ANNUAL
REPORT
OCTOBER 31, 1998
FRANKLIN TEMPLETON GLOBAL TRUST
FRANKLIN TEMPLETON GLOBAL CURRENCY FUND
FRANKLIN TEMPLETON HARD CURRENCY FUND
[Franklin(R)Templeton(R) LOGO]
<PAGE>
[Celebrating LOGO]
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective and remember that all securities markets move
both up and down, as do mutual fund share prices. We appreciate your past
support and look forward to serving your investment needs in the years ahead.
[Photograph]
DONALD P. GOULD
President
Franklin Templeton Global Trust
<PAGE>
CONTENTS
Shareholder Letter .................................................. 1
Economic Overview ................................................... 4
Fund Reports
Franklin Templeton Global Currency Fund ............................ 6
Franklin Templeton Hard Currency Fund .............................. 14
Financial Highlights & Statement of Investments ..................... 26
Financial Statements ................................................ 31
Notes to Financial Statements ....................................... 34
Independent Auditors' Report ........................................ 40
FUND CATEGORY
[Pyramid GRAPHIC]
SHAREHOLDER LETTER
Dear Shareholder:
We are pleased to bring you this annual report of Franklin Templeton Global
Trust for the fiscal year ended October 31, 1998.
Just when it seemed that the dollar knew only one direction -- up -- the
worldwide market volatility of late summer claimed the dollar as a victim, too.
After extending its multi-year climb well into 1998, the dollar declined sharply
against the Japanese yen and German mark beginning in mid-August. In October, it
experienced one of its largest drops against the yen since the advent of
floating exchange rates in the early 1970s, declining almost 10% in the span of
about two days.
For many years, numerous institutional investors have engaged in the so-called
"yen carry" trade, borrowing yen at Japan's very low nominal interest rates,
about 1%, and using the proceeds to acquire U.S. fixed-income securities
yielding, say, 5%. Provided the dollar/yen exchange rate remained stable, this
was an effective way to pocket a 4% interest rate differential (the "carry").
Since the dollar has generally appreciated against the yen during the past
several years, the trade was made more attractive still by the bonus of exchange
rate profits.
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Of course, leverage and exchange rates cut both ways, a fact made painfully
clear in the much publicized problems of several hedge funds in August and
September. As the yen began to weaken in late summer 1998, the yen "carry"
exchange rate profits turned to losses, ultimately precipitating a rush to
unwind the trades. As in any market, when everyone wants to exit through the
same door at the same time, liquidity tends to disappear and price movements
become highly exaggerated. Even in this most liquid of markets, bids virtually
disappeared.
Setting aside the volatility issue, we believe the dollar's long climb against
many other currencies may have come to an end in the fiscal year's last months.
Of course, we will only know this for sure at some point down the road. In our
opinion, a number of factors now weigh against the dollar. These include
continued U.S. dependence on foreign capital combined with a low and declining
domestic savings rate (now nearly zero); record-setting trade deficits fueled by
economic and currency declines in Asia; declining U.S. interest rates; and at
least an interruption in the relentless rise of the U.S. stock market.
It is this last issue which is perhaps most relevant to investors in the
Franklin Templeton Global Currency and Hard Currency Funds. We have repeatedly
observed the frequent correlation between U.S. stocks and the U.S. dollar. The
peak of U.S. equity market averages in mid-July corresponded very closely with
the beginning of the
2
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dollar's 12% decline against the mark, and preceded the dollar's peak against
the yen by only a month. So, foreign currency money markets again appear to
offer potentially strong diversification benefits to U.S.
investors.
The funds of the Franklin Templeton Global Trust continue to achieve their
objectives over time. Through the years of their existence, Franklin Templeton
Global Currency Fund and Franklin Templeton Hard Currency Fund have provided
strong total returns during periods of U.S. dollar weakness, while giving back
some of those gains in periods of dollar strength, when other assets within a
typical balanced portfolio tend to benefit from a strong dollar. Without the
ability to predict the future, we believe that it is prudent to seek protection
against future dollar decline and that the diversification afforded by foreign
money markets remains an intelligent strategy for many investors.
As ever, thank you for investing with us.
Sincerely,
/s/ Donald P. Gould
Donald P. Gould
President
Franklin Templeton Global Trust
3
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ECONOMIC OVERVIEW
During the year under review, three trends characterized global markets. First,
the decline in prices of raw materials and commodities, which contributed to
benign global inflation and a fall in global interest rates. The other two were
the emergence of periodic economic crises in emerging markets countries and a
persistent rise in bond prices in the world's major industrial markets. As a
result of these trends, higher quality bonds performed best during the period,
and helped the U.S. dollar versus many other currencies, as investors seeking a
"safe haven" for their money chose the U.S. Treasury market.
U.S. economic expansion continued for the sixth consecutive year and
unemployment fell to levels not seen since the early 1970s. In Europe, most
economies began to emerge from a sluggish growth environment, with those of
Finland, Spain and the Netherlands growing rapidly as low, long-term interest
rates stimulated economic
4
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activity. By the end of the period, accelerating growth had spread to Germany,
France, and Italy. Many continental European markets also benefited from a
convergence in interest rates in countries seeking membership in the European
Economic Union.
Japan, where banks staggered under an enormous load of bad debt, presented a
different picture. Government policy makers struggled but failed to restructure
its economy, and Japan remained in a recession. Its poor demand for products
from other Asian markets and the yen's persistent weakness put enormous pressure
on the economies of developing Asian countries.
Toward the end of the reporting period, Russia also came under tremendous
pressure because of its precarious debt financing. In order to establish at
least a semblance of stability, it devalued the ruble and declared a moratorium
on debt service. These actions influenced bond prices of other emerging markets,
such as Latin America, and also affected developed economies that were dependent
on commodity exports or trade with emerging market countries. By the close of
the period, Canada, Australia and New Zealand experienced rising interest rates
and moderate declines in their currencies relative to the U.S. dollar.
5
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FRANKLIN TEMPLETON
GLOBAL CURRENCY FUND
- --------------------------------------------------------------------------------
Your Fund's Goal: Franklin Templeton Global Currency Fund seeks to maximize the
investor's total return through a combination of interest income and changes in
the fund's net asset value due to changes in currency exchange rates. The fund
seeks to achieve its goal by investing in interest-earning money market
instruments denominated in three or more Major Currencies, as defined in the
fund's prospectus.
- --------------------------------------------------------------------------------
Since Franklin Templeton Global Currency Fund holds primarily short-term
securities whose prices have been relatively stable in local currency terms,
most of its total return is derived from interest paid by portfolio securities
and changes in the U.S. dollar's value relative to the currencies of countries
where the fund invests. This tends to put the fund at a disadvantage during
periods of U.S. dollar strength because our internal benchmark portfolio is only
one-third each in money markets of the U.S., Japan and Germany.
During the year under review, the dollar fell versus the German mark and
Japanese yen. However, Canada, Australia and New Zealand's
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 27 of
this report.
6
<PAGE>
economies slowed because of the Asian and Russian financial crises, and the
dollar rose in relation to their currencies. Within this environment, the fund
produced a +3.71% one-year cumulative total return, while the fund's benchmark,
the Salomon Brothers World Money Market Index, returned +5.17%, as discussed in
the Performance Summary on page 10. However, we always maintain a long-term
perspective when managing the fund, and we encourage shareholders to view their
investments in a similar manner. As the Performance Summary also shows, the fund
has delivered a +120.85% cumulative total return for the period from inception
on June 27, 1986, through October 31, 1998.
Throughout the fiscal year, we sought opportunities to add currencies to the
portfolio that would offer value given our assessment of the market. The fund's
U.S. dollar exposure began the reporting period at 19.0%, increased to 58.7% by
the middle of the period, and then, by October 31, 1998, we had reduced this
exposure to 29.6% of total net assets. Our exposure to Germany at the end of the
period was 43.8%, with none in Japan. The fund's remaining assets were invested
in Canadian, Australian, and New Zealand dollars.
Going forward, we believe that in the near term, the German mark may trade in a
fairly narrow range versus the U.S. dollar. In our opinion, the Asian economic
crisis, including the financial woes in Japan, eventually could lead to a weaker
Japanese yen. And we will continue to look for opportunities to add to our
Australian and New
ASSET ALLOCATION BY CURRENCY
Franklin Templeton Global Currency Fund
Based on Total Net Assets
10/31/98
[Pie Chart]
German Mark
43.8%
U.S. Dollar
29.6%
Canadian Dollar
10.7%
Australian Dollar
10.4%
New Zealand
Dollar 5.5%
7
<PAGE>
Zealand dollar positions. As always, we will continue to monitor economic
conditions, and try to position the portfolio to take advantage of opportunities
in the currency markets around the world.
Of course, there are special risk considerations associated with global
investing related to market, currency, economic, social, political, and other
factors, as discussed in the prospectus. Because a significant amount of the
fund's assets are denominated in foreign currencies, there is potential for
significant gain or loss from currency exchange rate fluctuations. A
non-diversified foreign fund may not be appropriate for all investors and should
not be considered a complete investment program.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of October 31, 1998, the end of the reporting period. However,
market and economic conditions are changing constantly, which can be expected to
affect our strategies and the fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
better understand our investment and management philosophy.
8
<PAGE>
Please note that although the fund's Statement of Investments on page 27 of this
report indicates that the fund held 58.7% of its portfolio investments in U.S.
dollar-denominated assets as of October 31, 1998, its NET EXPOSURE to the U.S.
dollar as of that date was only 29.6%. The difference is explained by the fund's
holdings of forward currency exchange contracts (see Note 2 in the Notes to
Financial Statements on page 35) calling for the purchase of various foreign
currencies in exchange for U.S. dollars at various future dates. The combination
of U.S. dollar-denominated instruments with "long" forward currency exchange
contracts creates a position economically equivalent to a money market
instrument denominated in the foreign currency itself. Such combined positions
are sometimes necessary when the money market in a particular foreign currency
is small or relatively illiquid.
