franklin templeton shariah funds

FRANKLIN TEMPLETON SHARIAH FUNDSSociété d’investissement à capital variableOctober 31, 2020

AUDITED ANNUAL REPORT

R.C.S. B 169 965

FRANKLIN TEMPLETON SHARIAH FUNDSsociété d’investissement à capital variable

AUDITED ANNUAL REPORTFor the year ended October 31, 2020

This report shall not constitute an offer or a solicitation of an offer to buy shares of Franklin Templeton Shariah Funds (the “Company”). Subscriptions are to be made on the basis of the current prospectus and its addendum as the case may be, where available the relevant Key Investor Information Documents (“KIIDs”), a copy of the latest available audited annual report and, if published thereafter, the latest unaudited semi-annual report.The auditor’s report refers only to the English version of the Annual Report and not to any translated versions.

www.franklintempleton.lu Audited AnnuAl RepoRt 5

General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Report of the Board of Directors . . . . . . . . . . . . . . . . . . 8Report of the Shariah Supervisory Board . . . . . . . . . . 9Report of the Investment Managers . . . . . . . . . . . . . . . 10Audit Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Fund Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Statement of Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . 17Statement of Operations and Changes in Net Assets 18Statistical Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 20Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . 26Franklin Global Sukuk Fund ............................................ ...26Templeton Shariah Global Equity Fund ........................... ...28Additional Information - Unaudited . . . . . . . . . . . . . . . . 31Franklin Templeton Office Directory . . . . . . . . . . . . . . . 33

Contents

FRANKLIN TEMPLETON SHARIAH FUNDS

General InformationAs at October 31, 2020

www.franklintempleton.luAudited Annual Report6

société d’investissement à capital variable8A, rue Albert Borschette, L-1246 Luxembourg, Grand Duchy of Luxembourg(Registered with the registre de commerce et des sociétés, Luxembourg, under number B 169 965)

BOARD OF DIRECTORS:ChairmanWilliam JacksonDirectorFRANKLIN TEMPLETON INVESTMENT MANAGEMENT LIMITED5 Morrison StreetEdinburgh EH3 8BH, ScotlandUnited Kingdom

DirectorsHans-J. WisserIndependent DirectorKälberstücksweg 3761350 Bad HomburgGermany

Caroline CarrollDirectorFRANKLIN TEMPLETON INVESTMENT MANAGEMENT LIMITEDCannon Place, 78 Cannon Street, London EC4N 6HLUnited Kingdom(Appointed as of April 9, 2020)

Michel TulleSenior Director Continental EuropeFRANKLIN TEMPLETON INTERNATIONAL SERVICESS.à r.l., French Branch20 rue de la PaixF-75002 ParisFrance

James F. KinlochDirectorFRANKLIN TEMPLETON LUXEMBOURG S.A.8A, rue Albert Borschette, L-1246 LuxembourgGrand Duchy of Luxembourg(Resigned as of April 9, 2020)

MANAGEMENT COMPANY:FRANKLIN TEMPLETON INTERNATIONAL SERVICESS.à r.l.8A, rue Albert Borschette, L-1246 LuxembourgGrand Duchy of Luxembourg

SHARIAH SUPERVISORY BOARD:AMANIE ADVISORS SDN BHDLevel 13A-2Menara Tokio Marine Life189, Jalan Tun Razak50400 Kuala LumpurMalaysia– Dr. Mohamed Ali Elgari– Dr. Muhammad Amin Ali Qattan– Dr. Mohd Daud Bakar– Dr. Osama Al Dereai

SHARIAH STOCK SCREENING PROVIDER:IDEALRATINGS INC425 Market Street, Suite 2200San Francisco, CA 94105United States of America

REGISTERED OFFICE:8A, rue Albert Borschette, L-1246 LuxembourgGrand Duchy of Luxembourg

PRINCIPAL DISTRIBUTOR:FRANKLIN TEMPLETON INTERNATIONAL SERVICESS.à r.l.8A, rue Albert Borschette, L-1246 LuxembourgGrand Duchy of Luxembourg

INVESTMENT MANAGERS:FRANKLIN TEMPLETON INVESTMENTS (ME) LIMITEDGate Building East Wing, 2nd FloorDubai International Financial CentreP.O. Box 506613Dubai, United Arab EmiratesFranklin Templeton Investments (ME) Limited manages Franklin Global Sukuk Fund.

TEMPLETON ASSET MANAGEMENT LTD7 Temasek Boulevard# 38-03 Suntec Tower OneSingapore 038987Templeton Asset Management Ltd manages Templeton Shariah Global Equity Fund.

FRANKLIN TEMPLETON SHARIAH FUNDSGENERAL INFORMATION

www.franklintempleton.lu Audited Annual Report 7

SUB-ADVISERS:FRANKLIN TEMPLETON GSC ASSET MANAGEMENT Sdn. Bhd.Suite 31-02, 31st Floor, Menara Keck Seng203 Jalan Bukit Bintang55100 Kuala LumpurMalaysiaFranklin Templeton GSC Asset Management Sdn. Bhd. has been appointed as sub-adviser for the Franklin Global Sukuk Fund.

DEPOSITARY BANK:HSBC Continental Europe, Luxembourg Branch(Previously named HSBC France, Luxembourg Branch)16, boulevard d’Avranches, L-1160 LuxembourgGrand Duchy of Luxembourg

ADMINISTRATIVE AGENT:J.P. MORGAN BANK LUXEMBOURG S.A.European Bank & Business Centre6C, route de TrèvesL-2633, SenningerbergGrand Duchy of Luxembourg(Appointed as of May 18, 2020)

AUDITOR:PRICEWATERHOUSECOOPERS, Société coopérative2, rue Gerhard Mercator, L-2182 LuxembourgGrand Duchy of Luxembourg

LEGAL ADVISERS:ELVINGER HOSS PRUSSEN, Société anonyme2, place Winston Churchill, L-1340 LuxembourgGrand Duchy of Luxembourg



Report of the Board of Directors

At October 31, 2020, total net assets of Franklin Templeton Shariah Funds (“FTSF,” or the “Company”) stood at US$320.04 million, higher than the US$245.40 million under management at October 31, 2019.

The size and depth of the Shariah-compliant investment universe has continued to increase over the past year, driven by a wide range of factors. Improving macroeconomic indicators in emerging markets, outperformance in select stock markets, new fixed income issuances and the inclusion of Sukuk securities in some conventional benchmark indices have all contributed to the growth of this sector.

With its specialized expertise and on-the-ground resources in key markets in the Middle East and Southeast Asia, Franklin Templeton stands ready to capture future opportunities amid a dynamic and changing investment landscape. The ongoing progress of economic reforms across Asia, the continued development of emerging-market nations and geopolitical events worldwide have all focused an increasing amount of investor attention on the Shariah-compliant space. With a long track record in these regions, we believe the Company is well positioned to navigate this complex territory and also to look beyond the headlines and identify fundamentally sound value for our investors.

Corporate GovernanceThe Company is committed to high standards of corporate governance. The Board of Directors of the Company (the “Board”) adheres to the principles of the ALFI Code of Conduct (as revised – June 2013) and considers that it has been in compliance with its principles throughout the financial year ended October 31, 2020.

Thank you for investing with Franklin Templeton. Please be advised that the prospectus, the Key Investor Information Documents (KIIDs) and all Funds and share classes of FTSF may not be available in your jurisdiction.

If you have any queries, comments or suggestions about your investments with us please contact your financial adviser or your local Franklin Templeton office using the contact details on the last page of the report.

THE BOARD OF DIRECTORSLuxembourg, November 2020

The information stated in this report represents historical data and is not an indication of future results.

