeton earn an impressive record of strong, long-term results.
Global Perspective Shaped by Local Expertise
In today’s complex and interconnected world, smart investing demands a global perspective. Franklin Templeton pioneered international investing over 60 years ago, and our expertise in emerging markets spans more than a quarter of a century. Today, our investment professionals are on the ground across the globe, spotting investment ideas and potential risks firsthand. These locally based teams bring in-depth understanding of local companies, economies and cultural nuances, and share their best thinking across our global research network.
Strength and Experience
Franklin Templeton is a global leader in asset management serving clients in over 150 countries.1 We run our business with the same prudence we apply to asset management, staying focused on delivering relevant investment solutions, strong long-term results and reliable, personal service. This approach, focused on putting clients first, has helped us to become one of the most trusted names in financial services.
1. As of 12/31/14. Clients are represented by the total number of shareholder accounts.
Not FDIC Insured | May Lose Value | No Bank Guarantee
| Contents | |
| Semiannual Report | |
| Templeton Foreign Smaller | |
| Companies Fund | 3 |
| Performance Summary | 7 |
| Your Fund’s Expenses | 10 |
| Financial Highlights and | |
| Statement of Investments | 12 |
| Financial Statements | 20 |
| Notes to Financial Statements | 23 |
| Shareholder Information | 30 |
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Semiannual Report
Templeton Foreign Smaller Companies Fund
We are pleased to bring you Templeton Foreign Smaller Companies Fund’s semiannual report for the period ended April 30, 2015. At the market close on December 10, 2013, the Fund closed to new investors with limited exceptions. Existing shareholders may add to their accounts. We believe this closure can help us effectively manage our current level of assets.
Your Fund’s Goal and Main Investments
The Fund seeks to provide long-term capital growth. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of smaller companies located outside the U.S., including emerging markets.
Performance Overview
For the six months under review, the Fund’s Class A shares delivered a +10.72% cumulative total return. In comparison, the MSCI All Country World Index Ex USA Small Cap Index, which measures performance of international small capitalization stocks in developed and emerging markets, excluding the U.S., generated a total return of +8.48%.1 Please note that index performance information is provided for reference and we do not attempt to track an index but rather undertake investments on the basis of fundamental research. You can find the
Fund’s long-term performance data in the Performance Summary beginning on page 7.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Economic and Market Overview
The global economy expanded moderately during the six months under review even though economic activity in some countries slowed. As measured by the MSCI World Index, stocks in global developed markets advanced overall during the six-month period amid a generally accommodative monetary policy environment and some signs of economic improvement in Europe and Japan. Oil prices declined sharply during the six-month period owing to strong global supply, and gold prices ended lower due to benign global inflation and a strong U.S. dollar.
U.S. economic growth moderated during the period under review. Lower energy prices and a stronger U.S. dollar along with harsh weather and labor disputes at key ports weighed on economic performance. Economic activity slowed in 2015’s first quarter as the dampening effects of lower exports and decreases in business investment and state and local government spending largely offset the positive effects from increases in consumer spending and private inventory investment. Although the U.S. Federal Reserve Board (Fed) stated that it could be patient with regard to raising interest rates, in March, the Fed removed the word “patient” from its monetary policy guidance. It added, however, that it might keep interest rates lower than what it viewed as normal. In its April meeting, the Fed attributed the economy’s first-quarter slowdown to transitory factors. The Fed reiterated that it would raise interest rates when it saw further improvement in the labor market and was reasonably confident that inflation would move back to its 2% objective over the medium term.
1. Source: Morningstar.
The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 16.
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TEMPLETON FOREIGN SMALLER COMPANIES FUND
Outside the U.S., economic growth slowed in the U.K. during 2015’s first quarter as the mining, construction and agriculture sectors contracted. In the eurozone, however, the economy showed signs of improvement as the gross domestic product growth rate picked up in the fourth quarter, led by Germany, the region’s largest economy. The European Central Bank (ECB) maintained its benchmark interest rate during the period and expanded its asset purchase program to boost inflation and stimulate the economy. Although the region benefited from lower oil prices, a weaker euro that helped exports, and the ECB’s accommodative policies, it continued to face headwinds such as deflationary pressures and the crisis in Ukraine. In March, the ECB raised its 2015 eurozone growth forecast as economic activity improved early in the year.
The Bank of Japan (BOJ) broadened its stimulus measures amid weak domestic demand and lower inflation. In December, Japan’s ruling coalition was reelected and announced a new stimulus package to revive economic growth. The country exited recession in the fourth quarter, supported largely by exports, while growth in domestic consumption and capital spending remained relatively weak. Toward period-end, the BOJ maintained its monetary policy and lowered its economic growth and inflation forecasts.
In emerging markets, economic growth generally moderated. Brazil’s economy contracted in the fourth quarter of 2014 as the country continued to face headwinds such as high inflation, lower commodity prices and a severe drought. Emerging market stocks, as measured by the MSCI Emerging Markets Index, rose for the six-month period, driven by the effect of China’s fiscal and monetary stimulus measures on domestic equities, the ECB’s monetary easing and the Fed’s continued accommodative policy stance. However, concerns surrounding the course of U.S. monetary policy, less robust Chinese economic data, continued geopolitical tensions in Ukraine and the Middle East, Greece’s debt concerns and slower global economic growth hampered emerging market stocks. Also weighing on investor sentiment was the drop in crude oil prices, which pressured several oil-producing countries’ financial positions and currencies. A temporary solution to Greece’s dispute with its international creditors and a Russia-Ukraine ceasefire agreement helped emerging market stocks during the period. Central bank actions varied across emerging markets. Some central banks raised interest rates in response to rising inflation and weakening currencies, while others lowered rates in efforts to promote economic growth.
| Top 10 Sectors/Industries | ||
| 4/30/15 | ||
| % of Total | ||
| Net Assets | ||
| Auto Components | 8.2 | % |
| Machinery | 6.4 | % |
| Textiles, Apparel & Luxury Goods | 6.3 | % |
| Household Durables | 6.1 | % |
| Capital Markets | 5.1 | % |
| Personal Products | 4.6 | % |
| Electronic Equipment, Instruments & Components | 4.1 | % |
| Banks | 3.9 | % |
| Energy Equipment & Services | 3.7 | % |
| Diversified Consumer Services | 3.5 | % |
Investment Strategy
We employ a bottom-up, value-oriented, long-term approach to investing. We focus our analysis on the market price of a company’s securities relative to our evaluation of the company’s long-term earnings, asset value and cash flow potential. We also consider a company’s price/earnings ratio, profit margins and liquidation value. We are patient investors and may hold a security for several years as we wait for the market to recognize a company’s true worth.
Manager’s Discussion
Several holdings performed well and contributed to the Fund’s absolute performance during the period under review. Huhtamaki is a Finnish company that manufactures and supplies packaging for various industries. The company’s solid strategy execution improved productivity and created a geographical footprint in which a considerable percentage of sales came from emerging markets. In our view, this performance improved Huhtamaki’s growth profile, and we believe the company’s sales in emerging markets have the potential for strong growth.
Amer Sports is a Finnish sporting goods company with revenues diversified across several product areas, including winter sports equipment, apparel and footwear, ball sports and fitness equipment. During the period, Amer announced its acquisition of Louisville Slugger, a baseball goods brand. We believe this acquisition may not significantly increase group sales, but this deal was Amer’s first meaningful acquisition since Salomon in 2005. The company expected the acquisition to have little impact on Amer’s margins in its fiscal year 2015 but to potentially add to its profits in the following fiscal year.
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TEMPLETON FOREIGN SMALLER COMPANIES FUND
| Top 10 Holdings | ||
| 4/30/15 | ||
| Company | % of Total | |
| Sector/Industry, Country | Net Assets | |
| Amer Sports OYJ | 2.2 | % |
| Leisure Products, Finland | ||
| Huhtamaki OYJ | 1.9 | % |
| Containers & Packaging, Finland | ||
| Value Partners Group Ltd. | 1.9 | % |
| Capital Markets, Hong Kong | ||
| Ontex Group NV | 1.9 | % |
| Personal Products, Belgium | ||
| Kobayashi Pharmaceutical Co. Ltd. | 1.9 | % |
| Personal Products, Japan | ||
| Techtronic Industries Co. Ltd. | 1.9 | % |
| Household Durables, Hong Kong | ||
| Asics Corp. | 1.8 | % |
| Textiles, Apparel & Luxury Goods, Japan | ||
| Arcadis NV | 1.8 | % |
| Construction & Engineering, Netherlands | ||
| Gerresheimer AG | 1.8 | % |
| Life Sciences Tools & Services, Germany | ||
| Aalberts Industries NV | 1.8 | % |
| Machinery, Netherlands |
Italian medical technology specialist Sorin had a high-quality cardiopulmonary and heart valve business but suffered from high expenses and an undersized Cardiac Rhythm Management (CRM) business. During the period, the company announced its merger with U.S. medical technology company Cyberonics. We believe this merger could strengthen Sorin’s presence in the lucrative U.S. market, potentially reduce costs and create a more credible platform to bring new CRM and neuromodula-tion products to market.
In contrast, the Fund had some underperformers during the period. X5 Retail Group is Russia’s second-largest retailer. During the period, the crisis between Ukraine and Russia impacted shares. We liquidated our position in the company by period-end.
Singapore-based Ezion, which owns offshore assets and provides offshore marine logistics services to the oil and gas industry, was another significant detractor. Ezion offered a range of services with strong demand within the Asia-Pacific region, and the management team has a long history of successful execution and excellent contacts within the oil and gas industry. Ezion’s market capitalization is quite small, however, and as a result the company, in our opinion, has been overlooked by investors. However, we believe that Ezion could soon take its earnings and profile to a higher level.
Headquartered in Canada, Dorel Industries is a leading global consumer products manufacturer, importer and marketer specializing in juvenile goods, home furnishings and leisure and recreational products. Performance was negatively affected by the U.S. dollar’s continued strength during the period, which weighed on earnings in markets outside of the U.S., where Dorel derives almost half of its revenue. Dorel traded at a steep discount to its peers and offered what we considered an attractive free cash flow yield, and we initiated a position during the period. Despite its portfolio of well-known consumer products, a strong track record for creating shareholder value and a platform to continue to drive future growth, investors outside of Canada showed little awareness of the company. Additionally, Dorel recently announced a restructuring that could reduce development and supply chain lead times, improve cost structures and operating margins and lower warranty costs.
It is important to recognize the effect of currency movements on the Fund’s performance. In general, if the value of the U.S. dollar goes up compared with a foreign currency, an investment traded in that foreign currency will go down in value because it will be worth fewer U.S. dollars. This can have a negative effect on Fund performance. Conversely, when the U.S. dollar weakens in relation to a foreign currency, an investment traded in that foreign currency will increase in value, which can contribute to Fund performance. For the six months ended April 30, 2015, the U.S. dollar rose in value relative to most currencies. As a result, the Fund’s performance was negatively affected by the portfolio’s investment predominantly in securities with non-U.S. currency exposure.
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TEMPLETON FOREIGN SMALLER COMPANIES FUND
Thank you for your continued participation in Templeton Foreign Smaller Companies Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of April 30, 2015, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
David Tuttle assumed portfolio manager responsibilities for the Fund effective January 15, 2015. He is a vice president, portfolio manager and research analyst for the Templeton Global Equity Group and is responsible for North American thrift and mortgage, Canadian banks and financial services, as well as small-cap resources, telecommunications and financials. Prior to joining Franklin Templeton in 2002, Mr. Tuttle was a senior associate for PricewaterhouseCoopers in the Corporate Valuation Consulting and Project Finance and Privatization Groups. He is a Chartered Financial Analyst (CFA) Charterholder, a Certified Financial Planner (CFP) and a member of the Toronto Society of Financial Analysts.
CFA® is a trademark owned by CFA Institute.
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TEMPLETON FOREIGN SMALLER COMPANIES FUND
Performance Summary as of April 30, 2015
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities. The performance table does not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.
| Net Asset Value | |||||
| Share Class (Symbol) | 4/30/15 | 10/31/141 | Change | ||
| A (FINEX) | $ | 17.84 | $ | 16.33 | +$1.51 |
| C (FCFSX) | $ | 17.19 | $ | 15.67 | +$1.52 |
| R6 (N/A) | $ | 17.81 | $ | 16.37 | +$1.44 |
| Advisor (FTFAX) | $ | 17.80 | $ | 16.33 | +$1.47 |
| Distributions (11/1/14–4/30/15) | |||||
| Dividend | |||||
| Share Class | Income | ||||
| A | $ | 0.2220 | |||
| C | $ | 0.0930 | |||
| R6 | $ | 0.3375 | |||
| Advisor | $ | 0.2763 | |||
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TEMPLETON FOREIGN SMALLER COMPANIES FUND
PERFORMANCE SUMMARY
Performance as of 4/30/15
Cumulative total return excludes sales charges. Average annual total returns and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: contingent deferred sales charge in first year only;
Class R6/Advisor Class: no sales charges.
| Value of | Average Annual | Total Annual | ||||||||||
| Cumulative | Average Annual | $ | 10,000 | Total Return | Operating Expenses6 | |||||||
| Share Class | Total Return2 | Total Return3 | Investment4 | (3/31/15 | )5 | (with waiver) | (without waiver) | |||||
| A | 1.67 | % | 1.67 | % | ||||||||
| 6-Month | +10.72 | %1 | +4.34 | % | $ | 10,434 | ||||||
| 1-Year | +1.41 | % | -4.43 | % | $ | 9,557 | -9.63 | % | ||||
| 5-Year | +34.31 | % | +4.83 | % | $ | 12,657 | +4.08 | % | ||||
| 10-Year | +80.43 | % | +5.46 | % | $ | 17,009 | +4.40 | % | ||||
| C | 2.42 | % | 2.42 | % | ||||||||
| 6-Month | +10.30 | %1 | +9.30 | % | $ | 10,930 | ||||||
| 1-Year | +0.67 | % | -0.33 | % | $ | 9,967 | -5.86 | % | ||||
| 5-Year | +29.38 | % | +5.29 | % | $ | 12,938 | +4.55 | % | ||||
| 10-Year | +67.45 | % | +5.29 | % | $ | 16,745 | +4.23 | % | ||||
| R67 | 1.10 | % | 1.11 | % | ||||||||
| 6-Month | +11.14 | %1 | +11.14 | % | $ | 11,114 | ||||||
| 1-Year | +2.04 | % | +2.04 | % | $ | 10,204 | -3.61 | % | ||||
| Since Inception (5/1/13) | +12.17 | % | +5.92 | % | $ | 11,217 | +2.74 | % | ||||
| Advisor | 1.42 | % | 1.42 | % | ||||||||
| 6-Month | +10.93 | %1 | +10.93 | % | $ | 11,093 | ||||||
| 1-Year | +1.71 | % | +1.71 | % | $ | 10,171 | -3.92 | % | ||||
| 5-Year | +36.14 | % | +6.36 | % | $ | 13,614 | +5.60 | % | ||||
| 10-Year | +85.06 | % | +6.35 | % | $ | 18,506 | +5.28 | % | ||||
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
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TEMPLETON FOREIGN SMALLER COMPANIES FUND
PERFORMANCE SUMMARY
All investments involve risks, including possible loss of principal. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in emerging markets involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size and lesser liquidity. Smaller, midsized and relatively new or unseasoned companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. Historically, these securities have exhibited greater price volatility than large company stocks, particularly over the short term. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
| Class C: | These shares have higher annual fees and expenses than Class A shares. |
| Class R6: | Shares are available to certain eligible investors as described in the prospectus. |
| Advisor Class: | Shares are available to certain eligible investors as described in the prospectus. |
1. Price and total return information is based on net asset values calculated for shareholder transactions. Certain adjustments were made to the net assets of the Fund at
10/31/14 for financial reporting purposes, and as a result, the net asset values for shareholder transactions and the total returns based on those net asset values differ from
the adjusted net asset values and total returns reported in the Financial Highlights.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Six-month return has not been annualized.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.
6. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
7. Class R6 has a fee waiver contractually guaranteed through at least 2/29/16. Investment results reflect the fee waiver; to the extent applicable; without this reduction, the
results would have been lower.
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TEMPLETON FOREIGN SMALLER COMPANIES FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
| 1. | Divide your account value by $1,000. |
| If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
| 2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
| If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
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TEMPLETON FOREIGN SMALLER COMPANIES FUND
YOUR FUND’S EXPENSES
| Beginning Account | Ending Account | Expenses Paid During | ||||
| Share Class | Value 11/1/14 | Value 4/30/15 | Period* 11/1/14–4/30/15 | |||
| A | ||||||
| Actual | $ | 1,000 | $ | 1,107.20 | $ | 9.20 |
| Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,016.07 | $ | 8.80 |
| C | ||||||
| Actual | $ | 1,000 | $ | 1,103.00 | $ | 13.09 |
| Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,012.35 | $ | 12.52 |
| R6 | ||||||
| Actual | $ | 1,000 | $ | 1,111.40 | $ | 5.97 |
| Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.14 | $ | 5.71 |
| Advisor | ||||||
| Actual | $ | 1,000 | $ | 1,109.30 | $ | 7.95 |
| Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,017.26 | $ | 7.60 |
*Expenses are calculated using the most recent six-month expense ratio, annualized for each class (A: 1.76%; C: 2.51%; R6: 1.14% (net of
expense waivers); and Advisor: 1.52%), multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half
year period.
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| FRANKLIN TEMPLETON INTERNATIONAL TRUST | ||||||||||||||||||
| Financial Highlights | ||||||||||||||||||
| Templeton Foreign Smaller Companies Fund | ||||||||||||||||||
| Six Months Ended | ||||||||||||||||||
| April 30, 2015 | Year Ended October 31, | |||||||||||||||||
| (unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
| Class A | ||||||||||||||||||
| Per share operating performance | ||||||||||||||||||
| (for a share outstanding throughout the period) | ||||||||||||||||||
| Net asset value, beginning of period | $ | 16.31 | $ | 18.02 | $ | 14.39 | $ | 13.92 | $ | 15.47 | $ | 12.82 | ||||||
| Income from investment operationsa: | ||||||||||||||||||
| Net investment incomeb | 0.03 | 0.05 | c | 0.13 | 0.24 | 0.12 | 0.08 | |||||||||||
| Net realized and unrealized gains (losses) | 1.72 | (1.50 | ) | 3.77 | 0.38 | (1.60 | ) | 2.68 | ||||||||||
| Total from investment operations | 1.75 | (1.45 | ) | 3.90 | 0.62 | (1.48 | ) | 2.76 | ||||||||||
| Less distributions from net investment | ||||||||||||||||||
| income | (0.22 | ) | (0.26 | ) | (0.27 | ) | (0.15 | ) | (0.07 | ) | (0.11 | ) | ||||||
| Net asset value, end of period | $ | 17.84 | $ | 16.31 | $ | 18.02 | $ | 14.39 | $ | 13.92 | $ | 15.47 | ||||||
| Total returnd | 10.93 | % | (8.11 | )% | 27.43 | % | 4.67 | % | (9.60 | )% | 21.71 | % | ||||||
| Ratios to average net assetse | ||||||||||||||||||
| Expenses | 1.76 | % | 1.67 | % | 1.65 | %f | 1.65 | % | 1.55 | %f | 1.59 | %f | ||||||
| Net investment income | 0.34 | % | 0.30 | %c | 0.83 | % | 1.72 | % | 0.80 | % | 0.56 | % | ||||||
| Supplemental data | ||||||||||||||||||
| Net assets, end of period (000’s) | $ | 93,736 | $ | 94,088 | $ | 131,844 | $ | 103,168 | $ | 121,119 | $ | 163,993 | ||||||
| Portfolio turnover rate | 37.47 | % | 38.68 | % | 42.94 | % | 57.56 | % | 50.03 | % | 19.65 | % | ||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.05 per share related to income received in the form of special dividends in connection with certain Fund
holdings. Excluding this amount, the ratio of net investment income (loss) to average net assets would have been (0.01)%.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of expense reduction rounds to less than 0.01%.
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FRANKLIN TEMPLETON INTERNATIONAL TRUST
FINANCIAL HIGHLIGHTS
| Templeton Foreign Smaller Companies Fund (continued) | ||||||||||||||||||
| Six Months Ended | ||||||||||||||||||
| April 30, 2015 | Year Ended October 31, | |||||||||||||||||
| (unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
| Class C | ||||||||||||||||||
| Per share operating performance | ||||||||||||||||||
| (for a share outstanding throughout the period) | ||||||||||||||||||
| Net asset value, beginning of period | $ | 15.65 | $ | 17.31 | $ | 13.83 | $ | 13.36 | $ | 14.89 | $ | 12.39 | ||||||
| Income from investment operationsa: | ||||||||||||||||||
| Net investment income (loss)b | (0.03 | ) | (0.08 | )c | 0.01 | 0.13 | 0.01 | (0.02 | ) | |||||||||
| Net realized and unrealized gains (losses) | 1.66 | (1.44 | ) | 3.63 | 0.38 | (1.54 | ) | 2.60 | ||||||||||
| Total from investment operations | 1.63 | (1.52 | ) | 3.64 | 0.51 | (1.53 | ) | 2.58 | ||||||||||
| Less distributions from net investment | ||||||||||||||||||
| income | (0.09 | ) | (0.14 | ) | (0.16 | ) | (0.04 | ) | — | (0.08 | ) | |||||||
| Net asset value, end of period | $ | 17.19 | $ | 15.65 | $ | 17.31 | $ | 13.83 | $ | 13.36 | $ | 14.89 | ||||||
| Total returnd | 10.51 | % | (8.82 | )% | 26.58 | % | 3.85 | % | (10.28 | )% | 20.90 | % | ||||||
| Ratios to average net assetse | ||||||||||||||||||
| Expenses | 2.51 | % | 2.42 | % | 2.40 | %f | 2.40 | % | 2.30 | %f | 2.34 | %f | ||||||
| Net investment income (loss) | (0.41 | )% | (0.45 | )%c | 0.08 | % | 0.97 | % | 0.05 | % | (0.19 | )% | ||||||
| Supplemental data | ||||||||||||||||||
| Net assets, end of period (000’s) | $ | 12,286 | $ | 13,040 | $ | 16,027 | $ | 12,814 | $ | 14,457 | $ | 17,202 | ||||||
| Portfolio turnover rate | 37.47 | % | 38.68 | % | 42.94 | % | 57.56 | % | 50.03 | % | 19.65 | % | ||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.05 per share related to income received in the form of special dividends in connection with certain Fund
holdings. Excluding this amount, the ratio of net investment income (loss) to average net assets would have been (0.76)%.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of expense reduction rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 13
FRANKLIN TEMPLETON INTERNATIONAL TRUST
FINANCIAL HIGHLIGHTS
| Templeton Foreign Smaller Companies Fund (continued) | |||||||||
| Six Months Ended | Year Ended | ||||||||
| April 30, 2015 | October 31, | ||||||||
| (unaudited) | 2014 | 2013 | a | ||||||
| Class R6 | |||||||||
| Per share operating performance | |||||||||
| (for a share outstanding throughout the period) | |||||||||
| Net asset value, beginning of period | $ | 16.34 | $ | 18.03 | $ | 16.53 | |||
| Income from investment operationsb: | |||||||||
| Net investment incomec | 0.08 | 0.15 | d | 0.16 | |||||
| Net realized and unrealized gains (losses) | 1.73 | (1.51 | ) | 1.34 | |||||
| Total from investment operations | 1.81 | (1.36 | ) | 1.50 | |||||
| Less distributions from net investment income | (0.34 | ) | (0.33 | ) | — | ||||
| Net asset value, end of period | $ | 17.81 | $ | 16.34 | $ | 18.03 | |||
| Total returne | 11.35 | % | (7.64 | )% | 9.07 | % | |||
| Ratios to average net assetsf | |||||||||
| Expenses before waiver and payments by affiliates | 1.15 | % | 1.11 | % | 2.55 | % | |||
| Expenses net of waiver and payments by affiliates | 1.14 | % | 1.10 | % | 1.12 | %g | |||
| Net investment income | 0.96 | % | 0.87 | %d | 1.36 | % | |||
| Supplemental data | |||||||||
| Net assets, end of period (000’s) | $ | 958 | $ | 835 | $ | 5 | |||
| Portfolio turnover rate | 37.47 | % | 38.68 | % | 42.94 | % | |||
aFor the period May 1, 2013 (effective date) to October 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dNet investment income per share includes approximately $0.05 per share related to income received in the form of special dividends in connection with certain Fund
holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.56%.
eTotal return is not annualized for periods less than one year.
fRatios are annualized for periods less than one year.
gBenefit of expense reduction rounds to less than 0.01%.