9
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PERFORMANCE SUMMARY
During the fiscal year ended October 31, 1998, the fund recognized net foreign
currency losses due to fluctuations in the value of its foreign-currency
denominated securities and foreign currency holdings. Under the Internal Revenue
Code, these losses reduce the fund's investment income available for
distribution to shareholders, which causes all or a portion of the total
distributions to be characterized as a return of capital at the fund's year end.
In general, return-of-capital distributions are not taxable. Instead, they
reduce the cost basis of your fund shares, and affect the computation of a
capital gain or loss when you sell your shares.
Franklin Templeton Global Currency Fund produced a +3.71% cumulative total
return for the one-year period ended October 31, 1998. Cumulative total return
measures the change in value of an investment, assuming reinvestment of all
distributions and does not include the sales charge. We have always maintained a
long-term perspective when managing the fund, and we encourage shareholders to
view their investments in a similar manner.
The fund's share price, as measured by net asset value, decreased
4 cents, from $12.10 on October 31, 1997, to $12.06 on October 31, 1998. During
the reporting period, shareholders received per-share distributions of 27.8
cents ($0.2780) in income dividends and 19.0 cents ($0.1900) in return of
capital. Based on the maximum offering price of $12.34 on October 31, 1998, and
an annualization of October's monthly dividend of 3.9 cents ($0.039) per share,
the fund's distribution rate was 3.79%. Distributions will vary depending on
income earned by the fund and any profits realized from the sale of securities
in the portfolio, as well as the level of the fund's operating expenses.
Past performance is not predictive of future results.
10
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The graph on page 12 compares the performance of Franklin Templeton Global
Currency Fund over the past 10 years and the unmanaged Salomon Brothers World
Money Market Index, which provides an indication of the performance of the U.S.
dollar and Eurocurrency short-term sectors. It is important to note the fund's
allocation of U.S. dollar instruments generally is higher than the index's.
Of course, an unmanaged index has an inherent performance differential over any
fund. It does not pay management fees to cover salaries of security analysts or
portfolio managers, or pay commissions or market spreads to buy and sell bonds.
Unlike indices, mutual funds never are fully invested because they need to have
cash on hand to redeem shares or pay for upcoming investments. In addition, the
fund's performance includes the maximum initial sales charge, all fund expenses
and account fees. If the fund's costs had been applied to the index, its
performance would have been lower. Please remember that an index simply is a
measure of performance and cannot be invested in directly.
Past performance is not predictive of future results.
11
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TOTAL RETURN INDEX COMPARISON
Franklin Templeton Global Currency Fund
$10,000 Investment (11/1/88 -- 10/31/98)
[Line Chart]
The following line graph compares the performance of Franklin Templeton Global
Currency Fund and the unmanaged Salomon Brothers World Money Market Index, based
on a $10,000 investment from 11/1/88 to 10/31/98.
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON SALOMON BROTHERS WORLD MONEY MARKET
GLOBAL CURRENCY FUND INDEX
-------------------------------------------------------------
<S> <C> <C> <C> <C>
11/1/88 $9,772 $10,000
11/30/88 $10,076 $10,374 3.74%
12/31/88 $9,965 $10,232 -1.37%
1/31/89 $9,797 $9,914 -3.11%
2/28/89 $9,801 $10,136 2.24%
3/31/89 $9,747 $9,904 -2.29%
4/30/89 $9,815 $9,994 0.91%
5/31/89 $9,606 $9,657 -3.37%
6/30/89 $9,718 $9,782 1.30%
7/31/89 $9,934 $10,249 4.77%
8/31/89 $9,762 $9,923 -3.18%
9/30/89 $9,837 $10,321 4.01%
10/31/89 $9,914 $10,421 0.97%
11/30/89 $10,111 $10,642 2.12%
12/31/89 $10,382 $11,006 3.42%
1/31/90 $10,471 $11,204 1.80%
2/28/90 $10,461 $11,193 -0.10%
3/31/90 $10,508 $11,225 0.29%
4/30/90 $10,619 $11,403 1.58%
5/31/90 $10,749 $11,555 1.33%
6/30/90 $10,886 $11,826 2.35%
7/31/90 $11,199 $12,388 4.75%
8/31/90 $11,359 $12,614 1.83%
9/30/90 $11,543 $12,810 1.55%
10/31/90 $11,917 $13,257 3.49%
11/30/90 $11,930 $13,375 0.89%
12/31/90 $11,881 $13,481 0.79%
1/31/91 $12,064 $13,736 1.89%
2/28/91 $12,086 $13,540 -1.42%
3/31/91 $11,835 $12,691 -6.27%
4/30/91 $11,916 $12,831 1.10%
5/31/91 $11,885 $12,762 -0.54%
6/30/91 $11,784 $12,555 -1.62%
7/31/91 $12,027 $12,892 2.68%
8/31/91 $11,920 $12,990 0.76%
9/30/91 $12,079 $13,547 4.29%
10/31/91 $12,092 $13,619 0.53%
11/30/91 $12,274 $13,921 2.22%
12/31/91 $12,785 $14,618 5.01%
1/31/92 $12,433 $14,209 -2.80%
2/29/92 $12,298 $14,033 -1.24%
3/31/92 $12,298 $14,026 -0.05%
4/30/92 $12,427 $14,134 0.77%
5/31/92 $12,771 $14,549 2.94%
6/30/92 $13,258 $15,157 4.18%
7/31/92 $13,464 $15,542 2.54%
8/31/92 $13,726 $16,172 4.05%
9/30/92 $13,779 $15,954 -1.35%
10/31/92 $13,378 $15,113 -5.27%
11/30/92 $13,277 $14,809 -2.01%
12/31/92 $13,250 $14,754 -0.37%
1/31/93 $13,296 $14,828 0.50%
2/28/93 $13,553 $14,791 -0.25%
3/31/93 $13,833 $15,207 2.81%
4/30/93 $14,077 $15,585 2.49%
5/31/93 $14,266 $15,743 1.01%
6/30/93 $14,041 $15,173 -3.62%
7/31/93 $14,124 $15,111 -0.41%
8/31/93 $14,220 $15,374 1.74%
9/30/93 $14,224 $15,635 1.70%
10/31/93 $14,074 $15,439 -1.25%
11/30/93 $14,048 $15,336 -0.67%
12/31/93 $14,048 $15,354 0.12%
1/31/94 $14,395 $15,482 0.83%
2/28/94 $14,502 $15,743 1.69%
3/31/94 $14,446 $15,934 1.21%
4/30/94 $14,558 $16,106 1.08%
5/31/94 $14,744 $16,158 0.32%
6/30/94 $14,910 $16,683 3.25%
7/31/94 $14,790 $16,714 0.19%
8/31/94 $14,862 $16,858 0.86%
9/30/94 $14,944 $17,243 2.28%
10/31/94 $15,161 $17,643 2.32%
11/30/94 $15,046 $17,159 -2.74%
12/31/94 $15,183 $17,281 0.71%
1/31/95 $15,248 $17,571 1.68%
2/28/95 $15,485 $17,979 2.32%
3/31/95 $16,251 $19,101 6.24%
4/30/95 $16,348 $19,156 0.29%
5/31/95 $16,312 $18,995 -0.84%
6/30/95 $16,472 $19,257 1.38%
7/31/95 $16,344 $19,327 0.36%
8/31/95 $15,866 $18,598 -3.77%
9/30/95 $15,932 $19,030 2.32%
10/31/95 $16,078 $19,094 0.34%
11/30/95 $15,891 $18,850 -1.28%
12/31/95 $15,945 $19,042 1.02%
1/31/96 $15,713 $18,541 -2.63%
2/29/96 $15,935 $18,786 1.32%
3/31/96 $16,033 $18,816 0.16%
4/30/96 $15,967 $18,538 -1.48%
5/31/96 $16,062 $18,584 0.25%
6/30/96 $16,042 $18,649 0.35%
7/31/96 $16,185 $19,093 2.38%
8/31/96 $16,319 $19,087 -0.03%
9/30/96 $16,186 $18,789 -1.56%
10/31/96 $16,282 $18,985 1.04%
11/30/96 $16,403 $18,892 -0.49%
12/31/96 $16,385 $18,830 -0.33%
1/31/97 $15,751 $18,116 -3.79%
2/28/97 $15,770 $17,897 -1.21%
3/31/97 $15,903 $18,015 0.66%
4/30/97 $15,737 $17,658 -1.98%
5/31/97 $16,039 $18,140 2.73%
6/30/97 $16,107 $18,066 -0.41%
7/31/97 $15,872 $17,567 -2.76%
8/31/97 $15,886 $17,729 0.92%
9/30/97 $15,952 $17,954 1.27%
10/31/97 $16,044 $18,335 2.12%
11/30/97 $15,737 $18,028 -1.67%
12/31/97 $15,642 $17,798 -1.28%
1/31/98 $15,656 $17,714 -0.47%
2/28/98 $15,800 $17,904 1.07%
3/31/98 $15,745 $17,678 -1.26%
4/30/98 $15,919 $17,977 1.69%
5/31/98 $15,904 $17,908 -0.38%
6/30/98 $15,863 $17,853 -0.31%
7/31/98 $15,902 $17,864 0.06%
8/31/98 $15,956 $18,067 1.14%
9/30/98 $16,462 $18,775 3.92%
10/31/98 $16,639 $19,281 2.69%
</TABLE>
*Performance figures represent the change in value of an investment over the
period shown, and have been restated to include the current, maximum 2.25%
initial sales charge, assuming reinvestment of distributions at net asset value.
Prior to August 3, 1998. Franklin Templeton Global Currency Fund was offered at
a higher sales charge; thus, actual total returns would have been lower. Past
performance is not predictive of future results.
**Source: Salomon Brothers. Index is unmanaged and includes reinvested
interest. One cannot invest directly in an index.
Past performance is not predictive of future results.