AMANIE ADVISORS SDN BHD 684050-H Level 13A-2 * Menara Tokio Marine Life * 189 Jalan Tun Razak * 50400 Kuala Lumpur * Malaysia

Tel * +603 2161 0260 Fax * +603 2161 0262 www.amanieadvisors.com

MALAYSIA | UNITED ARAB EMIRATES | KAZAKHSTAN

2 December 2020 Franklin Templeton International Services S.à r.l. 8A, Rue Albert Borschette, L-1246 Luxembourg Grand Duchy of Luxembourg Attn: The Conducting Officers ANNUAL SHARIAH COMPLIANCE REPORT FOR FRANKLIN TEMPLETON SHARIAH FUNDS FOR THE PERIOD BETWEEN 1 NOVEMBER 2019 AND 31 OCTOBER 2020

Based on our view of the investments of Franklin Templeton Global Sukuk Fund, Templeton Shariah Asian Growth Fund and Templeton Shariah Global Equity Fund ("the sub-funds") and on the information provided to us by the representative of Franklin Templeton Shariah Funds, we hereby confirm that the Funds’ investments as well as their transactions during the financial year ended 31 October 2020 are in compliance with the Islamic investment guidelines as interpreted and issued by Amanie Shariah Supervisory Board Members. Yours faithfully,

DATUK DR MOHD DAUD BAKAR (On behalf of the Amanie Advisors Shariah Supervisory Board) Shariah Supervisory Board Members Dr. Mohamed Ali Elgari (Chairman) Dr. Mohd. Daud Bakar Dr. Muhammad Amin Ali Qattan Dr. Osama Al Dereai



Report of the Investment ManagersYear to October 31, 2020

Market Performance

Global developed and emerging market equities, as measured by the MSCI All Country World Index, advanced during the 12-month period. After rising during the first months of the period, stocks fell sharply in early 2020 amidst investor fears of a global economic slowdown due to the novel coronavirus (COVID-19) pandemic. Such fears drove many investors to sell equities in favour of government bonds, cash and other investments perceived as safe. Global equities rebounded in late March 2020 amidst optimism about easing lockdown restrictions, vaccine and treatment development, and economic stimulus measures. However, geopolitical tensions, rising infection rates and the possibility of renewed restrictions pressured global markets in September and October.

In the United States, a strong labour market and solid consumer spending drove economic growth through February 2020. However, pandemic-related restrictions caused stiff economic headwinds, including mass layoffs that drove the unemployment rate to 14.7% in April. Equities began to rebound in the spring and resilient consumer spending and optimism about an economic rebound led equities higher throughout much of the summer and into fall.

In the eurozone, forecasts of a significant contraction in 2020 mounted as the magnitude of the pandemic’s economic disruption became apparent. Following several months of gains due to easing restrictions and robust stimulus measures, European developed market equities, as measured by the MSCI Europe Index, retreated in September and October, ending the period with an overall decline in value, as rising infection rates heightened concerns that the nascent economic revival could stall.

Asian developed and emerging market equities advanced, as measured by the MSCI All Country Asia Index. Early in 2020 pandemic-related lockdowns derailed economic growth. Sharp market declines were followed by rebounds, as China’s economy recovered in 2020’s second quarter and the region’s economies reopened, aided by robust stimulus measures and optimism around ongoing development of COVID-19 vaccines.

Emerging market stocks, as measured by the MSCI Emerging Markets Index, also advanced despite steep pandemic-related declines. During much of the period’s second half, however, improving economic activity, higher oil prices and US-dollar weakness led emerging markets equities to advance, despite investor concerns in September and October 2020 about surging COVID-19 cases in some emerging market countries.

Global Sukuk markets, as represented by the Dow Jones Sukuk Index, advanced over the 12-month review period. Returns from the Sukuk market were slightly higher than those from broader global bond indices such as the FTSE World Government Bond Index and the Barclays Global Aggregate Index. Sukuk markets also solidly outpaced emerging market (EM) bonds (represented by the JPMorgan Emerging Markets Bond Index Global (EMBIGD) Diversified, which tracks hard-currency EM government bonds), as EM bonds in particular were negatively impacted by drawdowns, notably in March.

The Sukuk market mainly benefitted from lower yields. Spread tightening was also beneficial, but to a lesser degree. Investor sentiment started the period in broadly robust fashion, helped by signs of improved US-China trade relations and the supportive monetary policies of major central banks. The COVID-19 virus outbreak then came to the fore in the first months of 2020, leading to unprecedented moves during March, as countries worldwide responded to the pandemic by restricting the movements of their populations, while many business sectors shuttered temporarily in moves designed to contain the virus. Governments and central banks stepped in with sizeable fiscal and monetary stimulus, which led to a strong market rebound from April onwards. Countries worldwide started to reopen their economies, but many were then beset by rising infection rates towards the end of the period. Central bank and government support measures continued to provide unprecedented levels of liquidity and funding, which in turn bolstered market sentiment. Crude oil prices initially slumped on the back of concerns that the pandemic would hit demand, before staging a partial rebound.

Fund Performance

Franklin Global Sukuk Fund

Franklin Global Sukuk Fund returned 5.86% on a gross basis and 4.3% on a net basis in the 12 months to 31 October 2020. It underperformed its benchmark, the Dow Jones Sukuk Index, which returned 6.82% over the same period, all in US dollars.



Asset allocation detracted, mainly because of an overweight to corporate industrials, followed by exposure to cash. Corporates underperformed sovereigns and quasi-sovereigns, particularly during the volatility in March, while spread tightening over the period caused cash exposure to detract.

Currency exposure detracted on the back of the Nigerian naira. However, there was a partial positive offset from euro exposure.

Yield-curve movements added the most to relative returns, as exposure to Nigerian rates was beneficial. There was a partial offset from the negative impact of US-dollar duration, due to an underweight to short-duration issues, as rates declined materially.

Security selection was marginally positive for relative performance. Sovereigns contributed, while corporate industrials and financials detracted somewhat. On an individual basis, Bahrain and Saudi Arabia added to sovereigns, Serba Dinamik and Arabian Centres boosted industrials and Dubai Islamic Bank helped financials.

Templeton Shariah Global Equity Fund

For the year ended 31 October 2020, the fund underperformed its benchmark index. The fund returned -6% (net) in US-dollar terms, while the benchmark MSCI All Country World Islamic Index posted a 1.20% total return, also in US-dollar terms.

Stock selection in the consumer discretionary sector hindered relative results. In particular, a lack of exposure to internet and direct marketing retailers pressured relative returns.

In the energy sector, leading detractors included BP, Husky Energy, Eni, Total and Exxon Mobil. More broadly, integrated oil companies did not keep up with the market return for most of 2020. We believe that over the coming years as demand for oil returns following the shutdown of economies around the world, prices should move higher as the market becomes more balanced. This would significantly improve free cash flow generation, which we believe is not being discounted in today’s depressed sector valuations. In the context of low interest rates, we think the yields on select integrated oil companies are very attractive.

From the communication services sector, China Telecom and China Mobile dampened relative performance. Telecoms have not been as defensive as we had hoped in recent bouts of volatility, though we believe the sector remains well-positioned for today’s low interest rate, elevated risk environment given its stable demand characteristics and attractive dividend yield profile.

Turning to contributors, stock selection in the materials sector boosted relative results. Within the sector, the shares of Wheaton Precious Metals, LG Chem, Freeport-McMoRan and Albemarle rose in value. More generally, we have balanced exposures in the materials sector, including uncorrelated precious metals holdings, quality chemicals firms with strong economics and low cyclicality, and select industrial metals exposures in firms with sound balance sheets, good cost positions and cyclical upside potential.

An overweighting in the health care sector supported relative performance. Draegerwerk and Allergan were top contributors. Allergan, a US specialty pharmaceutical company with a focus on medical aesthetics including Botox, was acquired by AbbVie (also held by the portfolio) in May 2020.

Regionally, stock selection in Asia and Europe detracted from relative returns. China, the United Kingdom and France were the largest detractors within those regions. Conversely, at the country level, security selection in Germany and Canada, along with positioning in South Korea, helped relative results.

Outlook

We remain comfortable with our diverse positioning in global equities, which combines higher-quality defensive and growth-oriented opportunities with carefully selected pro-cyclical exposures. This well-balanced positioning has added dynamism to Templeton’s portfolios without sacrificing our fundamental focus or valuation discipline.

We have also increased independence from the systematic value factor. Increasingly, risk and volatility have been concentrated in the valuation tails of the market. We have decreased exposure to the “cheapest” market segment on backward-looking accounting metrics given this elevated risk profile, while also avoiding the most expensive internet and momentum stocks. In our view, this expensive latter group looks vulnerable to possible tax selling at year-end in anticipation of an incoming Biden administration or, more generally, to an increasingly challenging advertising environment and heightened regulatory scrutiny.



By thinking creatively about future trends and probabilities, we are focused on buying emerging growth and quality characteristics that are not yet accurately priced by financial markets, in our analysis. Looking forward, we expect elevated volatility and are positioned with the aim of protecting capital in drawdowns while acting quickly and decisively to reposition portfolios when genuine value goes on sale.

Turning to the Sukuk market, in the near term there may be further volatility, if there are ongoing issues in the aftermath of the US presidential election that weigh on perceived risk assets. In addition, market sentiment could be negatively impacted by the uncertainty around the quality and timing of any further fiscal stimulus measures. There will then be a focus on the areas that could be beneficiaries of the US election’s outcome.