14 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN TEMPLETON INTERNATIONAL TRUST
FINANCIAL HIGHLIGHTS
| Templeton Foreign Smaller Companies Fund (continued) | ||||||||||||||||||
| Six Months Ended | ||||||||||||||||||
| April 30, 2015 | Year Ended October 31, | |||||||||||||||||
| (unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
| Advisor Class | ||||||||||||||||||
| Per share operating performance | ||||||||||||||||||
| (for a share outstanding throughout the period) | ||||||||||||||||||
| Net asset value, beginning of period | $ | 16.30 | $ | 18.00 | $ | 14.38 | $ | 13.93 | $ | 15.48 | $ | 12.81 | ||||||
| Income from investment operationsa: | ||||||||||||||||||
| Net investment incomeb | 0.05 | 0.10 | c | 0.18 | 0.26 | 0.17 | 0.11 | |||||||||||
| Net realized and unrealized gains (losses) | 1.73 | (1.50 | ) | 3.75 | 0.39 | (1.61 | ) | 2.69 | ||||||||||
| Total from investment operations | 1.78 | (1.40 | ) | 3.93 | 0.65 | (1.44 | ) | 2.80 | ||||||||||
| Less distributions from net investment income | (0.28 | ) | (0.30 | ) | (0.31 | ) | (0.20 | ) | (0.11 | ) | (0.13 | ) | ||||||
| Net asset value, end of period | $ | 17.80 | $ | 16.30 | $ | 18.00 | $ | 14.38 | $ | 13.93 | $ | 15.48 | ||||||
| Total returnd | 11.13 | % | (7.90 | )% | 27.79 | % | 4.90 | % | (9.38 | )% | 22.06 | % | ||||||
| Ratios to average net assetse | ||||||||||||||||||
| Expenses | 1.52 | % | 1.42 | % | 1.40 | %f | 1.40 | % | 1.30 | %f | 1.34 | %f | ||||||
| Net investment income | 0.58 | % | 0.55 | %c | 1.08 | % | 1.97 | % | 1.05 | % | 0.81 | % | ||||||
| Supplemental data | ||||||||||||||||||
| Net assets, end of period (000’s) | $ | 39,287 | $ | 40,153 | $ | 40,832 | $ | 31,817 | $ | 36,902 | $ | 33,172 | ||||||
| Portfolio turnover rate | 37.47 | % | 38.68 | % | 42.94 | % | 57.56 | % | 50.03 | % | 19.65 | % | ||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.05 per share related to income received in the form of special dividends in connection with certain Fund
holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.24%.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of expense reduction rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 15
| FRANKLIN TEMPLETON INTERNATIONAL TRUST | ||||
| Statement of Investments, April 30, 2015 (unaudited) | ||||
| Templeton Foreign Smaller Companies Fund | ||||
| Industry | Shares | Value | ||
| Closed End Funds (Cost $1,029,444) 0.9% | ||||
| Thailand 0.9% | ||||
| True Telecommunication Growth Infrastructure Fund | Diversified Financial Services | 3,287,700 | $ | 1,254,543 |
| Common Stocks 93.2% | ||||
| Austria 0.9% | ||||
| Wienerberger AG | Building Products | 76,890 | 1,250,548 | |
| Bahamas 1.7% | ||||
| aSteiner Leisure Ltd. | Diversified Consumer Services | 53,203 | 2,566,513 | |
| Belgium 1.9% | ||||
| aOntex Group NV | Personal Products | 52,170 | 1,552,703 | |
| a,bOntex Group NV, 144A | Personal Products | 40,280 | 1,198,829 | |
| 2,751,532 | ||||
| Brazil 1.4% | ||||
| Companhia de Saneamento de Minas Gerais | Water Utilities | 56,600 | 341,287 | |
| Grendene SA | Textiles, Apparel & Luxury Goods | 178,100 | 1,065,032 | |
| Tupy SA | Auto Components | 112,765 | 640,614 | |
| 2,046,933 | ||||
| Canada 7.2% | ||||
| AGF Management Ltd. | Capital Markets | 96,796 | 619,238 | |
| Badger Daylighting Inc. | Construction & Engineering | 36,100 | 895,657 | |
| Dorel Industries Inc., B | Household Durables | 58,400 | 1,718,003 | |
| Enerflex Ltd. | Energy Equipment & Services | 57,600 | 772,296 | |
| Ensign Energy Services Inc. | Energy Equipment & Services | 103,700 | 826,678 | |
| Genworth MI Canada Inc. | Thrifts & Mortgage Finance | 20,700 | 602,946 | |
| HudBay Minerals Inc. | Metals & Mining | 236,930 | 2,342,304 | |
| Laurentian Bank of Canada | Banks | 17,800 | 712,295 | |
| Mullen Group Ltd. | Energy Equipment & Services | 67,100 | 1,163,233 | |
| Precision Drilling Corp. | Energy Equipment & Services | 114,500 | 833,072 | |
| 10,485,722 | ||||
| China 5.8% | ||||
| China Medical System Holdings Ltd. | Pharmaceuticals | 406,000 | 714,523 | |
| China ZhengTong Auto Services Holdings Ltd. | Specialty Retail | 1,164,500 | 797,829 | |
| Goldpac Group Ltd. | Technology Hardware, Storage & | |||
| Peripherals | 462,900 | 387,621 | ||
| Haier Electronics Group Co. Ltd. | Household Durables | 471,000 | 1,349,118 | |
| aKingdee International Software Group Co. Ltd., fgn. | Software | 2,652,000 | 1,577,431 | |
| Minth Group Ltd. | Auto Components | 930,000 | 2,330,280 | |
| Yingde Gases Group Co. Ltd. | Chemicals | 1,592,000 | 1,394,725 | |
| 8,551,527 | ||||
| Finland 4.1% | ||||
| Amer Sports OYJ | Leisure Products | 129,580 | 3,253,945 | |
| Huhtamaki OYJ | Containers & Packaging | 87,800 | 2,814,602 | |
| 6,068,547 | ||||
| France 0.8% | ||||
| Ipsos | Media | 40,297 | 1,189,161 | |
| Germany 7.4% | ||||
| aDMG MORI SEIKI AG | Machinery | 33,800 | 1,158,807 | |
| Gerresheimer AG | Life Sciences Tools & Services | 45,980 | 2,615,191 | |
| aGrand City Properties SA | Real Estate Management & Development | 86,790 | 1,645,768 | |
16 | Semiannual Report franklintempleton.com
FRANKLIN TEMPLETON INTERNATIONAL TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| Templeton Foreign Smaller Companies Fund (continued) | ||||
| Industry | Shares | Value | ||
| Common Stocks (continued) | ||||
| Germany (continued) | ||||
| aKloeckner & Co. SE | Trading Companies & Distributors | 163,930 | $ | 1,584,439 |
| Leoni AG | Auto Components | 23,440 | 1,514,140 | |
| Rational AG | Machinery | 6,720 | 2,371,763 | |
| 10,890,108 | ||||
| Hong Kong 8.8% | ||||
| EVA Precision Industrial Holdings Ltd. | Machinery | 3,838,000 | 1,242,953 | |
| Luk Fook Holdings (International) Ltd. | Specialty Retail | 401,000 | 1,254,677 | |
| NewOcean Energy Holdings Ltd. | Oil, Gas & Consumable Fuels | 1,926,000 | 1,073,534 | |
| Samsonite International SA | Textiles, Apparel & Luxury Goods | 398,400 | 1,457,298 | |
| Techtronic Industries Co. Ltd. | Household Durables | 768,590 | 2,717,197 | |
| Value Partners Group Ltd. | Capital Markets | 1,490,700 | 2,781,214 | |
| VTech Holdings Ltd. | Communications Equipment | 166,300 | 2,313,060 | |
| 12,839,933 | ||||
| India 0.9% | ||||
| LIC Housing Finance Ltd. | Thrifts & Mortgage Finance | 201,535 | 1,363,859 | |
| Indonesia 0.9% | ||||
| a,cSakari Resources Ltd. | Metals & Mining | 1,342,000 | 1,263,809 | |
| Italy 2.9% | ||||
| Amplifon SpA | Health Care Providers & Services | 103,868 | 812,319 | |
| Marr SpA | Food & Staples Retailing | 95,710 | 1,924,454 | |
| aSorin SpA | Health Care Equipment & Supplies | 465,936 | 1,474,306 | |
| 4,211,079 | ||||
| Japan 15.3% | ||||
| Aderans Co. Ltd. | Personal Products | 60,100 | 564,806 | |
| Asics Corp. | Textiles, Apparel & Luxury Goods | 104,900 | 2,697,404 | |
| Capcom Co. Ltd. | Software | 70,700 | 1,326,476 | |
| Descente Ltd. | Textiles, Apparel & Luxury Goods | 110,000 | 1,417,958 | |
| Iida Group Holdings Co. Ltd. | Household Durables | 101,266 | 1,375,772 | |
| Keihin Corp. | Auto Components | 103,900 | 1,714,407 | |
| Kobayashi Pharmaceutical Co. Ltd. | Personal Products | 38,779 | 2,728,399 | |
| MEITEC Corp. | Professional Services | 65,000 | 2,098,794 | |
| Nissin Kogyo Co. Ltd. | Auto Components | 28,400 | 470,994 | |
| Square Enix Holdings Co. Ltd. | Software | 60,700 | 1,286,297 | |
| Sumitomo Rubber Industries Ltd. | Auto Components | 114,800 | 2,135,613 | |
| Tokai Rika Co. Ltd. | Auto Components | 30,300 | 744,620 | |
| Tsugami Corp. | Machinery | 144,000 | 845,498 | |
| Tsumura & Co. | Pharmaceuticals | 90,600 | 2,128,595 | |
| Unipres Corp. | Auto Components | 40,400 | 837,169 | |
| 22,372,802 | ||||
| Netherlands 3.6% | ||||
| Aalberts Industries NV | Machinery | 83,407 | 2,590,015 | |
| Arcadis NV | Construction & Engineering | 84,808 | 2,691,567 | |
| 5,281,582 | ||||
| Philippines 0.7% | ||||
| Energy Development Corp. | Independent Power & Renewable | |||
| Electricity Producers | 2,088,600 | 379,192 | ||
| Vista Land & Lifescapes Inc. | Real Estate Management & Development | 3,815,300 | 641,371 | |
| 1,020,563 | ||||
franklintempleton.com Semiannual Report | 17
FRANKLIN TEMPLETON INTERNATIONAL TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| Templeton Foreign Smaller Companies Fund (continued) | ||||
| Industry | Shares | Value | ||
| Common Stocks (continued) | ||||
| Portugal 1.2% | ||||
| bCTT-Correios de Portugal SA, 144A | Air Freight & Logistics | 158,979 | $ | 1,797,203 |
| Singapore 0.6% | ||||
| Ezion Holdings Ltd. | Energy Equipment & Services | 907,160 | 825,812 | |
| South Korea 7.7% | ||||
| Binggrae Co. Ltd. | Food Products | 15,747 | 1,255,574 | |
| BNK Financial Group Inc. | Banks | 117,243 | 1,746,679 | |
| DGB Financial Group Inc. | Banks | 106,728 | 1,203,666 | |
| Halla Visteon Climate Control Corp. | Auto Components | 43,881 | 1,645,543 | |
| aHyundai Mipo Dockyard Co. Ltd. | Machinery | 9,649 | 801,598 | |
| KIWOOM Securities Co. Ltd. | Capital Markets | 14,909 | 1,057,287 | |
| Korea Investment Holdings Co. Ltd. | Capital Markets | 17,296 | 1,107,761 | |
| Sindoh Co. Ltd. | Technology Hardware, Storage & | |||
| Peripherals | 11,513 | 743,788 | ||
| Youngone Corp. | Textiles, Apparel & Luxury Goods | 27,189 | 1,660,620 | |
| 11,222,516 | ||||
| Spain 0.7% | ||||
| Tecnicas Reunidas SA | Energy Equipment & Services | 21,772 | 1,015,281 | |
| Sweden 0.8% | ||||
| a,cD Carnegie & Co. AB | Real Estate Management & Development | 228 | — | |
| aOrexo AB | Pharmaceuticals | 32,090 | 380,984 | |
| Oriflame Cosmetics SA, SDR | Personal Products | 42,810 | 739,794 | |
| 1,120,778 | ||||
| Switzerland 2.3% | ||||
| aBasilea Pharmaceutica AG | Biotechnology | 5,910 | 709,859 | |
| Tecan Group AG | Life Sciences Tools & Services | 5,150 | 685,894 | |
| Vontobel Holding AG | Capital Markets | 43,540 | 1,940,709 | |
| 3,336,462 | ||||
| Taiwan 2.2% | ||||
| Simplo Technology Co. Ltd. | Electronic Equipment, Instruments & | |||
| Components | 379,000 | 1,887,820 | ||
| Tripod Technology Corp. | Electronic Equipment, Instruments & | |||
| Components | 670,000 | 1,313,039 | ||
| 3,200,859 | ||||
| Thailand 0.9% | ||||
| Tisco Financial Group PCL, fgn. | Banks | 994,800 | 1,363,256 | |
| Turkey 0.3% | ||||
| Turk Traktor ve Ziraat Makineleri AS | Machinery | 13,476 | 402,931 | |
| United Kingdom 12.2% | ||||
| Bellway PLC | Household Durables | 30,285 | 926,573 | |
| Bovis Homes Group PLC | Household Durables | 62,050 | 888,697 | |
| Chemring Group PLC | Aerospace & Defense | 140,390 | 463,594 | |
| Debenhams PLC | Multiline Retail | 877,990 | 1,210,283 | |
| Devro PLC | Food Products | 231,000 | 1,037,769 | |
| Dignity PLC | Diversified Consumer Services | 80,415 | 2,507,241 | |
| Foxtons Group PLC | Real Estate Management & Development | 20,400 | 68,931 | |
| HomeServe PLC | Commercial Services & Supplies | 216,340 | 1,269,296 | |
| bJust Retirement Group PLC, 144A | Insurance | 787,390 | 2,104,273 | |
18 | Semiannual Report franklintempleton.com
FRANKLIN TEMPLETON INTERNATIONAL TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| Templeton Foreign Smaller Companies Fund (continued) | ||||||
| Industry | Shares | Value | ||||
| Common Stocks (continued) | ||||||
| United Kingdom (continued) | ||||||
| Laird PLC | Electronic Equipment, Instruments & | |||||
| Components | 451,041 | $ | 2,491,143 | |||
| Oxford Instruments PLC | Electronic Equipment, Instruments & | |||||
| Components | 26,123 | 373,137 | ||||
| SIG PLC | Trading Companies & Distributors | 414,750 | 1,236,445 | |||
| aTSB Banking Group PLC | Banks | 131,080 | 674,643 | |||
| UBM PLC | Media | 226,802 | 1,966,408 | |||
| aVectura Group PLC | Pharmaceuticals | 267,270 | 643,459 | |||
| 17,861,892 | ||||||
| Total Common Stocks | ||||||
| (Cost $113,142,677) | 136,301,208 | |||||
| Preferred Stocks 1.2% | ||||||
| Brazil 0.6% | ||||||
| Alpargatas SA, pfd. | Textiles, Apparel & Luxury Goods | 262,600 | 864,559 | |||
| Germany 0.6% | ||||||
| Draegerwerk AG & Co. KGAA, pfd. | Health Care Equipment & Supplies | 8,300 | 962,500 | |||
| Total Preferred Stocks (Cost $1,827,460) | 1,827,059 | |||||
| Total Investments before Short Term | ||||||
| Investments (Cost $115,999,581) | 139,382,810 | |||||
| Principal | ||||||
| Amount | ||||||
| Short Term Investments (Cost $5,999,998) | ||||||
| 4.1% | ||||||
| U.S. Government and Agency Securities 4.1% | ||||||
| United States 4.1% | ||||||
| dFNMA, 5/01/15 | $ | 6,000,000 | 5,999,998 | |||
| Total Investments (Cost $121,999,579) | ||||||
| 99.4% | 145,382,808 | |||||
| Other Assets, less Liabilities 0.6% | 883,516 | |||||
| Net Assets 100.0% | $ | 146,266,324 | ||||
See Abbreviations on page 29.
aNon-income producing.
bSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buy-
ers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of
Trustees. At April 30, 2015, the aggregate value of these securities was $5,100,305, representing 3.49% of net assets.
cSecurity has been deemed illiquid because it may not be able to be sold within seven days. At April 30, 2015, the aggregate value of these securities was $1,263,809,
representing 0.86% of net assets.
dThe security is traded on a discount basis with no stated coupon rate.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 19
FRANKLIN TEMPLETON INTERNATIONAL TRUST
| Financial Statements | |||
| Statement of Assets and Liabilities | |||
| April 30, 2015 (unaudited) | |||
| Templeton Foreign Smaller Companies Fund | |||
| Assets: | |||
| Investments in securities: | |||
| Cost | $ | 121,999,579 | |
| Value | $ | 145,382,808 | |
| Cash | 773,301 | ||
| Receivables: | |||
| Investment securities sold | 41,164 | ||
| Capital shares sold | 97,413 | ||
| Dividends | 537,905 | ||
| Other assets | 75 | ||
| Total assets | 146,832,666 | ||
| Liabilities: | |||
| Payables: | |||
| Investment securities purchased | 20,220 | ||
| Capital shares redeemed | 273,373 | ||
| Management fees | 115,106 | ||
| Distribution fees | 28,628 | ||
| Transfer agent fees | 88,656 | ||
| Trustees’ fees and expenses | 99 | ||
| Accrued expenses and other liabilities | 40,260 | ||
| Total liabilities | 566,342 | ||
| Net assets, at value | $ | 146,266,324 | |
| Net assets consist of: | |||
| Paid-in capital | $ | 140,047,928 | |
| Distributions in excess of net investment income | (1,371,032 | ) | |
| Net unrealized appreciation (depreciation) | 23,378,169 | ||
| Accumulated net realized gain (loss) | (15,788,741 | ) | |
| Net assets, at value | $ | 146,266,324 | |
| Class A: | |||
| Net assets, at value | $ | 93,735,569 | |
| Shares outstanding | 5,252,834 | ||
| Net asset value per sharea | $ | 17.84 | |
| Maximum offering price per share (net asset value per share ÷ 94.25%) | $ | 18.93 | |
| Class C: | |||
| Net assets, at value | $ | 12,285,886 | |
| Shares outstanding | 714,583 | ||
| Net asset value and maximum offering price per sharea | $ | 17.19 | |
| Class R6: | |||
| Net assets, at value | $ | 957,651 | |
| Shares outstanding | 53,772 | ||
| Net asset value and maximum offering price per share | $ | 17.81 | |
| Advisor Class: | |||
| Net assets, at value | $ | 39,287,218 | |
| Shares outstanding | 2,207,436 | ||
| Net asset value and maximum offering price per share | $ | 17.80 | |
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
20 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN TEMPLETON INTERNATIONAL TRUST
FINANCIAL STATEMENTS
Statement of Operations
for the six months ended April 30, 2015 (unaudited)
| Templeton Foreign Smaller Companies Fund | |||
| Investment income: | |||
| Dividends (net of foreign taxes of $138,070) | $ | 1,483,258 | |
| Interest | 242 | ||
| Total investment income | 1,483,500 | ||
| Expenses: | |||
| Management fees (Note 3a) | 685,987 | ||
| Distribution fees: (Note 3c) | |||
| Class A | 106,830 | ||
| Class C | 60,669 | ||
| Transfer agent fees: (Note 3e) | |||
| Class A | 174,042 | ||
| Class C | 23,733 | ||
| Class R6 | 82 | ||
| Advisor Class | 73,958 | ||
| Custodian fees (Note 4) | 11,828 | ||
| Reports to shareholders | 22,311 | ||
| Registration and filing fees | 33,341 | ||
| Professional fees | 29,174 | ||
| Trustees’ fees and expenses | 5,087 | ||
| Other | 11,434 | ||
| Total expenses | 1,238,476 | ||
| Expenses waived/paid by affiliates (Note 3f) | (38 | ) | |
| Net expenses | 1,238,438 | ||
| Net investment income | 245,062 | ||
| Realized and unrealized gains (losses): | |||
| Net realized gain (loss) from: | |||
| Investments (net of foreign taxes of $208,589) | (1,346,402 | ) | |
| Foreign currency transactions | 20,570 | ||
| Net realized gain (loss) | (1,325,832 | ) | |
| Net change in unrealized appreciation (depreciation) on: | |||
| Investments | 15,671,668 | ||
| Translation of other assets and liabilities denominated in foreign currencies | 6,488 | ||
| Change in deferred taxes on unrealized appreciation | 210,847 | ||
| Net change in unrealized appreciation (depreciation) | 15,889,003 | ||
| Net realized and unrealized gain (loss) | 14,563,171 | ||
| Net increase (decrease) in net assets resulting from operations | $ | 14,808,233 | |
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 21
| FRANKLIN TEMPLETON INTERNATIONAL TRUST | ||||||
| FINANCIAL STATEMENTS | ||||||
| Statements of Changes in Net Assets | ||||||
| Templeton Foreign Smaller Companies Fund | ||||||
| Six Months Ended | ||||||
| April 30, 2015 | Year Ended | |||||
| (unaudited) | October 31, 2014 | |||||
| Increase (decrease) in net assets: | ||||||
| Operations: | ||||||
| Net investment income | $ | 245,062 | $ | 536,703 | ||
| Net realized gain (loss) from investments and foreign currency transactions | (1,325,832 | ) | 5,265,487 | |||
| Net change in unrealized appreciation (depreciation) on investments, translation of other | ||||||
| assets and liabilities denominated in foreign currencies and deferred taxes | 15,889,003 | (19,106,809 | ) | |||
| Net increase (decrease) in net assets resulting from operations | 14,808,233 | (13,304,619 | ) | |||
| Distributions to shareholders from: | ||||||
| Net investment income: | ||||||
| Class A | (1,245,197 | ) | (1,901,066 | ) | ||
| Class C | (75,247 | ) | (135,379 | ) | ||
| Class R6 | (17,007 | ) | (100 | ) | ||
| Advisor Class | (657,536 | ) | (669,813 | ) | ||
| Total distributions to shareholders | (1,994,987 | ) | (2,706,358 | ) | ||
| Capital share transactions: (Note 2) | ||||||
| Class A | (8,541,780 | ) | (27,559,717 | ) | ||
| Class C | (1,907,776 | ) | (1,562,503 | ) | ||
| Class R6 | 40,606 | 909,831 | ||||
| Advisor Class | (4,254,786 | ) | 3,631,272 | |||
| Total capital share transactions | (14,663,736 | ) | (24,581,117 | ) | ||
| Net increase (decrease) in net assets | (1,850,490 | ) | (40,592,094 | ) | ||
| Net assets: | ||||||
| Beginning of period | 148,116,814 | 188,708,908 | ||||
| End of period | $ | 146,266,324 | $ | 148,116,814 | ||
| Undistributed net investment income (distributions in excess of net investment income) | ||||||
| included in net assets: | ||||||
| End of period | $ | (1,371,032 | ) | $ | 378,893 | |
22 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Notes to Financial Statements (unaudited)
Templeton Foreign Smaller Companies Fund
1. Organization and Significant Accounting Policies
Franklin Templeton International Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end management investment company, consisting of four separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Templeton Foreign Smaller Companies Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. The Fund offers four classes of shares: Class A, Class C, Class R6, and Advisor Class. Each class of shares differs by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees. The Fund was closed to new investors effective at the close of market December 10, 2013. Existing shareholders may add to the accounts.
The following summarizes the Fund’s significant accounting policies.
a. Financial Instrument Valuation
The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value per share at the close of the New York Stock Exchange (NYSE), generally at 4 p.m. Eastern time (NYSE close) on each day the NYSE is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of the NYSE close, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the NYSE close on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VLOC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VLOC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VLOC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.
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FRANKLIN TEMPLETON INTERNATIONAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Templeton Foreign Smaller Companies Fund (continued)
1. Organization and Significant Accounting
Policies (continued)
a. Financial Instrument Valuation (continued)
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before the daily NYSE close. In addition, trading in certain foreign markets may not take place on every NYSE business day. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VLOC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Income and Deferred Taxes
It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax
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FRANKLIN TEMPLETON INTERNATIONAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Templeton Foreign Smaller Companies Fund (continued)
regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date. As a result of several court cases, in certain countries across the European Union, the Fund has filed additional tax reclaims for previously withheld taxes on dividends earned in those countries. These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. At this time, uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these reclaims, and the potential timing of payment, and accordingly, no amounts are reflected in the financial statements.
The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of April 30, 2015, and for all open tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.
d. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the funds based on the ratio of net assets of each fund to the combined net assets of the Trust. Fund specific expenses are charged directly to the fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.
e. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
f. Guarantees and Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
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FRANKLIN TEMPLETON INTERNATIONAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Templeton Foreign Smaller Companies Fund (continued)
2. Shares of Beneficial Interest
At April 30, 2015, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:
| Six Months Ended | Year Ended | ||||||||||
| April 30, 2015 | October 31, 2014 | ||||||||||
| Shares | Amount | Shares | Amount | ||||||||
| Class A Shares: | |||||||||||
| Shares sold | 151,513 | $ | 2,486,240 | 656,199 | $ | 11,658,914 | |||||
| Shares issued in reinvestment of distributions | 74,023 | 1,162,901 | 103,180 | 1,796,360 | |||||||
| Shares redeemed | (742,548 | ) | (12,190,921 | ) | (2,308,078 | ) | (41,014,991 | ) | |||
| Net increase (decrease) | (517,012 | ) | $ | (8,541,780 | ) | (1,548,699 | ) | $ | (27,559,717 | ) | |
| Class C Shares: | |||||||||||
| Shares sold | 18,841 | $ | 297,055 | 118,115 | $ | 2,021,467 | |||||
| Shares issued in reinvestment of distributions | 4,774 | 72,416 | 7,685 | 129,192 | |||||||
| Shares redeemed | (142,455 | ) | (2,277,247 | ) | (218,270 | ) | (3,713,162 | ) | |||
| Net increase (decrease) | (118,840 | ) | $ | (1,907,776 | ) | (92,470 | ) | $ | (1,562,503 | ) | |
| Class R6 Shares: | |||||||||||
| Shares sold | 6,798 | $ | 109,717 | 60,634 | $ | 1,084,834 | |||||
| Shares issued in reinvestment of distributions | 1,081 | 16,905 | — | — | |||||||
| Shares redeemed | (5,209 | ) | (86,016 | ) | (9,834 | ) | (175,003 | ) | |||
| Net increase (decrease) | 2,670 | $ | 40,606 | 50,800 | $ | 909,831 | |||||
| Advisor Class Shares: | |||||||||||
| Shares sold | 294,108 | $ | 4,769,960 | 1,274,813 | $ | 22,772,036 | |||||
| Shares issued in reinvestment of distributions | 39,491 | 618,028 | 32,798 | 569,372 | |||||||
| Shares redeemed | (589,555 | ) | (9,642,774 | ) | (1,112,364 | ) | (19,710,136 | ) | |||
| Net increase (decrease) | (255,956 | ) | $ | (4,254,786 | ) | 195,247 | $ | 3,631,272 | |||
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Trust are also officers and/or directors of the following subsidiaries:
| Subsidiary | Affiliation |
| Franklin Templeton Investment Corp. (FTIC) | Investment manager |
| Templeton Investment Counsel, LLC (TIC) | Investment manager |
| Franklin Templeton Services, LLC (FT Services) | Administrative manager |
| Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
| Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
a. Management Fees
The Fund pays an investment management fee to FTIC based on the average daily net assets of the Fund as follows:
| Annualized Fee Rate | Net Assets | |
| 1.000 | % | Up to and including $100 million |
| 0.900 | % | Over $100 million, up to and including $250 million |
| 0.800 | % | Over $250 million, up to and including $500 million |
| 0.750 | % | In excess of $500 million |
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FRANKLIN TEMPLETON INTERNATIONAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Templeton Foreign Smaller Companies Fund (continued)
Under a subadvisory agreement, TIC, an affiliate of FTIC, provides subadvisory services to the Fund. The subadvisory fee is paid by FTIC based on the Fund’s average daily net assets, and is not an additional expense of the Fund.
b. Administrative Fees
Under an agreement with FTIC, FT Services provides administrative services to the Fund. The fee is paid by FTIC based on the Fund’s average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Distribution fees are not charged on shares held by affiliates. Under the Fund’s Class A reimbursement distribution plan, the Fund reimburses Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribution plan, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Fund’s Class C compensation distribution plan, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.
The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:
| Class A | 0.25 | % |
| Class C | 1.00 | % |
d. Sales Charges/Underwriting Agreements
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. These charges are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Fund of the following commission transactions related to the sales and redemptions of the Fund’s shares for the period:
| Sales charges retained net of commissions paid to unaffiliated | ||
| broker/dealers | $ | 2,566 |
| CDSC retained | $ | 110 |
e. Transfer Agent Fees
Each class of shares, except for Class R6, pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations and reimburses Investor Services for out of pocket expenses incurred, including shareholding servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.
For the period ended April 30, 2015, the Fund paid transfer agent fees of $271,815, of which $99,575 was retained by Investor Services.
f. Waiver and Expense Reimbursements
Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.01% until February 29, 2016.
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FRANKLIN TEMPLETON INTERNATIONAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Templeton Foreign Smaller Companies Fund (continued)
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended April 30, 2015, there were no credits earned.
5. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains. Capital loss carryforwards with no expiration, if any, must be fully utilized before those losses with expiration dates.
At October 31, 2014, the Fund had capital loss carryforwards of $13,038,009 expiring in 2017.
At April 30, 2015, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
| Cost of investments | $ | 124,819,224 | |
| Unrealized appreciation | $ | 32,833,583 | |
| Unrealized depreciation | (12,269,999 | ) | |
| Net unrealized appreciation (depreciation) | $ | 20,563,584 | |
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of passive foreign investment company shares and wash sales.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the period ended April 30, 2015, aggregated $51,645,159 and $70,852,164, respectively.
7. Concentration of Risk
Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities.
8. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 12, 2016. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended April 30, 2015, the Fund did not use the Global Credit Facility.
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FRANKLIN TEMPLETON INTERNATIONAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Templeton Foreign Smaller Companies Fund (continued)
9. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s financial instruments and are summarized in the following fair value hierarchy:
- Level 1 – quoted prices in active markets for identical financial instruments
- Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
- Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.
A summary of inputs used as of April 30, 2015, in valuing the Fund’s assets carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 | Total | |||||
| Assets: | ||||||||
| Investments in Securities: | ||||||||
| Closed End Funds | $ | 1,254,543 | $ | — | $ | — | $ | 1,254,543 |
| Equity Investments: | ||||||||
| Indonesia | — | — | 1,263,809 | 1,263,809 | ||||
| All Other Equity Investmentsa,b | 136,864,458 | — | —c | 136,864,458 | ||||
| Short Term Investments | — | 5,999,998 | — | 5,999,998 | ||||
| Total Investments in Securities | $ | 138,119,001 | $ | 5,999,998 | $ | 1,263,809 | $ | 145,382,808 |
aFor detailed categories, see the accompanying Statement of Investments.
bIncludes common and preferred stocks.
cIncludes securities determined to have no value at April 30, 2015.
A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the end of the period.
10. New Accounting Pronouncements
In June 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-11, Transfers and Servicing (Topic 860), Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. The ASU changes the accounting for certain repurchase agreements and expands disclosure requirements related to repurchase agreements, securities lending, repurchase-to-maturity and similar transactions. The ASU is effective for interim and annual reporting periods beginning after December 15, 2014. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
11. Subsequent Events
The Fund evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.
| Abbreviations | |
| Selected Portfolio | |
| FNMA | Federal National Mortgage Association |
| SDR | Swedish Depositary Receipt |
franklintempleton.com Semiannual Report | 29
FRANKLIN TEMPLETON INTERNATIONAL TRUST TEMPLETON FOREIGN SMALLER COMPANIES FUND
Shareholder Information
Board Review of Investment Management Agreement
At a meeting held April 14, 2015, the Board of Trustees (Board), including a majority of non-interested or independent Trustees, approved renewal of the investment management agreement for each of the Funds within the Trust, including Templeton Foreign Smaller Companies Fund (Fund(s)). In reaching this decision, the Board took into account information furnished throughout the year at regular Board meetings, as well as information prepared specifically in connection with the annual renewal review process. Information furnished and discussed throughout the year included investment performance reports and related financial information for each Fund, along with periodic reports on expenses, shareholder services, legal and compliance matters, pricing, brokerage commissions and execution and other services provided by the Investment Manager (Manager) and its affiliates, as well as marketing support payments made to financial intermediaries. Information furnished specifically in connection with the renewal process included a report for each Fund prepared by Lipper, Inc. (Lipper), an independent organization, as well as additional material, including a Fund profitability analysis prepared by management. The Lipper reports compared each Fund’s investment performance and expenses with those of other mutual funds deemed comparable to the Fund as selected by Lipper. The Fund profitability analysis report discussed the profitability to Franklin Templeton Investments (FTI) from its overall U.S. fund operations, as well as on an individual fund-by-fund basis. Additional material accompanying such profitability analysis included information on a fund-by-fund basis listing portfolio managers and other accounts they manage, as well as information on management fees charged by the Manager and its affiliates to U.S. mutual funds and other accounts, including management’s explanation of differences where relevant. Such material also included a memorandum prepared by management describing project initiatives and capital investments relating to the services provided to the Funds by the FTI organization, as well as a memorandum relating to economies of scale and an analysis concerning transfer agent fees charged by an affiliate of the Manager. The Board also noted that at the February meetings each year, it receives an annual report on all marketing support payments made by FTI to financial intermediaries.
In considering such materials, the independent Trustees received assistance and advice from and met separately with independent counsel. While the investment management agreements for all Funds were considered at the same Board meeting, the Board dealt with each Fund separately. In approving continuance of the investment management agreement for each Fund, the Board, including a majority of independent Trustees, determined that the existing management fee structure was fair and reasonable and that continuance of the investment management agreement was in the best interests of each Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s decision.