12
<PAGE>
PERFORMANCE
Franklin Templeton Global Currency Fund
Periods ended 10/31/98
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR 10-YEAR (6/27/86)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) +3.71% +18.23% +72.91% +120.85%
Average Annual Total Return(2) +1.37% +2.93% +5.39% +6.43%
Value of $10,000 Investment(3) $ 10,137 $ 11,557 $ 16,901 $ 21,587
Distribution Rate(4) 3.79%
30-Day Standardized Yield(5) 3.42%
</TABLE>
<TABLE>
<CAPTION>
10/31/94 10/31/95 10/31/96 10/31/97 10/31/98
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One-Year Total Return(6) +7.72% +6.05% +1.27% -1.46% +3.71%
</TABLE>
(1) Cumulative total return represents the change in value of an investment over
the periods indicated and does not include the sales charge.
(2) Average annual total return represents the average annual change in value of
an investment over the periods indicated and has been restated to include the
current, maximum 2.25% initial sales charge. Prior to August 3, 1998, Franklin
Templeton Global Currency Fund was offered at a higher sales charge; thus,
actual total returns would have been lower.
(3) These figures represent the value of a hypothetical $10,000 investment in
the fund over the periods indicated and have been restated to include the
current, maximum 2.25% initial sales charge. Prior to August 3, 1998, Franklin
Templeton Global Currency Fund was offered at a higher sales charge; thus,
actual total returns would have been lower.
(4) Distribution rate is based on the maximum offering price of $12.34 per share
on October 31, 1998, and an annualization of the most recent monthly dividend of
3.9 cents ($0.039) per share.
(5) Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended October 31, 1998.
(6) One-year total return represents the change in value of an investment over
the periods ended on the dates indicated and does not include the sales charge.
All calculations assume reinvestment of distributions at net asset value. Past
expense waivers by the fund's Investment Manager increased the fund's total
return. If the fund's manager had not taken this action, total returns for the
fund would have been lower. Since markets can go down as well as up, investment
return and principal value will fluctuate with market conditions, currency
volatility and the economic, social and political climates of countries where
the fund invests. You may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
13
<PAGE>
FRANKLIN TEMPLETON
HARD CURRENCY FUND
- --------------------------------------------------------------------------------
Your Fund's Goal: Franklin Templeton Hard Currency Fund seeks to protect against
depreciation of the U.S. dollar relative to other currencies. The fund seeks to
achieve its goal by investing in high-quality money market instruments (and
forward contracts) denominated in foreign Major Currencies (as defined in the
fund's prospectus) which historically have experienced low rates of inflation
and which, in the view of the Investment Managers, follow economic policies
conducive to continued low rates of inflation and currency appreciation versus
the U.S. dollar over the long term.
- --------------------------------------------------------------------------------
Since Franklin Templeton Hard Currency Fund holds primarily short-term
securities whose prices have been relatively stable in local currency terms,
most of its total return is derived from interest paid by portfolio securities,
and changes in the U.S. dollar's value relative to the currencies of countries
where the fund invests. This can put your fund at a disadvantage during periods
when the dollar is strengthening, because our internal benchmark portfolio is
weighted one-third each in the money markets of Japan, Germany and Switzerland.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 30 of
this report.
14
<PAGE>
During the early part of the fiscal year, the U.S. dollar continued its
uncharacteristically strong upward trend versus all currencies in which the fund
invests. Signs of a slowing U.S. economy, a reduction in interest rates by the
Federal Reserve, deteriorating trade balances and repatriation of capital by
foreign investors all combined to focus the market on factors that historically
have undermined the U.S. dollar, and, as the financial turmoil in emerging
markets reached a peak in September, the U.S. dollar finally lost some of the
luster it had achieved the past several years. Within this environment, Franklin
Templeton Hard Currency Fund - Class I produced a +4.33% cumulative total return
for the year ended October 31, 1998, while the fund's benchmark, the Salomon
Brothers World Money Market Index, returned +5.17%, as discussed in the
Performance Summary on page 18. However, we always maintain a long-term
perspective when managing the fund, and we encourage shareholders to view their
investments in a similar manner. As the Performance Summary also shows, the fund
has delivered a +67.53% cumulative total return from its inception on November
17, 1989, through October 31, 1998.
During the reporting period, we repositioned the fund's portfolio in an effort
to take advantage of some of the trends and potential opportunities we were
finding at the time. At the beginning of the period, the fund's geographic
exposure consisted of Japan (33.0% of total net assets), Switzerland (27.2%),
Germany (27.0%), New
ASSET ALLOCATION BY CURRENCY
Franklin Templeton Hard Currency Fund
Based on Total Net Assets
10/31/98
[Pie Chart]
German Mark
27.8%
Japanese Yen
26.2%
Swiss Franc
21.9%
U.S. Dollar 19.8%
New Zealand
Dollar 4.3%
15
<PAGE>
Zealand (10.7%), and the U.S. (2.1%). By the end of the period, the fund's
exposure to these countries had shifted to Germany (27.8%), Japan (26.2%),
Switzerland (21.9%), the U.S. (19.8%), and New Zealand (4.3%).
Looking forward, we expect the German mark and Japanese yen to trade within
relatively narrow ranges for awhile. In our opinion, the market will eventually
focus on the dollar's fundamentals and the dollar's downward trend versus other
currencies may continue. We intend to search for opportunities to add to the
fund's holdings, while managing the portfolio based upon our expectations of the
market's direction.
As always, we will continue to monitor economic events, and try to position the
portfolio to take advantage of the many opportunities in the world's currency
markets. Of course, there are special considerations associated with global
investing related to market, currency, economic, social, political, and other
factors, as discussed in the prospectus. Because the fund's assets are largely
denominated in foreign currencies, there is potential for significant gain or
loss from currency exchange rate fluctuations. A non-diversified foreign fund
may not be appropriate for all investors and should not be considered a complete
investment program.
16
<PAGE>
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of October 31, 1998, the end of the reporting period. However,
market and economic conditions are changing constantly, which can be expected to
affect our strategies and the fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
better understand our investment and management philosophy.
Please note that although the fund's Statement of Investments on page 30 of this
report indicates that the fund held 56.7% of its portfolio investments in U.S.
dollar-denominated assets as of October 31, 1998, its NET EXPOSURE to the U.S.
dollar on that date was only 19.8%. The difference is explained by the fund's
holdings of forward currency exchange contracts (see Note 2 in the Notes to
Financial Statements on page 35) calling for the purchase of various foreign
currencies in exchange for U.S. dollars at various future dates. The combination
of U.S. dollar-denominated instruments with "long" forward currency exchange
contracts creates a position economically equivalent to a money market
instrument denominated in the foreign currency itself. Such combined positions
are sometimes necessary when the money market for a particular foreign currency
is small or relatively illiquid.
17
<PAGE>
PERFORMANCE SUMMARY
During the fiscal year ended October 31, 1998, the fund recognized net foreign
currency losses due to fluctuations in the value of its foreign-currency
denominated securities and foreign currency holdings. Under the Internal Revenue
Code, these losses reduce the fund's investment income available for
distribution to shareholders, which causes all or a portion of the total
distributions to be characterized as a return of capital at the fund's year end.
In general, return-of-capital distributions are not taxable. Instead, they
reduce the cost basis of your fund shares, and affect the computation of a
capital gain or loss when you sell your shares.
CLASS I
Franklin Templeton Hard Currency Fund - Class I produced a +4.33% cumulative
total return for the one-year period ended October 31, 1998. Cumulative total
return measures the change in value of an investment, assuming reinvestment of
all distributions, and does not include the sales charge. We have always
maintained a long-term perspective when managing the fund, and we encourage
shareholders to view their investments in a similar manner.
The fund's share price, as measured by net asset value, increased
11 cents, from $10.28 on October 31, 1997, to $10.39 on October 31, 1998. During
this same period, shareholders received per-share distributions of 24.7 cents
($0.2470) in income dividends and 6.0 cents ($0.0600) in return of capital.
Based on the maximum offering price of $10.63 on October 31, 1998, and an
annualization of October's monthly dividend of 2.3 cents ($0.023) per share, the
fund's distribution rate was 2.60%. Distributions will vary depending on income
earned by the fund and any profits realized from the sale of securities in the
portfolio, as well as the level of the fund's operating expenses.
Past performance is not predictive of future results.
18
<PAGE>
The graph on page 20 compares the performance of Franklin Templeton Hard
Currency Fund - Class I since inception, and the unmanaged Salomon Brothers
World Money Market Index, which provides an indication of the performance of the
U.S. dollar and Eurocurrency short-term sectors. It is important to note that
the fund generally does not maintain a significant exposure to the U.S. dollar.
Of course, an unmanaged index has an inherent performance differential over any
fund. It does not pay management fees to cover salaries of security analysts or
portfolio managers, or pay commissions or market spreads to buy and sell bonds.
Unlike indices, mutual funds never are fully invested because they need to have
cash on hand to redeem shares or pay for upcoming investments. In addition, the
fund's performance includes the maximum initial sales charge, all fund expenses
and account fees. If the fund's costs had been applied to the index, its
performance would have been lower. Please remember that an index simply is a
measure of performance and cannot be invested in directly.
Past performance is not predictive of future results.
19
<PAGE>
TOTAL RETURN INDEX COMPARISON
Franklin Templeton Hard Currency Fund -- Class I
$10,000 Investment (11/17/89 -- 10/31/98)
[Line Chart]
GRAPHIC MATERIAL (2)
The following line graph compares the performance of Franklin Templeton Hard
Currency Fund - Class I and the Salomon Brothers World Money Market Index, based
on a $10,000 investment from 11/17/89 to 10/31/98.