With that in mind, we believe that markets will continue to benefit from monetary policy support. The subdued market reaction to the Federal Reserve’s (Fed’s) first interest rate meeting under its new policy framework in September with rates flagged as unlikely to change through to 2023, at the earliest suggested that market has very high expectations of Fed support. That should not distract from the longer-term impact of these policies, which will prove supportive for many years, in our view. Similarly, the political- and fiscal-related volatility that we might experience should not distract from the longer-term drivers of a cyclical rebound in the global economy, post the COVID-led recession. The potential for developments around the vaccine is another important driver, particularly as negative headlines around rising case numbers have revived concerns.

The strong market recovery through to the end of the review period, when coupled with our current concerns, has caused us to be tactically more cautious and ready for temporary setbacks. However, we believe the uncertainty will potentially fade into calendar year-end, with the focus shifting more appropriately towards a possible sharper recovery in 2021, aided by further stimulus. The historic and timely policy interventions by major central banks, along with large-scale fiscal interventions by governments worldwide, could still support economies and positively impact financial and currency markets. We are once again prepared for potential volatility and the return of seasonally heavy new-issuance levels, which could continue to offer opportunities.

Our view is best summed up as a balance of concerns around short-term, transient risks, with optimism around positive, cyclically rebounding growth in 2021.

THE INVESTMENT MANAGERSNovember 2020

The information stated in this report represents historical data and is not an indication of future results.

PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 LuxembourgT : +352 494848 1, F : +352 494848 2900, www.pwc.lu Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°10028256)R.C.S. Luxembourg B 65 477 - TVA LU25482518

Audit report

To the Shareholders ofFranklin Templeton Shariah Funds

Our opinion

In our opinion, the accompanying financial statements give a true and fair view of the financial position of Franklin Templeton Shariah Funds (the “Fund”) and of each of its sub-funds as at 31 October 2020, and of the results of their operations and changes in their net assets for the year then ended in accordance with Luxembourg legal and regulatory requirements relating to the preparation and presentation of the financial statements.

What we have audited

The Fund’s financial statements comprise:

the statement of net assets as at 31 October 2020; the statement of operations and changes in net assets for the year then ended; the schedule of investments as at 31 October 2020; and the notes to the financial statements, which include a summary of significant accounting policies.

Basis for opinion

We conducted our audit in accordance with the Law of 23 July 2016 on the audit profession (Law of 23 July 2016) and with International Standards on Auditing (ISAs) as adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier” (CSSF). Our responsibilities under the Law of 23 July 2016 and ISAs as adopted for Luxembourg by the CSSF are further described in the “Responsibilities of the “Réviseur d’entreprises agréé” for the audit of the financial statements” section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

We are independent of the Fund in accordance with the International Code of Ethics for Professional Accountants, including International Independence Standards, issued by the International Ethics Standards Board for Accountants (IESBA Code) as adopted for Luxembourg by the CSSF together with the ethical requirements that are relevant to our audit of the financial statements. We have fulfilled our other ethical responsibilities under those ethical requirements.

Other information

The Board of Directors of the Fund is responsible for the other information. The other information comprises the information stated in the annual report but does not include the financial statements and our audit report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

14

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors of the Fund and those charged with governance for the financial statements

The Board of Directors of the Fund is responsible for the preparation and fair presentation of the financial statements in accordance with Luxembourg legal and regulatory requirements relating to the preparation and presentation of the financial statements, and for such internal control as the Board of Directors of the Fund determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Board of Directors of the Fund is responsible for assessing the Fund’s and each of its sub-funds' ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors of the Fund either intends to liquidate the Fund or close any of its sub-funds or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Fund’s financial reporting process.

Responsibilities of the “Réviseur d’entreprises agréé” for the audit of the financial statements

The objectives of our audit are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an audit report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control;

15

evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors of the Fund;

conclude on the appropriateness of the Board of Directors of the Fund’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Fund’s or any of its sub-funds' ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our audit report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our audit report. However, future events or conditions may cause the Fund or any of its sub-funds to cease to continue as a going concern;

evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

PricewaterhouseCoopers, Société coopérativeRepresented by@esig

@esigSteven Libby

Luxembourg, 10 February 2021

Fund Performance



Percentage Change to October 31, 2020

Reference Share Class

Launch Date of Fund

6 Month

%

1 Year

%

3 Years

%

5 Years

%

Since Launch

%Franklin Global Sukuk Fund A (Acc) USD 10 Sep 12 8.0 4.3 12.8 18.8 28.9Templeton Shariah Global Equity Fund A (Acc) USD 10 Sep 12 6.8 (6.0) (10.8) 5.6 15.5

The Fund Performance disclosed in this table is the performance of the reference share class in base currency of the Fund.

Information on other share classes is available on request. This report shall not constitute an offer or a solicitation of an offer to buy shares. Subscriptions are to be made on the basis of the current prospectus, where available the relevant Key Investor Information Documents (“KIIDs”), a copy of the latest available audited annual report and, if published thereafter, the latest unaudited semi-annual report. The price of shares and income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is no guarantee of future performance. Currency fluctuations may affect the value of investments.

The investment activities will be undertaken in accordance with the Shariah Guidelines. As a consequence, the performance of a fund may possibly be lower than other in-vestment funds that do not seek to strictly adhere to the Islamic investment criteria. The requirement to “purify” cash holdings or dividend income will likely result in payments being made to charities. The return to investors will be reduced by the amount of such payments.

Data source: Performance – Franklin Templeton and JPMorgan


Statement of Net AssetsAs at October 31, 2020

www.franklintempleton.lu The accompanying notes are an integral part of these financial statements. Audited Annual Report 17

Total

Franklin Global

Sukuk Fund

Templeton Shariah

Global Equity Fund

(USD) (USD) (USD)ASSETSInvestments in securities at market value (note 2(b)) 280,032,022 216,006,976 64,025,046Cash at bank and at brokers 40,599,433 37,191,743 3,407,690Amounts receivable on subscriptions 1,649,092 1,582,849 66,243Profit payments on Sukuk and dividends receivable, net 1,827,443 1,683,166 144,277Other receivables 9,477 8,823 654TOTAL ASSETS 324,117,467 256,473,557 67,643,910

LIABILITIESAmounts payable on purchases of investments 1,988,438 1,988,438 –Amounts payable on redemptions 1,451,192 1,397,139 54,053Investment management fees payable (note 4) 251,637 191,869 59,768Payable to charity 10,337 – 10,337Unrealised loss on Shariah compliant forward foreign exchange contracts (notes 2(c), 3) 1,843 1,843 –Taxes and expenses payable 373,902 276,213 97,689TOTAL LIABILITIES 4,077,349 3,855,502 221,847

TOTAL NET ASSETS 320,040,118 252,618,055 67,422,063

THREE YEAR ASSET SUMMARYOctober 31, 2019 245,401,107 167,839,276 77,561,831October 31, 2018 225,319,834 141,168,336 84,151,498October 31, 2017 220,250,572 128,882,926 86,301,235


Statement of Operations and Changes in Net AssetsFor the year ended October 31, 2020

www.franklintempleton.luAudited Annual Report The accompanying notes are an integral part of these financial statements.18

Total

Franklin Global

Sukuk Fund

Templeton Shariah

Global Equity Fund

(USD) (USD) (USD)NET ASSETS AT THE BEGINNING OF THE YEAR 245,401,107 167,839,276 77,561,831INCOMEDividends (net of withholding taxes) (note 2(e)) 1,850,215 – 1,850,215Profit payments on Sukuk (net of withholding taxes) (note 2(e)) 7,899,284 7,899,284 –Sundry income 3,060 3,060 –TOTAL INCOME 9,752,559 7,902,344 1,850,215EXPENSESInvestment management fees (note 4) 2,469,781 1,768,146 701,635Administration and transfer agency fees 617,448 449,197 168,251Directors fees 18,019 14,993 3,026Subscription tax (note 7) 113,094 81,198 31,896Depository fees 172,941 90,495 82,446Audit fees 54,978 34,266 20,712Printing and publishing expenses 80,539 63,667 16,872Shariah compliance fees 150,967 75,976 74,991Maintenance and service charges 719,368 422,240 297,128Other charges 140,336 108,287 32,049TOTAL EXPENSES 4,537,471 3,108,465 1,429,006Expense reimbursement (note 9) (723,709) (546,097) (177,612)NET EXPENSES 3,813,762 2,562,368 1,251,394NET PROFIT/(LOSS) FROM INVESTMENTS 5,938,797 5,339,976 598,821Net realised profit/(loss) on sale of investments (7,950,451) 186,255 (8,136,706)Net realised profit/(loss) on Shariah compliant forward foreign exchange contracts 7,717 7,717 –Net realised profit/(loss) on foreign exchange transactions (443,836) (377,161) (66,675)NET REALISED PROFIT/(LOSS) FOR THE YEAR (2,447,773) 5,156,787 (7,604,560)Change in net unrealised appreciation/(depreciation) on:

Investments 5,621,536 3,145,689 2,475,847Shariah compliant forward foreign exchange contracts (2,999) (2,999) –Foreign exchange transactions 211,493 8 211,485

Capital gains tax (959) (959) –NET INCREASE/(DECREASE) IN NET ASSETS AS A RESULT OF OPERATIONS 3,381,298 8,298,526 (4,917,228)DONATION TO CHARITYPurification of non-Shariah compliant income (note 15) (18,433) – (18,433)NET DECREASE IN NET ASSETS AS A RESULT OF DONATIONS TO CHARITY (18,433) – (18,433)MOVEMENT OF CAPITALIssue of shares 184,630,422 172,308,797 12,321,625Redemption of shares (105,197,509) (88,586,290) (16,611,219)Equalisation (note 12) 498,370 527,789 (29,419)

79,931,283 84,250,296 (4,319,013)Dividends paid/accumulated (8,655,137) (7,770,043) (885,094)NET INCREASE/(DECREASE) IN NET ASSETS AS A RESULT OF MOVEMENT IN CAPITAL 71,276,146 76,480,253 (5,204,107)NET ASSETS AT THE END OF THE YEAR 320,040,118 252,618,055 67,422,063Portfolio Turnover Ratio (note 13) (8.28)% 73.06%


Statistical Information


Total Expense Ratio

October 31, 2020

(See note 14)

Shares Outstanding

as at October 31,

2020

Net Asset Value per share

as at October 31,

2020


as at October 31,

2019


as at October 31,

2018Franklin Global Sukuk Fund - USD A (Acc) EUR 1.50% 116,546.263 13.42 13.42 11.83A (Acc) USD 1.50% 5,373,071.226 12.89 12.36 11.06A (Mdis) SGD 1.50% 2,329,569.916 10.04 9.99 9.54A (Mdis) USD 1.49% 9,136,996.320 9.48 9.48 8.89I (Acc) USD 0.86% 2,202,102.620 13.40 12.76 11.35N (Acc) EUR 2.45% 616.897 12.43 12.56 11.19N (Acc) USD* 2.45% 500.000 10.33 – –W (Acc) USD 0.89% 424,519.718 11.56 11.01 –W (Qdis) EUR-H1 0.90% 13,593.020 9.05 9.15 8.80W (Qdis) USD 0.89% 4,450,739.802 9.71 9.65 9.00X (Qdis) USD 0.37% 500.000 9.93 9.99 9.27

Templeton Shariah Global Equity Fund - USD A (Acc) SGD 1.88% 365,605.876 11.98 12.68 13.05A (Acc) USD 1.88% 2,280,570.540 11.55 12.29 12.41AS (Acc) SGD 1.73% 4,599,577.229 10.47 11.07 11.37I (Acc) USD 1.04% 210,313.322 12.40 13.08 13.09X (Ydis) USD 0.34% 500.000 9.61 10.32 10.48

– – –

*This share class was launched on December 6, 2019


Notes to Financial StatementsFor the year ending October 31, 2020


Note 1 - The CompanyFranklin Templeton Shariah Funds (“FTSF” or the “Company”) is a collective investment undertaking pursuant to Part I of the amended Luxembourg law of December 17, 2010 on undertakings for collective investment and qualifies as a société d’investissement à capital variable. The Company was incorporated in Luxembourg on July 3, 2012, for an undetermined period. At the date of this report, it offers shares in 2 sub-funds of the Company (the “Funds”). The Board of Directors of the Company may authorise the creation of additional Funds in future with different investment objectives.

The Company aims to provide Investors with a choice of Funds which invest in a wide range of Shariah-compliant transferable securities and other Shariah-compliant eligible assets on a worldwide basis and which feature a diverse array of investment objectives including capital growth and income. The overall objective of the Company is to seek to minimise investment risk exposure through diversification and to provide Investors with the benefit of a portfolio managed by entities of Franklin Templeton according to its successful time-tested investment selection methods.

Note 2 - Significant accounting policies

(a) GeneralThe financial statements are prepared in accordance with the regulations of the Grand Duchy of Luxembourg relating to investment funds under the going concern basis of accounting.

(b) Investment in securitiesSecurities which are listed on a stock exchange or traded on any other organised market are valued at the last available price on such exchange or market which is normally the principal market for each security, and those securities dealt in on an over-the-counter market are valued in a manner as near as possible to that for quoted securities.

Securities not listed on any stock exchange nor traded on any organised market are valued at the last available price, or if such price is not representative of their fair value, they are valued prudently and in good faith on the basis of their reasonably foreseeable sales prices.

In accordance with the provisions of the current prospectus, Market Level Fair Valuation may be implemented to protect the interests of the Company’s shareholders against market timing practices, as market timers may seek to exploit possible delays between the change in the value of a Fund’s portfolio holdings and the Net Asset Value of the Fund’s Shares in Funds that hold significant investments in foreign securities because certain foreign markets close several hours ahead of the US markets.

The Management Company and/or the Administrative Agent has procedures to determine the fair value of individual securities and other assets for which market prices are not readily available or which may not be reliably priced. In such circumstances, the price of such investment shall be adjusted in accordance with the procedures adopted, as determined by or under the direction of the Board of Directors.

During the accounting year under review, gains and losses on investment securities sold were computed on the average cost basis for all Funds.

During the accounting year under review, discounts and premiums were amortised to income over the period to maturity, or date sold, if earlier.

(c) Shariah compliant forward foreign exchange contractsShariah compliant forward foreign exchange contracts are valued at the foreign exchange currency rate applicable at the “Statement of Net Assets” date for the remaining period, until maturity. Gains or losses resulting from Shariah compliant forward exchange contracts are recognised in the “Statement of Operations and Changes in Net Assets”.

(d) Foreign exchange transactionsTransactions expressed in currencies other than each Fund’s currency are translated into each Fund’s currency at the exchange rates applicable on the transaction dates.

FRANKLIN TEMPLETON SHARIAH FUNDSNOTES TO FINANCIAL STATEMENTS


Assets and liabilities designated in currencies other than each Fund’s currency are translated into each Fund’s currency at the appropriate exchange rates ruling at the period-end. Gains and losses on foreign exchange transactions are recognised in the “Statement of Operations and Changes in Net Assets” in determining the results for the accounting year.

The reference currency of the Company as reflected in the financial statements is U.S. dollar. The principal exchange rates applied as at October 31, 2020, are as follows:

EUR 0.8587SGD 1.3660

The list of the currency abbreviations is available in note 17.

(e) IncomeDividends are credited to income on their ex-dividend date. Profit payments (including profit payments on Sukuk) are accrued on a daily basis.

(f) Formation expensesFormation expenses associated with the launch of the new Funds are expensed as incurred and are disclosed in "Other charges" in the Statement of Operations and Changes in Net Assets.

(g) Swing pricingA Fund may suffer dilution of the net asset value per share due to investors buying or selling shares in a Fund at a price that does not reflect dealing and other costs that arise when security trades are undertaken by the Investment Manager to accommodate cash inflows or outflows.

In order to counter this impact, a swing pricing mechanism may be adopted to protect the interests of Shareholders of the Fund. If on any valuation date, the aggregate net capital activity of a Fund exceeds a pre-determined threshold, as determined and reviewed for each Fund on a periodic basis, the net asset value per share will be adjusted upwards or downwards to reflect net capital inflows or net capital outflows respectively.

The net capital inflows and net capital outflows will be determined based on the latest available information at the time of calculation of the net asset value per share. The swing pricing mechanism may be applied across all Funds. The extent of the price adjustment is set to reflect dealing and other costs. Such adjustment may vary from Fund to Fund and will not exceed 2% of the original net asset value per share.

In the case of a swing pricing event on the last day of the annual/semi-annual period, the net assets as disclosed in the “Statement of Net Assets”, exclude the swing pricing adjustment, however, the net asset value per share as at year/semi-annual period end, as disclosed in the Statistical Information, would include the swing pricing adjustment.