NATURE, EXTENT AND QUALITY OF SERVICE. The Board was satisfied with the nature and quality of the overall services provided by the Manager and its affiliates to the Fund and its shareholders, except as noted later with respect to investment performance. The Board’s opinion was based, in part, upon periodic reports furnished it showing that the investment policies and restrictions for the Fund were consistently complied with as well as other reports periodically furnished the Board covering matters such as the compliance of portfolio managers and other management personnel with the code of ethics adopted throughout the Franklin Templeton fund complex, the adherence to fair value pricing procedures established by the Board, and the accuracy of net asset value calculations. The Board also noted the extent of benefits provided Fund shareholders from being part of the Franklin Templeton family of funds, including the right to exchange investments between the same class of shares of different funds without a sales charge, the ability to reinvest Fund dividends into other funds and the right to combine holdings in other funds to obtain a reduced sales charge. Favorable consideration was given to management’s continual efforts and expenditures in establishing effective business continuity plans and developing strategies to address cybersecurity threats. Among other factors taken into account by the Board were the Manager’s best execution trading policies, including a favorable report by an independent portfolio trading analytical firm that also covered FOREX transactions. Consideration was also given to the experience of the Fund’s portfolio management team, the number of accounts managed and general method of compensation. In this latter respect, the Board noted that a primary factor in management’s determination of a portfolio manager’s bonus compensation was the relative investment performance of the funds he or she managed and that a portion of such bonus was required to be invested in a predesignated list of funds within such person’s fund management area so as to be aligned with the interests of shareholders. The Board also took into account the quality of transfer agent and shareholder services provided Fund shareholders by an affiliate of the Manager, noting the
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FRANKLIN TEMPLETON INTERNATIONAL TRUST
TEMPLETON FOREIGN SMALLER COMPANIES FUND
SHAREHOLDER INFORMATION
changes taking place in the nature of transfer agency services throughout the industry and regulatory initiatives in this area, and the continual enhancements to the Franklin Templeton website. Particular attention was given to management’s conservative approach and diligent risk management procedures, including continual monitoring of counterparty credit risk and attention given to derivatives and other complex instruments, including expanded collateralization requirements. The Board also took into account, among other things, management’s efforts in establishing a global credit facility for the benefit of the Fund and other accounts managed by FTI to provide a source of cash for temporary and emergency purposes or to meet unusual redemption requests as well as the strong financial position of the Manager’s parent company and its commitment to the mutual fund business as evidenced by its continued subsidization of money market funds.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment performance of the Fund in view of its importance to shareholders. While consideration was given to performance reports and discussions with portfolio managers at Board meetings throughout the year, particular attention in assessing performance was given to the Lipper reports furnished for the agreement renewal. The Lipper reports prepared for the Fund showed the investment performance of its Class A shares in comparison to a performance universe selected by Lipper. Comparative performance for the Fund was shown for the one-year period ended January 31, 2015. The performance universe for the Fund consisted of the Fund and all retail and institutional international small-/mid-cap core funds as selected by Lipper. Comparative performance within such universe was shown for the one-year period ended January 31, 2015, and the previous 10 years ended that date. The Lipper report showed the Fund’s total return for the one-year period to be in the lowest performing quintile of such performance universe, and on an annualized basis to be in the second-lowest performing quintile of such universe for the previous three-, five- and 10-year periods. The Board discussed with management the reasons for the one-year underper-formance of the Fund during which discussion management expressed its view that its securities holdings reflected its conservative approach to investing, which was out of favor in current market conditions, and stated its conviction that the value of such holdings would eventually be recognized. Management further advised the Board that it had assigned a new portfolio manager to the Fund. While the Board found the Fund’s comparative performance as set forth in the Lipper report to be unacceptable, it acknowledged the additional resources management had made available. The Board took into account management’s explanation of the factors that negatively impacted returns and noted that, with the exception of the one-year period, the Fund had achieved positive returns on an annualized basis over the past 10-year period. The Board further noted that the Fund is closed to new investors at this time.
COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the management fee and total expense ratio of the Fund compared with those of a group of other funds selected by Lipper as constituting its appropriate Lipper expense group. Lipper expense data is based upon information taken from each fund’s most recent annual report, which reflects historical asset levels that may be quite different from those currently existing, particularly in a period of market volatility. While recognizing such inherent limitation and the fact that expense ratios generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Lipper to be an appropriate measure of comparative expenses. In reviewing comparative costs, Lipper provides information on the Fund’s contractual investment management fee in comparison with the investment management fee that would have been charged by other funds within its Lipper expense group assuming they were similar in size to the Fund, as well as the actual total expense ratio of the Fund in comparison with those of its Lipper expense group. The Lipper contractual investment management fee analysis includes administrative charges as being part of the investment management fee, and actual total expenses, for comparative consistency, are shown by Lipper for Fund Class A shares. The Lipper report showed the contractual investment management fee rate of the Fund to be below the median of its Lipper expense group and its actual total expense ratio to be above but within 18 basis points of the expense group median. The Board found the contractual investment management fee rate and total expense ratio of the Fund as shown in the Lipper report to be acceptable.
MANAGEMENT PROFITABILITY. The Board also considered the level of profits realized by the Manager and its affiliates in connection with the operation of the Fund. In this respect, the Board reviewed the Fund profitability analysis that addresses the overall profitability of Franklin Templeton’s U.S. fund business, as well as its profits in providing management and other services to each of the individual funds during the 12-month period ended September 30, 2014, being the most recent fiscal year-end for Franklin Resources, Inc., the
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FRANKLIN TEMPLETON INTERNATIONAL TRUST TEMPLETON FOREIGN SMALLER COMPANIES FUND SHAREHOLDER INFORMATION
Board Review of Investment Management
Agreement (continued)
Manager’s parent. In reviewing the analysis, the Board recognized that allocation methodologies are inherently subjective and various allocation methodologies may be reasonable while producing different results. In this respect, the Board noted that while management continually makes refinements to its methodologies in response to organizational and product related changes, the overall approach as defined by the primary drivers and activity measurements has remained consistent with that used in the Fund’s profitability report presentations from prior years. Additionally, the Fund’s independent registered public accounting firm had been engaged by the Manager to periodically review the reasonableness of the allocation methodologies to be used solely by the Fund’s Board in reference to the profitability analysis. In reviewing and discussing such analysis, management discussed with the Board its belief that costs incurred in establishing the infrastructure necessary for the type of mutual fund operations conducted by the Manager and its affiliates may not be fully reflected in the expenses allocated to the Fund in determining its profitability, as well as the fact that the level of profits, to a certain extent, reflected operational cost savings and efficiencies initiated by management. The Board also took into account management’s expenditures in improving shareholder services provided the Fund, as well as the need to implement systems and meet additional regulatory and compliance requirements resulting from statutes such as the Sarbanes-Oxley and Dodd-Frank Acts and recent SEC and other regulatory requirements. In addition, the Board considered a third-party study comparing the profitability of the Manager’s parent on an overall basis to other publicly held managers broken down to show profitability from management operations exclusive of distribution expenses, as well as profitability including distribution expenses. The Board also considered the extent to which the Manager and its affiliates might derive ancillary benefits from fund operations, including revenues generated from transfer agent services, potential benefits resulting from personnel and systems enhancements necessitated by fund growth, as well as increased leverage with the service providers and counterparties. Based upon its consideration of all these factors, the Board determined that the level of profits realized by the Manager and its affiliates from providing services to the Fund was not excessive in view of the nature, quality and extent of services provided.
ECONOMIES OF SCALE. The Board also considered whether economies of scale are realized by the Manager as the Fund grows larger and the extent to which this is reflected in the level of management fees charged. While recognizing that any precise determination is inherently subjective, the Board noted that based upon the Fund profitability analysis, it appears that as some funds get larger, at some point economies of scale do result in the Manager realizing a larger profit margin on management services provided such a fund. The Board also noted that economies of scale are shared with the Fund and its shareholders through management fee breakpoints so that as a fund grows in size, its effective management fee rate declines. The asset level of the Fund was approximately $142 million on December 31, 2014, and the Board believed the size of the Fund afforded no meaningful economies of scale.
Proxy Voting Policies and Procedures
The Fund’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Fund uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Fund’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Fund’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.
Quarterly Statement of Investments
The Fund files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.
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Franklin Templeton Investments
Gain From Our Perspective®
At Franklin Templeton Investments, we’re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we’re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world’s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe.
Focus on Investment Excellence
At the core of our firm, you’ll find multiple independent investment teams—each with a focused area of expertise—from traditional to alternative strategies and multi-asset solutions. And because our portfolio groups operate autonomously, their strategies can be combined to deliver true style and asset class diversification.
All of our investment teams share a common commitment to excellence grounded in rigorous, fundamental research and robust, disciplined risk management. Decade after decade, our consistent, research-driven processes have helped Franklin Templeton earn an impressive record of strong, long-term results.
Global Perspective Shaped by Local Expertise
In today’s complex and interconnected world, smart investing demands a global perspective. Franklin Templeton pioneered international investing over 60 years ago, and our expertise in emerging markets spans more than a quarter of a century. Today, our investment professionals are on the ground across the globe, spotting investment ideas and potential risks firsthand. These locally based teams bring in-depth understanding of local companies, economies and cultural nuances, and share their best thinking across our global research network.
Strength and Experience
Franklin Templeton is a global leader in asset management serving clients in over 150 countries.1 We run our business with the same prudence we apply to asset management, staying focused on delivering relevant investment solutions, strong long-term results and reliable, personal service. This approach, focused on putting clients first, has helped us to become one of the most trusted names in financial services.
1. As of 12/31/14. Clients are represented by the total number of shareholder accounts.
Not FDIC Insured | May Lose Value | No Bank Guarantee
| Contents | |
| Semiannual Report | |
| Franklin India Growth Fund | 3 |
| Performance Summary | 6 |
| Your Fund’s Expenses | 9 |
| Financial Highlights and | |
| Statement of Investments | 11 |
| Financial Statements | 16 |
| Notes to Financial Statements | 19 |
| FT (Mauritius) Offshore Investments | |
| Limited | 25 |
| Shareholder Information | 37 |
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Semiannual Report
Franklin India Growth Fund
We are pleased to bring you Franklin India Growth Fund’s semiannual report for the period ended April 30, 2015.
Your Fund’s Goal and Main Investments
The Fund seeks long-term capital appreciation by investing under normal market conditions at least 80% of its net assets in securities of “Indian companies,” which are defined as those organized under the laws of, with a principal office in, or for which the principal trading market for their securities is in India, that derive 50% or more of total revenue or profit from goods or services produced or sales made in India, or that have 50% or more of their assets in India.1
Performance Overview
The Fund’s Class A shares delivered a +1.46% cumulative total return for the six months under review. In comparison, the MSCI India Index had a -5.88% total return.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 6.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Economic and Market Overview
Despite reaching all-time highs during the period, Indian stock markets ended the six months under review down overall. Early in the reporting period, improvement in some broad economic indicators, a substantial drop in crude oil prices, surprise rate cuts by the Reserve Bank of India (RBI) and copious foreign capital inflows contributed to the upward stock price trend. However, concerns about earnings downgrades, uncertainties on taxation issues related to foreign investors and forecasts of a subpar monsoon season toward the end of the reporting period weighed on equities.
Government officials released a new gross domestic product (GDP) data series based on market prices, which suggested higher economic growth in recent years, primarily due to a more recent base year and much wider coverage. The improvement was largely driven by efficiency gains in manufacturing not captured by the old data series. Nominal GDP, however, remained unchanged.
1. The Fund currently invests indirectly in Indian companies through FT (Mauritius) Offshore Investments Limited, a wholly owned, collective investment vehicle
registered in the Republic of Mauritius.
2. Source: Morningstar.
The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 15.
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FRANKLIN INDIA GROWTH FUND
Industrial production recorded growth for the 11-month period ended February 2015, after being flat in the same period a year earlier, reflecting some improvement in investment activity. The current account deficit for the third quarter of India’s fiscal year 2015 was lower than in the second quarter. The decline was attributable mainly to improvement in factors such as net earnings in the travel and software services sectors, and lower net outflows in the form of interest and dividend payments. The trade deficit widened somewhat in fiscal year 2015, mainly due to a decline in exports.
What is a current account?
A current account is that part of the balance of payments where all of one country’s international transactions in goods and services are recorded.
What is balance of payments?
Balance of payments is a record of all of a country’s exports and imports of goods and services, borrowing and lending with the rest of the world during a particular time period. It helps a country evaluate its competitive strengths and weaknesses and forecast the strength of its currency.
The RBI implemented two rate cuts of 0.25% each during the period, one in January and one following the announcement of the annual Union Budget in late February. Continued moderation in inflation drove the January rate cut, while the Union Budget and agreement on a monetary policy framework appeared to be catalysts for the second rate cut. Inflation trends were benign with retail inflation at a 4.9% annualized rate in April 2015 while wholesale inflation dropped further to an annualized -2.7%.3
Investment Strategy
We are research-driven, fundamental investors pursuing a growth strategy. As bottom-up investors focusing primarily on individual securities, we seek to invest in companies whose current market price, in our opinion, does not reflect future growth prospects. We look for companies that have identifiable drivers of future earnings growth and that present, in our opinion, the best trade-off between potential earnings growth, business and financial risk, and valuation. Our philosophy includes favoring companies that have competitive advantages through leading-edge products, intellectual property, product positioning, unique market niches, brand identity, solid management teams, strong balance sheets, above-average or rising margins, and strong returns on capital invested in the business. In choosing equity investments, we also consider such factors as the company’s financial strength, management’s expertise, the company’s growth potential within the industry, and the industry’s growth potential.
Top 10 Equity Holdings1
4/30/15
| Company | % of Total | |
| Sector/Industry | Net Assets | |
| Sun Pharmaceutical Industries Ltd. | 5.0 | % |
| Pharmaceuticals | ||
| Infosys Ltd. | 5.0 | % |
| IT Services | ||
| HDFC Bank Ltd. | 4.7 | % |
| Banks | ||
| Tata Motors Ltd., ord. & A | 4.3 | % |
| Automobiles | ||
| HCL Technologies Ltd. | 3.9 | % |
| IT Services | ||
| Yes Bank Ltd. | 3.7 | % |
| Banks | ||
| Tata Consultancy Services Ltd. | 3.4 | % |
| IT Services | ||
| Larsen & Toubro Ltd. | 3.4 | % |
| Construction & Engineering | ||
| ICICI Bank Ltd. | 3.4 | % |
| Banks | ||
| Dr. Reddy’s Laboratories Ltd. | 2.9 | % |
| Pharmaceuticals |
Manager’s Discussion
We sought to identify companies that we thought were favorably positioned to gain from India’s growth over the medium to long term. In particular, we believed India’s demographics, increasing levels of wealth and higher infrastructure spending should be key structural drivers of economic growth, and we sought to position our portfolio with companies that we believed could derive maximum benefit from these opportunities.
During the period under review, the financials and health care sectors were among the top contributors to absolute performance.4 Among individual holdings, Yes Bank, Torrent Pharmaceuticals and engineering and electronics company Bosch were key contributors. Yes Bank shares performed well as the bank reported robust results with strong growth in core operations and profitability in the last few quarters. Torrent Pharmaceuticals rose in value as investor sentiment toward
3. Source: Central Statistics Office, India.
4. The financials sector comprises banks, capital markets, consumer finance, diversified financial services, and thrifts and mortgage finance in the SOI. The health care
sector comprises pharmaceuticals in the SOI.
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FRANKLIN INDIA GROWTH FUND
pharmaceuticals stocks improved. The company recorded growth in chronic therapies and faster growth in its domestic business following the earlier acquisition of Elder Pharmaceuticals’ branded formulations operations. Bosch fared well as a fall in inflation and two surprise rate cuts by the RBI boded well for consumer discretionary stocks. Additionally, Bosch’s addition to the MSCI India Index and the MSCI Emerging Markets Index in February also contributed to its gains.
In contrast, the consumer discretionary, information technology (IT) and telecommunication services sectors hindered absolute performance.5 Some key individual detractors were IT services firm Infosys, automaker Mahindra & Mahindra and housing finance provider Housing Development Finance. Concerns over currency fluctuations, lower-than-expected fiscal fourth-quarter 2015 results and a lack of decisive guidance for fiscal year 2016 weighed on Infosys shares. Unseasonal rains and hailstorms adversely affected market sentiment and hampered Mahindra & Mahindra’s performance. Housing Development Finance initially benefited from RBI rate cuts as investors anticipated the company’s cost of funds might fall faster than lending rates, but lower-than-expected results for fiscal fourth quarter 2015 hurt the share price. Despite the recent corrections, we believed the long-term structural growth drivers for each of these companies remained intact and we therefore continued to hold these positions.
Thank you for your continued participation in Franklin India Growth Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of April 30, 2015, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
CFA® is a trademark owned by CFA Institute.
5. The consumer discretionary sector comprises auto components; automobiles; hotels, restaurants and leisure; media; and textiles, apparel and luxury goods in the SOI.
The IT sector comprises IT services in the SOI. The telecommunication services sector comprises wireless telecommunication services in the SOI.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN INDIA GROWTH FUND
Performance Summary as of April 30, 2015
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities. The performance table does not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.
| Net Asset Value | |||||
| Share Class (Symbol) | 4/30/15 | 10/31/14 | Change | ||
| A (FINGX) | $ | 12.47 | $ | 12.37 | +$0.10 |
| C (FINDX) | $ | 11.91 | $ | 11.81 | +$0.10 |
| R6 (N/A) | $ | 12.72 | $ | 12.63 | +$0.09 |
| Advisor (FIGZX) | $ | 12.70 | $ | 12.60 | +$0.10 |
| Dividend | |||||
| Share Class | Income | ||||
| A | $ | 0.0789 | |||
| C | $ | 0.0353 | |||
| R6 | $ | 0.1099 | |||
| Advisor | $ | 0.0959 | |||
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PERFORMANCE SUMMARY
Performance as of 4/30/151
Cumulative total return excludes sales charges. Average annual total returns and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R6/Advisor Class: no sales charges.
| Value of | Average Annual | |||||||||||
| Total Annual Operating Expenses6 | ||||||||||||
| Cumulative | Average Annual | $ | 10,000 | Total Return | ||||||||
| Share Class | Total Return2 | Total Return3 | Investment4 | (3/31/15 | )5 | (with waiver) | (without waiver) | |||||
| A | 1.65 | % | 2.25 | % | ||||||||
| 6-Month | +1.46 | % | -4.34 | % | $ | 9,566 | ||||||
| 1-Year | +31.56 | % | +24.02 | % | $ | 12,402 | +31.42 | % | ||||
| 5-Year | +32.28 | % | +4.52 | % | $ | 12,472 | +6.21 | % | ||||
| Since Inception (1/31/08) | +31.83 | % | +3.04 | % | $ | 12,425 | +3.94 | % | ||||
| C | 2.35 | % | 2.95 | % | ||||||||
| 6-Month | +1.15 | % | +0.15 | % | $ | 10,015 | ||||||
| 1-Year | +30.70 | % | +29.70 | % | $ | 12,970 | +37.37 | % | ||||
| 5-Year | +27.69 | % | +5.01 | % | $ | 12,769 | +6.70 | % | ||||
| Since Inception (1/31/08) | +25.26 | % | +3.16 | % | $ | 12,526 | +4.07 | % | ||||
| R6 | 1.20 | % | 1.80 | % | ||||||||
| 6-Month | +1.61 | % | +1.61 | % | $ | 10,161 | ||||||
| 1-Year | +32.03 | % | +32.03 | % | $ | 13,203 | +39.83 | % | ||||
| Since Inception (5/1/13) | +37.25 | % | +17.18 | % | $ | 13,725 | +21.70 | % | ||||
| Advisor | 1.35 | % | 1.95 | % | ||||||||
| 6-Month | +1.66 | % | +1.66 | % | $ | 10,166 | ||||||
| 1-Year | +31.94 | % | +31.94 | % | $ | 13,194 | +39.76 | % | ||||
| 5-Year | +34.30 | % | +6.07 | % | $ | 13,430 | +7.78 | % | ||||
| Since Inception (1/31/08) | +34.60 | % | +4.19 | % | $ | 13,460 | +5.10 | % | ||||
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
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FRANKLIN INDIA GROWTH FUND
PERFORMANCE SUMMARY
All investments involve risks, including possible loss of principal. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in developing markets involve heightened risks related to the same factors, in addition to risks associated with these companies’ smaller size, lesser liquidity and the potential lack of established legal, political, business and social frameworks to support securities markets in the countries in which they operate. The Fund may also experience greater volatility than a fund that is more broadly diversified geographically.
The Fund is designed for the aggressive portion of a well-diversified portfolio. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
| Class C: | These shares have higher annual fees and expenses than Class A shares. |
| Class R6: | Shares are available to certain eligible investors as described in the prospectus. |
| Advisor Class: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has an expense reduction contractually guaranteed through at least 2/29/16. The Fund has a fee waiver associated with any investments in a Franklin
Templeton money fund, contractually guaranteed through at least its current fiscal year-end. Class R6 has a fee waiver contractually guaranteed through at least the
Fund’s current fiscal year-end. Fund investment results reflect the expense reduction and waivers, to the extent applicable; without these reductions, the results would
have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Six-month return has not been annualized.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.
6. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
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Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
| 1. | Divide your account value by $1,000. |
| If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
| 2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
| If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
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| FRANKLIN INDIA GROWTH FUND | ||||||
| YOUR FUND’S EXPENSES | ||||||
| Beginning Account | Ending Account | Expenses Paid During | ||||
| Share Class | Value 11/1/14 | Value 4/30/15 | Period* 11/1/14–4/30/15 | |||
| A | ||||||
| Actual | $ | 1,000 | $ | 1,014.60 | $ | 8.19 |
| Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,016.66 | $ | 8.20 |
| C | ||||||
| Actual | $ | 1,000 | $ | 1,011.50 | $ | 11.67 |
| Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,013.19 | $ | 11.68 |
| R6 | ||||||
| Actual | $ | 1,000 | $ | 1,016.10 | $ | 6.10 |
| Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,018.74 | $ | 6.11 |
| Advisor | ||||||
| Actual | $ | 1,000 | $ | 1,016.60 | $ | 6.70 |
| Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,018.15 | $ | 6.71 |
*Expenses are calculated using the most recent six-month expense ratio, net of expense waivers, annualized for each class (A: 1.64%;
C: 2.34%; R6: 1.22%; and Advisor: 1.34%), multiplied by the average account value over the period, multiplied by 181/365 to reflect the
one-half year period.
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| FRANKLIN TEMPLETON INTERNATIONAL TRUST | ||||||||||||||||||
| Financial Highlights | ||||||||||||||||||
| Franklin India Growth Fund | ||||||||||||||||||
| Six Months Ended | ||||||||||||||||||
| April 30, 2015 | Year Ended October 31, | |||||||||||||||||
| (unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
| Class A | ||||||||||||||||||
| Per share operating performancea | ||||||||||||||||||
| (for a share outstanding throughout the period) | ||||||||||||||||||
| Net asset value, beginning of period | $ | 12.37 | $ | 8.55 | $ | 8.73 | $ | 9.45 | $ | 11.34 | $ | 8.24 | ||||||
| Income from investment operationsb: | ||||||||||||||||||
| Net investment income (loss)c | (0.09 | ) | 0.02 | d | (0.01 | ) | (0.04 | ) | (0.06 | ) | (0.03 | ) | ||||||
| Net realized and unrealized gains (losses) | 0.27 | 3.80 | (0.17 | ) | (0.55 | ) | (1.56 | ) | 3.19 | |||||||||
| Total from investment operations | 0.18 | 3.82 | (0.18 | ) | (0.59 | ) | (1.62 | ) | 3.16 | |||||||||
| Less distributions from: | ||||||||||||||||||
| Net investment income | (0.08 | ) | — | — | — | — | (0.04 | ) | ||||||||||
| Net realized gains | — | — | — | (0.13 | ) | (0.27 | ) | (0.02 | ) | |||||||||
| Total distributions | (0.08 | ) | — | — | (0.13 | ) | (0.27 | ) | (0.06 | ) | ||||||||
| Net asset value, end of period | $ | 12.47 | $ | 12.37 | $ | 8.55 | $ | 8.73 | $ | 9.45 | $ | 11.34 | ||||||
| Total returne | 1.46 | % | 44.68 | % | (2.06 | )% | (6.02 | )% | (14.53 | )% | 38.54 | % | ||||||
| Ratios to average net assetsa,f | ||||||||||||||||||
| Expenses before waiver and payments by | ||||||||||||||||||
| affiliates | 2.00 | % | 2.25 | % | 2.26 | % | 2.21 | % | 2.25 | % | 2.27 | % | ||||||
| Expenses net of waiver and payments by | ||||||||||||||||||
| affiliates | 1.64 | % | 1.65 | % | 1.68 | % | 1.68 | % | 1.70 | % | 1.70 | % | ||||||
| Net investment income (loss) | (1.47 | )% | 0.22 | %d | (0.07 | )% | (0.43 | )% | (0.62 | )% | (0.31 | )% | ||||||
| Supplemental data | ||||||||||||||||||
| Net assets, end of period (000’s) | $ | 78,720 | $ | 53,230 | $ | 25,025 | $ | 31,555 | $ | 38,079 | $ | 37,392 | ||||||
| Portfolio turnover rateg | 22.20 | % | 35.48 | % | 16.95 | % | 41.30 | % | 39.07 | % | 83.21 | % | ||||||
aThe per share amounts and ratios include income and expenses of the Portfolio.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dNet investment income per share includes approximately $0.02 per share received in the form of special dividends. Excluding these amounts, the ratio of net investment
income to average net assets would have been 0.04%.
eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
fRatios are annualized for periods less than one year.
gIncludes the Portfolio’s rate of turnover.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 11
FRANKLIN TEMPLETON INTERNATIONAL TRUST
FINANCIAL HIGHLIGHTS
| Franklin India Growth Fund (continued) | ||||||||||||||||||
| Six Months Ended | ||||||||||||||||||
| April 30, 2015 | Year Ended October 31, | |||||||||||||||||
| (unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
| Class C | ||||||||||||||||||
| Per share operating performancea | ||||||||||||||||||
| (for a share outstanding throughout the period) | ||||||||||||||||||
| Net asset value, beginning of period | $ | 11.81 | $ | 8.22 | $ | 8.45 | $ | 9.22 | $ | 11.15 | $ | 8.14 | ||||||
| Income from investment operationsb: | ||||||||||||||||||
| Net investment income (loss)c | (0.13 | ) | (0.05 | )d | (0.07 | ) | (0.09 | ) | (0.13 | ) | (0.09 | ) | ||||||
| Net realized and unrealized gains (losses) | 0.27 | 3.64 | (0.16 | ) | (0.55 | ) | (1.53 | ) | 3.14 | |||||||||
| Total from investment operations | 0.14 | 3.59 | (0.23 | ) | (0.64 | ) | (1.66 | ) | 3.05 | |||||||||
| Less distributions from: | ||||||||||||||||||
| Net investment income | (0.04 | ) | — | — | — | — | (0.02 | ) | ||||||||||
| Net realized gains | — | — | — | (0.13 | ) | (0.27 | ) | (0.02 | ) | |||||||||
| Total distributions | (0.04 | ) | — | — | (0.13 | ) | (0.27 | ) | (0.04 | ) | ||||||||
| Net asset value, end of period | $ | 11.91 | $ | 11.81 | $ | 8.22 | $ | 8.45 | $ | 9.22 | $ | 11.15 | ||||||
| Total returne | 1.15 | % | 43.67 | % | (2.72 | )% | (6.71 | )% | (15.06 | )% | 37.53 | % | ||||||
| Ratios to average net assetsa,f | ||||||||||||||||||
| Expenses before waiver and payments by | ||||||||||||||||||
| affiliates | 2.70 | % | 2.95 | % | 2.98 | % | 2.93 | % | 2.95 | % | 2.97 | % | ||||||
| Expenses net of waiver and payments by | ||||||||||||||||||
| affiliates | 2.34 | % | 2.35 | % | 2.40 | % | 2.40 | % | 2.40 | % | 2.40 | % | ||||||
| Net investment income (loss) | (2.17 | )% | (0.48 | )%d | (0.79 | )% | (1.15 | )% | (1.32 | )% | (1.01 | )% | ||||||
| Supplemental data | ||||||||||||||||||
| Net assets, end of period (000’s) | $ | 19,273 | $ | 11,655 | $ | 6,078 | $ | 9,201 | $ | 11,192 | $ | 10,878 | ||||||
| Portfolio turnover rateg | 22.20 | % | 35.48 | % | 16.95 | % | 41.30 | % | 39.07 | % | 83.21 | % | ||||||
aThe per share amounts and ratios include income and expenses of the Portfolio.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dNet investment income (loss) per share includes approximately $0.02 per share received in the form of special dividends. Excluding these amounts, the ratio of net
investment income to average net assets would have been (0.66)%.
eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
fRatios are annualized for periods less than one year.
gIncludes the Portfolio’s rate of turnover.