INDEX COMPARISON
Class I
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON SALOMON BROTHERS
HARD CURRENCY FUND- WORLD MONEY MARKET
CLASS I INDEX
-----------------------------------------
<S> <C> <C> <C>
11/17/89 $9,773 $10,000
11/30/89 $10,000 $10,092
12/31/89 $10,516 $10,437
1/31/90 $10,647 $10,625
2/28/90 $10,554 $10,614
3/31/90 $10,495 $10,645
4/30/90 $10,641 $10,813
5/31/90 $10,763 $10,957
6/30/90 $10,974 $11,215
7/31/90 $11,555 $11,747
8/31/90 $11,730 $11,962
9/30/90 $11,975 $12,148
10/31/90 $12,552 $12,572
11/30/90 $12,630 $12,683
12/31/90 $12,639 $12,784
1/31/91 $12,957 $13,025
2/28/91 $12,733 $12,840
3/31/91 $11,650 $12,035
4/30/91 $11,816 $12,168
5/31/91 $11,629 $12,102
6/30/91 $11,342 $11,906
7/31/91 $11,744 $12,225
8/31/91 $11,844 $12,318
9/30/91 $12,435 $12,846
10/31/91 $12,474 $12,914
11/30/91 $12,857 $13,201
12/31/91 $13,685 $13,862
1/31/92 $13,014 $13,474
2/29/92 $12,762 $13,307
3/31/92 $12,726 $13,301
4/30/92 $12,808 $13,403
5/31/92 $13,371 $13,797
6/30/92 $14,046 $14,374
7/31/92 $14,365 $14,739
8/31/92 $15,021 $15,336
9/30/92 $15,288 $15,129
10/31/92 $14,409 $14,331
11/30/92 $14,123 $14,043
12/31/92 $13,992 $13,991
1/31/93 $14,118 $14,061
2/28/93 $14,283 $14,026
3/31/93 $14,651 $14,420
4/30/93 $14,999 $14,779
5/31/93 $15,062 $14,929
6/30/93 $14,607 $14,388
7/31/93 $14,641 $14,329
8/31/93 $14,665 $14,579
9/30/93 $14,760 $14,826
10/31/93 $14,564 $14,641
11/30/93 $14,500 $14,543
12/31/93 $14,643 $14,560
1/31/94 $15,023 $14,681
2/28/94 $15,322 $14,929
3/31/94 $15,317 $15,110
4/30/94 $15,541 $15,273
5/31/94 $15,621 $15,322
6/30/94 $16,183 $15,820
7/31/94 $16,162 $15,850
8/31/94 $16,274 $15,986
9/30/94 $16,655 $16,351
10/31/94 $17,056 $16,730
11/30/94 $16,658 $16,272
12/31/94 $16,854 $16,387
1/31/95 $17,065 $16,663
2/28/95 $17,545 $17,049
3/31/95 $18,821 $18,113
4/30/95 $18,873 $18,166
5/31/95 $18,683 $18,013
6/30/95 $18,944 $18,262
7/31/95 $18,783 $18,327
8/31/95 $17,660 $17,636
9/30/95 $18,082 $18,046
10/31/95 $18,198 $18,107
11/30/95 $17,853 $17,875
12/31/95 $17,969 $18,058
1/31/96 $17,420 $17,583
2/29/96 $17,678 $17,815
3/31/96 $17,593 $17,843
4/30/96 $17,189 $17,579
5/31/96 $17,083 $17,623
6/30/96 $17,131 $17,685
7/31/96 $17,686 $18,106
8/31/96 $17,621 $18,100
9/30/96 $17,145 $17,818
10/31/96 $17,107 $18,003
11/30/96 $16,887 $17,915
12/31/96 $16,708 $17,856
1/31/97 $15,842 $17,179
2/28/97 $15,551 $16,971
3/31/97 $15,645 $17,083
4/30/97 $15,263 $16,745
5/31/97 $15,836 $17,202
6/30/97 $15,628 $17,132
7/31/97 $14,965 $16,659
8/31/97 $15,086 $16,812
9/30/97 $15,342 $17,026
10/31/97 $15,691 $17,387
11/30/97 $15,245 $17,096
12/31/97 $14,966 $16,877
1/31/98 $15,008 $16,798
2/28/98 $15,156 $16,978
3/31/98 $14,609 $16,764
4/30/98 $14,819 $17,047
5/31/98 $14,733 $16,982
6/30/98 $14,524 $16,930
7/31/98 $14,547 $16,940
8/31/98 $14,853 $17,133
9/30/98 $15,517 $17,805
10/31/98 $16,386 $18,284
</TABLE>
THE HISTORICAL DATA SHOWN PERTAIN ONLY TO THE FUNDS' CLASS I SHARES. THE FUND
OFFERS ANOTHER SHARE CLASS SUBJECT TO DIFFERENT FEES AND EXPENSES, WHICH AFFECT
PERFORMANCE. SEE THE PROSPECTUS FOR DETAILS.
*Performance figures represent the change in value of an investment over the
period shown, and have been restated to include the current, maximum 2.25%
initial sales charge, assuming reinvestment of distributions at net asset value.
Prior to August 3, 1998, Franklin Templeton Hard Currency Fund -- Class I was
offered at a higher sales charge; thus, actual total returns would have been
lower. Past performance is not predictive of future results.
**Source: Salomon Brothers. Index is unmanaged and includes reinvested
dividends. One cannot invest directly in an index.
Past performance is not predictive of future results.
20
<PAGE>
PERFORMANCE
Franklin Templeton Hard Currency Fund - Class I
Periods ended 10/31/98
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (11/17/89)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) +4.33% +12.39% +67.53%
Average Annual Total Return(2) +1.95% +1.90% +5.65%
Value of $10,000 Investment(3) $ 10,195 $ 10,986 $ 16,360
Distribution Rate(4) 2.60%
30-Day Standardized Yield(5) 2.25%
</TABLE>
<TABLE>
<CAPTION>
10/31/94 10/31/95 10/31/96 10/31/97 10/31/98
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One-Year Total Return(6) +17.11% +6.68% -5.99% -8.28% +4.33%
</TABLE>
(1) Cumulative total return represents the change in value of an investment over
the periods indicated and does not include the sales charge.
(2) Average annual total return represents the average annual change in value of
an investment over the periods indicated and has been restated to include the
current, maximum 2.25% initial sales charge. Prior to August 3, 1998, Franklin
Templeton Hard Currency Fund - Class I was offered at a higher sales charge;
thus, actual total returns would have been lower.
(3) These figures represent the value of a hypothetical $10,000 investment in
the fund over the periods indicated and have been restated to include the
current, maximum 2.25% initial sales charge. Prior to August 3, 1998, Franklin
Templeton Hard Currency Fund - Class I was offered at a higher sales charge;
thus, actual total returns would have been lower.
(4) Distribution rate is based on the maximum offering price of $10.63 per share
on October 31, 1998, and an annualization of the most recent monthly dividend of
2.3 cents ($0.0230) per share.
(5) Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio during the 30 days ended October 31, 1998.
(6) One-year total return represents the change in value of an investment over
the periods ended on the dates indicated and does not include the sales charge.
All calculations assume reinvestment of distributions at net asset value. Past
expense waivers by the fund's Investment Manager increased the fund's total
returns. If the fund's manager had not taken this action, total returns for the
fund would have been lower. Since markets can go down as well as up, investment
return and principal value will fluctuate with market conditions, currency
volatility, and the economic, social and political climates of countries where
the fund invests. You may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
21
<PAGE>
During the fiscal year ended October 31, 1998, the fund recognized net foreign
currency losses due to fluctuations in the value of its foreign-currency
denominated securities and foreign currency holdings. Under the Internal Revenue
Code, these losses reduce the fund's investment income available for
distribution to shareholders, which causes all or a portion of the total
distributions to be characterized as a return of capital at the fund's year end.
In general, return-of-capital distributions are not taxable. Instead, they
reduce the cost basis of your fund shares, and affect the computation of a
capital gain or loss when you sell your shares.
ADVISOR CLASS
Franklin Templeton Hard Currency Fund - Advisor Class produced a +4.89%
cumulative total return for the one-year period ended October 31, 1998.
Cumulative total return measures the change in value of an investment, assuming
reinvestment of all distributions.
The fund's share price, as measured by net asset value, increased
13 cents, from $10.28 on October 31, 1997, to $10.41 on October 31, 1998. During
this same period, shareholders received per-share distributions of 28.11 cents
($0.2811) in income dividends and 6.0 cents ($0.0600) in return of capital.
Based on the maximum offering price of $10.41 on October 31, 1998, and an
annualization of October's monthly dividend of 3.26 cents ($0.0326) per share,
the fund's distribution rate was 3.76%. Distributions will vary depending on
income earned by the fund and any profits realized from the sale of securities
in the portfolio, as well as the level of the fund's operating expenses.
The graph on page 24 compares the performance of Franklin Templeton Hard
Currency Fund - Advisor Class since inception, and the unmanaged Salomon
Brothers World Money Market Index.
Past performance is not predictive of future results.
22
<PAGE>
For periods prior to January 2, 1997 (commencement of sales), the fund
performance is that of the fund's Class I shares, excluding the sales charge,
but including Class I expenses. The Salomon Brothers World Money Market Index
provides an indication of the performance of the U.S. dollar and Eurocurrency
short-term sectors. It is important to note that the fund generally does not
maintain a significant exposure to the U.S. dollar.
Of course, an unmanaged index has an inherent performance differential over any
fund. It does not pay management fees to cover salaries of security analysts or
portfolio managers, or pay commissions or market spreads to buy and sell bonds.
Unlike indices, mutual funds never are fully invested because they need to have
cash on hand to redeem shares or pay for upcoming investments. In addition, the
fund's performance includes all fund expenses and account fees. If the fund's
costs had been applied to the index, its performance would have been lower.
Please remember that an index simply is a measure of performance and cannot be
invested in directly.
Past performance is not predictive of future results.
23
<PAGE>
TOTAL RETURN INDEX COMPARISON
Franklin Templeton Hard Currency Fund -- Advisor Class
$10,000 Investment (11/17/89 -- 10/31/98)
[Line Chart]
GRAPHIC MATERIAL (3)
The following line graph compares the performance of Franklin Templeton Hard
Currency Fund - Advisor Class and the Salomon Brothers World Money Market Index,
based on a $10,000 investment from 11/17/89 to 10/31/98.