Due to the considerable impact and current exceptional market circumstances involved by the propagation of the Coronavirus (COVID-19), the board of directors of the Company have decided that, on a temporary basis and in order to protect the best interest of the shareholders, the swing factor applied to the Funds could be increased beyond the 2% limit. This may be necessary in order to ensure the increased costs of trading experienced at this time (due to the exceptional market conditions) are captured in the swing factor, in order to protect investors in the Funds.

Shareholders of Funds for which swing factor greater than 2% has been applied will be receiving specific shareholder notice informing them that this event has actually occurred.

There was no swing pricing adjustment affecting the Fund's Net Asset Value per share on the last day of the year.

During the year ended October 31, 2020, swing pricing adjustments affected the net asset value per share of the following Funds:

- Franklin Global Sukuk Fund

Note 2 - Significant accounting policies (continued)

(d) Foreign exchange transactions (continued)



- Templeton Shariah Global Equity Fund

Note 3 - Shariah compliant forward foreign exchange contractsAs at October 31, 2020, the Company had entered into the following outstanding contracts:

Franklin Global Sukuk Fund

Purchases Sales Maturity Date

Unrealised profit/(loss)

USDForward foreign exchange contracts used for share class hedging:EUR 123,399 USD 145,594 16-Nov-20 (1,843)

(1,843)The above contracts were opened with the below counterparties:HSBC (1,016)Standard Chartered (827)

(1,843)

Note 4 - Investment management feesThe Management Company receives from the Company a monthly investment management fee equivalent to a certain percentage per annum (as detailed below) of each Fund’s average daily net assets during the accounting year. The following percentages apply in respect of the different Funds as at October 31, 2020.

The Investment Managers, as noted on page 6, will be remunerated by the Management Company out of the investment management fee received from the Company

No management fee is payable by an investor on the acquisition of Class X shares, instead a fee is paid to the Investment Manager or affiliates under a separate agreement.

Class A, AS, N Class I Class WFranklin Global Sukuk Fund 1.00% 0.70% 0.70%Templeton Shariah Global Equity Fund 1.00% 0.70% NA

Note 5 - Soft commissionConsistent with obtaining best execution, brokerage commissions on portfolio transactions for the Company may be directed by the Investment Managers to broker-dealers in recognition of research services furnished by them as well as for services rendered in the execution of orders by such broker-dealers.

The receipt of investment research and information and related services permits the Investment Managers to supplement their own research and analysis and makes available to them the views and information of individuals and research staffs of other firms.

Such services do not include travel, accommodation, entertainment, general administrative goods or services, general office equipment or premises, membership fees, employee salaries or direct money payment, which are paid for directly by the Investment Managers.

Note 6 - Connected party transactionsCertain Directors of the Company are or may also be Officers and/or Directors of the Registrar and Transfer, Corporate, Domiciliary and Administrative Agent, Franklin Templeton International Services S.à r.l. All transactions with connected parties were entered into in the ordinary course of business and under normal commercial terms.

The investment management fees that are accrued by the Company in respect of the Management Company are detailed in note 4 to the financial statements.

Note 2 - Significant accounting policies (continued)

(g) Swing pricing (continued)



There are no connected brokers in Franklin Templeton, and no transactions were entered into with connected brokers during the year ended October 31, 2020.

During the year ended October 31, 2020, the Company accrued fees in respect of Franklin Templeton International Services S.à r.l. as Management Company and Principal Distributor of the Funds.

Note 7 - TaxationThe Company is not liable in the Grand Duchy of Luxembourg to any tax on its profits or income.

The Company, however, is liable in the Grand Duchy of Luxembourg to a tax of 0.05% per annum of its NAV, such tax being payable quarterly on the basis of the value of the net assets of the Company at the end of the relevant calendar quarter. This tax is not applicable for the portion of the assets of a Fund invested in other undertakings for collective investment which have been already subject to such tax.

Class I Shares and Class X Shares may qualify for the reduced tax rate of 0.01% if all the investors of these Share Classes are respectively Institutional Investors. No stamp duty or other tax is payable in the Grand Duchy of Luxembourg on the issue of the Shares in the Company. Under current laws and practice, no capital gains tax is payable in the Grand Duchy of Luxembourg on the realised or unrealised capital appreciation of the assets of the Company.

The Company is registered for Value Added Tax in the Grand Duchy of Luxembourg and subject to account for Value Added Tax in accordance with applicable laws. Investment income received or capital gains realised by the Company may be subject to tax in the countries of origin at varying rates. The Company may benefit in certain circumstances from double taxation treaties which the Grand Duchy of Luxembourg has concluded with other countries.

Note 8 - Share classesClass A shares: are offered at the applicable net asset value, plus an entry charge of up to 5.75% of the total amount invested varying per asset class. In addition, a maintenance charge of up to 0.50% per annum of the applicable average net asset value is deducted and paid to the Principal Distributor. This charge is accrued daily and is deducted and paid monthly to the Principal Distributor. A contingent deferred sales charge of up to 1%, retained by the Principal Distributor, applies to certain redemptions on qualified investments of USD 1 million or more within 18 months after repurchase.

Class AS shares: are offered in Singapore to CPF Investors as more fully described in the current prospectus of the Company. The price at which Class AS Shares will be offered is the Net Asset Value per Share, plus an entry charge of up to 3.00% of the total amount invested.

Class I shares: are offered to institutional investors as more fully described in the current prospectus of the Company. Purchases of Class I shares are not subject to an entry charge, nor a contingent deferred sales charge or any maintenance or servicing charges.

Class N shares: are subject to an entry charge of up to 3% of the total amount invested. In addition, a maintenance charge of up to 1.25% per annum of the applicable average net asset value is accrued daily and is deducted and paid monthly to the Principal Distributor. Class N shares may be offered in certain limited circumstances as more fully described in the current prospectus of the Company.

Class W shares: are not subject to an entry charge, contingent deferred sales charge nor any maintenance or servicing charge. Class W shares may be offered in certain limited circumstances as more fully described in the current prospectus of the Company.

Class X shares: are not subject to an entry charge and no management fees will be payable by an investor on the acquisition of Class X shares (instead a fee is paid to the Investment Manager or affiliates under an agreement between the Investment Manager and the investor). Class X shares are offered to institutional investors in certain limited circumstances as more fully described in the current prospectus of the Company.

Distributing shares: may have different frequencies. (Mdis) share classes distribute monthly, (Qdis) share classes distribute quarterly and (Ydis) share classes distribute annually.

Note 6 - Connected party transactions (continued)



Accumulating shares (acc): do not distribute any dividends but the income attributable is reflected in the increased value of the shares. All other terms and conditions are the same as those which apply to distributing share classes.

Hedged share classes: in order to reduce exchange rate fluctuations and return fluctuations, the Company offers H1 classes. The base currency exposure of the hedged share class is hedged into a specified alternative currency.

Note 9 - Expenses reimbursementOn a daily basis, for share classes where the expenses are capped, the level of expenses is calculated and compared to the cap and where the level of expenses is higher than the cap, this difference is booked as a decrease of expense (the “waiver fees”). On a monthly basis the waiver fees are deducted from the fees received by Franklin Templeton International Services S.à r.l.

The amount of waiver fees is disclosed as “Expenses reimbursement” in the “Statement of Operations and Changes in Net Assets”.

Note 10 - Statement of changes in the investment portfolioA list, specifying for each Fund total purchases and sales transacted during the year under review, may be obtained, upon request, at the registered office of the Company.

Note 11 - Transaction costsTransaction costs are costs incurred to acquire and dispose of financial assets or liabilities. They include fees and commissions paid to agents, brokers and dealers. During the year ended October 31, 2020, the Company incurred the following transaction costs:

Fund Name Currency AmountFranklin Global Sukuk Fund USD –*Templeton Shariah Global Equity Fund USD 39,585

*For Sukuk, transaction costs are not separately identifiable from the purchase price of the security and therefore cannot be disclosed separately.

Note 12 - EqualisationThe Funds use an accounting practice known as equalisation, by which a portion of the proceeds from issue and costs of redemption of shares, equivalent on a per share basis to the amount of undistributed investment income on the date of the transaction, is credited or charged to undistributed income which is disclosed as equalisation in the “Statement of Operations and Changes in Net Assets”. As a result, undistributed investment income per share is unaffected by issue or redemptions of shares.

Note 13 - Portfolio Turnover RatioThe Portfolio Turnover Ratio (“PTR”), expressed as a percentage, is equal to the total of purchases and sales of securities netted against the total value of subscriptions and redemptions, over average net assets of the Fund for a year. It is effectively a measure of how frequently a Fund buys or sells securities.