12 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
| FRANKLIN TEMPLETON INTERNATIONAL TRUST | |||||||||
| FINANCIAL HIGHLIGHTS | |||||||||
| Franklin India Growth Fund (continued) | |||||||||
| Six Months Ended | Year Ended | ||||||||
| April 30, 2015 | October 31, | ||||||||
| (unaudited) | 2014 | 2013 | a | ||||||
| Class R6 | |||||||||
| Per share operating performanceb | |||||||||
| (for a share outstanding throughout the period) | |||||||||
| Net asset value, beginning of period | $ | 12.63 | $ | 8.68 | $ | 9.35 | |||
| Income from investment operationsc: | |||||||||
| Net investment income (loss)d | (0.07 | ) | 0.07 | e | 0.02 | ||||
| Net realized and unrealized gains (losses) | 0.27 | 3.88 | (0.69 | ) | |||||
| Total from investment operations | 0.20 | 3.95 | (0.67 | ) | |||||
| Less distributions from net investment income | (0.11 | ) | — | — | |||||
| Net asset value, end of period | $ | 12.72 | $ | 12.63 | $ | 8.68 | |||
| Total returnf | 1.61 | % | 45.51 | % | (7.17 | )% | |||
| Ratios to average net assetsb,g | |||||||||
| Expenses before waiver and payments by affiliates | 1.58 | % | 1.80 | % | 1.78 | % | |||
| Expenses net of waiver and payments by affiliates | 1.22 | % | 1.20 | % | 1.20 | % | |||
| Net investment income (loss) | (1.05 | )% | 0.67 | %e | 0.41 | % | |||
| Supplemental data | |||||||||
| Net assets, end of period (000’s) | $ | 923 | $ | 740 | $ | 459 | |||
| Portfolio turnover rateh | 22.20 | % | 35.48 | % | 16.95 | % | |||
aFor the period May 1, 2013 (effective date) to October 31, 2013.
bThe per share amounts and ratios include income and expenses of the Portfolio.
cThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
dBased on average daily shares outstanding.
eNet investment income per share includes approximately $0.02 per share received in the form of special dividends. Excluding these amounts, the ratio of net investment
income to average net assets would have been 0.49%.
fTotal return is not annualized for periods less than one year.
gRatios are annualized for periods less than one year.
hIncludes the Portfolio’s rate of turnover.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 13
FRANKLIN TEMPLETON INTERNATIONAL TRUST
FINANCIAL HIGHLIGHTS
| Franklin India Growth Fund (continued) | ||||||||||||||||||
| Six Months Ended | ||||||||||||||||||
| April 30, 2015 | Year Ended October 31, | |||||||||||||||||
| (unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
| Advisor Class | ||||||||||||||||||
| Per share operating performancea | ||||||||||||||||||
| (for a share outstanding throughout the period) | ||||||||||||||||||
| Net asset value, beginning of period | $ | 12.60 | $ | 8.68 | $ | 8.83 | $ | 9.54 | $ | 11.41 | $ | 8.28 | ||||||
| Income from investment operationsb: | ||||||||||||||||||
| Net investment income (loss)c | (0.08 | ) | 0.05 | d | 0.02 | (0.01 | ) | (0.03 | ) | (—)e | ||||||||
| Net realized and unrealized gains (losses) | 0.28 | 3.87 | (0.17 | ) | (0.57 | ) | (1.57 | ) | 3.20 | |||||||||
| Total from investment operations | 0.20 | 3.92 | (0.15 | ) | (0.58 | ) | (1.60 | ) | 3.20 | |||||||||
| Less distributions from: | ||||||||||||||||||
| Net investment income | (0.10 | ) | — | — | — | — | (0.05 | ) | ||||||||||
| Net realized gains | — | — | — | (0.13 | ) | (0.27 | ) | (0.02 | ) | |||||||||
| Total distributions | (0.10 | ) | — | — | (0.13 | ) | (0.27 | ) | (0.07 | ) | ||||||||
| Net asset value, end of period | $ | 12.70 | $ | 12.60 | $ | 8.68 | $ | 8.83 | $ | 9.54 | $ | 11.41 | ||||||
| Total returnf | 1.66 | % | 45.16 | % | (1.70 | )% | (5.75 | )% | (14.26 | )% | 38.91 | % | ||||||
| Ratios to average net assetsa,g | ||||||||||||||||||
| Expenses before waiver and payments by | ||||||||||||||||||
| affiliates | 1.70 | % | 1.95 | % | 1.98 | % | 1.93 | % | 1.95 | % | 1.97 | % | ||||||
| Expenses net of waiver and payments | ||||||||||||||||||
| by affiliates | 1.34 | % | 1.35 | % | 1.40 | % | 1.40 | % | 1.40 | % | 1.40 | % | ||||||
| Net investment income (loss) | (1.17 | )% | 0.52 | %d | 0.21 | % | (0.15 | )% | (0.32 | )% | (0.01 | )% | ||||||
| Supplemental data | ||||||||||||||||||
| Net assets, end of period (000’s) | $ | 38,090 | $ | 41,740 | $ | 28,340 | $ | 30,642 | $ | 42,915 | $ | 40,493 | ||||||
| Portfolio turnover rateh | 22.20 | % | 35.48 | % | 16.95 | % | 41.30 | % | 39.07 | % | 83.21 | % | ||||||
aThe per share amounts and ratios include income and expenses of the Portfolio.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dNet investment income per share includes approximately $0.02 per share received in the form of special dividends. Excluding these amounts, the ratio of net investment
income to average net assets would have been 0.34%.
eAmount rounds to less than $0.01 per share.
fTotal return is not annualized for periods less than one year.
gRatios are annualized for periods less than one year.
hIncludes the Portfolio’s rate of turnover.
14 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN TEMPLETON INTERNATIONAL TRUST
| Statement of Investments, April 30, 2015 (unaudited) | ||||
| Franklin India Growth Fund | ||||
| Shares | Value | |||
| Common Stocks (Cost $1,505,544) 1.7% | ||||
| IT Services 1.7% | ||||
| aCognizant Technology Solutions Corp., A (United States) | 40,000 | $ | 2,341,600 | |
| Mutual Funds (Cost $100,076,945) 98.4% | ||||
| Diversified Financial Services 98.4% | ||||
| aFT (Mauritius) Offshore Investments Ltd. (India) | 9,846,709 | 134,824,183 | ||
| Total Investments (Cost $101,582,489) 100.1% | 137,165,783 | |||
| Other Assets, less Liabilities (0.1)% | (159,456 | ) | ||
| Net Assets 100.0% | $ | 137,006,327 |
aNon-income producing.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 15
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Financial Statements
Statement of Assets and Liabilities
April 30, 2015 (unaudited)
| Franklin India Growth Fund | |||
| Assets: | |||
| Investments in securities: | |||
| Cost | $ | 1,505,544 | |
| Value | $ | 2,341,600 | |
| Investment in FT(Mauritius) Offshore Investments Limited (Note 1) | 134,824,183 | ||
| Total value of investments | $ | 137,165,783 | |
| Receivables: | |||
| Investment securities sold | 458,681 | ||
| Capital shares sold | 387,967 | ||
| Affiliates | 9,326 | ||
| Other assets | 77 | ||
| Total assets | 138,021,834 | ||
| Liabilities: | |||
| Payables: | |||
| Capital shares redeemed | 540,672 | ||
| Distribution fees | 37,205 | ||
| Transfer agent fees | 8,321 | ||
| Funds advanced by custodian | 408,681 | ||
| Accrued expenses and other liabilities | 20,628 | ||
| Total liabilities | 1,015,507 | ||
| Net assets, at value | $ | 137,006,327 | |
| Net assets consist of: | |||
| Paid-in capital | $ | 115,938,122 | |
| Distributions in excess of net investment income | (1,588,683 | ) | |
| Net unrealized appreciation (depreciation) | 29,738,032 | ||
| Accumulated net realized gain (loss) | (7,081,144 | ) | |
| Net assets, at value | $ | 137,006,327 | |
| Class A: | |||
| Net assets, at value | $ | 78,719,806 | |
| Shares outstanding | 6,313,195 | ||
| Net asset value per sharea | $ | 12.47 | |
| Maximum offering price per share (net asset value per share ÷ 94.25%) | $ | 13.23 | |
| Class C: | |||
| Net assets, at value | $ | 19,272,898 | |
| Shares outstanding | 1,618,860 | ||
| Net asset value and maximum offering price per sharea | $ | 11.91 | |
| Class R6: | |||
| Net assets, at value | $ | 923,329 | |
| Shares outstanding | 72,573 | ||
| Net asset value and maximum offering price per share | $ | 12.72 | |
| Advisor Class: | |||
| Net assets, at value | $ | 38,090,294 | |
| Shares outstanding | 2,999,136 | ||
| Net asset value and maximum offering price per share | $ | 12.70 | |
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
16 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN TEMPLETON INTERNATIONAL TRUST
FINANCIAL STATEMENTS
Statement of Operations
for the six months ended April 30, 2015 (unaudited)
| Franklin India Growth Fund | |||
| Net investment income allocated from FT (Mauritius) Offshore Investments Limited: | |||
| Dividends | $ | 117,921 | |
| Expenses | (711,039 | ) | |
| Net investment income allocated from FT (Mauritius) Offshore Investments Limited | (593,118 | ) | |
| Expenses: | |||
| Management fees (Note 3a) | 253,194 | ||
| Distribution fees: (Note 3c) | |||
| Class A | 104,525 | ||
| Class C | 80,493 | ||
| Transfer agent fees: (Note 3e) | |||
| Class A | 47,402 | ||
| Class C | 10,954 | ||
| Class R6 | 78 | ||
| Advisor Class | 31,863 | ||
| Custodian fees (Note 4) | 799 | ||
| Reports to shareholders | 14,050 | ||
| Registration and filing fees | 26,877 | ||
| Professional fees | 36,358 | ||
| Trustees’ fees and expenses | 1,912 | ||
| Other | 1,670 | ||
| Total expenses | 610,175 | ||
| Expenses waived/paid by affiliates (Note 3f) | (240,603 | ) | |
| Net expenses | 369,572 | ||
| Net investment income (loss) | (962,690 | ) | |
| Realized and unrealized gains (losses) on investments allocated from FT (Mauritius) Offshore Investments Limited: | |||
| Net realized gain (loss) from: | |||
| Investments | 3,235,798 | ||
| Foreign currency transactions | (306,925 | ) | |
| Net realized gain (loss) | 2,928,873 | ||
| Net change in unrealized appreciation (depreciation) on: | |||
| Investmentsa | (2,156,573 | ) | |
| Translation of assets and liabilities denominated in foreign currencies | (12,436 | ) | |
| Net change in unrealized appreciation (depreciation) | (2,169,009 | ) | |
| Net realized and unrealized gain (loss) | 759,864 | ||
| Net increase (decrease) in net assets resulting from operations | $ | (202,826 | ) |
aIncludes $387,600 of change in unrealized appreciation on other investments held by Franklin India Growth Fund.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 17
| FRANKLIN TEMPLETON INTERNATIONAL TRUST | |||||
| FINANCIAL STATEMENTS | |||||
| Statements of Changes in Net Assets | |||||
| Franklin India Growth Fund | |||||
| Six Months Ended | |||||
| April 30, 2015 | Year Ended | ||||
| (unaudited) | October 31, 2014 | ||||
| Increase (decrease) in net assets: | |||||
| Operations: | |||||
| Net investment income (loss) | $ | (962,690 | ) | $ | 212,696 |
| Net realized gain (loss) from investments and foreign currency transactions | 2,928,873 | 810,661 | |||
| Net change in unrealized appreciation (depreciation) on investments and translation of | |||||
| other assets and liabilities denominated in foreign currencies | (2,169,009 | ) | 26,577,897 | ||
| Net increase (decrease) in net assets resulting from operations | (202,826 | ) | 27,601,254 | ||
| Distributions to shareholders from: | |||||
| Net investment income: | |||||
| Class A | (377,153 | ) | — | ||
| Class C | (39,821 | ) | — | ||
| Class R6 | (8,415 | ) | — | ||
| Advisor Class | (360,434 | ) | — | ||
| Total distributions to shareholders | (785,823 | ) | — | ||
| Capital share transactions: (Note 2) | |||||
| Class A | 26,576,505 | 16,016,138 | |||
| Class C | 7,937,403 | 2,892,628 | |||
| Class R6 | 197,443 | 69,697 | |||
| Advisor Class | (4,080,926 | ) | 883,366 | ||
| Total capital share transactions | 30,630,425 | 19,861,829 | |||
| Net increase (decrease) in net assets | 29,641,776 | 47,463,083 | |||
| Net assets: | |||||
| Beginning of period | 107,364,551 | 59,901,468 | |||
| End of period | $ | 137,006,327 | $ | 107,364,551 | |
| Undistributed net investment income (distributions in excess of net investment income) | |||||
| included in net assets: | |||||
| End of period | $ | (1,588,683 | ) | $ | 159,830 |
18 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Notes to Financial Statements (unaudited)
Franklin India Growth Fund
1. Organization and Significant Accounting Policies
Franklin Templeton International Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end management investment company, consisting of four separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin India Growth Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. The Fund offers four classes of shares: Class A, Class C, Class R6, and Advisor Class. Each class of shares differs by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees.
The Fund operates using a “master fund/feeder fund” structure and primarily invests indirectly in the securities of Indian companies through FT (Mauritius) Offshore Investments Limited (Portfolio), an entity registered with and regulated by the Mauritius Financial Services Commission, which shares the same investment objective as the Fund. The accounting policies of the Portfolio, including the Portfolio’s security valuation policies, will directly affect the recorded value of the Fund’s investment in the Portfolio. The financial statements of the Portfolio, including the Statement of Investments, are included elsewhere in this report, and should be read in conjunction with the Fund’s financial statements. At April 30, 2015, the Fund owned 100% of the outstanding shares of the Portfolio.
The following summarizes the Fund’s significant accounting policies.
a. Financial Instrument Valuation
The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share at the close of the New York Stock Exchange (NYSE), generally at 4 p.m. Eastern time (NYSE close) on each day the NYSE is open for trading. Under compliance policies and procedures approved by the Fund’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Over-the-counter securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VLOC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VLOC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VLOC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.
The Fund’s investment in the Portfolio shares is valued at the Portfolio’s NAV per share. Valuation of securities by the Portfolio is discussed in Note 1(a) of the Portfolio’s Notes to Financial Statements, which are included elsewhere in this report.
franklintempleton.com
Semiannual Report | 19
FRANKLIN TEMPLETON INTERNATIONAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin India Growth Fund (continued)
1. Organization and Significant Accounting
Policies (continued)
b. Income Taxes
It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of April 30, 2015, and for all open tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.
The Fund’s investment in the Portfolio may be subject to income and withholding taxes in Mauritius and/or India which are discussed in Note 1(c) of the Portfolio’s Notes to Financial Statements.
The India tax law also includes provisions that impose tax on certain transfers of shares of non-Indian companies that substantially derive their value from Indian assets. Uncertainty exists with respect to the application of this law on investment structures such as the Fund and the Portfolio. However, based on judgment and analysis of the facts and circumstances, management currently believes that the provisions are not likely to have a material impact on the Fund and the Portfolio.
c. Security Transactions, Investment Income, Expenses and Distributions
Security transactions, including investments in the Portfolio, are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the funds based on the ratio of net assets of each fund to the combined net assets of the Trust. Fund specific expenses are charged directly to the fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.
The Fund records its proportionate share of the Portfolio’s income, expenses and realized and unrealized gains and losses daily. In addition, the Fund accrues its own expenses.
d. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
e. Guarantees and Indemnifications
Under the Trust’s organizational documents, its officers and directors are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
20 | Semiannual Report
franklintempleton.com
FRANKLIN TEMPLETON INTERNATIONAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin India Growth Fund (continued)
2. Shares of Beneficial Interest
At April 30, 2015, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:
| Six Months Ended | Year Ended | ||||||||||
| April 30, 2015 | October 31, 2014 | ||||||||||
| Shares | Amount | Shares | Amount | ||||||||
| Class A Shares: | |||||||||||
| Shares sold | 3,564,999 | $ | 46,586,707 | 3,184,828 | $ | 34,355,838 | |||||
| Shares issued in reinvestment of distributions | 29,663 | 360,698 | — | — | |||||||
| Shares redeemed | (1,583,827 | ) | (20,370,900 | ) | (1,809,371 | ) | (18,339,700 | ) | |||
| Net increase (decrease) | 2,010,835 | $ | 26,576,505 | 1,375,457 | $ | 16,016,138 | |||||
| Class C Shares: | |||||||||||
| Shares sold | 830,920 | $ | 10,400,126 | 722,501 | $ | 7,157,582 | |||||
| Shares issued in reinvestment of distributions | 3,132 | 36,455 | — | — | |||||||
| Shares redeemed | (201,699 | ) | (2,499,178 | ) | (475,292 | ) | (4,264,954 | ) | |||
| Net increase (decrease) | 632,353 | $ | 7,937,403 | 247,209 | $ | 2,892,628 | |||||
| Class R6 Shares: | |||||||||||
| Shares sold | 64,908 | $ | 841,835 | 16,874 | $ | 196,249 | |||||
| Shares issued in reinvestment of distributions | 679 | 8,415 | — | — | |||||||
| Shares redeemed | (51,634 | ) | (652,807 | ) | (11,130 | ) | (126,552 | ) | |||
| Net increase (decrease) | 13,953 | $ | 197,443 | 5,744 | $ | 69,697 | |||||
| Advisor Class Shares: | |||||||||||
| Shares sold | 1,497,501 | $ | 19,712,034 | 1,484,046 | $ | 16,405,842 | |||||
| Shares issued in reinvestment of distributions | 18,179 | 224,880 | — | — | |||||||
| Shares redeemed | (1,829,452 | ) | (24,017,840 | ) | (1,437,411 | ) | (15,522,476 | ) | |||
| Net increase (decrease) | (313,772 | ) | $ | (4,080,926 | ) | 46,635 | $ | 883,366 | |||
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Trust are also officers, and/or directors of the Portfolio and of the following subsidiaries:
| Subsidiary | Affiliation |
| Franklin Advisers, Inc. (Advisers) | Investment manager |
| Templeton Asset Management Ltd. (TAML) | Investment manager |
| Franklin Templeton Services, LLC (FT Services) | Administrative manager |
| Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
| Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
franklintempleton.com
Semiannual Report | 21
FRANKLIN TEMPLETON INTERNATIONAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin India Growth Fund (continued)
3. Transactions with Affiliates (continued)
a. Management Fees
The Fund pays an investment management fee to Advisers (directly and/or indirectly through the Portfolio). The total management fee is paid based on the average daily net assets of the Fund as follows:
| Annualized Fee Rate | Net Assets | |
| 1.300 | % | Up to and including $1 billion |
| 1.250 | % | Over $1 billion, up to and including $5 billion |
| 1.200 | % | Over $5 billion, up to and including $10 billion |
| 1.150 | % | Over $10 billion, up to and including $15 billion |
| 1.100 | % | Over $15 billion, up to and including $20 billion |
| 1.050 | % | In excess of $20 billion |
Under a subadvisory agreement, TAML, an affiliate of Advisers, provides subadvisory services to the Fund. The subadvisory fee is paid by Advisers based on the Fund’s average daily net assets, and is not an additional expense of the Fund.
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on the Fund’s average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Distribution fees are not charged on shares held by affiliates. Under the Fund’s Class A reimbursement distribution plan, the Fund reimburses Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribution plan, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Fund’s Class C compensation distribution plan, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate. The plan year, for purposes of monitoring compliance with the maximum annual plan rate, is February 1 through January 31.
The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:
| Class A | 0.35 | % |
| Class C | 1.00 | % |
The Board has set the current rate at 0.30% per year for Class A shares until further notice and approval by the Board.
d. Sales Charges/Underwriting Agreements
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. These charges are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Fund of the following commission transactions related to the sales and redemptions of the Fund’s shares for the period:
| Sales charges retained net of commissions paid to unaffiliated | ||
| broker/dealers | $ | 75,199 |
| CDSC retained | $ | 4,148 |
22 | Semiannual Report franklintempleton.com
FRANKLIN TEMPLETON INTERNATIONAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin India Growth Fund (continued)
e. Transfer Agent Fees
Each class of shares, except for Class R6, pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations and reimburses Investor Services for out of pocket expenses incurred, including shareholding servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.
For the period ended April 30, 2015, the Fund paid transfer agent fees of $90,297, of which $53,042 was retained by Investor Services.
f. Waiver and Expense Reimbursements
Advisers and Investor Services have contractually agreed in advance to waive or limit their fees and to assume as their own expense certain expenses otherwise payable by the Fund so that the expenses, including the Fund’s share of the Portfolio's allocated expenses, (excluding distribution fees), for Class A, Class C and Advisor Class of the Fund do not exceed 1.40%, and Class R6 does not exceed 1.25% based on the average net assets of each class (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until February 29, 2016.
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended April 30, 2015, there were no credits earned.
5. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains, if any. At October 31, 2014, the capital loss carryforwards were as follows:
| Capital loss carryforwards: | ||
| Short term | $ | 1,558,410 |
| Long term | 7,303,405 | |
| Total capital loss carryforwards | $ | 8,861,815 |
At April 30, 2015, the cost of investments and net unrealized appreciation (depreciation), including the holdings of the Portfolio, for income tax purposes were as follows:
| Cost of investments | $ | 107,250,236 | |
| Unrealized appreciation | $ | 31,591,903 | |
| Unrealized depreciation | (3,723,618 | ) | |
| Net unrealized appreciation (depreciation) | $ | 27,868,285 | |
The Portfolio is a disregarded entity for United States federal income tax purposes.
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of passive foreign investment company shares.
6. Investment Transactions
Purchases and sales of investments including transactions from the Portfolio (excluding short term securities) for the period ended April 30, 2015, aggregated $56,601,579 and $28,409,208, respectively.
franklintempleton.com
Semiannual Report | 23
FRANKLIN TEMPLETON INTERNATIONAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin India Growth Fund (continued)
7. Concentration of Risk
Investing in Indian equity securities through the Portfolio that may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values, less liquidity, expropriation, confiscatory taxation, nationalization, exchange control regulations (including currency blockage), differing legal standards and changing local and regional economic, political and social conditions, which may result in greater market volatility.
8. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 12, 2016. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended April 30, 2015, the Fund did not use the Global Credit Facility.
9. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s financial instruments and are summarized in the following fair value hierarchy:
- Level 1 – quoted prices in active markets for identical financial instruments
- Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
- Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.
At April 30, 2015, all of the Fund’s investments in financial instruments carried at fair value were valued using Level 1 inputs.
For detailed categories, see the accompanying Statement of Investments.
10. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.
24 | Semiannual Report
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| FT (MAURITIUS) OFFSHORE INVESTMENTS LIMITED | ||||||||||||||||||
| Financial Highlights | ||||||||||||||||||
| (Expressed in U.S. Dollars) | ||||||||||||||||||
| Six Months Ended | ||||||||||||||||||
| April 30, 2015 | Year Ended October 31, | |||||||||||||||||
| (unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
| Per share operating performance | ||||||||||||||||||
| (for a share outstanding throughout the period) | ||||||||||||||||||
| Net asset value, beginning of period | $ | 13.49 | $ | 9.19 | $ | 9.37 | $ | 9.88 | $ | 11.52 | $ | 8.26 | ||||||
| Income from investment operationsa: | ||||||||||||||||||
| Net investment income (loss)b | (0.06 | ) | 0.09 | c | 0.06 | 0.02 | (0.01 | ) | 0.02 | |||||||||
| Net realized and unrealized gains (losses) | 0.26 | 4.21 | (0.24 | ) | (0.53 | ) | (1.63 | ) | 3.24 | |||||||||
| Total from investment operations | 0.20 | 4.30 | (0.18 | ) | (0.51 | ) | (1.64 | ) | 3.26 | |||||||||
| Net asset value, end of period | $ | 13.69 | $ | 13.49 | $ | 9.19 | $ | 9.37 | $ | 9.88 | $ | 11.52 | ||||||
| Total returnd | 1.48 | % | 46.79 | % | (1.92 | )% | (5.16 | )% | (14.24 | )% | 39.47 | % | ||||||
| Ratios to average net assetse | ||||||||||||||||||
| Expenses | 1.09 | % | 1.12 | % | 1.07 | % | 1.08 | % | 1.17 | % | 1.22 | % | ||||||
| Net investment income (loss) | (0.91 | )% | 0.80 | %c | 0.54 | % | 0.19 | % | (0.08 | )% | 0.18 | % | ||||||
| Supplemental data | ||||||||||||||||||
| Net assets, end of period (000’s) | $ | 134,824 | $ | 105,258 | $ | 58,206 | $ | 70,010 | $ | 90,257 | $ | 88,225 | ||||||
| Portfolio turnover rate | 22.20 | % | 35.48 | % | 16.95 | % | 41.30 | % | 39.07 | % | 83.21 | % | ||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.02 per share received in the form of special dividends. Excluding these amounts, the ratio of net investment
income to average net assets would have been 0.62%.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 25
FT (MAURITIUS) OFFSHORE INVESTMENTS LIMITED
Statement of Investments, April 30, 2015 (unaudited)
(Expressed in U.S. Dollars)
| Shares | Value | ||
| Common Stocks 98.4% | |||
| India 98.4% | |||
| Auto Components 2.1% | |||
| Bharat Forge Ltd. | 79,000 | $ | 1,559,856 |
| Bosch Ltd. | 3,400 | 1,204,023 | |
| a,bNirvikara Paper Mills Ltd. | 4,966 | 7,525 | |
| 2,771,404 | |||
| Automobiles 7.8% | |||
| Mahindra & Mahindra Ltd. | 178,790 | 3,221,431 | |
| Tata Motors Ltd. | 262,972 | 2,103,232 | |
| Tata Motors Ltd., A | 762,293 | 3,727,034 | |
| TVS Motor Co. Ltd. | 383,000 | 1,420,255 | |
| 10,471,952 | |||
| Banks 22.5% | |||
| Axis Bank Ltd. | 412,000 | 3,681,228 | |
| HDFC Bank Ltd. | 413,400 | 6,432,490 | |
| ICICI Bank Ltd. | 883,000 | 4,601,354 | |
| IndusInd Bank Ltd. | 298,863 | 3,874,308 | |
| Kotak Mahindra Bank Ltd. | 146,000 | 3,062,320 | |
| State Bank of India | 848,520 | 3,601,834 | |
| Yes Bank Ltd. | 385,000 | 5,085,758 | |
| 30,339,292 | |||
| Capital Markets 0.6% | |||
| Motilal Oswal Financial Services Ltd. | 161,300 | 760,460 | |
| Chemicals 3.3% | |||
| Asian Paints Ltd. | 195,000 | 2,339,624 | |
| Coromandel International Ltd. | 111,000 | 401,396 | |
| Pidilite Industries Ltd. | 157,000 | 1,400,945 | |
| Rallis India Ltd. | 88,000 | 300,430 | |
| 4,442,395 | |||
| Construction & Engineering 5.1% | |||
| Larsen & Toubro Ltd. | 182,000 | 4,672,027 | |
| Voltas Ltd. | 483,500 | 2,138,738 | |
| 6,810,765 | |||
| Construction Materials 3.8% | |||
| Ramco Cements Ltd. | 239,000 | 1,152,168 | |
| Shree Cements Ltd. | 9,392 | 1,506,447 | |
| Ultra Tech Cement Ltd. | 57,500 | 2,417,802 | |
| 5,076,417 | |||
| Consumer Finance 1.5% | |||
| Mahindra & Mahindra Financial Services Ltd. | 475,000 | 2,000,603 | |
| Diversified Financial Services 1.3% | |||
| Credit Analysis and Research Ltd. | 71,000 | 1,739,647 | |
| Electrical Equipment 2.6% | |||
| Amara Raja Batteries Ltd. | 169,430 | 2,119,085 | |
| aHavell’s India Ltd. | 322,800 | 1,421,286 | |
| 3,540,371 |
26 | Semiannual Report
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FT (MAURITIUS) OFFSHORE INVESTMENTS LIMITED
STATEMENT OF INVESTMENTS (UNAUDITED)
(Expressed in U.S. Dollars)
| Shares | Value | ||
| Common Stocks (continued) | |||
| India (continued) | |||
| Food Products 1.6% | |||
| Kaveri Seed Co. Ltd. | 43,600 | $ | 574,334 |
| Nestle India Ltd. | 15,000 | 1,551,417 | |
| 2,125,751 | |||
| Hotels, Restaurants & Leisure 0.5% | |||
| aIndian Hotels Co. Ltd. | 379,853 | 652,737 | |
| Industrial Conglomerates 0.8% | |||
| Aditya Birla Nuvo Ltd. | 46,000 | 1,135,021 | |
| IT Services 13.3% | |||
| HCL Technologies Ltd. | 386,000 | 5,348,617 | |
| Infosys Ltd. | 222,100 | 6,788,188 | |
| Tata Consultancy Services Ltd. | 120,542 | 4,673,329 | |
| Tech Mahindra Ltd. | 120,000 | 1,173,323 | |
| 17,983,457 | |||
| Machinery 5.9% | |||
| AIA Engineering Ltd. | 77,000 | 1,394,169 | |
| Cummins India Ltd. | 262,000 | 3,554,341 | |
| Eicher Motors Ltd. | 9,850 | 2,354,723 | |
| SKF India Ltd. | 30,000 | 667,011 | |
| 7,970,244 | |||
| Media 0.7% | |||
| Jagran Prakashan Ltd. | 560,933 | 994,357 | |
| Metals & Mining 1.5% | |||
| Tata Steel Ltd. | 346,000 | 1,962,008 | |
| Oil, Gas & Consumable Fuels 3.7% | |||
| Bharat Petroleum Corp. Ltd. | 289,418 | 3,482,934 | |
| Gujarat Mineral Development Corp. Ltd. | 410,000 | 651,959 | |
| Petronet LNG Ltd. | 310,000 | 851,982 | |
| 4,986,875 | |||
| Personal Products 1.8% | |||
| Marico Ltd. | 392,302 | 2,479,833 | |
| Pharmaceuticals 13.0% | |||
| Cadila Healthcare Ltd. | 63,000 | 1,687,132 | |
| Dr. Reddy’s Laboratories Ltd. | 75,000 | 3,906,809 | |
| IPCA Laboratories Ltd. | 64,000 | 646,670 | |
| Lupin Ltd. | 48,400 | 1,350,032 | |
| aPfizer Ltd. | 25,305 | 831,432 | |
| Sun Pharmaceutical Industries Ltd. | 465,150 | 6,872,099 | |
| Torrent Pharmaceuticals Ltd. | 120,000 | 2,269,508 | |
| 17,563,682 | |||
| Textiles, Apparel & Luxury Goods 1.0% | |||
| Titan Co. Ltd. | 233,778 | 1,408,237 | |
| Thrifts & Mortgage Finance 1.2% | |||
| Housing Development Finance Corp. Ltd. | 89,465 | 1,647,173 |
franklintempleton.com
Semiannual Report | 27
FT (MAURITIUS) OFFSHORE INVESTMENTS LIMITED
STATEMENT OF INVESTMENTS (UNAUDITED)
(Expressed in U.S. Dollars)
| Shares | Value | |||
| Common Stocks (continued) | ||||
| India (continued) | ||||
| Wireless Telecommunication Services 2.8% | ||||
| Bharti Airtel Ltd. | 638,000 | $ | 3,826,131 | |
| Total Common Stocks (Cost $103,812,139) | 132,688,812 | |||
| Principal | ||||
| Amount* | ||||
| Convertible Bonds (Cost $50,870) 0.1% | ||||
| India 0.1% | ||||
| Hotels, Restaurants & Leisure 0.1% | ||||
| Indian Hotels Co. Ltd., cvt., zero cpn., 3/01/16 | 56,216 | INR | 88,109 | |
| Total Investments (Cost $103,863,009) 98.5% | 132,776,921 | |||
| Other Assets, less Liabilities 1.5% | 2,047,262 | |||
| Net Assets 100.0% | $ | 134,824,183 | ||
See Abbreviations on page 36.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aNon-income producing.
bSecurity has been deemed illiquid because it may not be able to be sold within seven days. At April 30, 2015, the value of this security was $7,525, representing less than
0.01% of net assets.