INDEX COMPARISON
Advisor Class
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON SALOMON BROTHERS
HARD CURRENCY WORLD MONEY
FUND- ADVISOR MARKET INDEX
---------------------------------------
<S> <C> <C> <C>
11/17/89 $10,000 $10,000
11/30/89 $10,232 $10,092
12/31/89 $10,760 $10,437
1/31/90 $10,894 $10,625
2/28/90 $10,799 $10,614
3/31/90 $10,738 $10,645
4/30/90 $10,888 $10,813
5/31/90 $11,013 $10,957
6/30/90 $11,229 $11,215
7/31/90 $11,823 $11,747
8/31/90 $12,002 $11,962
9/30/90 $12,252 $12,148
10/31/90 $12,843 $12,572
11/30/90 $12,923 $12,683
12/31/90 $12,932 $12,784
1/31/91 $13,257 $13,025
2/28/91 $13,028 $12,840
3/31/91 $11,920 $12,035
4/30/91 $12,090 $12,168
5/31/91 $11,899 $12,102
6/30/91 $11,605 $11,906
7/31/91 $12,017 $12,225
8/31/91 $12,119 $12,318
9/30/91 $12,723 $12,846
10/31/91 $12,764 $12,914
11/30/91 $13,155 $13,201
12/31/91 $14,003 $13,862
1/31/92 $13,316 $13,474
2/29/92 $13,058 $13,307
3/31/92 $13,021 $13,301
4/30/92 $13,105 $13,403
5/31/92 $13,681 $13,797
6/30/92 $14,372 $14,374
7/31/92 $14,698 $14,739
8/31/92 $15,370 $15,336
9/30/92 $15,643 $15,129
10/31/92 $14,743 $14,331
11/30/92 $14,451 $14,043
12/31/92 $14,317 $13,991
1/31/93 $14,446 $14,061
2/28/93 $14,614 $14,026
3/31/93 $14,991 $14,420
4/30/93 $15,347 $14,779
5/31/93 $15,411 $14,929
6/30/93 $14,946 $14,388
7/31/93 $14,981 $14,329
8/31/93 $15,006 $14,579
9/30/93 $15,103 $14,826
10/31/93 $14,901 $14,641
11/30/93 $14,836 $14,543
12/31/93 $14,982 $14,560
1/31/94 $15,372 $14,681
2/28/94 $15,678 $14,929
3/31/94 $15,672 $15,110
4/30/94 $15,902 $15,273
5/31/94 $15,983 $15,322
6/30/94 $16,559 $15,820
7/31/94 $16,537 $15,850
8/31/94 $16,652 $15,986
9/30/94 $17,041 $16,351
10/31/94 $17,451 $16,730
11/30/94 $17,045 $16,272
12/31/94 $17,245 $16,387
1/31/95 $17,461 $16,663
2/28/95 $17,952 $17,049
3/31/95 $19,258 $18,113
4/30/95 $19,310 $18,166
5/31/95 $19,116 $18,013
6/30/95 $19,384 $18,262
7/31/95 $19,219 $18,327
8/31/95 $18,070 $17,636
9/30/95 $18,502 $18,046
10/31/95 $18,620 $18,107
11/30/95 $18,267 $17,875
12/31/95 $18,386 $18,058
1/31/96 $17,824 $17,583
2/29/96 $18,088 $17,815
3/31/96 $18,001 $17,843
4/30/96 $17,588 $17,579
5/31/96 $17,479 $17,623
6/30/96 $17,528 $17,685
7/31/96 $18,097 $18,106
8/31/96 $18,030 $18,100
9/30/96 $17,543 $17,818
10/31/96 $17,504 $18,003
11/30/96 $17,279 $17,915
12/31/96 $17,095 $17,856
1/31/97 $16,228 $17,179
2/28/97 $15,918 $16,971
3/31/97 $16,033 $17,083
4/30/97 $15,630 $16,745
5/31/97 $16,219 $17,202
6/30/97 $16,026 $17,132
7/31/97 $15,333 $16,659
8/31/97 $15,458 $16,812
9/30/97 $15,723 $17,026
10/31/97 $16,083 $17,387
11/30/97 $15,628 $17,096
12/31/97 $15,346 $16,877
1/31/98 $15,392 $16,798
2/28/98 $15,547 $16,978
3/31/98 $14,988 $16,764
4/30/98 $15,223 $17,047
5/31/98 $15,122 $16,982
6/30/98 $14,525 $16,930
7/31/98 $14,934 $16,940
8/31/98 $15,266 $17,133
9/30/98 $15,977 $17,805
10/31/98 $16,869 $18,284
</TABLE>
THE HISTORICAL DATA SHOWN PERTAIN ONLY TO THE FUND'S ADVISOR CLASS SHARES. THE
FUND OFFERS ANOTHER SHARE CLASS SUBJECT TO DIFFERENT FEES AND EXPENSES, WHICH
AFFECT PERFORMANCE. SEE THE PROSPECTUS FOR DETAILS.
*Performance figures represent the change in value of an investment over the
period shown, assuming reinvestment of distributions at net asset value. On
January 2, 1997, the fund began selling Advisor Class shares to certain eligible
investors as described in the prospectus. This share class does not have sales
charges or a Rule 12b-1 plan. Performance quotations have been calculated as
follows: (a) For periods prior to January 2, 1997, figures reflect the fund's
Class I performance, excluding the effect of the Class I shares charge, but
including the effect of Class I expenses, containing Rule 12b-1 fees; and (b)
for periods after January 1, 1997, figures reflect actual Advisor Class
performance, including the deduction of all fees and expenses applicable only to
that class. Past performance is not predictive of future results.
**Source: Salomon Brothers. Index is unmanaged and includes reinvested
dividends. One cannot invest directly in an index.
Past performance is not predictive of future results.
24
<PAGE>
PERFORMANCE
Franklin Templeton Hard Currency Fund - Advisor Class
Periods ended 10/31/98
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR* 5-YEAR* (11/17/89)*
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) +4.89% +13.21% +68.56%
Average Annual Total Return(1) +4.89% +2.51% +6.01%
Value of $10,000 Investment(2) $ 10,489 $ 11,321 $ 16,856
Distribution Rate(3) 3.76%
30-Day Standardized Yield(4) 2.75%
</TABLE>
<TABLE>
<CAPTION>
10/31/94 10/31/95 10/31/96 10/31/97 10/31/98
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One-Year Total Return(5) +17.11% +6.68% -5.99% -8.12% +4.89%
</TABLE>
*On January 2, 1997, the fund began selling Advisor Class shares to certain
eligible investors as described in the prospectus. This share class does not
have sales charges or a Rule 12b-1 plan. Performance quotations have been
calculated as follows: (a) For periods prior to January 2, 1997, figures reflect
the fund's Class I performance, excluding the effect of the Class I shares
charge, but including the effect of Class I expenses, containing Rule 12b-1
fees; and (b) for periods after January 1, 1997, figures reflect actual Advisor
Class performance, including the deduction of all fees and expenses applicable
only to that class. Since January 2, 1997 (commencement of sales), the
cumulative total return of Advisor Class shares was -1.24%.
(1) Cumulative total return represents the change in value of an investment over
the periods indicated. Average annual total return represents the average annual
change in value of an investment over the periods indicated.
(2) These figures represent the value of a hypothetical $10,000 investment in
the fund over the periods indicated.
(3) Distribution rate is based on the maximum offering price of $10.41 per share
on October 31, 1998, and an annualization of the most recent monthly dividend of
3.26 cents ($0.0326) per share.
(4) Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio during the 30 days ended October 31, 1998.
(5) One-year total return represents the change in value of an investment over
the periods ended on the dates indicated.
All calculations assume reinvestment of distributions at net asset value. Past
expense waivers by the fund's Investment Manager increased the fund's total
returns. If the fund's manager had not taken this action, total returns for the
fund would have been lower. Since markets can go down as well as up, investment
return and principal value will fluctuate with market conditions, currency
volatility, and the economic, social and political climates of countries where
the fund invests. You may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
25
<PAGE>
FRANKLIN TEMPLETON GLOBAL TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN TEMPLETON GLOBAL CURRENCY FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, YEAR ENDED APRIL 30,
-----------------------------------------------------------------------------------
1998 1997 1996 1995 1994+ 1994
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year .......... $ 12.10 $ 12.80 $ 13.67 $ 14.14 $ 13.85 $ 13.96
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income ...................... .50 .49 .69 1.29 .25 .57
Net realized and unrealized gains (losses).. (.07) (.68) (.54) (.49) .32 (.11)
-----------------------------------------------------------------------------------
Total from investment operations ............ .43 (.19) .15 .80 .57 .46
-----------------------------------------------------------------------------------
Less distributions from:
Net investment income ...................... (.28) -- (.71) (1.27) (.28) (.57)
Tax return of capital ...................... (.19) (.51) (.31) -- -- --
-----------------------------------------------------------------------------------
Total distributions ......................... (.47) (.51) (1.02) (1.27) (.28) (.57)
-----------------------------------------------------------------------------------
Net asset value, end of year ................ $ 12.06 $ 12.10 $ 12.80 $ 13.67 $ 14.14 $ 13.85
===================================================================================
Total return* ............................... 3.71% (1.46)% 1.27% 6.05% 4.14% 3.41%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............. $ 33,703 $ 41,795 $ 50,773 $ 59,942 $ 56,098 $ 51,539
Ratios to average net assets:
Expenses ................................... 1.19% 1.10% .99% .99% 1.04%** 1.41%
Expenses, excluding waiver and
payments by affiliate .................... 1.19% 1.10% .99% .99% 1.12%** 1.61%
Net investment income ...................... 4.08% 4.01% 4.30% 5.29% 3.55%** 2.78%
Portfolio turnover rate ..................... .00% .00% .00% 46.05% 25.62% 37.16%
</TABLE>
*Total return does not reflect sales commissions and is not annualized.
**Annualized.
+Six months ended October 31, 1994. Prior to this period, the Fund's fiscal year
end was April 30.
See notes to financial statements.