Note 14 - Total Expense Ratio The Total Expense Ratio (“TER”), expressed as a percentage, represents how the total annualised expenses of each share class relate to the average net assets of each share class for the year ended October 31, 2020. The total expenses comprise the investment management fees, the administration and transfer agency fees, the custodian fees and other expenses as summarised in the “Statement of Operations and Changes in Net Assets”. For share classes launched during the year, the TER is annualised.

Note 8 - Share classes (continued)



Note 15 - Purification of non-Shariah compliant income The Shariah Supervisory Board from time to time issues guidelines to quantify the annual amount of income of a Fund that should be donated to charity, being derived from eligible securities for investment pursuant to the investment objective, policy and restrictions set out in the prospectus, but that are engaged in an activity or activities of a marginal nature which are not Shariah-compliant and which are not screened out by the Shariah restrictions. Such amount is calculated on each relevant transaction, based on the purification ratios, expressed as a percentage of each target company’s dividend payments. The resulting amount is donated to a charity. Any such amounts are deducted only upon their actual determination and no anticipated accrual thereof is made.

For the year ended October 31, 2020, this amount was donated to the United Kingdom Committee for the United Nations Children’s Fund (UNICEF).

Note 16 - Audited annual reports and unaudited semi-annual reportsThe audited annual reports and unaudited semi-annual reports are available on the following Franklin Templeton website, www.franklintempleton.lu, or may be obtained, free of charge, on request at the registered office of the Company. They are only distributed to registered Shareholders in those countries where local regulation so requires.

Note 17 - AbbreviationsCountriesARE United Arab Emirates DEU Germany JPN Japan SAU Saudi ArabiaBEL Belgium DNK Denmark KOR South Korea SP SupranationalBHR Bahrain FRA France KWT Kuwait THA ThailandBRL Brazil GBR United Kingdom MYS Malaysia TUR TurkeyCAN Canada HKG Hong Kong NOR Norway TWN TaiwanCHE Switzerland IDN Indonesia PAK Pakistan USA United StatesCHN China ITA Italy QAT Qatar

CurrenciesCAD Canadian Dollar EUR Euro JPY Japanese Yen THB Thai BahtCHF Swiss Franc GBP British Pound Sterling KRW South Korean Won TWD New Taiwan DollarDKK Danish Krone HKD Hong Kong Dollar NOK Norwegian Krone USD US Dollar

Note 18 - Subsequent eventsThere have been no subsequent events since the period end.

Note 19 - Other informationBeginning in January 2020, global financial markets have experienced and may continue to experience significant volatility resulting from the spread of a novel corona virus known as COVID-19. The outbreak of COVID-19 has resulted in travel and border restrictions, quarantines, supply chain disruptions, lower consumer demand and general market uncertainty. The effects of COVID-19 have and may continue to adversely affect the global economy, the economies of certain nations and individual issuers, all of which may negatively impact the Fund’s performance.

Note 20 - Significant changes during the yearIn May 2020 Franklin Templeton International Services S.à r.l. appointed J.P. Morgan Bank Luxembourg S.A. as the Administrative Agent for the Franklin Templeton Shariah Funds.


Schedule of Investments, October 31, 2020Franklin Global Sukuk Fund

www.franklintempleton.lu26 Audited Annual Report The acompanying notes are an integral part of these financial statements.

(Currency - USD)

Number of shares or face value Description

Country code

Trading currency

Market value

% of net assets

TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIAL STOCK EXCHANGE LISTINGSUKUKCorporate Sukuk

8,000,000 Arab National Bank, Reg. S 3.326% 10/28/2030 SAU USD 8,078,119 3.196,845,000 DP World Salaam, Reg. S 6% Perpetual ARE USD 7,192,726 2.855,660,000 Saudi Electricity Global Sukuk Co. 2, Reg. S 5.06% 04/08/2043 SAU USD 6,808,651 2.705,925,000 Unity 1 Sukuk Ltd., Reg. S 3.86% 11/30/2021 ARE USD 6,046,565 2.395,242,000 Equate Sukuk Spc Ltd., Reg. S 3.944% 02/21/2024 KWT USD 5,588,994 2.214,670,000 QIB Sukuk Ltd., Reg. S 3.982% 03/26/2024 QAT USD 5,000,564 1.984,190,000 DIB Sukuk Ltd., Reg. S 2.95% 01/16/2026 ARE USD 4,355,889 1.724,265,000 MAR Sukuk Ltd., Reg. S 2.21% 09/02/2025 QAT USD 4,291,997 1.704,250,000 Saudi Electricity Global Sukuk Co. 5, Reg. S 1.74% 09/17/2025 SAU USD 4,237,002 1.684,210,000 Dar Al-Arkan Sukuk Co. Ltd., Reg. S 6.75% 02/15/2025 SAU USD 4,036,464 1.603,700,000 SIB Sukuk Co. III Ltd., Reg. S 2.85% 06/23/2025 ARE USD 3,836,438 1.523,440,000 Aldar Sukuk Ltd., Reg. S 4.75% 09/29/2025 ARE USD 3,824,929 1.513,350,000 Senaat Sukuk Ltd., Reg. S 4.76% 12/05/2025 ARE USD 3,774,783 1.493,900,000 Alpha Star Holding III Ltd., Reg. S 6.25% 04/20/2022 ARE USD 3,724,188 1.473,310,000 MAF Sukuk Ltd., Reg. S 4.638% 05/14/2029 ARE USD 3,629,633 1.443,025,000 Tabreed Sukuk Spc Ltd., Reg. S 5.5% 10/31/2025 ARE USD 3,513,955 1.392,850,000 Saudi Electricity Global Sukuk Co. 4, Reg. S 4.723% 09/27/2028 SAU USD 3,365,558 1.332,965,000 MAF Sukuk Ltd., Reg. S 4.5% 11/03/2025 ARE USD 3,209,470 1.273,165,000 Alpha Star Holding V Ltd., Reg. S 6.625% 04/18/2023 ARE USD 2,975,100 1.182,900,000 Boubyan Tier 1 Capital SPC Ltd., Reg. S 6.75% 11/16/2168 KWT USD 2,946,400 1.173,080,000 Dar Al-Arkan Sukuk Co. Ltd., Reg. S 6.875% 02/26/2027 SAU USD 2,916,220 1.152,370,000 Riyad Bank, Reg. S 3.174% 02/25/2030 SAU USD 2,387,775 0.951,880,000 Saudi Electricity Global Sukuk Co. 3, Reg. S 5.5% 04/08/2044 SAU USD 2,361,941 0.932,200,000 Axiata SPV2 Bhd., Reg. S 2.163% 08/19/2030 MYS USD 2,188,869 0.872,050,000 Fab Sukuk Co. Ltd., Reg. S 2.5% 01/21/2025 ARE USD 2,133,894 0.842,000,000 DIB Sukuk Ltd., Reg. S 3.664% 02/14/2022 ARE USD 2,061,910 0.821,900,000 IDB Trust Services Ltd., Reg. S 2.261% 09/26/2022 SP USD 1,962,178 0.781,690,000 Noor Sukuk Co. Ltd., Reg. S 4.471% 04/24/2023 ARE USD 1,800,511 0.711,750,000 QIB Sukuk Ltd., Reg. S 3.251% 05/23/2022 QAT USD 1,796,318 0.711,645,000 QIIB Senior Sukuk Ltd., Reg. S 4.264% 03/05/2024 QAT USD 1,772,974 0.701,445,000 Warba Sukuk Ltd., Reg. S 2.982% 09/24/2024 KWT USD 1,507,548 0.601,225,000 SIB Sukuk Co. III Ltd., Reg. S 4.231% 04/18/2023 ARE USD 1,307,399 0.521,000,000 MAR Sukuk Ltd., Reg. S 3.025% 11/13/2024 QAT USD 1,044,415 0.411,000,000 Dar Al-Arkan Sukuk Co. Ltd., Reg. S 6.875% 03/21/2023 SAU USD 984,580 0.398,820,000 Asya Sukuk Co. Ltd., Reg. S 0.004% 03/28/2023§ TUR USD 749,700 0.30

700,000 DIB Sukuk Ltd., Reg. S 2.95% 02/20/2025 ARE USD 728,306 0.29710,550 Medjool Ltd., Reg. S 3.875% 03/19/2023 ARE USD 708,525 0.28

5,813,000 NMC Healthcare Sukuk Ltd., Reg. S 5.95% 11/21/2023 ARE USD 639,430 0.25431,981 Khadrawy Ltd., Reg. S 2.471% 03/31/2025 GBR USD 430,664 0.17