28 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FT (MAURITIUS) OFFSHORE INVESTMENTS LIMITED
Financial Statements
(Expressed in U.S. Dollars)
Statement of Assets and Liabilities
April 30, 2015 (unaudited)
| Assets: | ||
| Investments in securities: | ||
| Cost | $ | 103,863,009 |
| Value | $ | 132,776,921 |
| Cash | 35,968 | |
| Foreign currency, at value (cost $1,300,681) | 1,297,105 | |
| Receivables: | ||
| Investment securities sold | 1,488,566 | |
| Dividends | 24,297 | |
| Total assets | 135,622,857 | |
| Liabilities: | ||
| Payables: | ||
| Investment securities purchased | 184,189 | |
| Capital shares redeemed | 458,681 | |
| Management fees | 133,554 | |
| Administrative fees | 1,461 | |
| Accrued expenses and other liabilities | 20,789 | |
| Total liabilities | 798,674 | |
| Net assets, at value | $ | 134,824,183 |
| Shares outstanding | 9,846,709 | |
| Net asset value per share | $ | 13.69 |
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 29
FT (MAURITIUS) OFFSHORE INVESTMENTS LIMITED
FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Statement of Operations
for the six months ended April 30, 2015 (unaudited)
| Investment income: | |||
| Dividends | $ | 117,921 | |
| Expenses: | |||
| Management fees (Note 3a) | 612,995 | ||
| Administrative fees (Note 3b) | 17,711 | ||
| Custodian fees | 50,638 | ||
| Reports to shareholders | 749 | ||
| Professional fees | 15,754 | ||
| Directors’ fees and expenses | 4,991 | ||
| Other | 8,201 | ||
| Total expenses | 711,039 | ||
| Net investment income (loss) | (593,118 | ) | |
| Realized and unrealized gains (losses): | |||
| Net realized gain (loss) from: | |||
| Investments | 3,235,798 | ||
| Foreign currency transactions | (306,925 | ) | |
| Net realized gain (loss) | 2,928,873 | ||
| Net change in unrealized appreciation (depreciation) on: | |||
| Investments | (2,544,173 | ) | |
| Translation of other assets and liabilities denominated in foreign currencies | (12,436 | ) | |
| Net change in unrealized appreciation (depreciation) | (2,556,609 | ) | |
| Net realized and unrealized gain (loss) | 372,264 | ||
| Net increase (decrease) in net assets resulting from operations | $ | (220,854 | ) |
30 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FT (MAURITIUS) OFFSHORE INVESTMENTS LIMITED
FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
| Statements of Changes in Net Assets | |||||
| Six Months Ended | |||||
| April 30, 2015 | Year Ended | ||||
| (unaudited) | October 31, 2014 | ||||
| Increase (decrease) in net assets: | |||||
| Operations: | |||||
| Net investment income (loss) | $ | (593,118 | ) | $ | 576,512 |
| Net realized gain (loss) from investments and foreign currency transactions | 2,928,873 | 810,661 | |||
| Net change in unrealized appreciation (depreciation) on investments and translation of | |||||
| other assets and liabilities denominated in foreign currencies | (2,556,609 | ) | 26,362,497 | ||
| Net increase (decrease) in net assets resulting from operations | (220,854 | ) | 27,749,670 | ||
| Capital share transactions (Note 2) | 29,786,812 | 19,302,836 | |||
| Net increase (decrease) in net assets | 29,565,958 | 47,052,506 | |||
| Net assets: | |||||
| Beginning of period | 105,258,225 | 58,205,719 | |||
| End of period | $ | 134,824,183 | $ | 105,258,225 | |
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 31
FT (MAURITIUS) OFFSHORE INVESTMENTS LIMITED
Notes to Financial Statements (unaudited)
(Expressed in U.S. Dollars)
1. Organization and Significant Accounting Policies
FT (Mauritius) Offshore Investments Limited (Portfolio) is registered with and regulated by the Mauritius Financial Services Commission and has elected to be treated as a disregarded entity for United States federal income tax purposes.
At April 30, 2015, Franklin India Growth Fund (Fund) owned 100% of the Portfolio.
The following summarizes the Portfolio’s significant accounting policies.
a. Financial Instrument Valuation
The Portfolio’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Portfolio calculates the net asset value per share at the close of the New York Stock Exchange (NYSE), generally at 4 p.m. Eastern time (NYSE close) on each day the NYSE is open for trading. Under compliance policies and procedures approved by the Fund’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides administration and oversight of the Portfolio’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Portfolio to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of the NYSE close, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the NYSE close on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Debt securities generally trade in the OTC market rather than on a securities exchange. The Portfolio’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at the NYSE close on the date that the values of the foreign debt securities are determined.
The Portfolio follows the Fund’s procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VLOC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VLOC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VLOC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before the daily NYSE close. In addition, trading in certain foreign markets may not take place on every NYSE business day. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question
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FT (MAURITIUS) OFFSHORE INVESTMENTS LIMITED
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(Expressed in U.S. Dollars)
the reliability of the value of a portfolio security held by the Portfolio. As a result, differences may arise between the value of the Portfolio’s securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VLOC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Portfolio. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Portfolio’s securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Portfolio for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Portfolio may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Portfolio does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Income Taxes
The Portfolio conducts its investment activities in India as a tax resident of Mauritius and expects to obtain benefits under the double taxation treaty between Mauritius and India (Treaty). To obtain benefits under the Treaty, the Portfolio must meet certain tests and conditions, including the establishment of Mauritius tax residence and related requirements. The Portfolio has obtained a certificate from the Mauritius tax authorities and believes that such certification is evidence that it is a resident of Mauritius under the Treaty. A company which is a tax resident in Mauritius under the Treaty and has no branch or permanent establishment in India, will not be subject to capital gains tax in India on the sale of Indian securities but is subject to Indian withholding tax on interest earned on Indian securities up to maximum rate of 21.63% (which includes surcharges). There is no withholding tax in India with respect to dividends paid by Indian companies and such dividends are exempt for shareholders.
The Portfolio holds a Category 1 Global Business Licence for the purpose of the Financial Services Act 2007 and under current laws and regulations, is subject to tax in Mauritius at the rate of 15% on its net income. However, the Portfolio is entitled to a deemed tax credit equivalent to the higher of actual foreign tax suffered or a presumed foreign tax equivalent of 80% of the Mauritian tax on its foreign source income. Thus, the effective tax rate in Mauritius should not exceed 3% (i.e. 15% less 80% of 15%). Indian companies making distributions are, however, liable to a dividend distribution tax equivalent to 16.995% of the dividends distributed. A company holding at least 5% of the share capital of an Indian company and receiving dividends from that Indian company may claim a credit for tax paid by the Indian company on its profits out of which the dividends were distributed including the dividend distribution tax. No Mauritian capital gains tax is payable on profits arising from sale of securities, and any dividends and redemption proceeds paid by the Portfolio to its shareholders will be exempt from withholding or other tax.
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FT (MAURITIUS) OFFSHORE INVESTMENTS LIMITED NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (Expressed in U.S. Dollars)
1. Organization and Significant Accounting
Policies (continued)
c. Income Taxes (continued)
The Portfolio continues to: (i) comply with the requirements of the Treaty; (ii) be a tax resident of Mauritius; and (iii) maintain that its central management and control resides in Mauritius, and therefore management believes that the Portfolio will be able to obtain the benefits of the Treaty. Accordingly, no provision for Indian income taxes has been made in the accompanying financial statements of the Portfolio for taxes related to capital gains or dividends.
The Indian Finance Minister announced the introduction of a General Anti Avoidance Rule (“GAAR”) in the Indian tax law in the 2012/2013 budget. Subsequently, following representations made by stakeholders, the implementation of the GAAR provisions has been deferred. The GAAR provisions are now expected to come into force for the financial year 2017-2018 (i.e. as from April 1, 2017).
The Portfolio’s accounting policy in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) is to account for changes in tax laws when the laws are enacted.
The India tax law also includes provisions that impose tax on certain transfers of shares of non-Indian companies that substantially derive their value from Indian assets. Uncertainty exists with respect to the application of this law on investment structures such as the Portfolio and the Fund. However, based on judgment and analysis of the facts and circumstances, management currently believes that the provisions are not likely to have a material impact on the Portfolio and the Fund.
d. Security Transactions, Investment Income and Expenses
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date except for certain dividends from foreign securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Portfolio.
e. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
f. Guarantees and Indemnifications
Under the Portfolio’s organizational documents, the Portfolio’s officers and directors are indemnified by the Portfolio against certain liabilities arising out of the performance of their duties to the Portfolio. Additionally, in the normal course of business, the Portfolio enters into contracts with service providers that contain general indemnification clauses. The Portfolio’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Portfolio that have not yet occurred. Currently, the Portfolio expects the risk of loss to be remote.
2. Shares of Beneficial Interest
At April 30, 2015, there were an unlimited number of shares authorized (without par value). Transactions in the Portfolio’s shares were as follows:
| Six Months Ended | Year Ended | |||||||||
| April 30, 2015 | October 31, 2014 | |||||||||
| Shares | Amount | Shares | Amount | |||||||
| Shares sold | 3,622,317 | $ | 51,877,713 | 3,095,391 | $ | 36,704,878 | ||||
| Shares redeemed | (1,575,809 | ) | (22,090,901 | ) | (1,631,551 | ) | (17,402,042 | ) | ||
| Net increase (decrease) | 2,046,508 | $ | 29,786,812 | 1,463,840 | $ | 19,302,836 | ||||
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FT (MAURITIUS) OFFSHORE INVESTMENTS LIMITED
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(Expressed in U.S. Dollars)
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company of Franklin Advisers, Inc. (Advisers) which is the investment manager of the Portfolio.
a. Management Fees
The Portfolio pays an investment management fee to Advisers (directly and/or indirectly through the Fund). The total management fee is paid based on the average daily net assets of the Fund as follows:
| Annualized Fee Rate | Net Assets | |
| 1.300 | % | Up to and including $1 billion |
| 1.250 | % | Over $1 billion, up to and including $5 billion |
| 1.200 | % | Over $5 billion, up to and including $10 billion |
| 1.150 | % | Over $10 billion, up to and including $15 billion |
| 1.100 | % | Over $15 billion, up to and including $20 billion |
| 1.050 | % | In excess of $20 billion |
b. Administrative Fees
The Portfolio pays an administrative fee to International Financial Services Limited (IFS), a Mauritius company, an annual fee of $30,000 plus reimbursement of certain expenses. Certain directors of the Portfolio are also directors of IFS.
4. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the period ended April 30, 2015, aggregated $56,601,579 and $28,409,208, respectively.
5. Concentration of Risk
Investing in Indian equity securities that may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values, less liquidity, expropriation, confiscatory taxation, nationalization, exchange control regulations (including currency blockage), differing legal standards and changing local and regional economic, political and social conditions, which may result in greater market volatility.
6. Fair Value Measurements
The Portfolio follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Portfolio’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Portfolio’s financial instruments and are summarized in the following fair value hierarchy:
- Level 1 – quoted prices in active markets for identical financial instruments
- Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
- Level 3 – significant unobservable inputs (including the Portfolio’s own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
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FT (MAURITIUS) OFFSHORE INVESTMENTS LIMITED
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(Expressed in U.S. Dollars)
6. Fair Value Measurements (continued)
For movements between the levels within the fair value hierarchy, the Portfolio has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.
A summary of inputs used as of April 30, 2015, in valuing the Portfolio’s assets carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 | Total | |||||
| Assets: | ||||||||
| Investments in Securities: | ||||||||
| Equity Investments: | ||||||||
| Auto Components | $ | 2,763,879 | $ | — | $ | 7,525 | $ | 2,771,404 |
| All Other Equity Investmentsa | 129,917,408 | — | — | 129,917,408 | ||||
| Convertible Bonds | 88,109 | — | — | 88,109 | ||||
| Total Investments in Securities | $ | 132,769,396 | $ | — | $ | 7,525 | $ | 132,776,921 |
| aFor detailed categories, see the accompanying Statement of Investments. |
A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the end of the period.
7. Subsequent Events
The Portfolio has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.
| Abbreviations |
| Currency |
| INR Indian Rupee |
36 | Semiannual Report
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FRANKLIN TEMPLETON INTERNATIONAL TRUST
FRANKLIN INDIA GROWTH FUND
Shareholder Information
Board Review of Investment Management Agreement
At a meeting held April 14, 2015, the Board of Trustees (Board), including a majority of non-interested or independent Trustees, approved renewal of the investment management agreement for each of the Funds within the Trust, including Franklin India Growth Fund (Fund(s)). In reaching this decision, the Board took into account information furnished throughout the year at regular Board meetings, as well as information prepared specifically in connection with the annual renewal review process. Information furnished and discussed throughout the year included investment performance reports and related financial information for each Fund, along with periodic reports on expenses, shareholder services, legal and compliance matters, pricing, brokerage commissions and execution and other services provided by the Investment Manager (Manager) and its affiliates, as well as marketing support payments made to financial intermediaries. Information furnished specifically in connection with the renewal process included a report for each Fund prepared by Lipper, Inc. (Lipper), an independent organization, as well as additional material, including a Fund profitability analysis prepared by management. The Lipper reports compared each Fund’s investment performance and expenses with those of other mutual funds deemed comparable to the Fund as selected by Lipper. The Fund profitability analysis report discussed the profitability to Franklin Templeton Investments (FTI) from its overall U.S. fund operations, as well as on an individual fund-by-fund basis. Additional material accompanying such profitability analysis included information on a fund-by-fund basis listing portfolio managers and other accounts they manage, as well as information on management fees charged by the Manager and its affiliates to U.S. mutual funds and other accounts, including management’s explanation of differences where relevant. Such material also included a memorandum prepared by management describing project initiatives and capital investments relating to the services provided to the Funds by the FTI organization, as well as a memorandum relating to economies of scale and an analysis concerning transfer agent fees charged by an affiliate of the Manager. The Board also noted that at the February meetings each year, it receives an annual report on all marketing support payments made by FTI to financial intermediaries.
In considering such materials, the independent Trustees received assistance and advice from and met separately with independent counsel. While the investment management agreements for all Funds were considered at the same Board meeting, the Board dealt with each Fund separately. In approving continuance of the investment management agreement for each Fund, the Board, including a majority of independent Trustees, determined that the existing management fee structure was fair and reasonable and that continuance of the investment management agreement was in the best interests of each Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s decision.
NATURE, EXTENT AND QUALITY OF SERVICE. The Board was satisfied with the nature and quality of the overall services provided by the Manager and its affiliates to the Fund and its shareholders with respect to investment performance. and expenses. The Board’s opinion was based, in part, upon periodic reports furnished it showing that the investment policies and restrictions for the Fund were consistently complied with as well as other reports periodically furnished the Board covering matters such as the compliance of portfolio managers and other management personnel with the code of ethics adopted throughout the Franklin Templeton fund complex, the adherence to fair value pricing procedures established by the Board, and the accuracy of net asset value calculations. The Board also noted the extent of benefits provided Fund shareholders from being part of the Franklin Templeton family of funds, including the right to exchange investments between the same class of shares of different funds without a sales charge, the ability to reinvest Fund dividends into other funds and the right to combine holdings in other funds to obtain a reduced sales charge. Favorable consideration was given to management’s continual efforts and expenditures in establishing effective business continuity plans and developing strategies to address cybersecurity threats. Among other factors taken into account by the Board were the Manager’s best execution trading policies, including a favorable report by an independent portfolio trading analytical firm that also covered FOREX transactions. Consideration was also given to the experience of the Fund’s portfolio management team, the number of accounts managed and general method of compensation. In this latter respect, the Board noted that a primary factor in management’s determination of a portfolio manager’s bonus compensation was the relative investment performance of the funds he or she managed and that a portion of such bonus was required to be invested in a predesignated list of funds within such person’s fund management area so as to be aligned with the interests of shareholders. The Board also took into account the quality of transfer agent and shareholder services provided Fund shareholders by an affiliate of the Manager, noting the changes
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Semiannual Report | 37
FRANKLIN TEMPLETON INTERNATIONAL TRUST FRANKLIN INDIA GROWTH FUND
SHAREHOLDER INFORMATION
Board Review of Investment Management
Agreement (continued) taking place in the nature of transfer agency services throughout the industry and regulatory initiatives in this area, and the continual enhancements to the Franklin Templeton website. Particular attention was given to management’s conservative approach and diligent risk management procedures, including continual monitoring of counterparty credit risk and attention given to derivatives and other complex instruments, including expanded collateralization requirements. The Board also took into account, among other things, management’s efforts in establishing a global credit facility for the benefit of the Fund and other accounts managed by FTI to provide a source of cash for temporary and emergency purposes or to meet unusual redemption requests as well as the strong financial position of the Manager’s parent company and its commitment to the mutual fund business as evidenced by its continued subsidization of money market funds.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment performance of the Fund in view of its importance to shareholders. While consideration was given to performance reports and discussions with portfolio managers at Board meetings throughout the year, particular attention in assessing performance was given to the Lipper reports furnished for the agreement renewal. The Lipper reports prepared for the Fund showed the investment performance of its Class A shares in comparison to a performance universe selected by Lipper. Comparative performance for the Fund was shown for the one-year period ended January 31, 2015, and previous periods ended that date of up to 10 years unless otherwise noted. The performance universe for the Fund consisted of the Fund and all retail and institutional India region funds as selected by Lipper. The Lipper report comparison showed the Fund’s total return to be in the middle performing quintile of such performance universe for the one-year period ended January 31, 2015, and on an annualized basis to be in the middle performing quintile of such universe during the previous three-year period, and in the highest performing quintile during the previous five-year period. The Board was satisfied with the Fund’s overall comparative performance as set forth in the Lipper report.
COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the management fee and total expense ratio of the Fund compared with those of a group of other funds selected by Lipper as constituting its appropriate Lipper expense group. Lipper expense data is based upon information taken from each fund’s most recent annual report, which reflects historical asset levels that may be quite different from those currently existing, particularly in a period of market volatility. While recognizing such inherent limitation and the fact that expense ratios generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Lipper to be an appropriate measure of comparative expenses. In reviewing comparative costs, Lipper provides information on the Fund’s contractual investment management fee in comparison with the investment management fee that would have been charged by other funds within its Lipper expense group assuming they were similar in size to the Fund, as well as the actual total expense ratio of the Fund in comparison with those of its Lipper expense group. The Lipper contractual investment management fee analysis includes administrative charges as being part of the investment management fee, and actual total expenses, for comparative consistency, are shown by Lipper for Fund Class A shares. The Lipper report showed the contractual investment management fee rate for the Fund to be at the median of its Lipper expense group, and its actual total expense ratio to be below the median of such group. The Board was satisfied with the expenses of the Fund and noted that the Fund benefited from a waiver of fees.
MANAGEMENT PROFITABILITY. The Board also considered the level of profits realized by the Manager and its affiliates in connection with the operation of the Fund. In this respect, the Board reviewed the Fund profitability analysis that addresses the overall profitability of Franklin Templeton’s U.S. fund business, as well as its profits in providing management and other services to each of the individual funds during the 12-month period ended September 30, 2014, being the most recent fiscal year-end for Franklin Resources, Inc., the Manager’s parent. In reviewing the analysis, the Board recognized that allocation methodologies are inherently subjective and various allocation methodologies may be reasonable while producing different results. In this respect, the Board noted that while management continually makes refinements to its methodologies in response to organizational and product related changes, the overall approach as defined by the primary drivers and activity measurements has remained consistent with that used in the Fund’s profitability report presentations from prior years. Additionally, the Fund’s independent registered public accounting firm had been engaged by the Manager to periodically review the reasonableness of the allocation methodologies to be used solely by the Fund’s Board in reference to the profitability analysis. In reviewing and discussing such analysis, management discussed with the Board its belief that costs incurred in establishing the infrastructure necessary
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FRANKLIN TEMPLETON INTERNATIONAL TRUST
FRANKLIN INDIA GROWTH FUND
SHAREHOLDER INFORMATION
for the type of mutual fund operations conducted by the Manager and its affiliates may not be fully reflected in the expenses allocated to the Fund in determining its profitability, as well as the fact that the level of profits, to a certain extent, reflected operational cost savings and efficiencies initiated by management. The Board also took into account management’s expenditures in improving shareholder services provided the Fund, as well as the need to implement systems and meet additional regulatory and compliance requirements resulting from statutes such as the Sarbanes-Oxley and Dodd-Frank Acts and recent SEC and other regulatory requirements. In addition, the Board considered a third-party study comparing the profitability of the Manager’s parent on an overall basis to other publicly held managers broken down to show profitability from management operations exclusive of distribution expenses, as well as profitability including distribution expenses. The Board also considered the extent to which the Manager and its affiliates might derive ancillary benefits from fund operations, including revenues generated from transfer agent services, potential benefits resulting from personnel and systems enhancements necessitated by fund growth, as well as increased leverage with the service providers and counterparties. Based upon its consideration of all these factors, the Board determined that the level of profits realized by the Manager and its affiliates from providing services to the Fund was not excessive in view of the nature, quality and extent of services provided.
ECONOMIES OF SCALE. The Board also considered whether economies of scale are realized by the Manager as the Fund grows larger and the extent to which this is reflected in the level of management fees charged. While recognizing that any precise determination is inherently subjective, the Board noted that based upon the Fund profitability analysis, it appears that as some funds get larger, at some point economies of scale do result in the Manager realizing a larger profit margin on management services provided such a fund. The Board also noted that economies of scale are shared with the Fund and its shareholders through management fee breakpoints so that as a fund grows in size, its effective management fee rate declines. The asset level of the Fund was approximately $125 million on December 31, 2014, and the Board believed the size of the Fund afforded no meaningful economies of scale.
Proxy Voting Policies and Procedures
The Fund’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Fund uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Fund’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Fund’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.
Quarterly Statement of Investments
The Fund files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.
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Franklin Templeton Investments
Gain From Our Perspective®
At Franklin Templeton Investments, we’re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we’re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world’s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe.
Focus on Investment Excellence
At the core of our firm, you’ll find multiple independent investment teams—each with a focused area of expertise—from traditional to alternative strategies and multi-asset solutions. And because our portfolio groups operate autonomously, their strategies can be combined to deliver true style and asset class diversification.
All of our investment teams share a common commitment to excellence grounded in rigorous, fundamental research and robust, disciplined risk management. Decade after decade, our consistent, research-driven processes have helped Franklin Templeton earn an impressive record of strong, long-term results.
Global Perspective Shaped by Local Expertise
In today’s complex and interconnected world, smart investing demands a global perspective. Franklin Templeton pioneered international investing over 60 years ago, and our expertise in emerging markets spans more than a quarter of a century. Today, our investment professionals are on the ground across the globe, spotting investment ideas and potential risks firsthand. These locally based teams bring in-depth understanding of local companies, economies and cultural nuances, and share their best thinking across our global research network.
Strength and Experience
Franklin Templeton is a global leader in asset management serving clients in over 150 countries.1 We run our business with the same prudence we apply to asset management, staying focused on delivering relevant investment solutions, strong long-term results and reliable, personal service. This approach, focused on putting clients first, has helped us to become one of the most trusted names in financial services.
1. As of 12/31/14. Clients are represented by the total number of shareholder accounts
Not FDIC Insured | May Lose Value | No Bank Guarantee
| Contents | |
| Semiannual Report | |
| Franklin World Perspectives Fund | 3 |
| Performance Summary | 8 |
| Your Fund’s Expenses | 11 |
| Financial Highlights and | |
| Statement of Investments | 13 |
| Financial Statements | 26 |
| Notes to Financial Statements | 30 |
| Shareholder Information | 40 |
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Semiannual Report
Franklin World Perspectives Fund
We are pleased to bring you Franklin World Perspectives Fund’s semiannual report for the period ended April 30, 2015.
Your Fund’s Goal and Main Investments
The Fund seeks long-term capital appreciation. Under normal market conditions, the Fund invests primarily in equity securities in developed, emerging and frontier markets across the entire market capitalization spectrum.
Performance Overview
The Fund’s Class A shares delivered a +6.29% cumulative total return for the six months under review. In comparison, the Fund’s benchmark, the MSCI All Country World Index Plus Frontier Markets Index (ACWI+FM), which measures stock performance in developed, emerging and frontier markets, produced a +5.21% total return.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 8.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Economic and Market Overview
The global economy expanded moderately during the six months under review even though economic activity in some countries slowed. As measured by the MSCI World Index, stocks in global developed markets advanced overall during the six-month period amid a generally accommodative monetary policy environment and some signs of economic improvement in Europe and Japan. Oil prices declined sharply during the six-month period owing to strong global supply, and gold prices ended lower due to benign global inflation and a strong U.S. dollar.
U.S. economic growth moderated during the period under review. Lower energy prices and a stronger U.S. dollar along with harsh weather and labor disputes at key ports weighed on economic performance. Economic activity slowed in 2015’s
first quarter as the dampening effects of lower exports and decreases in business investment and state and local government spending largely offset the positive effects from increases in consumer spending and private inventory investment. Although the U.S. Federal Reserve Board (Fed) stated that it could be patient with regard to raising interest rates, in March, the Fed removed the word “patient” from its monetary policy guidance. It added, however, that it might keep interest rates lower than what it viewed as normal. In its April meeting, the Fed attributed the economy’s first-quarter slowdown to transitory factors. The Fed reiterated that it would raise interest rates when it saw further improvement in the labor market and was reasonably confident that inflation would move back to its 2% objective over the medium term.
Outside the U.S., economic growth slowed in the U.K. during 2015’s first quarter as the mining, construction and agriculture sectors contracted. In the eurozone, however, the economy showed signs of improvement as the gross domestic product growth rate picked up in the fourth quarter, led by Germany, the region’s largest economy. The European Central Bank (ECB) maintained its benchmark interest rate during the
1. Source: Morningstar.
The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 17.
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FRANKLIN WORLD PERSPECTIVES FUND
period and expanded its asset purchase program to boost inflation and stimulate the economy. Although the region benefited from lower oil prices, a weaker euro that helped exports, and the ECB’s accommodative policies, it continued to face head-winds such as deflationary pressures and the crisis in Ukraine. In March, the ECB raised its 2015 eurozone growth forecast as economic activity improved early in the year.
The Bank of Japan (BOJ) broadened its stimulus measures amid weak domestic demand and lower inflation. In December, Japan’s ruling coalition was reelected and announced a new stimulus package to revive economic growth. The country exited recession in the fourth quarter, supported largely by exports, while growth in domestic consumption and capital spending remained relatively weak. Toward period-end, the BOJ maintained its monetary policy and lowered its economic growth and inflation forecasts.
In emerging markets, economic growth generally moderated. Brazil’s economy contracted in the fourth quarter of 2014 as the country continued to face headwinds such as high inflation, lower commodity prices and a severe drought. Emerging market stocks, as measured by the MSCI Emerging Markets Index, rose for the six-month period, driven by the effect of China’s fiscal and monetary stimulus measures on domestic equities, the ECB’s monetary easing and the Fed’s continued accommodative policy stance. However, concerns surrounding the course of U.S. monetary policy, less robust Chinese economic data, continued geopolitical tensions in Ukraine and the Middle East, Greece’s debt concerns and slower global economic growth hampered emerging market stocks. Also weighing on investor sentiment was the drop in crude oil prices, which pressured several oil-producing countries’ financial positions and currencies. A temporary solution to Greece’s dispute with its international creditors and a Russia-Ukraine ceasefire agreement helped emerging market stocks during the period. Central bank actions varied across emerging markets. Some central banks raised interest rates in response to rising inflation and weakening currencies, while others lowered rates in efforts to promote economic growth.
Investment Strategy
While we have overall responsibility for the Fund’s investments, we manage the Fund using a multi-manager approach. We consult with Franklin Templeton’s local asset management teams (subadvisors) based in countries around the world to help determine regional and country allocations, and each subadvisor is responsible for selecting investments for that portion of the
| Top 10 Countries | ||
| 4/30/15 | ||
| % of Total | ||
| Net Assets | ||
| U.S. | 44.4 | % |
| U.K. | 8.0 | % |
| Japan | 5.6 | % |
| France | 5.0 | % |
| Italy | 3.6 | % |
| Canada | 3.3 | % |
| China | 2.6 | % |
| Germany | 2.5 | % |
| Spain | 2.1 | % |
| Belgium | 1.9 | % |
Fund’s portfolio allocated to it. We work closely with the sub-advisors to develop local portfolios of securities seeking to outperform the relevant market of each region and combine those portfolios into a single global growth equity fund. The Fund’s actual exposure to various regions and markets will vary from time to time according to our and the subadvisors’ opinions as to the prevailing conditions and prospects for these markets.
Using a growth-oriented investment style, we seek to invest in growth-oriented equity securities of companies in developed, emerging and frontier regions and countries around the world. When choosing equity investments for the Fund, we and the subadvisors, with the benefit of local knowledge and market insight, apply a research-driven, bottom-up, fundamental long-term approach. We focus on the market price of a company’s securities relative to our and the subadvisors’ evaluations of the company’s long-term earnings, asset value and cash flow potential. We seek to invest in financially strong companies with favorable growth potential and sustainable competitive advantages.
Manager’s Discussion
Global economic growth remained quite tepid during the reporting period, but corporations were able to expand their earnings despite a lack of real revenue improvement, and some key countries began to show signs of improvement. Financial markets remained driven by central bank policies in the U.S., Europe and Japan, although geopolitical tensions and large-scale elections in many parts of the world created many developments for the market to digest. Developed markets
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| Top 10 Industries | ||
| 4/30/15 | ||
| % of Total | ||
| Net Assets | ||
| Pharmaceuticals | 7.0 | % |
| Media | 5.2 | % |
| Banks | 4.4 | % |
| Technology Hardware, Storage & Peripherals | 3.9 | % |
| Biotechnology | 3.7 | % |
| Foreign Equity | 3.7 | % |
| IT Services | 3.6 | % |
| Internet Software & Services | 3.5 | % |
| Beverages | 2.6 | % |
| Internet & Catalog Retail | 2.6 | % |
slightly outperformed emerging markets, while frontier markets underperformed both. The U.S. dollar continued to appreciate relative to many currencies, leading overseas equity markets higher in local terms but lower in U.S. dollar terms. Among emerging markets, China led results, while returns elsewhere were mostly negative in U.S. dollar terms, particularly in Brazil and Latin America more broadly, as well as in much of Southeast Asia. Weak performance across Eastern Europe, the Middle East, North Africa and Asia led emerging and frontier markets lower. The Fund’s allocations to various regions contributed to performance relative to the benchmark and overcame the negative effect of stock selection.