26
<PAGE>
FRANKLIN TEMPLETON GLOBAL TRUST
STATEMENT OF INVESTMENTS, OCTOBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN TEMPLETON GLOBAL CURRENCY FUND AMOUNT* VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN GOVERNMENT SECURITIES - FLOATING RATE NOTE (COST $2,728,125) 7.4%
Government of Spain, FRN, 3.625%, 6/29/02 ..................................... 4,150,000 DEM $ 2,508,993
------------
SHORT TERM INVESTMENTS 89.2%
COMMERCIAL PAPER 22.2%
Ciesco LP, 5.07%, 11/18/98 .................................................... $ 1,750,000 1,745,229
International Lease Finance Corp., 4.98%, 12/22/98 ............................ 1,770,000 1,756,872
Kingdom of Sweden, 5.50%, 12/9/98 ............................................. 300,000 298,677
Merrill Lynch & Co. Inc., 5.20%, 11/16/98 ..................................... 125,000 124,064
Merrill Lynch & Co. Inc., 5.30%, 1/19/99 ...................................... 1,700,000 1,680,875
National Rural Utility Finance Co., 5.09%, 12/03/98 ........................... 125,000 124,403
Toyota Motor Credit Corp., 5.12%, 11/23/98 .................................... 1,750,000 1,744,026
------------
TOTAL COMMERCIAL PAPER (COST $7,474,425) ...................................... 7,474,146
------------
CORPORATE BONDS (COST $934,865) 3.0%
General Electric Capital Corp., 4.75%,11/3/98 ................................. 1,700,000 DEM 1,026,446
------------
GOVERNMENT SECURITIES 30.8%
Australia Treasury Bill, 4.76%, 11/19/98 ...................................... 3,085,000 AUD 1,914,376
Canada Treasury Bill, 5.01%, 1/21/99 .......................................... 2,800,000 CAD 1,790,196
Canada Treasury Bill, 4.95%, 2/04/99 .......................................... 2,830,000 CAD 1,805,934
German Treasury Bill, 3.36%, 1/15/99 .......................................... 5,000,000 DEM 2,997,497
New Zealand Treasury Bill, 4.35%, 12/09/98 .................................... 3,530,000 NZD 1,859,997
------------
TOTAL GOVERNMENT SECURITIES (COST $10,482,791) ................................ 10,368,000
------------
U.S. GOVERNMENT AGENCIES 33.2%
Fannie Mae, 4.76% to 5.17%, with maturities to 3/11/99 ........................ 6,750,000 6,703,159
Federal Home Loan Bank, 4.77%, 11/18/98 ....................................... 1,750,000 1,746,243
Federal Home Loan Mortgage Corp., 4.77% to 5.02% with maturities to 11/16/99 .. 2,750,000 2,745,619
------------
TOTAL U.S. GOVERNMENT AGENCIES (COST $11,181,911) ............................. 11,195,021
------------
TOTAL SHORT TERM INVESTMENTS (COST $30,073,992) ............................... 30,063,613
------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $32,802,117) ............. 32,572,606
------------
(a) REPURCHASE AGREEMENTS 6.9%
Morgan Stanley Group Inc., 5.38%, 11/02/98 (Maturity Value $1,150,515)
Collateralized by U.S. Treasury Notes and Bonds .............................. 1,150,000 1,150,000
Warburg Dillon Read, 5.37%,11/02/98 (Maturity Value $1,175,527)
Collateralized by U.S. Treasury Notes and Bonds .............................. 1,175,000 1,175,000
------------
TOTAL REPURCHASE AGREEMENTS (COST $2,325,000) ................................. 2,325,000
------------
TOTAL INVESTMENTS (COST $35,127,117) 103.5% ................................... 34,897,606
NET EQUITY IN FORWARD CONTRACTS (.4%) ......................................... (137,692)
OTHER ASSETS, LESS LIABILITIES (3.1%) ......................................... (1,056,588)
------------
TOTAL NET ASSETS 100.0% ....................................................... $ 33,703,326
============
</TABLE>
CURRENCY ABBREVIATIONS:
AUD - Australian Dollar DEM - German Mark
CAD - Canadian Dollar NZD - New Zealand Dollar
*Securities traded in U.S. dollars unless otherwise indicated.
(a) At October 31, 1998, all repurchase agreements held by the fund had been
entered into on that date.
See notes to financial statements.
27
<PAGE>
FRANKLIN TEMPLETON GLOBAL TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN TEMPLETON HARD CURRENCY FUND
<TABLE>
<CAPTION>
CLASS I
-------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED APRIL 30,
-------------------------------------------------------------------------------
1998(a) 1997 1996 1995 1994+ 1994
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year............. $ 10.28 $ 11.64 $ 13.09 $ 13.95 $ 12.95 $ 13.00
-------------------------------------------------------------------------------
Income from investment operations:
Net investment income......................... .30 .37 .57 1.84 .26 .50
Net realized and unrealized gains (losses).... .12 (1.33) (1.34) (1.02) .99 (.05)
-------------------------------------------------------------------------------
Total from investment operations............... .42 (.96) (.77) .82 1.25 .45
-------------------------------------------------------------------------------
Less distributions from:
Net investment income.......................... (.25) -- (.06) (1.68) (.25) (.13)
Tax return of capital.......................... (.06) (.40) (.62) -- -- (.37)
-------------------------------------------------------------------------------
Total distributions............................. (.31) (.40) (.68) (1.68) (.25) (.50)
-------------------------------------------------------------------------------
Net asset value, end of year.................... $ 10.39 $ 10.28 $ 11.64 $ 13.09 $ 13.95 $ 12.95
===============================================================================
Total return*................................... 4.33% (8.28)% (5.99)% 6.68% 9.74% 3.62%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)................. $ 68,902 $ 91,976 $124,666 $132,089 $ 61,228 $ 35,739
Ratios to average net assets:
Expenses....................................... 1.35% 1.13% 1.10% 1.15% 1.05%** 1.47%
Expenses, excluding waiver and
payments by affiliate......................... 1.35% 1.13% 1.10% 1.15% 1.28%** 1.71%
Net investment income.......................... 3.07% 3.53% 4.50% 4.68% 3.80%** 3.83%
Portfolio turnover rate......................... 96.41% 2.68% .00% 15.72% 28.18% .00%
</TABLE>
*Total return does not reflect sales commissions and is not annualized.
**Annualized.
+Six months ended October 31, 1994. Prior to this period, the Fund's fiscal year
end was April 30.
(a)Based on average weighted shares outstanding.
See notes to financial statements.
28
<PAGE>
FRANKLIN TEMPLETON GLOBAL TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND (CONT.)
<TABLE>
<CAPTION>
ADVISOR CLASS
----------------------
YEAR ENDED OCTOBER 31,
----------------------
1998 1997+
----------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year .......... $ 10.28 $ 11.28
----------------------
Income from investment operations:
Net investment income ...................... .33 .34
Net realized and unrealized gains (losses).. .14 (1.00)
----------------------
Total from investment operations ............ .47 (.66)
----------------------
Less distributions from:
Net investment income ...................... (.28) --
Tax return of capital ...................... (.06) (.34)
----------------------
Total distributions ......................... (.34) (.34)
----------------------
Net asset value, end of year ................ $ 10.41 $ 10.28
======================
Total return* ............................... 4.89% (5.84)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............. $ 3,343 $ 249
Ratios to average net assets:
Expenses ................................... 1.01% .94%**
Net investment income ...................... 3.29% 3.67%**
Portfolio turnover rate ..................... 96.41% 2.68%
</TABLE>
*Total return is not annualized.
**Annualized.
+For the period January 2, 1997 (effective date) through October 31, 1997.
See notes to financial statements.
29
<PAGE>
FRANKLIN TEMPLETON GLOBAL TRUST
STATEMENT OF INVESTMENTS, OCTOBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN TEMPLETON HARD CURRENCY FUND AMOUNT* VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 2.1%
CORPORATE BONDS-FLOATING RATE NOTE (COST $170,880) .3%
Commerzbank Overseas Finance, FRN, 1.281%, 1/19/99 ........................... 250,000 CHF $ 184,802
------------
FOREIGN GOVERNMENT SECURITIES-FLOATING RATE NOTES 1.8%
Government of Italy, FRN, 0.461%, 7/26/99 .................................... 135,000,000 JPY 1,160,964
South Australia Finance Authority, FRN, 1.527%, 3/18/99 ...................... 200,000 CHF 147,546
------------
TOTAL FOREIGN GOVERNMENT SECURITIES-FLOATING RATE NOTES (COST $1,529,304) .... 1,308,510
------------
TOTAL LONG TERM INVESTMENTS (COST $1,700,184) ................................ 1,493,312
------------
SHORT TERM INVESTMENTS 96.5%
COMMERCIAL PAPER 47.5%
Canadian Wheat Board, 5.48%, 12/16/98 ........................................ $ 600,000 596,049
Ciesco LP, 5.07%, 11/18/98 ................................................... 3,800,000 3,789,641
Halifax Building Society Ltd., 1.95%, 11/13/98 ............................... 7,000,000 CHF 5,166,319
International Lease Finance Corp., 4.98%, 12/22/98 ........................... 3,665,000 3,637,817
Merrill Lynch & Co. Inc., 5.30%, 1/19/99 ..................................... 3,500,000 3,460,625
Nestle Capital Corp., 1.67%, 11/13/98 ........................................ 7,000,000 CHF 5,166,319
Shell Finance BV, 1.76%, 11/13/98 ............................................ 7,000,000 CHF 5,166,319
Toyota Motor Credit Corp., 5.12%, 11/23/98 ................................... 3,800,000 3,787,027
UBS AG Finance Delaware Inc., 5.08%, 12/28/98 ................................ 3,600,000 3,570,311
------------
TOTAL COMMERCIAL PAPER (COST $34,777,731) .................................... 34,340,427
------------
GOVERNMENT SECURITIES 19.8%
Federal Republic of Germany, 3.50%, 6/18/99 .................................. 1,650,000 DEM 996,655
German Treasury Bill, 3.24% to 4.88%, 1/15/99 ................................ 17,000,000 DEM 10,190,000
New Zealand Treasury Bill, 5.44%, 12/09/98 ................................... 5,938,000 NZD 3,128,800
------------
TOTAL GOVERNMENT SECURITIES (COST $14,382,957) ............................... 14,315,455
------------
U.S. GOVERNMENT AGENCIES 29.2%
Fannie Mae, 4.76% to 5.17%, with maturities to 3/11/99 ....................... 11,700,000 11,644,086
Federal Home Loan Bank, 4.77%, 11/18/98 ...................................... 3,800,000 3,791,841
Federal Home Loan Mortgage Corp., 4.77% to 5.02% with maturities to 11/16/99.. 5,650,000 5,640,841
------------
TOTAL U.S. GOVERNMENT AGENCIES (COST $21,053,396) ............................ 21,076,768
------------
TOTAL SHORT TERM INVESTMENTS (COST $70,214,084) .............................. 69,732,650
------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $71,914,268) ............ 71,225,962
------------
(a)REPURCHASE AGREEMENTS 4.6%
Morgan Stanley Group Inc., 5.38%,11/02/98 (Maturity Value $1,814,813)
Collateralized by U.S. Treasury Notes and Bonds ............................. 1,814,000 1,814,000
Warburg Dillon Read, 5.37%,11/02/98 (Maturity Value $1,500,671)
Collateralized by U.S. Treasury Notes and Bonds ............................. 1,500,000 1,500,000
------------
TOTAL REPURCHASE AGREEMENTS (COST $3,314,000) ................................ 3,314,000
------------
TOTAL INVESTMENTS (COST $75,228,268) 103.2% .................................. 74,539,962
NET EQUITY IN FORWARD CONTRACTS .5% .......................................... 347,314
OTHER ASSETS, LESS LIABILITIES (3.7%) ........................................ (2,642,055)
------------
TOTAL NET ASSETS 100.0% ...................................................... $ 72,245,221
============
</TABLE>
CURRENCY ABBREVIATIONS:
CHF -Swiss Franc JPY -Japanese Yen
DEM -German Mark NZD -New Zealand Dollar
*Securities traded in U.S. dollars unless otherwise indicated.