119,920,582 47.46Government and Municipal Sukuk

8,545,000 Perusahaan Penerbit SBSN Indonesia III, Reg. S 4.4% 03/01/2028 IDN USD 9,754,502 3.866,220,000 KSA Sukuk Ltd., Reg. S 4.303% 01/19/2029 SAU USD 7,276,156 2.885,115,000 Perusahaan Penerbit SBSN Indonesia III, Reg. S 4.55% 03/29/2026 IDN USD 5,853,811 2.32

5,250,000CBB International Sukuk Programme Co. SPC, Reg. S 6.25% 11/14/2024 BHR USD 5,675,906 2.25

4,705,000 Perusahaan Penerbit SBSN Indonesia III, Reg. S 4.325% 05/28/2025 IDN USD 5,306,534 2.104,850,000 KSA Sukuk Ltd., Reg. S 2.969% 10/29/2029 SAU USD 5,192,333 2.06

4,660,000Third Pakistan International Sukuk Co. Ltd. (The), Reg. S 5.5% 10/13/2021 PAK USD 4,661,165 1.85

4,500,000 Perusahaan Penerbit SBSN Indonesia III, Reg. S 2.8% 06/23/2030 IDN USD 4,630,230 1.833,950,000 Perusahaan Penerbit SBSN Indonesia III, Reg. S 3.9% 08/20/2024 IDN USD 4,340,635 1.723,575,000 KSA Sukuk Ltd., Reg. S 3.628% 04/20/2027 SAU USD 3,980,396 1.583,250,000 Perusahaan Penerbit SBSN Indonesia III, Reg. S 4.15% 03/29/2027 IDN USD 3,648,613 1.442,900,000 Saudi Telecom Co., Reg. S 3.89% 05/13/2029 SAU USD 3,296,619 1.302,912,000 Sharjah Sukuk Program Ltd., Reg. S 2.942% 06/10/2027 ARE USD 3,008,533 1.192,550,000 Hong Kong Sukuk 2017 Ltd., Reg. S 3.132% 02/28/2027 HKG USD 2,795,986 1.112,435,000 Perusahaan Penerbit SBSN Indonesia III, Reg. S 3.8% 06/23/2050 IDN USD 2,595,783 1.031,800,000 Sharjah Sukuk Program Ltd., Reg. S 4.226% 03/14/2028 ARE USD 2,001,057 0.79

FRANKLIN TEMPLETON SHARIAH FUNDSSCHEDULE OF INVESTMENTS

Franklin Global Sukuk Fund (continued)

www.franklintempleton.lu 27The acompanying notes are an integral part of these financial statements. Audited Annual Report

(Currency - USD)


Country code

Trading currency

Market value

% of net assets

2,000,000 ICDPS Sukuk Ltd., Reg. S 1.81% 10/15/2025 SP USD 1,998,066 0.791,450,000 Malaysia Sukuk Global Bhd., Reg. S 4.08% 04/27/2046 MYS USD 1,851,803 0.731,525,000 IDB Trust Services Ltd., Reg. S 0.037% 12/04/2024 SP EUR 1,784,775 0.711,490,000 IDB Trust Services Ltd., Reg. S 0.554% 11/07/2023 SP EUR 1,771,672 0.701,550,000 Malaysia Sovereign Sukuk Bhd., Reg. S 3.043% 04/22/2025 MYS USD 1,690,035 0.671,300,000 RAK Capital, Reg. S 3.094% 03/31/2025 ARE USD 1,379,547 0.55

890,000Third Pakistan International Sukuk Co. Ltd. (The), Reg. S 5.625% 12/05/2022 PAK USD 891,388 0.35

790,000 KSA Sukuk Ltd., Reg. S 2.894% 04/20/2022 SAU USD 813,983 0.32625,000 Perusahaan Penerbit SBSN Indonesia III, Reg. S 4.35% 09/10/2024 IDN USD 697,478 0.28

86,897,006 34.41TOTAL SUKUK 206,817,588 81.87TOTAL TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIAL STOCK EXCHANGE LISTING 206,817,588 81.87TRANSFERABLE SECURITIES DEALT IN ON ANOTHER REGULATED MARKETSUKUKCorporate Sukuk

4,728,000International Islamic Liquidity Management 2 SA, Reg. S 0.45% 01/21/2021 SP USD 4,737,195 1.88

3,000,000 Virgin Mobile Middle East & Africa Sukuk Ltd. 12% 03/31/2023 ARE USD 3,082,500 1.221,330,000 Boubyan Sukuk Ltd., Reg. S 2.593% 02/18/2025 KWT USD 1,369,693 0.54

9,189,388 3.64TOTAL SUKUK 9,189,388 3.64TOTAL TRANSFERABLE SECURITIES DEALT IN ON ANOTHER REGULATED MARKET 9,189,388 3.64

TOTAL INVESTMENTS 216,006,976 85.51

a§ This Sukuk is currently in default


Schedule of Investments, October 31, 2020Templeton Shariah Global Equity Fund

www.franklintempleton.lu28 Audited Annual Report The accompanying notes are an integral part of these financial statements.

(Currency - USD)


Country code

Trading currency

Market value

% of net assets

TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIAL STOCK EXCHANGE LISTINGSHARESAir Freight & Logistics

599,000 Kerry Logistics Network Ltd. CHN HKD 1,250,995 1.861,250,995 1.86

Auto Components23,400 Toyota Industries Corp. JPN JPY 1,512,043 2.24

655,367 Johnson Electric Holdings Ltd. HKG HKD 1,356,015 2.012,868,058 4.25

Automobiles652,000 Brilliance China Automotive Holdings Ltd. CHN HKD 562,811 0.83

562,811 0.83Biotechnology

11,440 BioMarin Pharmaceutical, Inc. USA USD 851,479 1.26851,479 1.26

Chemicals2,910 LG Chem Ltd. KOR KRW 1,584,144 2.35

14,090 Albemarle Corp. USA USD 1,313,329 1.9518,627 Yara International ASA BRL NOK 651,830 0.97

3,549,303 5.27Communications Equipment

13,540 F5 Networks, Inc. USA USD 1,800,008 2.6717,627 Ciena Corp. USA USD 694,327 1.03

2,494,335 3.70Containers & Packaging

1,445,000 Greatview Aseptic Packaging Co. Ltd. CHN HKD 619,135 0.92619,135 0.92

Diversified Telecommunication Services3,410,000 China Telecom Corp. Ltd. 'H' CHN HKD 1,070,425 1.59

1,070,425 1.59Electrical Equipment

54,100 Mitsubishi Electric Corp. JPN JPY 696,681 1.03696,681 1.03

Electronic Equipment, Instruments & Components37,890 Hitachi Ltd. JPN JPY 1,276,934 1.9030,400 Alps Alpine Co. Ltd. JPN JPY 438,549 0.65

1,715,483 2.55Food & Staples Retailing

48,200 Matsumotokiyoshi Holdings Co. Ltd. JPN JPY 1,779,199 2.6418,300 Walgreens Boots Alliance, Inc. USA USD 622,932 0.92

2,402,131 3.56Health Care Equipment & Supplies

15,550 Medtronic plc USA USD 1,563,863 2.326,266 Draegerwerk AG & Co. KGaA DEU EUR 447,879 0.66

2,011,742 2.98Industrial Conglomerates

9,341 Siemens AG DEU EUR 1,095,802 1.631,095,802 1.63

Machinery19,652 Westinghouse Air Brake Technologies Corp. USA USD 1,165,364 1.73

1,165,364 1.73Marine

578 AP Moller - Maersk A/S 'B' DNK DKK 926,279 1.37926,279 1.37


Templeton Shariah Global Equity Fund (continued)

www.franklintempleton.lu 29The accompanying notes are an integral part of these financial statements. Audited Annual Report

(Currency - USD)


Country code

Trading currency

Market value

% of net assets

Metals & Mining72,500 Sumitomo Metal Mining Co. Ltd. JPN JPY 2,253,357 3.3444,348 Wheaton Precious Metals Corp. BRL CAD 2,035,308 3.0277,300 Freeport-McMoRan, Inc. USA USD 1,340,382 1.99

5,629,047 8.35Multiline Retail

15,100 Dollar Tree, Inc. USA USD 1,363,832 2.021,363,832 2.02

Multi-Utilities148,397 E.ON SE DEU EUR 1,545,366 2.29

1,545,366 2.29Oil, Gas & Consumable Fuels

42,343 TOTAL SE FRA EUR 1,282,799 1.90448,396 BP plc GBR GBP 1,143,585 1.7015,060 Exxon Mobil Corp. USA USD 491,257 0.7369,056 Eni SpA ITA EUR 483,720 0.72