North America
Stock selection in the U.S. slightly detracted from relative performance, while stock selection in Canada contributed. In the U.S., stock selection in the information technology (IT), financials, health care and consumer staples sectors contributed to results, while stock selection in consumer discretionary and industrials detracted.2 Notable contributors to relative performance included video game maker Electronic Arts, semiconductor firm Cavium,3 Valeant Pharmaceuticals International,3 biotechnology company Biogen and Monster Beverage. Within Canada, positioning in the financials and
consumer staples sectors supported relative results. Positioning in the energy sector weighed slightly on performance.4 During the period, we trimmed our U.S. allocation seeking to take advantage of opportunities elsewhere. Our allocation to Canada also declined slightly.
Europe
Overall, stock selection in Europe was a significant detractor from relative performance during the period. At the country level, allocation results were mixed. An overweighting in Belgium supported performance, but overweighting in Norway and underweighting in Germany detracted from results. From a sector perspective, stock selection within financials and our underweighted allocation to the energy sector helped relative performance. Major factors weighing on relative performance were stock selection in the utilities and consumer discretionary sectors.5 Notable relative detractors included U.K. electric power generation company Drax Group3 (sold by period-end), French postal equipment maker Neopost,3 German market research firm GFK,3 and Spanish television network Mediaset Espana Comunicacion.3 Key contributors included Italian bank Banca Generali,3 French insurer Euler Hermes Group,3 Italian power and telecommunication cables manufacturer Prysmian and Belgian mail delivery provider bpost.3
Overall, our allocation to Europe increased during the period. In our view, the euro’s recent depreciation against the U.S. dollar created additional opportunities for growth across the continent, particularly for exports. We raised our allocation to Europe to seek to capitalize on opportunities arising from this trend.
Asia Pacific ex-Japan
Fund positioning in the region was positive, as our slight overweighting and stock selection contributed to relative results. South Korea, Australia and Hong Kong were significant contributors to relative performance during the period. Positioning in China helped absolute performance, but stock selection there weighed on relative performance. India was also a bright spot for relative performance owing to stock selection during the
2. The IT sector comprises communications equipment; electronic equipment, instruments and components; Internet software and services; IT services; semiconductors
and semiconductor equipment; software; and technology hardware, storage and peripherals in the SOI. The financials sector comprises banks, capital markets, consumer
finance, diversified financial services, insurance, real estate investment trusts (REITs), real estate management and development, and thrifts and mortgage finance in the
SOI. The health care sector comprises biotechnology; health care equipment and supplies; health care providers and services; health care technology; life sciences, tools
and services; and pharmaceuticals in the SOI. The consumer staples sector comprises beverages, food products, food and staples retailing, personal products and tobacco
in the SOI. The consumer discretionary sector comprises auto components; automobiles; distributors; diversified consumer services; hotels, restaurants and leisure;
household durables; Internet and catalog retail; media; multiline retail; specialty retail; and textiles, apparel and luxury goods in the SOI. The industrials sector comprises
aerospace and defense, air freight and logistics, airlines, commercial services and supplies, construction and engineering, electrical equipment, industrial conglomerates,
machinery, professional services, road and rail, and trading companies and distributors in the SOI.
3. Not part of the index.
4. The energy sector comprises energy equipment and services; and oil, gas and consumable fuels in the SOI.
5. The utilities sector comprises electric utilities, gas utilities, multi-utilities and water utilities in the SOI.
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| FRANKLIN WORLD PERSPECTIVES FUND | ||
| Top 10 Equity Holdings | ||
| 4/30/15 | ||
| Company | % of Total | |
| Sector/Industry, Country | Net Assets | |
| Apple Inc. | 3.1 | % |
| Technology Hardware, Storage & Peripherals, U.S. | ||
| Actavis PLC | 2.0 | % |
| Pharmaceuticals, U.S. | ||
| Franklin India Growth Fund, Class R6 | 1.7 | % |
| Foreign Equity, India | ||
| Celgene Corp. | 1.5 | % |
| Biotechnology, U.S. | ||
| MasterCard Inc., A | 1.4 | % |
| IT Services, U.S. | ||
| Biogen Inc. | 1.4 | % |
| Biotechnology, U.S. | ||
| Sanofi | 1.3 | % |
| Pharmaceuticals, France | ||
| McKesson Corp. | 1.2 | % |
| Health Care Providers & Services, U.S. | ||
| Anheuser-Busch InBev NV | 1.1 | % |
| Beverages, Belgium | ||
| Visa Inc., A | 1.1 | % |
| IT Services, U.S. | ||
period. Within South Korea, a position in industrial conglomerate Cheil Industries was a top contributor to relative performance. In Hong Kong, Hong Kong Exchanges & Clearing and consumer discretionary companies Samsonite International3 and Techtronic Industries were notable contributors. Our allocation to the region increased slightly over the period, and the region was one of our larger overweightings at period-end.
Japan
Underweighting and stock selection in Japan detracted from relative performance during the period. Positioning in industrials and materials weighed on relative results, while positioning in the health care and utilities sectors contributed.6 The largest individual detractors included heavy equipment maker Komatsu, construction firm Taisei and Shin-Etsu Chemical. Our allocation to Japan remained relatively unchanged and we maintained our underweighting.
Latin America
Positioning in Latin America contributed slightly to relative performance during the period. Stocks in the materials sector contributed, while positioning in consumer discretionary and utilities detracted somewhat. Equity markets in the region broadly declined in U.S. dollar terms, particularly in Brazil, where the real continued to depreciate against the U.S. dollar. The Brazilian real lost 18.19% and the Chilean peso depreciated 5.49% against the U.S. dollar during the period.7 Our allocation to Latin America was unchanged during the period and remained slightly overweighted relative to the benchmark.
Middle East and North Africa (MENA)
Effects from the MENA region were mixed but not substantial in either direction. The region did not have a meaningful impact on relative performance during the period. Positioning in Saudi Arabia and Kuwait supported results, while stock selection in Egypt detracted. Our allocation to the region did not change substantially during the period, and we remained slightly overweighted.
It is important to recognize the effect of currency movements on the Fund’s performance. In general, if the value of the U.S. dollar goes up compared with a foreign currency, an investment traded in that foreign currency will go down in value because it will be worth fewer U.S. dollars. This can have a negative effect on Fund performance. Conversely, when the U.S. dollar weakens in relation to a foreign currency, an investment traded in that foreign currency will increase in value, which can contribute to Fund performance. For the six months ended April 30, 2015, the U.S. dollar rose in value relative to most currencies. As a result, the Fund’s performance was negatively affected by the portfolio’s significant investment in securities with non-U.S. currency exposure.
6. The materials sector comprises chemicals, construction materials, containers and packaging, metals and mining, and paper and forest products in the SOI.
7. Source: FactSet.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN WORLD PERSPECTIVES FUND
We thank you for your participation in Franklin World Perspectives Fund and look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of April 30, 2015, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
CFA® is a trademark owned by CFA Institute.
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FRANKLIN WORLD PERSPECTIVES FUND
Performance Summary as of April 30, 2015
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities. The performance table does not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.
| Net Asset Value | ||||||
| Share Class (Symbol) | 4/30/15 | 10/31/14 | Change | |||
| A (FWPAX) | $ | 12.77 | $ | 13.14 | -$ | 0.37 |
| C (N/A) | $ | 12.70 | $ | 13.02 | -$ | 0.32 |
| R (N/A) | $ | 12.74 | $ | 13.08 | -$ | 0.34 |
| Advisor (FWPZX) | $ | 12.79 | $ | 13.17 | -$ | 0.38 |
| Distributions (11/1/14–4/30/15) | ||||||
| Dividend | Long-Term | |||||
| Share Class | Income | Capital Gain | Total | |||
| A | $ | 0.1095 | $ | 0.9743 | $ | 1.0838 |
| C | $ | 0.0154 | $ | 0.9743 | $ | 0.9897 |
| R | $ | 0.0600 | $ | 0.9743 | $ | 1.0343 |
| Advisor | $ | 0.1359 | $ | 0.9743 | $ | 1.1102 |
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PERFORMANCE SUMMARY
Performance as of 4/30/151
Cumulative total return excludes sales charges. Average annual total returns and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R/Advisor Class: no sales charges.
| Value of | Average Annual | Total Annual | ||||||||||
| Operating Expenses6 | ||||||||||||
| Cumulative | Average Annual | $ | 10,000 | Total Return | ||||||||
| Share Class | Total Return2 | Total Return3 | Investment4 | (3/31/15 | )5 | (with waiver) | (without waiver) | |||||
| A | 1.58 | % | 2.11 | % | ||||||||
| 6-Month | +6.29 | % | +0.19 | % | $ | 10,019 | ||||||
| 1-Year | +7.43 | % | +1.28 | % | $ | 10,128 | -1.55 | % | ||||
| 3-Year | +39.07 | % | +9.43 | % | $ | 13,105 | +8.61 | % | ||||
| Since Inception (12/16/10) | +44.96 | % | +7.40 | % | $ | 13,663 | +7.08 | % | ||||
| C | 2.28 | % | 2.81 | % | ||||||||
| 6-Month | +5.91 | % | +4.94 | % | $ | 10,494 | ||||||
| 1-Year | +6.73 | % | +5.75 | % | $ | 10,575 | +2.80 | % | ||||
| 3-Year | +36.21 | % | +10.85 | % | $ | 13,621 | +10.03 | % | ||||
| Since Inception (12/16/10) | +40.74 | % | +8.13 | % | $ | 14,074 | +7.84 | % | ||||
| R | 1.78 | % | 2.31 | % | ||||||||
| 6-Month | +6.12 | % | +6.12 | % | $ | 10,612 | ||||||
| 1-Year | +7.11 | % | +7.11 | % | $ | 10,711 | +4.12 | % | ||||
| 3-Year | +37.42 | % | +11.18 | % | $ | 13,742 | +10.33 | % | ||||
| Since Inception (12/16/10) | +42.58 | % | +8.46 | % | $ | 14,258 | +8.14 | % | ||||
| Advisor | 1.28 | % | 1.81 | % | ||||||||
| 6-Month | +6.43 | % | +6.43 | % | $ | 10,643 | ||||||
| 1-Year | +7.66 | % | +7.66 | % | $ | 10,766 | +4.67 | % | ||||
| 3-Year | +39.68 | % | +11.78 | % | $ | 13,968 | +10.91 | % | ||||
| Since Inception (12/16/10) | +45.84 | % | +9.02 | % | $ | 14,584 | +8.70 | % | ||||
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
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FRANKLIN WORLD PERSPECTIVES FUND
PERFORMANCE SUMMARY
All investments involve risks, including possible loss of principal. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in emerging market countries involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. Smaller company stocks have historically had more price volatility than large-company stocks, particularly over the short term. The Fund is designed for the aggressive portion of a well-diversified portfolio. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
| Class C: | These shares have higher annual fees and expenses than Class A shares. |
| Class R: | Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares. |
| Advisor Class: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has an expense reduction contractually guaranteed through at least 2/29/16 and fee waivers associated with any investments in a Franklin Templeton money
fund and in Franklin India Growth Fund, contractually guaranteed through at least its current fiscal year-end. Fund investment results reflect the expense reduction and fee
waivers, to the extent applicable; without these reductions, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Six-month return has not been annualized.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.
6. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
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FRANKLIN WORLD PERSPECTIVES FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
| 1. | Divide your account value by $1,000. |
| If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
| 2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
| If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
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| FRANKLIN WORLD PERSPECTIVES FUND | ||||||
| YOUR FUND’S EXPENSES | ||||||
| Beginning Account | Ending Account | Expenses Paid During | ||||
| Share Class | Value 11/1/14 | Value 4/30/15 | Period* 11/1/14–4/30/15 | |||
| A | ||||||
| Actual | $ | 1,000 | $ | 1,062.90 | $ | 7.31 |
| Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,017.70 | $ | 7.15 |
| C | ||||||
| Actual | $ | 1,000 | $ | 1,059.10 | $ | 10.52 |
| Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,014.58 | $ | 10.29 |
| R | ||||||
| Actual | $ | 1,000 | $ | 1,061.20 | $ | 8.94 |
| Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,016.12 | $ | 8.75 |
| Advisor | ||||||
| Actual | $ | 1,000 | $ | 1,064.30 | $ | 6.40 |
| Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,018.60 | $ | 6.26 |
*Expenses are calculated using the most recent six-month expense ratio, net of expense waivers, annualized for each class (A: 1.43%;
C: 2.06%; R: 1.75%; and Advisor: 1.25%), multiplied by the average account value over the period, multiplied by 181/365 to reflect the
one-half year period.
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| FRANKLIN TEMPLETON INTERNATIONAL TRUST | |||||||||||||||
| Financial Highlights | |||||||||||||||
| Franklin World Perspectives Fund | |||||||||||||||
| Six Months Ended | |||||||||||||||
| April 30, 2015 | Year Ended October 31, | ||||||||||||||
| (unaudited) | 2014 | 2013 | 2012 | 2011 | a | ||||||||||
| Class A | |||||||||||||||
| Per share operating performance | |||||||||||||||
| (for a share outstanding throughout the period) | |||||||||||||||
| Net asset value, beginning of period | $ | 13.14 | $ | 12.70 | $ | 10.10 | $ | 9.63 | $ | 10.00 | |||||
| Income from investment operationsb: | |||||||||||||||
| Net investment incomec | 0.01 | 0.04 | 0.09 | 0.07 | 0.05 | ||||||||||
| Net realized and unrealized gains (losses) | 0.70 | 0.58 | 2.63 | 0.50 | (0.41 | ) | |||||||||
| Total from investment operations | 0.71 | 0.62 | 2.72 | 0.57 | (0.36 | ) | |||||||||
| Less distributions from: | |||||||||||||||
| Net investment income | (0.11 | ) | (0.18 | ) | (0.12 | ) | (0.10 | ) | (0.01 | ) | |||||
| Net realized gains | (0.97 | ) | — | — | — | — | |||||||||
| Total distributions | (1.08 | ) | (0.18 | ) | (0.12 | ) | (0.10 | ) | (0.01 | ) | |||||
| Net asset value, end of period | $ | 12.77 | $ | 13.14 | $ | 12.70 | $ | 10.10 | $ | 9.63 | |||||
| Total returnd | 6.29 | % | 4.92 | % | 27.17 | % | 5.97 | % | (3.64 | )% | |||||
| Ratios to average net assetse | |||||||||||||||
| Expenses before waiver and payments by affiliates | 1.92 | % | 1.92 | % | 1.82 | % | 1.98 | % | 2.29 | % | |||||
| Expenses net of waiver and payments by affiliates | 1.43 | %f | 1.39 | %f | 1.35 | %f | 1.37 | % | 1.33 | %f | |||||
| Net investment income | 0.16 | % | 0.28 | % | 0.76 | % | 0.67 | % | 0.54 | % | |||||
| Supplemental data | |||||||||||||||
| Net assets, end of period (000’s) | $ | 14,738 | $ | 16,438 | $ | 17,341 | $ | 12,752 | $ | 11,796 | |||||
| Portfolio turnover rate | 61.43 | % | 79.24 | % | 66.56 | % | 62.96 | % | 71.86 | % | |||||
aFor the period December 16, 2010 (commencement of operations) to October 31, 2011.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of expense reduction rounds to less than 0.01%.
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FRANKLIN TEMPLETON INTERNATIONAL TRUST
FINANCIAL HIGHLIGHTS
| Franklin World Perspectives Fund (continued) | |||||||||||||||
| Six Months Ended | |||||||||||||||
| April 30, 2015 | Year Ended October 31, | ||||||||||||||
| (unaudited) | 2014 | 2013 | 2012 | 2011 | a | ||||||||||
| Class C | |||||||||||||||
| Per share operating performance | |||||||||||||||
| (for a share outstanding throughout the period) | |||||||||||||||
| Net asset value, beginning of period | $ | 13.02 | $ | 12.61 | $ | 10.04 | $ | 9.57 | $ | 10.00 | |||||
| Income from investment operationsb: | |||||||||||||||
| Net investment income (loss)c | (0.03 | ) | (0.05 | ) | 0.01 | —d | (0.01 | ) | |||||||
| Net realized and unrealized gains (losses) | 0.70 | 0.58 | 2.61 | 0.52 | (0.41 | ) | |||||||||
| Total from investment operations | 0.67 | 0.53 | 2.62 | 0.52 | (0.42 | ) | |||||||||
| Less distributions from: | |||||||||||||||
| Net investment income | (0.02 | ) | (0.12 | ) | (0.05 | ) | (0.05 | ) | (0.01 | ) | |||||
| Net realized gains | (0.97 | ) | — | — | — | — | |||||||||
| Total distributions | (0.99 | ) | (0.12 | ) | (0.05 | ) | (0.05 | ) | (0.01 | ) | |||||
| Net asset value, end of period | $ | 12.70 | $ | 13.02 | $ | 12.61 | $ | 10.04 | $ | 9.57 | |||||
| Total returne | 5.91 | % | 4.22 | % | 26.22 | % | 5.38 | % | (4.14 | )% | |||||
| Ratios to average net assetsf | |||||||||||||||
| Expenses before waiver and payments by affiliates | 2.55 | % | 2.59 | % | 2.51 | % | 2.62 | % | 3.00 | % | |||||
| Expenses net of waiver and payments by affiliates | 2.06 | %g | 2.06 | %g | 2.04 | %g | 2.01 | % | 2.04 | %g | |||||
| Net investment income (loss) | (0.47 | )% | (0.39 | )% | 0.07 | % | 0.03 | % | (0.17 | )% | |||||
| Supplemental data | |||||||||||||||
| Net assets, end of period (000’s) | $ | 3,161 | $ | 4,185 | $ | 3,849 | $ | 2,820 | $ | 2,689 | |||||
| Portfolio turnover rate | 61.43 | % | 79.24 | % | 66.56 | % | 62.96 | % | 71.86 | % | |||||
aFor the period December 16, 2010 (commencement of operations) to October 31, 2011.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dAmount rounds to less than $0.01 per share.
eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
fRatios are annualized for periods less than one year.
gBenefit of expense reduction rounds to less than 0.01%.
14 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
| FRANKLIN TEMPLETON INTERNATIONAL TRUST | |||||||||||||||
| FINANCIAL HIGHLIGHTS | |||||||||||||||
| Franklin World Perspectives Fund (continued) | |||||||||||||||
| Six Months Ended | |||||||||||||||
| April 30, 2015 | Year Ended October 31, | ||||||||||||||
| (unaudited) | 2014 | 2013 | 2012 | 2011 | a | ||||||||||
| Class R | |||||||||||||||
| Per share operating performance | |||||||||||||||
| (for a share outstanding throughout the period) | |||||||||||||||
| Net asset value, beginning of period | $ | 13.08 | $ | 12.65 | $ | 10.07 | $ | 9.60 | $ | 10.00 | |||||
| Income from investment operationsb: | |||||||||||||||
| Net investment income (loss)c | (0.01 | ) | (0.01 | ) | 0.04 | 0.03 | 0.01 | ||||||||
| Net realized and unrealized gains (losses) | 0.70 | 0.58 | 2.62 | 0.51 | (0.40 | ) | |||||||||
| Total from investment operations | 0.69 | 0.57 | 2.66 | 0.54 | (0.39 | ) | |||||||||
| Less distributions from: | |||||||||||||||
| Net investment income | (0.06 | ) | (0.14 | ) | (0.08 | ) | (0.07 | ) | (0.01 | ) | |||||
| Net realized gains | (0.97 | ) | — | — | — | — | |||||||||
| Total distributions | (1.03 | ) | (0.14 | ) | (0.08 | ) | (0.07 | ) | (0.01 | ) | |||||
| Net asset value, end of period | $ | 12.74 | $ | 13.08 | $ | 12.65 | $ | 10.07 | $ | 9.60 | |||||
| Total returnd | 6.12 | % | 4.54 | % | 26.58 | % | 5.70 | % | (3.94 | )% | |||||
| Ratios to average net assetse | |||||||||||||||
| Expenses before waiver and payments by affiliates | 2.24 | % | 2.28 | % | 2.22 | % | 2.36 | % | 2.71 | % | |||||
| Expenses net of waiver and payments by affiliates | 1.75 | %f | 1.75 | %f | 1.75 | %f | 1.75 | % | 1.75 | %f | |||||
| Net investment income (loss) | (0.16 | )% | (0.08 | )% | 0.36 | % | 0.29 | % | 0.12 | % | |||||
| Supplemental data | |||||||||||||||
| Net assets, end of period (000’s) | $ | 3,185 | $ | 3,269 | $ | 3,163 | $ | 2,517 | $ | 2,399 | |||||
| Portfolio turnover rate | 61.43 | % | 79.24 | % | 66.56 | % | 62.96 | % | 71.86 | % | |||||
aFor the period December 16, 2010 (commencement of operations) to October 31, 2011.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of expense reduction rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 15
FRANKLIN TEMPLETON INTERNATIONAL TRUST
FINANCIAL HIGHLIGHTS
| Franklin World Perspectives Fund (continued) | |||||||||||||||
| Six Months Ended | |||||||||||||||
| April 30, 2015 | Year Ended October 31, | ||||||||||||||
| (unaudited) | 2014 | 2013 | 2012 | 2011 | a | ||||||||||
| Advisor Class | |||||||||||||||
| Per share operating performance | |||||||||||||||
| (for a share outstanding throughout the period) | |||||||||||||||
| Net asset value, beginning of period | $ | 13.17 | $ | 12.72 | $ | 10.12 | $ | 9.64 | $ | 10.00 | |||||
| Income from investment operationsb: | |||||||||||||||
| Net investment incomec | 0.02 | 0.06 | 0.10 | 0.08 | 0.05 | ||||||||||
| Net realized and unrealized gains (losses) | 0.71 | 0.58 | 2.63 | 0.51 | (0.40 | ) | |||||||||
| Total from investment operations | 0.73 | 0.64 | 2.73 | 0.59 | (0.35 | ) | |||||||||
| Less distributions from: | |||||||||||||||
| Net investment income | (0.14 | ) | (0.19 | ) | (0.13 | ) | (0.11 | ) | (0.01 | ) | |||||
| Net realized gains | (0.97 | ) | — | — | — | — | |||||||||
| Total distributions | (1.11 | ) | (0.19 | ) | (0.13 | ) | (0.11 | ) | (0.01 | ) | |||||
| Net asset value, end of period | $ | 12.79 | $ | 13.17 | $ | 12.72 | $ | 10.12 | $ | 9.64 | |||||
| Total returnd | 6.43 | % | 5.07 | % | 27.26 | % | 6.25 | % | (3.54 | )% | |||||
| Ratios to average net assetse | |||||||||||||||
| Expenses before waiver and payments by affiliates | 1.74 | % | 1.78 | % | 1.72 | % | 1.86 | % | 2.21 | % | |||||
| Expenses net of waiver and payments by affiliates | 1.25 | %f | 1.25 | %f | 1.25 | %f | 1.25 | % | 1.25 | %f | |||||
| Net investment income | 0.34 | % | 0.42 | % | 0.86 | % | 0.79 | % | 0.62 | % | |||||
| Supplemental data | |||||||||||||||
| Net assets, end of period (000’s) | $ | 10,444 | $ | 12,818 | $ | 13,567 | $ | 10,662 | $ | 10,047 | |||||
| Portfolio turnover rate | 61.43 | % | 79.24 | % | 66.56 | % | 62.96 | % | 71.86 | % | |||||
aFor the period December 16, 2010 (commencement of operations) to October 31, 2011.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of expense reduction rounds to less than 0.01%.