(a)At October 31, 1998, all repurchase agreements held by the fund had been
entered into on that date.
See notes to financial statements.
30
<PAGE>
FRANKLIN TEMPLETON GLOBAL TRUST
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
TEMPLETON GLOBAL TEMPLETON HARD
CURRENCY FUND CURRENCY FUND
---------------------------------
<S> <C> <C>
Assets:
Investments in securities:
Cost ................................................................................ $ 32,802,117 $ 71,914,268
=================================
Value ............................................................................... 32,572,606 71,225,962
Repurchase agreements, at value and cost ............................................. 2,325,000 3,314,000
Cash ................................................................................. 43,145 933
Receivables:
Beneficial shares sold .............................................................. 12,893 164,774
Dividends and interest .............................................................. 93,504 44,556
Unrealized gain on forward exchange contracts (Note 6) ............................... 47,091 566,316
---------------------------------
Total assets ....................................................................... 35,094,239 75,316,541
---------------------------------
Liabilities:
Payables:
Investment securities purchased ..................................................... 1,000,000 1,850,000
Beneficial shares redeemed .......................................................... 17,981 303,996
To affiliates ....................................................................... 56,398 190,205
To shareholders ..................................................................... 98,738 431,726
Unrealized loss on forward exchange contracts (Note 6) ............................... 184,783 219,002
Accrued expenses ..................................................................... 33,013 76,391
---------------------------------
Total liabilities .................................................................. 1,390,913 3,071,320
---------------------------------
Net assets, at value .............................................................. $ 33,703,326 $ 72,245,221
=================================
Net assets consist of:
Undistributed net investment income/(Distributions in excess of
net investment income).............................................................. $ 137,692 $ (347,314)
Net unrealized depreciation .......................................................... (362,489) (340,888)
Accumulated net realized loss ........................................................ (340,985) (1,514,548)
Beneficial shares .................................................................... 34,269,108 74,447,971
---------------------------------
Net assets, at value ................................................................ $ 33,703,326 $ 72,245,221
=================================
CLASS I:
Net asset value ...................................................................... $ 33,703,326 $ 68,902,251
=================================
Shares outstanding ................................................................... 2,795,057 6,629,159
=================================
Net asset value per share ............................................................ $ 12.06 $ 10.39
=================================
Maximum offering price per share (Net asset value per share / 97.75%) ................ $ 12.34 $ 10.63
=================================
ADVISOR CLASS:
Net asset value ...................................................................... $ 3,342,970
============
Shares outstanding ................................................................... 321,095
============
Net asset value and maximum offering price per share ................................. $ 10.41
============
</TABLE>
See notes to financial statements.
31
<PAGE>
FRANKLIN TEMPLETON GLOBAL TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1998
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
TEMPLETON GLOBAL TEMPLETON HARD
CURRENCY FUND CURRENCY FUND
---------------------------------
<S> <C> <C>
Interest Income ........................................................ $ 1,908,155 $ 3,260,840
---------------------------------
Expenses:
Management fees (Note 3) .............................................. 235,045 479,459
Distribution fees - Class I (Note 3) .................................. 95,416 247,406
Transfer agent fees (Note 3) .......................................... 34,000 95,100
Custodian fees ........................................................ 12,200 15,229
Reports to shareholders ............................................... 22,591 63,500
Registration and filing fees .......................................... 9,500 40,700
Professional fees ..................................................... 10,500 28,000
Trustees' fees and expenses ........................................... 11,700 18,500
Other ................................................................. 65 3,016
---------------------------------
Total expenses .................................................... 431,017 990,910
---------------------------------
Net investment income ............................................ 1,477,138 2,269,930
---------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ......................................................... (598,169) 1,267,308
Foreign currency transactions ....................................... (144,500) (1,022,894)
---------------------------------
Net realized gain (loss) ......................................... (742,669) 244,414
Net unrealized appreciation (depreciation) on:
Investments ........................................................... 283,385 (477,361)
Translation of assets and liabilities denominated
in foreign currencies................................................. 124,156 (481,729)
---------------------------------
Net unrealized appreciation (depreciation) ....................... 407,541 (959,090)
---------------------------------
Net realized and unrealized loss ....................................... (335,128) (714,676)
---------------------------------
Net increase in net assets resulting from operations ................... $ 1,142,010 $ 1,555,254
=================================
</TABLE>
See notes to financial statements.
32
<PAGE>
FRANKLIN TEMPLETON GLOBAL TRUST
Financial Statements (continued)
Statements of Changes in Net Assets
for the years ended October 31, 1998 and 1997
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
GLOBAL CURRENCY FUND HARD CURRENCY FUND
----------------------------------------------------------------
1998 1997 1998 1997
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................................. $ 1,477,138 $ 1,831,151 $ 2,269,930 $ 3,706,100
Net realized gain (loss) from investments and
foreign currency transactions ......................... (742,669) (1,811,951) 244,414 (15,811,999)
Net unrealized appreciation (depreciation) on
investments and translation of assets and
liabilities denominated in foreign currencies ......... 407,541 (798,869) (959,090) 1,406,507
----------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations .......................... 1,142,010 (779,669) 1,555,254 (10,699,392)
Distributions to shareholders from:
Net investment income:
Class I ............................................... (863,306) -- (1,877,762) --
Advisor Class ......................................... -- -- (57,064) --
Tax return of capital:
Class I ............................................... (572,882) (1,895,614) (422,559) (3,971,925)
Advisor Class ......................................... -- -- (12,841) (7,680)
Beneficial share transactions (Note 2):
Class I ............................................... (7,797,014) (6,303,604) (22,281,132) (18,010,343)
Advisor Class ......................................... -- -- 3,115,985 248,378
----------------------------------------------------------------
Net decrease in net assets .......................... (8,091,192) (8,978,887) (19,980,119) (32,440,962)
Net assets:
Beginning of year ...................................... 41,794,518 50,773,405 92,225,340 124,666,302
----------------------------------------------------------------
End of year ............................................ $ 33,703,326 $ 41,794,518 $ 72,245,221 $ 92,225,340
================================================================
Undistributed net investment income/(Distributions in
excess of net investment income) included in net assets:
End of year ........................................... $ 137,692 $ 265,180 $ (347,314) $ (817,703)
================================================================
</TABLE>
See notes to financial statements.
33
<PAGE>
FRANKLIN TEMPLETON GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Templeton Global Trust (the Trust) is registered under the Investment
Company Act of 1940 as an open-end, non-diversified investment company,
consisting of two funds (the Funds). The Funds and their investment policies
are:
Franklin Templeton Global Currency Fund - The Global Currency Fund seeks to
maximize total return, through a combination of interest income and currency
gains, by investing in interest-earning money market instruments, at least 65%
of which will be denominated in three or more major currencies, including the
U.S. dollar.
Franklin Templeton Hard Currency Fund - The Hard Currency Fund seeks to protect
shareholders against depreciation of the U.S. dollar relative to other
currencies by investing in high-quality, interest-bearing money market
instruments (and forward contracts), denominated in those major currencies which
historically have experienced low rates of inflation, and which are currently
pursuing economic policies conducive to continued low rates of inflation and
currency appreciation versus the U.S. dollar over the long term.
The following summarizes the Funds' significant accounting policies.
a. SECURITY VALUATION:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Trustees.
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. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date. When
the Funds purchase or sell foreign securities they will customarily enter into
foreign exchange contracts to minimize foreign exchange risk from the trade date
to the settlement date of such transactions.
The Funds do 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.
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 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 currency
denominated assets and liabilities other than investments in securities held at
the end of the reporting period.
c. FORWARD EXCHANGE CONTRACTS:
The Funds may enter into forward exchange contracts to obtain an investment
result that is substantially equal to a direct investment in a foreign currency
denominated instrument and to hedge against foreign exchange risks. These
contracts are valued daily and the Funds' equity therein is included in the
Statement of Assets and Liabilities. Realized and unrealized gains and losses
are included in the Statement of Operations.