438,200 PTT PCL THA THB 435,447 0.65163,700 Husky Energy, Inc. CAN CAD 421,476 0.6230,728 Equinor ASA NOR NOK 392,062 0.58

4,650,346 6.90Pharmaceuticals

14,030 Johnson & Johnson USA USD 1,923,653 2.8517,586 Merck & Co., Inc. USA USD 1,322,643 1.9637,170 Pfizer, Inc. USA USD 1,318,792 1.963,960 Roche Holding AG CHE CHF 1,272,265 1.89

38,700 Tsumura & Co. JPN JPY 1,135,788 1.6912,161 Sanofi FRA EUR 1,098,011 1.6312,947 Novartis AG CHE CHF 1,008,698 1.497,085 UCB SA BEL EUR 699,767 1.04

37,010 Astellas Pharma, Inc. JPN JPY 507,467 0.753,304 Merck KGaA DEU EUR 489,404 0.73

10,087 Bayer AG DEU EUR 473,973 0.7011,250,461 16.69

Semiconductors & Semiconductor Equipment153,600 Taiwan Semiconductor Manufacturing Co. Ltd. TWN TWD 2,323,471 3.4561,260 Infineon Technologies AG DEU EUR 1,705,478 2.534,100 Tokyo Electron Ltd. JPN JPY 1,100,379 1.63

16,400 Micron Technology, Inc. USA USD 825,576 1.229,546 SK Hynix, Inc. KOR KRW 676,101 1.00

6,631,005 9.83Software

6,900 Zendesk, Inc. USA USD 765,486 1.145,140 SAP SE DEU EUR 548,336 0.81

1,313,822 1.95Specialty Retail

23,380 TJX Cos., Inc. (The) USA USD 1,187,704 1.761,187,704 1.76

Technology Hardware, Storage & Peripherals65,837 Samsung Electronics Co. Ltd. KOR KRW 3,303,864 4.90

1,681,920 Lenovo Group Ltd. CHN HKD 1,056,027 1.574,359,891 6.47

Textiles, Apparel & Luxury Goods1,945 adidas AG DEU EUR 577,845 0.86

577,845 0.86Transportation Infrastructure

44,400 Mitsubishi Logistics Corp. JPN JPY 1,168,375 1.731,168,375 1.73


Templeton Shariah Global Equity Fund (continued)

www.franklintempleton.lu30 Audited Annual Report The accompanying notes are an integral part of these financial statements.

(Currency - USD)


Country code

Trading currency

Market value

% of net assets

Wireless Telecommunication Services174,500 China Mobile Ltd. CHN HKD 1,067,329 1.58

1,067,329 1.58TOTAL SHARES 64,025,046 94.96TOTAL TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIAL STOCK EXCHANGE LISTING 64,025,046 94.96

TOTAL INVESTMENTS 64,025,046 94.96



Additional Information - Unaudited

Calculation Method of the Risk ExposureThe Commitment Approach* is used for measuring the Global Exposure** for:

Franklin Global Sukuk FundTempleton Shariah Global Equity Fund

*Commitment Approach is an approach for measuring risk or “global exposure” that factors in the market risk of the investments held in a UCITS sub-fund, including risk associated with any financial derivatives instruments held by converting the financial derivatives into equivalent positions in the underlying assets of those derivatives (sometimes referred to as “notional exposure”), after netting and hedging arrangements where the market value of underlying security positions may be offset by other commitments related to the same underlying positions.

** Global Exposure refers to a measure of the risk exposure for a UCITS sub-fund that factors in the market risk exposure of underlying investments, as well as the incremental market risk exposure and implied leverage associated with financial derivative instruments held in the portfolio.

FRANKLIN TEMPLETON SHARIAH FUNDSADDITIONAL INFORMATION - UNAUDITED


UCITS Remuneration DisclosureFranklin Templeton International Services S.à r.l. (“FTIS”), as UCITS licensed management company (the “Management Company”) has a remuneration policy (the “Policy”) in place which applies to all UCITS funds (each a “UCITS” and together the “UCITS”) under its management. The Policy has been designed to discourage excessive risk taking, integrating in its performance management systems risk criteria specific to the business units it covers. The policy has a governance structure aimed at preventing internal conflicts of interest.

There are defined procedures in place for the creation, update, review and approval of the Policy as well as for communication and implementation of the Policy. Senior Management, Human Resources, Compliance and other functions are all involved in this process and the Policy is approved by Senior Management and the Board of managers of the Management Company.

Fixed remuneration is defined as base salary plus other benefits which may include pension contributions, life assurance premiums or private medical insurance premiums. Levels of fixed remuneration are set with reference to job complexity, level of responsibility, performance and market benchmarking data. These levels are reviewed on a regular basis.

Variable remuneration is defined as annual bonuses, long term awards in the form of performance share grants or sales bonus payments. Levels of variable remuneration are set with reference to overall corporate and business unit performance as well as individual performance.

The full Policy is available at the registered office of the Management Company. Quantitative information relevant to the Franklin Templeton Shariah Funds is outlined below.

Total amount of fixed remuneration paid by FTIS and its delegates during the year ended September 30, 2020*,** € 50,049 Total amount of variable remuneration paid by FTIS and its delegates during the year ended September 30, 2020 € 19,267 Number of staff of FTIS and in its delegates as at September 30, 2020 196 Total amount of compensation paid by FTIS and its delegates to Senior managers during the year ended September 30, 2020*,** € 19,602 Total amount paid by FTIS and its delegates to other members of staff who have a material impact on the profile of UCITS during year ended September 30, 2020*,** € -

*The total amount of compensation paid by FTIS has been allocated to FTSF based on its pro rata share of the average month end total net assets of the funds under management of FTIS for the year ended September 30,2020.

** The total amount of compensation paid by the FTIS delegates has been allocated to FTSF based on its pro rata share of the average month end total net assets of the funds under management of the FTIS delegates for the year ended September 30, 2020.



Franklin Templeton Office Directory

Further information regarding Franklin Templeton Shariah Funds is available from the following Franklin Templeton offices:

EUROPE

FranceFranklin Templeton International Services S.à r.l.French Branch20, rue de la PaixF-75002 Paris, FranceTel: +33 (0)1 40 73 86 00 Fax: +33 (0)1 40 73 86 10www.franklintempleton.fr

LuxembourgFranklin Templeton International Services S.à r.l.8A, rue Albert Borschette, L-1246 LuxembourgB.P. 169, L-2011 LuxembourgGrand Duchy of LuxembourgTel: +352 46 66 67 1 Fax: +352 46 66 76www.franklintempleton.lu

SpainFranklin Templeton Investment Management LimitedSucursal en EspañaJosé Ortega y Gasset, 29-6º28006 Madrid, SpainTel: +34 91 426 3600 Fax: +34 91 577 1857www.franklintempleton.com.es

SwitzerlandFranklin Templeton Switzerland LtdStockerstrasse 38CH-8002 Zurich, SwitzerlandTel: +41 (0) 44 217 81 81 Fax: +41 (0) 44 217 81 82www.franklintempleton.ch

UNITED KINGDOM

LondonFranklin Templeton Investment Management LimitedCannon Place, 78 Cannon StreetLondon EC4N 6HL, United KingdomTel: +44 (0) 20 7073 8500 Fax: +44 (0) 20 7073 8700UK Freefone: 0800 305 306www.franklintempleton.co.uk

ASIA

SingaporeTempleton Asset Management Ltd7 Temasek Boulevard#38-03 Suntec Tower OneSingapore 038987Tel: +65 6241 2662 Fax: +65 6332 2295www.franklintempleton.com.sg

MIDDLE EAST AND AFRICA

South AfricaFranklin Templeton Investments SA (PTY) LtdKildare HouseThe Oval, 1 Oakdale RoadNewlands, Cape Town, 7700South AfricaTel: +27 11 341 2300 Fax: +27 11 484 2301www.franklintempleton.co.za

United Arab EmiratesFranklin Templeton Investments (ME) LimitedGate Building EastWing, 2nd FloorDubai International Financial CentreP.O. Box 506613Dubai, United Arab EmiratesTel: +971 (4) 428 4100 Fax: +971 (4) 428 4140www.franklintempletongem.com

Please note that the websites mentioned above are directed at residents within the country stated on these websites. (Please refer to the website disclaimers).

Franklin Templeton International Services S.à r.l.8A, rue Albert BorschetteL-1246 LuxembourgGrand Duchy of LuxembourgTel: +352 (46) 66-67-1Fax: +352 (46) 66-76