16 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
| FRANKLIN TEMPLETON INTERNATIONAL TRUST | ||||
| Statement of Investments, April 30, 2015 (unaudited) | ||||
| Franklin World Perspectives Fund | ||||
| Industry | Shares/Units | Value | ||
| Common Stocks and | ||||
| Other Equity Interests 93.5% | ||||
| Australia 1.6% | ||||
| Amcor Ltd. | Containers & Packaging | 2,883 | $ | 30,868 |
| BHP Billiton Ltd. | Metals & Mining | 3,340 | 84,500 | |
| BHP Billiton PLC | Metals & Mining | 2,400 | 57,541 | |
| Brambles Ltd. | Commercial Services & Supplies | 8,439 | 72,325 | |
| Commonwealth Bank of Australia | Banks | 1,002 | 70,468 | |
| Computershare Ltd. | IT Services | 3,097 | 30,169 | |
| CSL Ltd. | Biotechnology | 1,507 | 108,500 | |
| FlexiGroup Ltd. | Consumer Finance | 11,565 | 31,208 | |
| Origin Energy Ltd. | Oil, Gas & Consumable Fuels | 2,615 | 26,364 | |
| Woolworths Ltd. | Food & Staples Retailing | 32 | 747 | |
| 512,690 | ||||
| Belgium 1.9% | ||||
| Anheuser-Busch InBev NV | Beverages | 2,880 | 351,911 | |
| bpost SA | Air Freight & Logistics | 8,129 | 233,273 | |
| 585,184 | ||||
| Brazil 0.4% | ||||
| Ambev SA | Beverages | 3,100 | 19,506 | |
| BRF SA | Food Products | 800 | 17,116 | |
| CETIP SA Mercados Organizados | Capital Markets | 3,800 | 43,617 | |
| Cielo SA | IT Services | 900 | 12,540 | |
| Fleury SA | Health Care Providers & Services | 1,300 | 7,070 | |
| JBS SA | Food Products | 1,300 | 6,711 | |
| Souza Cruz SA | Tobacco | 1,100 | 10,050 | |
| Ultrapar Participacoes SA | Oil, Gas & Consumable Fuels | 600 | 13,822 | |
| 130,432 | ||||
| Canada 3.3% | ||||
| Agrium Inc. | Chemicals | 175 | 18,127 | |
| Alimentation Couche-Tard Inc., B | Food & Staples Retailing | 600 | 22,961 | |
| ARC Resources Ltd. | Oil, Gas & Consumable Fuels | 225 | 4,603 | |
| ATCO Ltd., I | Multi-Utilities | 350 | 13,263 | |
| Bank of Montreal | Banks | 675 | 44,088 | |
| Bank of Nova Scotia | Banks | 750 | 41,349 | |
| Baytex Energy Corp. | Oil, Gas & Consumable Fuels | 375 | 7,324 | |
| Bonavista Energy Corp. | Oil, Gas & Consumable Fuels | 2,150 | 14,805 | |
| Brookfield Asset Management Inc., A | Real Estate Management & Development | 1,075 | 57,877 | |
| Calfrac Well Services Ltd. | Energy Equipment & Services | 1,575 | 13,104 | |
| Canadian Energy Services & Technology Corp., A | Energy Equipment & Services | 1,200 | 6,056 | |
| Canadian Imperial Bank of Commerce | Banks | 675 | 54,190 | |
| Canadian National Railway Co. | Road & Rail | 1,125 | 72,623 | |
| Canadian Natural Resources Ltd. | Oil, Gas & Consumable Fuels | 900 | 29,899 | |
| Canadian Pacific Railway Ltd. | Road & Rail | 175 | 33,358 | |
| CanElson Drilling Inc. | Energy Equipment & Services | 1,525 | 5,813 | |
| Cenovus Energy Inc. | Oil, Gas & Consumable Fuels | 900 | 16,952 | |
| aCrew Energy Inc. | Oil, Gas & Consumable Fuels | 2,100 | 9,310 | |
| Enbridge Inc. | Oil, Gas & Consumable Fuels | 950 | 49,643 | |
| Franco-Nevada Corp. | Metals & Mining | 350 | 18,168 | |
| Gildan Activewear Inc. | Textiles, Apparel & Luxury Goods | 300 | 9,507 | |
| Home Capital Group Inc. | Thrifts & Mortgage Finance | 225 | 8,879 | |
franklintempleton.com Semiannual Report | 17
FRANKLIN TEMPLETON INTERNATIONAL TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| Franklin World Perspectives Fund (continued) | ||||
| Industry | Shares/Units | Value | ||
| Common Stocks and | ||||
| Other Equity Interests (continued) | ||||
| Canada (continued) | ||||
| IGM Financial Inc. | Capital Markets | 400 | $ | 15,125 |
| aKelt Exploration Ltd. | Oil, Gas & Consumable Fuels | 1,150 | 8,872 | |
| Keyera Corp. | Oil, Gas & Consumable Fuels | 300 | 10,558 | |
| MacDonald Dettwiler and Associates Ltd. | Aerospace & Defense | 415 | 32,939 | |
| Major Drilling Group International Inc. | Metals & Mining | 1,275 | 6,836 | |
| Metro Inc., A | Food & Staples Retailing | 925 | 26,736 | |
| Mullen Group Ltd. | Energy Equipment & Services | 500 | 8,668 | |
| aNuvista Energy Ltd. | Oil, Gas & Consumable Fuels | 3,125 | 23,151 | |
| Onex Corp. | Diversified Financial Services | 450 | 27,091 | |
| Peyto Exploration & Development Corp. | Oil, Gas & Consumable Fuels | 325 | 9,445 | |
| Potash Corp. of Saskatchewan Inc. | Chemicals | 525 | 17,141 | |
| Power Corp. of Canada | Insurance | 1,200 | 32,965 | |
| Power Financial Corp. | Insurance | 975 | 30,153 | |
| Restaurant Brands International Inc. | Hotels, Restaurants & Leisure | 400 | 16,318 | |
| Rogers Communications Inc., B | Wireless Telecommunication Services | 350 | 12,501 | |
| Royal Bank of Canada | Banks | 750 | 49,789 | |
| Saputo Inc. | Food Products | 675 | 19,997 | |
| Savanna Energy Services Corp. | Energy Equipment & Services | 2,425 | 4,019 | |
| Thomson Reuters Corp. | Media | 875 | 35,943 | |
| The Toronto-Dominion Bank | Banks | 1,100 | 50,773 | |
| aTourmaline Oil Corp. | Oil, Gas & Consumable Fuels | 500 | 17,253 | |
| TransCanada Corp. | Oil, Gas & Consumable Fuels | 550 | 25,523 | |
| 1,033,695 | ||||
| Chile 0.1% | ||||
| iShares MSCI Chile Capped ETF | Foreign Equity | 1,095 | 46,231 | |
| China 2.6% | ||||
| aAlibaba Group Holding Ltd., ADR | Internet Software & Services | 1,084 | 88,118 | |
| aBaidu Inc., ADR | Internet Software & Services | 438 | 87,723 | |
| Brilliance China Automotive Holdings Ltd. | Automobiles | 34,000 | 64,048 | |
| China Construction Bank Corp., H | Banks | 41,000 | 39,940 | |
| China Merchants Bank Co. Ltd., H | Banks | 23,002 | 70,041 | |
| China Overseas Land & Investment Ltd. | Real Estate Management & Development | 36,000 | 150,495 | |
| China Resources Land Ltd. | Real Estate Management & Development | 6,444 | 23,530 | |
| aCtrip.com International Ltd., ADR | Internet & Catalog Retail | 548 | 34,897 | |
| aJD.com Inc., ADR | Internet & Catalog Retail | 547 | 18,357 | |
| Ping An Insurance (Group) Co. of China Ltd. | Insurance | 8,000 | 115,401 | |
| Tencent Holdings Ltd. | Internet Software & Services | 4,700 | 97,573 | |
| aVipshop Holdings Ltd., ADR | Internet & Catalog Retail | 619 | 17,512 | |
| 807,635 | ||||
| Egypt 0.1% | ||||
| bEastern Tobacco | Tobacco | 390 | 9,967 | |
| bTalaat Moustafa Group | Real Estate Management & Development | 6,910 | 8,975 | |
| 18,942 | ||||
| Euro Community 0.6% | ||||
| iShares MSCI Emerging Markets Eastern Europe | ||||
| ETF | Foreign Equity | 9,163 | 182,344 |
18 | Semiannual Report
franklintempleton.com
FRANKLIN TEMPLETON INTERNATIONAL TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| Franklin World Perspectives Fund (continued) | ||||
| Industry | Shares/Units | Value | ||
| Common Stocks and | ||||
| Other Equity Interests (continued) | ||||
| Finland 0.6% | ||||
| Outotec OYJ | Construction & Engineering | 26,392 | $ | 185,082 |
| France 5.0% | ||||
| Euler Hermes Group | Insurance | 2,049 | 224,160 | |
| Eutelsat Communications | Media | 8,504 | 296,563 | |
| Legrand SA | Electrical Equipment | 4,155 | 240,752 | |
| Neopost SA | Technology Hardware, Storage & Peripherals | 2,088 | 100,637 | |
| Sanofi | Pharmaceuticals | 4,009 | 410,245 | |
| Schneider Electric SE | Electrical Equipment | 1,784 | 133,796 | |
| Vinci SA | Construction & Engineering | 2,581 | 158,759 | |
| 1,564,912 | ||||
| Germany 2.0% | ||||
| BRAAS Monier Building Group SA | Construction Materials | 9,299 | 255,736 | |
| GFK AG | Media | 4,648 | 178,363 | |
| Takkt AG | Internet & Catalog Retail | 10,780 | 196,736 | |
| 630,835 | ||||
| Hong Kong 1.1% | ||||
| AIA Group Ltd. | Insurance | 23,200 | 155,058 | |
| Hong Kong Exchanges & Clearing Ltd. | Diversified Financial Services | 2,942 | 112,587 | |
| Samsonite International SA | Textiles, Apparel & Luxury Goods | 12,000 | 43,895 | |
| Techtronic Industries Co. Ltd. | Household Durables | 8,000 | 28,282 | |
| 339,822 | ||||
| India 1.7% | ||||
| cFranklin India Growth Fund, Class R6 | Foreign Equity | 42,949 | 546,307 | |
| Indonesia 0.6% | ||||
| Bank Central Asia Tbk PT | Banks | 50,100 | 52,081 | |
| Bank Mandiri Persero Tbk PT | Banks | 27,300 | 22,640 | |
| Kalbe Farma Tbk PT | Pharmaceuticals | 243,700 | 33,747 | |
| Matahari Department Store Tbk PT | Multiline Retail | 20,200 | 27,271 | |
| Mayora Indah Tbk PT | Food Products | 10,900 | 21,463 | |
| Surya Citra Media Tbk PT | Media | 156,985 | 35,121 | |
| 192,323 | ||||
| Italy 3.6% | ||||
| Banca Generali | Capital Markets | 9,349 | 314,282 | |
| Cerved Information Solutions SpA | Diversified Financial Services | 18,364 | 133,935 | |
| aEi TOWERS | Communications Equipment | 2,617 | 158,859 | |
| Prysmian SpA | Electrical Equipment | 14,468 | 297,079 | |
| Snam SpA | Gas Utilities | 43,968 | 229,700 | |
| 1,133,855 | ||||
| Japan 5.6% | ||||
| Coca-Cola West Company Ltd. | Beverages | 3,603 | 57,520 | |
| Fuji Heavy Industries Ltd. | Automobiles | 1,596 | 53,799 | |
| Hitachi Ltd. | Electronic Equipment, Instruments & Components | 8,960 | 61,487 | |
| Hokuriku Electric Power Co. | Electric Utilities | 2,884 | 42,853 | |
| Hoya Corp. | Electronic Equipment, Instruments & Components | 1,493 | 58,037 | |
| INPEX Corp. | Oil, Gas & Consumable Fuels | 1,301 | 16,455 | |
| ITOCHU Corp. | Trading Companies & Distributors | 8,592 | 106,509 |
franklintempleton.com Semiannual Report | 19
FRANKLIN TEMPLETON INTERNATIONAL TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| Franklin World Perspectives Fund (continued) | ||||
| Industry | Shares/Units | Value | ||
| Common Stocks and | ||||
| Other Equity Interests (continued) | ||||
| Japan (continued) | ||||
| KDDI Corp. | Wireless Telecommunication Services | 1,785 | $ | 42,461 |
| Keio Corp. | Road & Rail | 11,789 | 91,437 | |
| Keyence Corp. | Electronic Equipment, Instruments & Components | 127 | 68,377 | |
| Komatsu Ltd. | Machinery | 3,501 | 70,993 | |
| Mitsubishi Estate Co. Ltd. | Real Estate Management & Development | 3,651 | 86,329 | |
| Mitsubishi UFJ Financial Group Inc. | Banks | 13,602 | 97,512 | |
| Nippon Steel Sumitomo Metal Corp. | Metals & Mining | 18,841 | 49,395 | |
| Oriental Land Co. Ltd. | Hotels, Restaurants & Leisure | 730 | 49,576 | |
| Panasonic Corp. | Household Durables | 4,833 | 69,789 | |
| Seven & I Holdings Co. Ltd. | Food & Staples Retailing | 1,585 | 68,702 | |
| Shin-Etsu Chemical Co. Ltd. | Chemicals | 824 | 50,762 | |
| SoftBank Corp. | Wireless Telecommunication Services | 810 | 50,918 | |
| Sumitomo Mitsui Financial Group Inc. | Banks | 2,175 | 95,497 | |
| T&D Holdings Inc. | Insurance | 5,355 | 77,797 | |
| Taisei Corp. | Construction & Engineering | 10,376 | 60,401 | |
| Takeda Pharmaceutical Co. Ltd. | Pharmaceuticals | 2,154 | 111,083 | |
| Toyota Industries Corp. | Auto Components | 1,283 | 73,290 | |
| Toyota Motor Corp. | Automobiles | 2,249 | 157,443 | |
| 1,768,422 | ||||
| Kuwait 0.1% | ||||
| bJazeera Airways | Airlines | 3,250 | 5,603 | |
| Kuwait Projects Co. Holding KSC | Diversified Financial Services | 4,667 | 10,213 | |
| Mabanee Co. SAKC | Real Estate Management & Development | 2,719 | 8,745 | |
| 24,561 | ||||
| Luxembourg 0.1% | ||||
| L’Occitane International SA | Specialty Retail | 11,750 | 34,793 | |
| Malaysia 0.2% | ||||
| d7-Eleven Malaysia Holdings Bhd., 144A | Food & Staples Retailing | 73,600 | 34,295 | |
| Nestle (Malaysia) Bhd. | Food Products | 1,600 | 33,280 | |
| 67,575 | ||||
| Mexico 0.5% | ||||
| iShares MSCI Mexico Capped ETF | Foreign Equity | 2,526 | 148,049 | |
| Netherlands 0.9% | ||||
| aNXP Semiconductors NV | Semiconductors & Semiconductor Equipment | 3,100 | 297,972 | |
| Norway 0.8% | ||||
| TGS Nopec Geophysical Co. ASA | Energy Equipment & Services | 10,462 | 265,727 | |
| Oman 0.0%† | ||||
| Bank Muscat SAOG | Banks | 6,103 | 8,306 | |
| Singapore 0.3% | ||||
| DBS Group Holdings Ltd. | Banks | 4,447 | 70,852 | |
| Singapore Technologies Engineering Ltd. | Aerospace & Defense | 6,000 | 16,409 | |
| 87,261 | ||||
| South Africa 0.8% | ||||
| iShares MSCI South Africa ETF | Foreign Equity | 3,474 | 245,577 |
20 | Semiannual Report
franklintempleton.com
FRANKLIN TEMPLETON INTERNATIONAL TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| Franklin World Perspectives Fund (continued) | ||||
| Industry | Shares/Units | Value | ||
| Common Stocks and | ||||
| Other Equity Interests (continued) | ||||
| South Korea 1.1% | ||||
| Amorepacific Corp. | Personal Products | 50 | $ | 18,026 |
| a,dCheil Industries Inc., 144A | Industrial Conglomerates | 162 | 23,834 | |
| Hyundai Glovis Co. Ltd. | Air Freight & Logistics | 87 | 19,058 | |
| Hyundai Motor Co. | Automobiles | 229 | 35,923 | |
| Hyundai Wia Corp. | Auto Components | 207 | 29,302 | |
| Lotte Chemical Corp. | Chemicals | 119 | 27,725 | |
| Naver Corp. | Internet Software & Services | 46 | 27,754 | |
| POSCO | Metals & Mining | 67 | 15,672 | |
| Samsung Electronics Co. Ltd. | Technology Hardware, Storage & Peripherals | 90 | 117,791 | |
| dSamsung SDS Co. Ltd., 144A | IT Services | 124 | 29,466 | |
| Shinsegae International Co. Ltd. | Specialty Retail | 179 | 17,778 | |
| 362,329 | ||||
| Spain 2.1% | ||||
| aApplus Services SA | Professional Services | 18,571 | 224,733 | |
| Cia de Distribucion Integral Logista Holdings SA | Air Freight & Logistics | 1,338 | 28,600 | |
| aMediaset Espana Comunicacion SA | Media | 15,737 | 213,923 | |
| Tecnicas Reunidas SA | Energy Equipment & Services | 4,209 | 196,276 | |
| 663,532 | ||||
| Sri Lanka 0.1% | ||||
| Nestle Lanka PLC | Food Products | 2,132 | 36,786 | |
| Switzerland 0.5% | ||||
| Roche Holding AG | Pharmaceuticals | 525 | 151,543 | |
| Taiwan 1.6% | ||||
| aE Ink Holdings Inc. | Electronic Equipment, Instruments & Components | 82,000 | 37,363 | |
| Epistar Corp. | Semiconductors & Semiconductor Equipment | 17,000 | 26,653 | |
| aG Tech Optoelectronics Corp. | Electronic Equipment, Instruments & Components | 27,000 | 23,723 | |
| GeoVision Inc. | Electronic Equipment, Instruments & Components | 5,000 | 17,475 | |
| Ginko International Co. Ltd. | Health Care Equipment & Supplies | 2,000 | 29,396 | |
| Hota Industrial Manufacturing Co. Ltd. | Auto Components | 25,000 | 63,284 | |
| Lion Travel Service Co. Ltd. | Hotels, Restaurants & Leisure | 9,000 | 38,950 | |
| Poya Co. Ltd. | Multiline Retail | 5,000 | 53,648 | |
| ScinoPharm Taiwan Ltd. | Pharmaceuticals | 30,000 | 50,366 | |
| St. Shine Optical Co. Ltd. | Health Care Equipment & Supplies | 2,000 | 35,472 | |
| Taiwan Semiconductor Manufacturing Co. Ltd. | Semiconductors & Semiconductor Equipment | 20,570 | 98,765 | |
| Yuanta Financial Holding Co. Ltd. | Capital Markets | 46,000 | 26,819 | |
| 501,914 | ||||
| Thailand 1.0% | ||||
| BEC World PCL, fgn. | Media | 25,100 | 30,596 | |
| Bumrungrad Hospital PCL, fgn. | Health Care Providers & Services | 9,700 | 47,149 | |
| CP ALL PCL, fgn. | Food & Staples Retailing | 24,100 | 30,654 | |
| Kasikornbank PCL, fgn. | Banks | 10,900 | 69,321 | |
| Major Cineplex Group PCL, fgn. | Media | 21,100 | 21,407 | |
| The Siam Cement PCL, fgn. | Construction Materials | 3,900 | 63,071 | |
| Siam Commercial Bank PCL, fgn. | Banks | 11,090 | 53,401 | |
| 315,599 |
franklintempleton.com
Semiannual Report | 21
FRANKLIN TEMPLETON INTERNATIONAL TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| Franklin World Perspectives Fund (continued) | ||||
| Industry | Shares/Units | Value | ||
| Common Stocks and | ||||
| Other Equity Interests (continued) | ||||
| United Arab Emirates 0.2% | ||||
| Air Arabia PJSC | Airlines | 26,750 | $ | 11,944 |
| Emaar Properties PJSC | Real Estate Management & Development | 8,129 | 18,237 | |
| Emirates NBD PJSC | Banks | 3,180 | 8,571 | |
| First Gulf Bank PJSC | Banks | 3,110 | 12,913 | |
| 51,665 | ||||
| United Kingdom 8.0% | ||||
| Ashtead Group PLC | Trading Companies & Distributors | 3,400 | 58,800 | |
| AstraZeneca PLC | Pharmaceuticals | 750 | 51,796 | |
| Avon Rubber PLC | Aerospace & Defense | 5,000 | 59,439 | |
| BG Group PLC | Oil, Gas & Consumable Fuels | 3,100 | 56,302 | |
| Bodycote PLC | Machinery | 4,500 | 47,551 | |
| Bovis Homes Group PLC | Household Durables | 3,500 | 50,128 | |
| BP PLC | Oil, Gas & Consumable Fuels | 8,300 | 59,928 | |
| British American Tobacco PLC | Tobacco | 1,020 | 56,281 | |
| Card Factory PLC | Specialty Retail | 10,186 | 49,594 | |
| Clipper Logistics Group Ltd. | Commercial Services & Supplies | 22,000 | 64,201 | |
| Compass Group PLC | Hotels, Restaurants & Leisure | 2,960 | 52,600 | |
| Dixons Carphone PLC | Specialty Retail | 9,150 | 59,629 | |
| Essentra PLC | Chemicals | 3,500 | 51,660 | |
| GlaxoSmithKline PLC | Pharmaceuticals | 2,100 | 48,849 | |
| Gooch & Housego PLC | Electronic Equipment, Instruments & Components | 5,000 | 55,331 | |
| IMI PLC | Machinery | 2,950 | 56,727 | |
| Imperial Tobacco Group PLC | Tobacco | 1,200 | 58,831 | |
| Inchcape PLC | Distributors | 4,500 | 57,504 | |
| Lavendon Group PLC | Trading Companies & Distributors | 20,000 | 53,449 | |
| Micro Focus International PLC | Software | 3,000 | 57,919 | |
| Next PLC | Multiline Retail | 450 | 50,800 | |
| Reed Elsevier NV | Media | 11,322 | 273,577 | |
| Reed Elsevier PLC | Media | 3,300 | 54,841 | |
| Regus PLC | Commercial Services & Supplies | 15,000 | 57,481 | |
| Restaurant Group PLC | Hotels, Restaurants & Leisure | 5,000 | 52,221 | |
| Restore PLC | Commercial Services & Supplies | 15,000 | 55,984 | |
| Rio Tinto Ltd. | Metals & Mining | 1,651 | 74,668 | |
| Rio Tinto PLC | Metals & Mining | 1,325 | 58,712 | |
| Royal Dutch Shell PLC, A | Oil, Gas & Consumable Fuels | 1,800 | 56,937 | |
| RWS Holdings PLC | Professional Services | 20,000 | 42,314 | |
| The Sage Group PLC | Software | 7,350 | 54,864 | |
| Scapa Group PLC | Chemicals | 21,000 | 52,896 | |
| SIG PLC | Trading Companies & Distributors | 17,500 | 52,171 | |
| Smith & Nephew PLC | Health Care Equipment & Supplies | 3,040 | 52,154 | |
| Smiths Group PLC | Industrial Conglomerates | 2,800 | 49,241 | |
| Spire Healthcare Group PLC | Health Care Providers & Services | 10,000 | 49,026 | |
| St. James’s Place Capital PLC | Insurance | 3,700 | 50,719 | |
| Ted Baker PLC | Textiles, Apparel & Luxury Goods | 1,200 | 52,565 | |
| Topps Tiles PLC | Specialty Retail | 30,000 | 53,104 | |
| Unite Group PLC | Real Estate Management & Development | 6,000 | 55,200 | |
| Urban & Civic PLC | Real Estate Management & Development | 13,000 | 51,913 | |
| Workspace Group PLC | Real Estate Investment Trusts (REITs) | 4,000 | 51,852 | |
| 2,509,759 |
22 | Semiannual Report
franklintempleton.com
FRANKLIN TEMPLETON INTERNATIONAL TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| Franklin World Perspectives Fund (continued) | ||||
| Industry | Shares/Units | Value | ||
| Common Stocks and | ||||
| Other Equity Interests (continued) | ||||
| United States 44.4% | ||||
| aActavis PLC | Pharmaceuticals | 2,200 | $ | 622,292 |
| Advance Auto Parts Inc. | Specialty Retail | 1,600 | 228,800 | |
| aAffiliated Managers Group Inc. | Capital Markets | 1,350 | 305,275 | |
| aAmazon.com Inc. | Internet & Catalog Retail | 590 | 248,850 | |
| Apple Inc. | Technology Hardware, Storage & Peripherals | 7,690 | 962,403 | |
| aBiogen Inc. | Biotechnology | 1,160 | 433,759 | |
| aBioMarin Pharmaceutical Inc. | Biotechnology | 610 | 68,351 | |
| Bristol-Myers Squibb Co. | Pharmaceuticals | 2,690 | 171,434 | |
| aCavium Inc. | Semiconductors & Semiconductor Equipment | 3,100 | 200,849 | |
| aCelgene Corp. | Biotechnology | 4,250 | 459,255 | |
| aCerner Corp. | Health Care Technology | 3,500 | 251,335 | |
| aCharter Communications Inc., A | Media | 850 | 159,001 | |
| aChipotle Mexican Grill Inc. | Hotels, Restaurants & Leisure | 170 | 105,628 | |
| aCognizant Technology Solutions Corp., A | IT Services | 790 | 46,247 | |
| Constellation Brands Inc., A | Beverages | 1,960 | 227,242 | |
| aCoStar Group Inc. | Internet Software & Services | 660 | 134,924 | |
| Cytec Industries Inc. | Chemicals | 1,920 | 106,157 | |
| aDexCom Inc. | Health Care Equipment & Supplies | 1,700 | 114,869 | |
| Ecolab Inc. | Chemicals | 2,250 | 251,955 | |
| aEdwards Lifesciences Corp. | Health Care Equipment & Supplies | 1,000 | 126,650 | |
| aElectronic Arts Inc. | Software | 3,400 | 197,506 | |
| aEnvision Healthcare Holdings Inc. | Health Care Providers & Services | 6,560 | 249,018 | |
| aFacebook Inc., A | Internet Software & Services | 3,280 | 258,366 | |
| aFleetCor Technologies Inc. | IT Services | 1,300 | 209,157 | |
| aFMC Technologies Inc. | Energy Equipment & Services | 1,520 | 67,032 | |
| Harris Corp. | Communications Equipment | 730 | 58,575 | |
| aHD Supply Holdings Inc. | Trading Companies & Distributors | 7,300 | 240,900 | |
| Honeywell International Inc. | Aerospace & Defense | 1,500 | 151,380 | |
| aIDEXX Laboratories Inc. | Health Care Equipment & Supplies | 650 | 81,491 | |
| aIHS Inc., A | Professional Services | 1,910 | 239,648 | |
| aIllumina Inc. | Life Sciences Tools & Services | 1,130 | 208,202 | |
| Intercontinental Exchange Inc. | Diversified Financial Services | 630 | 141,454 | |
| aJazz Pharmaceuticals PLC | Pharmaceuticals | 610 | 109,007 | |
| Kansas City Southern | Road & Rail | 1,450 | 148,610 | |
| aLinkedIn Corp., A | Internet Software & Services | 1,200 | 302,556 | |
| MasterCard Inc., A | IT Services | 4,900 | 442,029 | |
| McKesson Corp. | Health Care Providers & Services | 1,670 | 373,078 | |
| Medtronic PLC | Health Care Equipment & Supplies | 1,960 | 145,922 | |
| aMobileye NV | Software | 1,190 | 53,383 | |
| aMonster Beverage Corp. | Beverages | 1,130 | 154,934 | |
| NIKE Inc., B | Textiles, Apparel & Luxury Goods | 3,100 | 306,404 | |
| aPalo Alto Networks Inc. | Communications Equipment | 1,900 | 280,668 | |
| aPrestige Brands Holdings Inc. | Pharmaceuticals | 2,780 | 109,115 | |
| aThe Priceline Group Inc. | Internet & Catalog Retail | 230 | 284,696 | |
| aQuintiles Transnational Holdings Inc. | Life Sciences Tools & Services | 2,350 | 154,818 | |
| aRegeneron Pharmaceuticals Inc. | Biotechnology | 220 | 100,641 | |
| Roper Technologies Inc. | Industrial Conglomerates | 900 | 151,353 | |
| aSalesforce.com Inc. | Software | 3,530 | 257,055 | |
| aServiceNow Inc. | Software | 2,300 | 172,178 | |
| aSignature Bank | Banks | 1,577 | 211,460 |
franklintempleton.com
Semiannual Report | 23
FRANKLIN TEMPLETON INTERNATIONAL TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| Franklin World Perspectives Fund (continued) | ||||
| Industry | Shares/Units | Value | ||
| Common Stocks and | ||||
| Other Equity Interests (continued) | ||||
| United States (continued) | ||||
| Skyworks Solutions Inc. | Semiconductors & Semiconductor Equipment | 1,550 | $ | 142,988 |
| aSpirit Airlines Inc. | Airlines | 2,000 | 136,940 | |
| Starbucks Corp. | Hotels, Restaurants & Leisure | 1,500 | 74,370 | |
| aStericycle Inc. | Commercial Services & Supplies | 1,800 | 240,174 | |
| aSVB Financial Group | Banks | 1,100 | 146,036 | |
| aTesla Motors Inc. | Automobiles | 240 | 54,252 | |
| Tractor Supply Co. | Specialty Retail | 1,470 | 126,508 | |
| aTRI Pointe Homes Inc. | Household Durables | 7,820 | 111,670 | |
| aTwitter Inc. | Internet Software & Services | 2,300 | 89,608 | |
| aUnder Armour Inc., A | Textiles, Apparel & Luxury Goods | 2,160 | 167,508 | |
| aValeant Pharmaceuticals International Inc. | Pharmaceuticals | 1,600 | 347,088 | |
| Vanguard Consumer Discretionary ETF | Diversified Consumer Services | 1,544 | 188,229 | |
| Vanguard Financials ETF | Diversified Financial Services | 4,816 | 236,562 | |
| Visa Inc., A | IT Services | 5,290 | 349,404 | |
| The Walt Disney Co. | Media | 3,000 | 326,160 | |
| Whole Foods Market Inc. | Food & Staples Retailing | 2,250 | 107,460 | |
| aZebra Technologies Corp., A | Electronic Equipment, Instruments & Components | 880 | 81,030 | |
| 14,011,899 | ||||
| Total Common Stocks and Other Equity | ||||
| Interests (Cost $23,176,357) | 29,463,558 | |||
| eParticipatory Notes 0.2% | ||||
| Saudi Arabia 0.2% | ||||
| HSBC Bank PLC, | ||||
| Banque Saudi Fransi, 1/22/18 | Banks | 1,552 | 15,974 | |
| dSamba Financial Group, 144A, 6/29/17 | Banks | 2,276 | 18,692 | |
| dSaudi Basic Industries Corp., 144A, 10/31/16 | Chemicals | 413 | 11,976 | |
| Yanbu National Petrochemicals Co., 7/31/17 | Chemicals | 575 | 8,203 | |
| Merrill Lynch International & Co. CV, Al Tayyar Travel | ||||
| Group, 6/10/15 | Hotels, Restaurants & Leisure | 537 | 15,572 | |
| Total Participatory Notes | ||||
| (Cost $63,698) | 70,417 | |||
| Preferred Stocks 1.2% | ||||
| Brazil 0.5% | ||||
| Banco Bradesco SA, pfd. | Banks | 3,020 | 32,266 | |
| Cia de Saneamento do Parana, pfd. | Water Utilities | 7,800 | 12,957 | |
| Companhia Brasileira de Distribuicao, pfd., A | Food & Staples Retailing | 800 | 27,109 | |
| Gerdau SA, pfd. | Metals & Mining | 3,900 | 13,021 | |
| Itau Unibanco Holding SA, pfd. | Banks | 3,400 | 43,522 | |
| aPetroleo Brasileiro SA, pfd. | Oil, Gas & Consumable Fuels | 2,900 | 12,573 | |
| Suzano Papel e Celulose SA, pfd., A | Paper & Forest Products | 2,400 | 12,040 | |
| Telefonica Brasil SA, pfd. | Diversified Telecommunication Services | 900 | 14,950 | |
| 168,438 | ||||
| Germany 0.5% | ||||
| Draegerwerk AG & Co. KGAA, pfd. | Health Care Equipment & Supplies | 1,279 | 148,318 | |
| South Korea 0.2% | ||||
| Samsung Electronics Co. Ltd., pfd. | Technology Hardware, Storage & Peripherals | 61 | 61,717 | |
| Total Preferred Stocks (Cost $385,023) | 378,473 |
24 | Semiannual Report franklintempleton.com
| FRANKLIN TEMPLETON INTERNATIONAL TRUST | ||||||
| STATEMENT OF INVESTMENTS (UNAUDITED) | ||||||
| Franklin World Perspectives Fund (continued) | ||||||
| Principal | ||||||
| Industry | Amount* | Value | ||||
| Convertible Bonds (Cost $233) 0.0%† | ||||||
| Oman 0.0%† | ||||||
| fBank Muscat SAOG, cvt., 3.50%, 3/19/18 | Banks | 820 | OMR | $ | 213 | |
| Total Investments before Short Term | ||||||
| Investments (Cost $23,625,311) | 29,912,661 | |||||
| Short Term Investments | ||||||
| (Cost $1,170,000) 3.7% | ||||||
| U.S. Government and Agency Securities 3.7% | ||||||
| United States 3.7% | ||||||
| gFHLB, 5/01/15 | 1,170,000 | 1,170,000 | ||||
| Total Investments | ||||||
| (Cost $24,795,311) 98.6% | 31,082,661 | |||||
| Other Assets, less Liabilities 1.4% | 445,160 | |||||
| Net Assets 100.0% | $ | 31,527,821 | ||||
†Rounds to less than 0.1% of net assets.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aNon-income producing.
bA portion or all of the security purchased on a delayed delivery basis. See Note 1(c).
cSee Note 3(f) regarding investments in Franklin India Growth Fund.
dSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buy-
ers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of
Trustees. At April 30, 2015, the aggregate value of these securities was $118,263, representing 0.38% of net assets.
eSee Note 1(e) regarding Participatory Notes.
fSecurity has been deemed illiquid because it may not be able to be sold within seven days. At April 30, 2015, the value of this security was $213, representing less than
0.01% of net assets.
gThe security is traded on a discount basis with no stated coupon rate.