34
<PAGE>
FRANKLIN TEMPLETON GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
d. INCOME TAXES:
No provision has been made for income taxes because each Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income.
e. 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.
Certain income from foreign securities is recorded as soon as information is
available to the Fund. Interest income and estimated expenses are accrued daily.
Distributions to shareholders are recorded on the ex-dividend date.
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
Common expenses incurred by the Trust are allocated among the funds comprising
the Trust based on the ratio of net assets of each fund to the combined net
assets. Other expenses are charged to each fund on a specific identification
basis.
f. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles 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 expense during the reporting
period. Actual results could differ from those estimates.
2. BENEFICIAL SHARES
The Hard Currency Fund offers two classes of shares: Class I shares and Advisor
Class shares. The shares differ by their initial sales load, distribution fees,
voting rights affecting a single class and the exchange privilege of each class.
The Global Currency Fund offers one class of shares.
At October 31, 1998, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Funds' shares were as follows:
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
GLOBAL CURRENCY FUND HARD CURRENCY FUND
-------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS I SHARES:
1998
Shares sold .................................. 279,185 $ 3,284,072 2,210,728 $ 21,802,773
Shares issued on reinvestment
of distributions............................. 106,675 1,253,805 187,976 1,820,909
Shares redeemed .............................. (1,045,274) (12,334,891) (4,713,561) (45,904,814)
-------------------------------------------------------------------
Net decrease ................................. (659,414) $ (7,797,014) (2,314,857) $(22,281,132)
===================================================================
1997
Shares sold .................................. 491,508 $ 6,060,556 6,145,940 $ 65,035,999
Shares issued on reinvestment
of distributions............................. 130,486 1,604,655 290,801 3,068,787
Shares redeemed .............................. (1,134,907) (13,968,815) (8,200,653) (86,115,129)
-------------------------------------------------------------------
Net decrease ................................. (512,913) $ (6,303,604) (1,763,912) $(18,010,343)
===================================================================
</TABLE>
35
<PAGE>
FRANKLIN TEMPLETON GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
2. BENEFICIAL SHARES (cont.)
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON
HARD CURRENCY FUND
-----------------------------
SHARES AMOUNT
-----------------------------
<S> <C> <C>
ADVISOR CLASS SHARES:
1998
Shares sold .................................. 1,414,038 $ 13,878,770
Shares issued on reinvestment
of distributions............................. 7,092 69,905
Shares redeemed .............................. (1,124,297) (10,832,690)
-----------------------------
Net increase ................................. 296,833 $ 3,115,985
=============================
1997*
Shares sold .................................. 87,809 $ 907,672
Shares issued on reinvestment
of distributions............................. 684 7,041
Shares redeemed .............................. (64,231) (666,335)
-----------------------------
Net increase ................................. 24,262 $ 248,378
=============================
</TABLE>
*Effective date of Advisor Class Shares was January 2, 1997.
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Trust are also officers or directors of Franklin
Advisers, Inc. (Advisers), Franklin/Templeton Distributors, Inc. (Distributors)
and Franklin/Templeton Investor Services, Inc. (Investor Services), the Funds'
investment manager, principal underwriter and transfer agent, respectively.
Global Currency Fund and Hard Currency Fund pay an investment management fee to
Advisers of 0.65% per year of the average daily net assets of each Fund. Under a
subadvisory agreement, Templeton Investment Counsel, Inc., a wholly owned
subsidiary of Franklin Resources, Inc., provides subadvisory services to the
Funds and receives from Advisers fees of 0.25% per year of the aggregate average
daily net assets of each Fund.
The Global Currency Fund reimburses Distributors up to 0.45% per year of the
Funds average daily net assets for costs incurred in marketing the Funds shares.
The Hard Currency Fund reimburses Distributors up to 0.45% per year of the
Fund's average daily net assets of Class I shares for costs incurred in
marketing the Fund's Class I shares.
Distributors received net commissions on sales of Fund shares, and paid
commissions to other dealers for the year ended October 31, 1998 as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
TEMPLETON TEMPLETON
GLOBAL HARD
CURRENCY FUND CURRENCY FUND
------------------------------
<S> <C> <C>
Total commissions received ... $16,137 $110,110
==============================
Paid to other dealers ........ $13,895 $ 97,256
==============================
</TABLE>
36
<PAGE>
FRANKLIN TEMPLETON GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
4. INCOME TAXES
At October 31, 1998, the Funds had tax basis capital losses which may be carried
over to offset future capital gains as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
TEMPLETON TEMPLETON
GLOBAL HARD
CURRENCY FUND CURRENCY FUND
-------------------------------
<S> <C> <C>
Capital loss carryovers expiring in:
2001 ............................... $ 35,182 $ 192,513
2002 ............................... -- 271
2003 ............................... 173,253 112,254
2004 ............................... 77,143 1,047,201
2005 ............................... 54,060 162,309
2006 ............................... 1,347 --
-------------------------------
$340,985 $1,514,548
===============================
</TABLE>
The cost of securities for income tax purposes is the same as that shown in the
Statement of Investments. At October 31, 1998, the net unrealized depreciation
based on the cost of investments for income tax purposes were as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
TEMPLETON TEMPLETON
GLOBAL HARD
CURRENCY FUND CURRENCY FUND
--------------------------------
<S> <C> <C>
Unrealized appreciation ........ $214,328 $120,941
Unrealized depreciation ........ (443,839) (809,247)
--------------------------------
Net unrealized depreciation .... $(229,511) $(688,306)
================================
</TABLE>
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended October 31, 1998 were as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
TEMPLETON TEMPLETON
GLOBAL HARD
CURRENCY FUND CURRENCY FUND
------------------------------
<S> <C> <C>
Purchases .......... $ -- $4,853,984
Sales .............. $2,141,897 $7,460,926
</TABLE>
6. OFF-BALANCE SHEET RISK
The Funds have been parties to financial instruments with off-balance-sheet
risk, primarily forward exchange contracts in order to obtain investment results
that are substantially equal to direct investments in foreign currency
denominated instruments and to minimize the impact on the Funds from adverse
changes in the relationship between the U.S. dollar and foreign currencies and
interest rates. These instruments involve market risk in excess of the amount
recognized on the
37
<PAGE>
FRANKLIN TEMPLETON GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
6. OFF-BALANCE SHEET RISK (cont.)
Statement of Assets and Liabilities. Some of these risks have been minimized by
offsetting contracts. Risks arise from the possible inability of counterparties
to meet the terms of their contracts, future movement in currency values and
interest rates and contract positions that are not exact offsets. The contract
amount indicates the extent of the Funds' involvement in such contracts.
A forward exchange contract is an agreement between two parties to exchange
different currencies at a specific rate at an agreed future date. The contracts
are reported in the financial statements at the Funds' net equity, as measured
by the difference between the forward exchange rates at the reporting date and
the forward exchange rates at the day of entry into the contract.
As of October 31, 1998, the Global Currency Fund had the following forward
foreign currency contracts outstanding:
<TABLE>
<CAPTION>
IN SETTLEMENT UNREALIZED
EXCHANGE FOR DATE GAIN/(LOSS)
--------------------------------------------
<S> <C> <C> <C>
CONTRACTS TO BUY:
2,578,000 Australian Dollars ............................................ U.S. $1,598,747 11/27/98 U.S. $ 6,011
==========
Net unrealized gain on offsetting forward exchange contracts.. 41,080
---------
Unrealized gain on forward exchange contracts ............... 47,091
---------
CONTRACTS TO BUY:
5,000,000 Deutschemarks ................................................. U.S. $3,082,614 11/13/98 (61,620)
8,300,000 Deutschemarks ................................................. 5,136,139 11/19/98 (119,841)
---------- ---------
U.S. $8,218,753 (181,461)
==========
Net unrealized loss on offsetting forward exchange contracts... (3,322)
---------
Unrealized loss on forward exchange contracts ................ (184,783)
---------
Net unrealized loss on forward exchange contracts ........... U.S. $(137,692)
=========
</TABLE>
As of October 31, 1998, the Hard Currency Fund had the following forward foreign
currency contracts outstanding:
<TABLE>
<CAPTION>
IN SETTLEMENT UNREALIZED
EXCHANGE FOR DATE GAIN/(LOSS)
--------------------------------------------
<S> <C> <C> <C>
CONTRACTS TO BUY:
3,982,000 Deutschemarks ................................................. U.S. $ 2,403,573 11/30/98 U.S. $ 4,319
2,100,000,000 Japanese Yen .................................................. 17,736,486 11/16/98 328,151
---------- ---------
U.S. $20,140,059 332,470
==========
Net unrealized gain on offsetting forward exchange contracts.. 233,846
---------
Unrealized gain on forward exchange contracts ............... 566,316
---------
Contracts to Buy:
5,672,000 Deutschemarks ................................................. U.S. $ 3,496,917 11/13/98 (69,902)
4,860,000 Deutschemarks ................................................. 3,007,426 11/19/98 (70,172)
---------- ---------
U.S. $ 6,504,343 (140,074)
==========
Net unrealized loss on offsetting forward exchange contracts.. (78,928)
---------
Unrealized loss on forward exchange contracts ............... (219,002)
---------
Net unrealized gain on forward exchange contracts ......... U.S. $ 347,314
=========
</TABLE>
38
<PAGE>
FRANKLIN TEMPLETON GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
7. CREDIT RISK
The Funds have investments in excess of 10% of their total net assets in the
following:
Global Currency Fund - debt securities denominated in German deutschemarks and
Canadian dollars.
Hard Currency Fund - debt securities denominated in Swiss francs and in German
deutschemarks
Such concentrations may subject the Funds more significantly to economic changes
occurring within that country.
39
<PAGE>
FRANKLIN TEMPLETON GLOBAL TRUST
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
OF FRANKLIN TEMPLETON GLOBAL TRUST
In our opinion, the accompanying statements of assets and liabilities, including
the statements of investments, and the related statements of operations and
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the funds constituting the
Franklin Templeton Global Trust (hereafter referred to as the "Funds") at
October 31, 1998, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 1998 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
November 25, 1998
40