At April 30, 2015, the Fund had the following forward exchange contracts outstanding. See Note 1(d).
| Forward Exchange Contracts | |||||||||
| Contract | Settlement | Unrealized | Unrealized | ||||||
| Currency | Counterpartya | Type | Quantity | Amount | Date | Appreciation | Depreciation | ||
| Japanese Yen | BKF | Sell | 149,622,192 | $ | 1,258,000 | 8/03/15 | $ | 3,265 | $ — |
| Net unrealized appreciation (depreciation) | $ | 3,265 | |||||||
| aMay be comprised of multiple contracts with the same counterparty, currency and settlement date. | |||||||||
See Abbreviations on page 39.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 25
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Financial Statements
Statement of Assets and Liabilities
April 30, 2015 (unaudited)
| Franklin World Perspectives Fund | |||
| Assets: | |||
| Investments in securities: | |||
| Cost - Unaffiliated issuers | $ | 24,341,145 | |
| Cost - Non-controlled affiliated issuers (Note 3f) | 454,166 | ||
| Total cost of investments | $ | 24,795,311 | |
| Value - Unaffiliated issuers | $ | 30,536,354 | |
| Value - Non-controlled affiliated issuers (Note 3f) | 546,307 | ||
| Total value of investments | 31,082,661 | ||
| Cash | 415,675 | ||
| Foreign currency, at value (cost $253,419) | 252,152 | ||
| Receivables: | |||
| Investment securities sold | 797,612 | ||
| Capital shares sold | 124,671 | ||
| Dividends and interest | 60,803 | ||
| Unrealized appreciation on forward exchange contracts | 3,265 | ||
| Other assets | 16 | ||
| Total assets | 32,736,855 | ||
| Liabilities: | |||
| Payables: | |||
| Investment securities purchased | 1,162,507 | ||
| Management fees | 14,693 | ||
| Distribution fees | 5,337 | ||
| Transfer agent fees | 1,809 | ||
| Accrued expenses and other liabilities | 24,688 | ||
| Total liabilities | 1,209,034 | ||
| Net assets, at value | $ | 31,527,821 | |
| Net assets consist of: | |||
| Paid-in capital | $ | 23,363,485 | |
| Distributions in excess of net investment income | (362,922 | ) | |
| Net unrealized appreciation (depreciation) | 6,289,014 | ||
| Accumulated net realized gain (loss) | 2,238,244 | ||
| Net assets, at value | $ | 31,527,821 | |
26 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN TEMPLETON INTERNATIONAL TRUST
FINANCIAL STATEMENTS
| Statement of Assets and Liabilities (continued) | ||
| April 30, 2015 (unaudited) | ||
| Class A: | ||
| Net assets, at value | $ | 14,737,549 |
| Shares outstanding | 1,154,003 | |
| Net asset value per sharea | $ | 12.77 |
| Maximum offering price per share (net asset value per share ÷ 94.25%) | $ | 13.55 |
| Class C: | ||
| Net assets, at value | $ | 3,161,298 |
| Shares outstanding | 248,843 | |
| Net asset value and maximum offering price per sharea | $ | 12.70 |
| Class R: | ||
| Net assets, at value | $ | 3,185,239 |
| Shares outstanding | 250,000 | |
| Net asset value and maximum offering price per share | $ | 12.74 |
| Advisor Class: | ||
| Net assets, at value | $ | 10,443,735 |
| Shares outstanding | 816,809 | |
| Net asset value and maximum offering price per share | $ | 12.79 |
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 27
FRANKLIN TEMPLETON INTERNATIONAL TRUST
FINANCIAL STATEMENTS
Statement of Operations
for the six months ended April 30, 2015 (unaudited)
| Franklin World Perspectives Fund | |||
| Investment income: | |||
| Dividends: (net of foreign taxes of $13,686) | |||
| Unaffiliated issuers | $ | 247,913 | |
| Non-controlled affiliated issuers (Note 3f) | 5,840 | ||
| Interest | 55 | ||
| Total investment income | 253,808 | ||
| Expenses: | |||
| Management fees (Note 3a) | 168,565 | ||
| Distribution fees: (Note 3c) | |||
| Class A | 13,279 | ||
| Class C | 14,043 | ||
| Class R | 7,764 | ||
| Transfer agent fees: (Note 3e) | |||
| Class A | 4,459 | ||
| Class C | 1,075 | ||
| Class R | 962 | ||
| Advisor Class | 3,438 | ||
| Custodian fees (Note 4) | 2,377 | ||
| Reports to shareholders | 12,418 | ||
| Registration and filing fees | 29,364 | ||
| Professional fees | 34,912 | ||
| Other | 22,388 | ||
| Total expenses | 315,044 | ||
| Expense reductions (Note 4) | (5 | ) | |
| Expenses waived/paid by affiliates (Notes 3f and 3g) | (79,778 | ) | |
| Net expenses | 235,261 | ||
| Net investment income | 18,547 | ||
| Realized and unrealized gains (losses): | |||
| Net realized gain (loss) from: | |||
| Investments: | |||
| Unaffiliated issuers | 2,109,212 | ||
| Non-controlled affiliated issuers (Note 3f) | 101,378 | ||
| Foreign currency transactions | 184,389 | ||
| Net realized gain (loss) | 2,394,979 | ||
| Net change in unrealized appreciation (depreciation) on: | |||
| Investments | (529,658 | ) | |
| Translation of other assets and liabilities denominated in foreign currencies | (128,166 | ) | |
| Net change in unrealized appreciation (depreciation) | (657,824 | ) | |
| Net realized and unrealized gain (loss) | 1,737,155 | ||
| Net increase (decrease) in net assets resulting from operations | $ | 1,755,702 | |
28 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
| FRANKLIN TEMPLETON INTERNATIONAL TRUST | ||||||
| FINANCIAL STATEMENTS | ||||||
| Statements of Changes in Net Assets | ||||||
| Franklin World Perspectives Fund | ||||||
| Six Months Ended | ||||||
| April 30, 2015 | Year Ended | |||||
| (unaudited) | October 31, 2014 | |||||
| Increase (decrease) in net assets: | ||||||
| Operations: | ||||||
| Net investment income | $ | 18,547 | $ | 85,949 | ||
| Net realized gain (loss) from investments and foreign currency transactions | 2,394,979 | 3,367,275 | ||||
| Net change in unrealized appreciation (depreciation) on investments and translation of | ||||||
| other assets and liabilities denominated in foreign currencies | (657,824 | ) | (1,660,154 | ) | ||
| Net increase (decrease) in net assets resulting from operations | 1,755,702 | 1,793,070 | ||||
| Distributions to shareholders from: | ||||||
| Net investment income: | ||||||
| Class A | (119,795 | ) | (252,661 | ) | ||
| Class C | (5,008 | ) | (36,819 | ) | ||
| Class R | (15,000 | ) | (34,550 | ) | ||
| Advisor Class | (135,351 | ) | (203,228 | ) | ||
| Net realized gains: | ||||||
| Class A | (1,065,905 | ) | — | |||
| Class C | (316,786 | ) | — | |||
| Class R | (243,575 | ) | — | |||
| Advisor Class | (970,366 | ) | — | |||
| Total distributions to shareholders | (2,871,786 | ) | (527,258 | ) | ||
| Capital share transactions: (Note 2) | ||||||
| Class A | (1,396,122 | ) | (1,485,847 | ) | ||
| Class C | (857,610 | ) | 205,295 | |||
| Advisor Class | (1,813,273 | ) | (1,194,694 | ) | ||
| Total capital share transactions | (4,067,005 | ) | (2,475,246 | ) | ||
| Net increase (decrease) in net assets | (5,183,089 | ) | (1,209,434 | ) | ||
| Net assets: | ||||||
| Beginning of period | 36,710,910 | 37,920,344 | ||||
| End of period | $ | 31,527,821 | $ | 36,710,910 | ||
| Distributions in excess of net investment income included in net assets: | ||||||
| End of period | $ | (362,922 | ) | $ | (106,315 | ) |
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 29
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Notes to Financial Statements (unaudited)
Franklin World Perspectives Fund
1. Organization and Significant Accounting Policies
Franklin Templeton International Trust (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end management investment company, consisting of four separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin World Perspectives Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. The Fund offers four classes of shares: Class A, Class C, Class R, and Advisor Class. Each class of shares differs by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees.
The following summarizes the Fund’s significant accounting policies.
a. Financial Instrument Valuation
The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share at the close of the New York Stock Exchange (NYSE), generally at 4 p.m. Eastern time (NYSE close) on each day the NYSE is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities and exchange traded funds listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of the NYSE close, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the NYSE close on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities. Investments in open-end mutual funds are valued at the closing NAV.
Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at the NYSE close on the date that the values of the foreign debt securities are determined.
Certain derivative financial instruments (derivatives) trade in the OTC market. The Fund’s pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Fund’s net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VLOC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VLOC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used
30 | Semiannual Report
franklintempleton.com
FRANKLIN TEMPLETON INTERNATIONAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin World Perspectives Fund (continued)
in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VLOC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before the daily NYSE close. In addition, trading in certain foreign markets may not take place on every NYSE business day. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VLOC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Securities Purchased on a Delayed Delivery Basis
The Fund purchases securities on a delayed delivery basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of holding the securities, it may sell the securities before the settlement date. Sufficient assets have been segregated for these securities.
d. Derivative Financial Instruments
The Fund invested in derivatives in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net
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FRANKLIN TEMPLETON INTERNATIONAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin World Perspectives Fund (continued)
1. Organization and Significant Accounting
Policies (continued)
d. Derivative Financial Instruments (continued)
investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market movements which expose the Fund to gains or losses in excess of the amounts shown in the Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Statement of Operations.
Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination. Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement. At April 30, 2015, the Fund had no OTC derivatives in a net liability position for such contracts.
Collateral requirements differ by type of derivative. Collateral terms are contract specific for OTC derivatives. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the fund or the applicable coun-terparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of fund business each day and any additional collateral required due to changes in derivative values may be delivered by the fund or the counterparty within a few business days. Collateral pledged and/or received by the fund, if any, is held in segregated accounts with the fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund’s investment objectives.
The Fund entered into OTC forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.
See Note 8 regarding other derivative information.
e. Participatory Notes
The Fund invests in Participatory Notes (P-Notes). P-notes are promissory notes that are designed to offer a return linked to the performance of a particular underlying equity security or market. P-Notes are issued by banks or broker-dealers and allow the fund to gain exposure to common stocks in markets where direct investment is not allowed. Income received from P-Notes is recorded as dividend income in the Statement of Operations. P-Notes may contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract. These securities may be more volatile and less liquid than other investments held by the Fund.
f. Income and Deferred Taxes
It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin World Perspectives Fund (continued)
The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.
The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of April 30, 2015, and for all open tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.
g. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income is recorded on the ex-dividend date except for certain dividends from foreign securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary.
Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the funds based on the ratio of net assets of each fund to the combined net assets of the Trust. Fund specific expenses are charged directly to the fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.
h. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
i. Guarantees and Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin World Perspectives Fund (continued)
2. Shares of Beneficial Interest
At April 30, 2015, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:
| Six Months Ended | Year Ended | ||||||||||
| April 30, 2015a | October 31, 2014a | ||||||||||
| Shares | Amount | Shares | Amount | ||||||||
| Class A Shares: | |||||||||||
| Shares sold | 78,100 | $ | 966,678 | 224,626 | $ | 2,908,136 | |||||
| Shares issued in reinvestment of distributions | 50,522 | 584,534 | 6,358 | 79,857 | |||||||
| Shares redeemed | (225,960 | ) | (2,947,334 | ) | (344,821 | ) | (4,473,840 | ) | |||
| Net increase (decrease) | (97,338 | ) | $ | (1,396,122 | ) | (113,837 | ) | $ | (1,485,847 | ) | |
| Class C Shares: | |||||||||||
| Shares sold | 12,216 | $ | 152,072 | 37,978 | $ | 487,682 | |||||
| Shares issued in reinvestment of distributions | 6,450 | 74,369 | 607 | 7,594 | |||||||
| Shares redeemed | (91,322 | ) | (1,084,051 | ) | (22,330 | ) | (289,981 | ) | |||
| Net increase (decrease) | (72,656 | ) | $ | (857,610 | ) | 16,255 | $ | 205,295 | |||
| Advisor Class Shares: | |||||||||||
| Shares sold | 38,000 | $ | 502,326 | 63,296 | $ | 827,884 | |||||
| Shares issued in reinvestment of distributions | 3,462 | 40,057 | 499 | 6,274 | |||||||
| Shares redeemed | (198,182 | ) | (2,355,656 | ) | (156,666 | ) | (2,028,852 | ) | |||
| Net increase (decrease) | (156,720 | ) | $ | (1,813,273 | ) | (92,871 | ) | $ | (1,194,694 | ) | |
aDuring the period Class R did not report any share transactions.
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:
| Subsidiary | Affiliation |
| Franklin Advisers, Inc. (Advisers) | Investment manager |
| Franklin Templeton Investimentos (Brasil) Ltda. (FTI Brasil) | Investment manager |
| Franklin Templeton Investment Management Limited (FTIML) | Investment manager |
| Franklin Templeton Investment Trust Management Co., Ltd. (FT Korea) | Investment manager |
| Franklin Templeton Investments Corp. (FTIC) | Investment manager |
| Franklin Templeton Investments (ME) Limited (FTIME) | Investment manager |
| Templeton Asset Management Ltd. (TAML) | Investment manager |
| Franklin Templeton Services, LLC (FT Services) | Administrative manager |
| Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
| Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin World Perspectives Fund (continued)
a. Management Fees
The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:
| Annualized Fee Rate | Net Assets | |
| 1.050 | % | Up to and including $1 billion |
| 1.000 | % | Over $1 billion, up to and including $4 billion |
| 0.950 | % | In excess of $4 billion |
Under a subadvisory agreement, FTI Brasil, FTIML, FT Korea, FTIC, FTIME and TAML, affiliates of Advisers, provide subad-visory services to the Fund. The subadvisory fee is paid by Advisers based on the Fund’s average daily net assets, and is not an additional expense of the Fund.
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on the Fund’s average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted distribution plans for each share class, with the exception of Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Distribution fees are not charged on shares held by affiliates. Under the Fund’s Class A reimbursement distribution plan, the Fund reimburses Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribution plan, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Fund’s Class C and R compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.
The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:
| Class A | 0.30 | % |
| Class C | 1.00 | % |
| Class R | 0.50 | % |
d. Sales Charges/Underwriting Agreements
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. These charges are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Fund of the following commission transactions related to the sales and redemptions of the Fund’s shares for the period:
| Sales charges retained net of commissions paid to unaffiliated broker/dealers | $ | 1,856 |
| CDSC retained | $ | 12 |
e. Transfer Agent Fees
Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations and reimburses Investor Services for out of pocket expenses incurred, including shareholding servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets.
For the period ended April 30, 2015, the Fund paid transfer agent fees of $9,934, of which $5,602 was retained by Investor Services.
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FRANKLIN TEMPLETON INTERNATIONAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin World Perspectives Fund (continued)
3. Transactions with Affiliates (continued)
f. Investments in Franklin India Growth Fund
The Fund invests in Franklin India Growth Fund (India Fund), an affiliated open-end management investment company. Management fees paid by the Fund are waived on assets invested in the India Fund, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by the India Fund. Prior to November 1, 2013, the waiver was accounted for as a reduction to management fees.
| % of | |||||||||||||
| Number | Number | Affiliated | |||||||||||
| of Shares | of Shares | Fund Shares | |||||||||||
| Held at | Held | Value | Outstanding | ||||||||||
| Beginning | Gross | Gross | at End | at End | Investment | Realized | Held at End | ||||||
| Fund Name | of Period | Additions | Reductions | of Period | of Period | Income | Gain (Loss) | of Period | |||||
| Non-Controlled Affiliates | |||||||||||||
| Franklin India Growth Fund, | |||||||||||||
| Class R6 | |||||||||||||
| (Value is 1.73% of Net Assets) | 58,608 | 27,423 | (43,082 | ) | 42,949 | $ | 546,307 | $ | 5,840 | $ | 101,378 | 0.39 | % |
g. Waiver and Expense Reimbursements
Advisers has contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees and acquired fund fees and expenses) for each class of the Fund do not exceed 1.25% based on the average net assets of each class (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until February 29, 2016.
h. Other Affiliated Transactions
At April 30, 2015, Franklin Resources, Inc. owned 68.09% of the Fund’s outstanding shares. Investment activities of this shareholder could have a material impact on the Fund.
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended April 30, 2015, the custodian fees were reduced as noted in the Statement of Operations.
5. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains. Capital loss carryforwards with no expiration, if any, must be fully utilized before those losses with expiration dates.
At April 30, 2015, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
| Cost of investments | $ | 25,206,539 | |
| Unrealized appreciation | $ | 6,598,803 | |
| Unrealized depreciation | (722,681 | ) | |
| Net unrealized appreciation (depreciation) | $ | 5,876,122 | |
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin World Perspectives Fund (continued)
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions, passive foreign investment company shares and wash sales.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the period ended April 30, 2015, aggregated $19,422,543 and $27,344,835, respectively.
7. Concentration of Risk
Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities.
8. Other Derivative Information
At April 30, 2015, the Fund’s investments in derivative contracts are reflected in the Statement of Assets and Liabilities as follows:
| Asset Derivatives | Liability Derivatives | ||||
| Derivative Contracts | |||||
| Not Accounted for as | Statement of Assets and | Statement of Assets and | |||
| Hedging Instruments | Liabilities Location | Fair Value | Liabilities Location | Fair Value | |
| Foreign exchange contracts | Unrealized appreciation on | $ | 3,265 | Unrealized depreciation on | $ — |
| forward exchange contracts | forward exchange contracts | ||||
For the period ended April 30, 2015, the effect of derivative contracts in the Fund’s Statement of Operations was as follows:
| Change in | ||||||
| Unrealized | ||||||
| Derivative Contracts | Realized | Appreciation | ||||
| Not Accounted for as | Gain (Loss) | (Depreciation) | ||||
| Hedging Instruments | Statement of Operations Locations | for the Period | for the Period | |||
| Foreign exchange contracts | Net realized gain (loss) from foreign currency | $ | 214,089 | $ | (126,565 | ) |
| transactions / Net change in unrealized appreciation | ||||||
| (depreciation) on translation of other assets and | ||||||
| liabilities denominated in foreign currencies |
For the period ended April 30, 2015, the average month end fair value of derivatives represented 0.12% of average month end net assets. The average month end number of open derivative contracts for the period was 1.
See Note 1(d) regarding derivative financial instruments.
9. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 12, 2016. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.
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FRANKLIN TEMPLETON INTERNATIONAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin World Perspectives Fund (continued)
9. Credit Facility (continued)
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended April 30, 2015, the Fund did not use the Global Credit Facility.
10. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s financial instruments and are summarized in the following fair value hierarchy:
- Level 1 – quoted prices in active markets for identical financial instruments
- Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
- Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.
A summary of inputs used as of April 30, 2015, in valuing the Fund’s assets carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 | Total | |||||
| Assets: | ||||||||
| Investments in Securities: | ||||||||
| Equity Investmentsa,b | $ | 29,842,031 | $ | — | $ | — | $ | 29,842,031 |
| Participatory Notes | — | 70,417 | — | 70,417 | ||||
| Convertible Bonds | — | — | 213 | 213 | ||||
| Short Term Investments | — | 1,170,000 | — | 1,170,000 | ||||
| Total Investments in Securities | $ | 29,842,031 | $ | 1,240,417 | $ | 213 | $ | 31,082,661 |
| Other Financial Instruments | ||||||||
| Forward Exchange Contracts | $ | — | $ | 3,265 | $ | — | $ | 3,265 |
| alncludes common and preferred stocks as well as other equity investments. | ||||||||
| bFor detailed categories, see the accompanying Statement of Investments. | ||||||||
A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the end of the period.
11. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
| Franklin World Perspectives Fund (continued) | |||
| Abbreviations | |||
| Counterparty | Currency | Selected Portfolio | |
| BKF Deutsche Bank AG | OMR Omani Rial | ADR | American Depositary Receipt |
| ETF | Exchange Traded Fund | ||
| FHLB | Federal Home Loan Bank | ||
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FRANKLIN TEMPLETON INTERNATIONAL TRUST FRANKLIN WORLD PERSPECTIVES FUND
Shareholder Information
Board Review of Investment Management Agreement
At a meeting held April 14, 2015, the Board of Trustees (Board), including a majority of non-interested or independent Trustees, approved renewal of the investment management agreement for each of the Funds within the Trust, including Franklin World Perspectives Fund (Fund(s)). In reaching this decision, the Board took into account information furnished throughout the year at regular Board meetings, as well as information prepared specifically in connection with the annual renewal review process. Information furnished and discussed throughout the year included investment performance reports and related financial information for each Fund, along with periodic reports on expenses, shareholder services, legal and compliance matters, pricing, brokerage commissions and execution and other services provided by the Investment Manager (Manager) and its affiliates, as well as marketing support payments made to financial intermediaries. Information furnished specifically in connection with the renewal process included a report for each Fund prepared by Lipper, Inc. (Lipper), an independent organization, as well as additional material, including a Fund profitability analysis prepared by management. The Lipper reports compared each Fund’s investment performance and expenses with those of other mutual funds deemed comparable to the Fund as selected by Lipper. The Fund profitability analysis report discussed the profitability to Franklin Templeton Investments (FTI) from its overall U.S. fund operations, as well as on an individual fund-by-fund basis. Additional material accompanying such profitability analysis included information on a fund-by-fund basis listing portfolio managers and other accounts they manage, as well as information on management fees charged by the Manager and its affiliates to U.S. mutual funds and other accounts, including management’s explanation of differences where relevant. Such material also included a memorandum prepared by management describing project initiatives and capital investments relating to the services provided to the Funds by the FTI organization, as well as a memorandum relating to economies of scale and an analysis concerning transfer agent fees charged by an affiliate of the Manager. The Board also noted that at the February meetings each year, it receives an annual report on all marketing support payments made by FTI to financial intermediaries.
In considering such materials, the independent Trustees received assistance and advice from and met separately with independent counsel. While the investment management agreements for all Funds were considered at the same Board meeting, the Board dealt with each Fund separately. In approving continuance of the investment management agreement for each Fund, the Board, including a majority of independent Trustees, determined that the existing management fee structure was fair and reasonable and that continuance of the investment management agreement was in the best interests of each Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s decision.
NATURE, EXTENT AND QUALITY OF SERVICE. The Board was satisfied with the nature and quality of the overall services provided by the Manager and its affiliates to the Fund and its shareholders, as noted later with respect to investment performance and expenses. The Board’s opinion was based, in part, upon periodic reports furnished it showing that the investment policies and restrictions for the Fund were consistently complied with as well as other reports periodically furnished the Board covering matters such as the compliance of portfolio managers and other management personnel with the code of ethics adopted throughout the Franklin Templeton fund complex, the adherence to fair value pricing procedures established by the Board, and the accuracy of net asset value calculations. The Board also noted the extent of benefits provided Fund shareholders from being part of the Franklin Templeton family of funds, including the right to exchange investments between the same class of shares of different funds without a sales charge, the ability to reinvest Fund dividends into other funds and the right to combine holdings in other funds to obtain a reduced sales charge. Favorable consideration was given to management’s continual efforts and expenditures in establishing effective business continuity plans and developing strategies to address cybersecurity threats. Among other factors taken into account by the Board were the Manager’s best execution trading policies, including a favorable report by an independent portfolio trading analytical firm that also covered FOREX transactions. Consideration was also given to the experience of the Fund’s portfolio management team, the number of accounts managed and general method of compensation. In this latter respect, the Board noted that a primary factor in management’s determination of a portfolio manager’s bonus compensation was the relative investment performance of the funds he or she managed and that a portion of such bonus was required to be invested in a predesignated list of funds within such person’s fund management area so as to be aligned with the interests of shareholders. The Board also took into account the quality of transfer agent and shareholder services provided Fund shareholders by an affiliate of the Manager, noting the
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FRANKLIN WORLD PERSPECTIVES FUND
SHAREHOLDER INFORMATION
changes taking place in the nature of transfer agency services throughout the industry and regulatory initiatives in this area, and the continual enhancements to the Franklin Templeton website. Particular attention was given to management’s conservative approach and diligent risk management procedures, including continual monitoring of counterparty credit risk and attention given to derivatives and other complex instruments, including expanded collateralization requirements. The Board also took into account, among other things, management’s efforts in establishing a global credit facility for the benefit of the Fund and other accounts managed by FTI to provide a source of cash for temporary and emergency purposes or to meet unusual redemption requests as well as the strong financial position of the Manager’s parent company and its commitment to the mutual fund business as evidenced by its continued subsidization of money market funds.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment performance of the Fund in view of its importance to shareholders. While consideration was given to performance reports and discussions with portfolio managers at Board meetings throughout the year, particular attention in assessing performance was given to the Lipper reports furnished for the agreement renewal. The Lipper reports prepared for the Fund showed the investment performance of its Class A shares in comparison to a performance universe selected by Lipper. Comparative performance for the Fund was shown for the one-year period ended January 31, 2015, and previous periods ended that date of up to 10 years unless otherwise noted. The performance universe for the Fund consisted of the Fund and all retail and institutional global multi-cap growth funds as selected by Lipper. The Fund has been in operation for only four years and the Lipper report showed its total return to be in the second-lowest performing quintile of such universe for the one-year period ended January 31, 2015, and on an annualized basis to be in the middle performing quintile of such universe during each of the previous three- and four-year periods. The Board discussed with management its ongoing review of allocations to countries and regions. It found the Fund’s overall comparative performance as set forth in the Lipper report to be acceptable, noting its relatively short period of operation.
COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the management fee and total expense ratio of the Fund compared with those of a group of other funds selected by Lipper as constituting its appropriate Lipper expense group. Lipper expense data is based upon information taken from each fund’s most recent annual report, which reflects historical asset levels that may be quite different from those currently existing, particularly in a period of market volatility. While recognizing such inherent limitation and the fact that expense ratios generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Lipper to be an appropriate measure of comparative expenses. In reviewing comparative costs, Lipper provides information on the Fund’s contractual investment management fee in comparison with the investment management fee that would have been charged by other funds within its Lipper expense group assuming they were similar in size to the Fund, as well as the actual total expense ratio of the Fund in comparison with those of its Lipper expense group. The Lipper contractual investment management fee analysis includes administrative charges as being part of the investment management fee, and actual total expenses, for comparative consistency, are shown by Lipper for Fund Class A shares. The Lipper report for the Fund showed its contractual management fee rate to be within five basis points of the median of its Lipper expense group and actual total expense ratio to be below the median of its Lipper expense group. The Board was satisfied with the expenses of the Fund and noted that the Fund benefited from a waiver of fees.
MANAGEMENT PROFITABILITY. The Board also considered the level of profits realized by the Manager and its affiliates in connection with the operation of the Fund. In this respect, the Board reviewed the Fund profitability analysis that addresses the overall profitability of Franklin Templeton’s U.S. fund business, as well as its profits in providing management and other services to each of the individual funds during the 12-month period ended September 30, 2014, being the most recent fiscal year-end for Franklin Resources, Inc., the Manager’s parent. In reviewing the analysis, the Board recognized that allocation methodologies are inherently subjective and various allocation methodologies may be reasonable while producing different results. In this respect, the Board noted that while management continually makes refinements to its methodologies in response to organizational and product related changes, the overall approach as defined by the primary drivers and activity measurements has remained consistent with that used in the Fund’s profitability report presentations from prior years. Additionally, the Fund’s independent registered public accounting firm had been engaged by the Manager to periodically review the reasonableness of the allocation methodologies to be used solely by the Fund’s Board in reference to the profitability analysis. In reviewing and discussing
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Semiannual Report | 41
FRANKLIN TEMPLETON INTERNATIONAL TRUST
FRANKLIN WORLD PERSPECTIVES FUND
SHAREHOLDER INFORMATION
Board Review of Investment Management
Agreement (continued) such analysis, management discussed with the Board its belief that costs incurred in establishing the infrastructure necessary for the type of mutual fund operations conducted by the Manager and its affiliates may not be fully reflected in the expenses allocated to the Fund in determining its profitability, as well as the fact that the level of profits, to a certain extent, reflected operational cost savings and efficiencies initiated by management. The Board also took into account management’s expenditures in improving shareholder services provided the Fund, as well as the need to implement systems and meet additional regulatory and compliance requirements resulting from statutes such as the Sarbanes-Oxley and Dodd-Frank Acts and recent SEC and other regulatory requirements. In addition, the Board considered a third-party study comparing the profitability of the Manager’s parent on an overall basis to other publicly held managers broken down to show profitability from management operations exclusive of distribution expenses, as well as profitability including distribution expenses. The Board also considered the extent to which the Manager and its affiliates might derive ancillary benefits from fund operations, including revenues generated from transfer agent services, potential benefits resulting from personnel and systems enhancements necessitated by fund growth, as well as increased leverage with the service providers and counterparties. Based upon its consideration of all these factors, the Board determined that the level of profits realized by the Manager and its affiliates from providing services to the Fund was not excessive in view of the nature, quality and extent of services provided.
ECONOMIES OF SCALE. The Board also considered whether economies of scale are realized by the Manager as the Fund grows larger and the extent to which this is reflected in the level of management fees charged. While recognizing that any precise determination is inherently subjective, the Board noted that based upon the Fund profitability analysis, it appears that as some funds get larger, at some point economies of scale do result in the Manager realizing a larger profit margin on management services provided such a fund. The Board also noted that economies of scale are shared with the Fund and its shareholders through management fee breakpoints so that as a fund grows in size, its effective management fee rate declines. The asset level of the Fund was approximately $33 million on December 31, 2014, and the Board believed the size of the Fund afforded no meaningful economies of scale.
Proxy Voting Policies and Procedures
The Fund’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Fund uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Fund’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Fund’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.
Quarterly Statement of Investments
The Fund files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.
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Item 2. Code of Ethics.
(a) The Registrant has adopted a code of ethics that applies to its principal executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer.
Item 3. Audit Committee Financial Expert.
(a)(1) The Registrant has an audit committee financial expert serving on its audit committee.
(2) The audit committee financial expert is John B. Wilson and he is "independent" as defined under the relevant Securities and Exchange Commission Rules and Releases.
Item 4. Principal Accountant Fees and Services. N/A
Item 5. Audit Committee of Listed Registrants. N/A
Item 6. Schedule of Investments. N/A
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. N/A
Item 8. Portfolio Managers of Closed-End Management Investment Companies. N/A
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. N/A
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant's Board of Trustees that would require disclosure herein.
Item 11. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.
(b) Changes in Internal Controls. There have been no changes in the Registrant’s internal controls or in other factors that could materially affect the internal controls over financial reporting subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR.
Item 12. Exhibits.
(a) (1) Code of Ethics
(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN TEMPLETON INTERNATIONAL TRUST
By /s/Laura F. Fergerson
Laura F. Fergerson
Chief Executive Officer - Finance and Administration
Date June 25, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By /s/Laura F. Fergerson
Laura F. Fergerson
Chief Executive Officer - Finance and Administration
Date June 25, 2015
By /s/Gaston Gardey
Gaston Gardey
Chief Financial Officer and Chief Accounting Officer
Date June 25, 2015