SHAREHOLDER LETTER
Dear Shareholder:
This annual report for Franklin Templeton International Trust, which consists of
Templeton Foreign Smaller Companies Fund and Templeton Pacific Growth Fund,
covers the year ended October 31, 2000.
During the reporting period, global economies generally experienced varying
degrees of recovery and growth. Many European and Latin American economies
expanded throughout the fiscal year, but Asian economies, which grew the fastest
during the first half of the period, slowed somewhat in the second half.
Global equity markets generally performed well during the beginning of the
reporting period but by spring 2000, high oil prices, rising interest rates and
a meltdown in the technology-laden U.S. Nasdaq Composite Index (Nasdaq(R)),
combined to rattle investors worldwide.(1) The Morgan Stanley Capital
International (MSCI(R)) World Index delivered an annual return of 8.50% in local
currency terms, compared to 26.94% for the previous fiscal year. Most European
markets performed relatively well, with the MSCI Europe Index rising
(1) The Nasdaq Composite Index measures all Nasdaq domestic and non-U.S.-based
common stocks listed on The Nasdaq Stock Market(R). The index is
market-value weighted and includes over 4,800 companies (as of
10/31/00).
CONTENTS
<TABLE>
<S> <C>
Shareholder Letter 1
Fund Reports
Templeton Foreign
Smaller Companies Fund 3
Templeton Pacific
Growth Fund 13
Financial Highlights &
Statements of Investments 22
Financial Statements 37
Notes to
Financial Statements 41
Independent
Auditors' Report 46
Tax Designation 47
</TABLE>
[FUND CATEGORY PYRAMID GRAPHIC]
<PAGE>
21.40% in local currency terms. But due to the extremely weak euro, it rose by
only 1.21% in U.S.-dollar terms. Asian markets suffered the worst, and the MSCI
Pacific Index plummeted 5.16% in local currency terms.(2)
On the following pages, you will find detailed discussions about Templeton
Foreign Smaller Companies Fund and Templeton Pacific Growth Fund. Although the
Funds have different investment goals and strategies, their managers share a
dedication to the principles of careful stock selection and constant
professional supervision. For specific information about the Funds, including
the effects of market conditions and management strategies on their performance,
please refer to the Funds' reports following this letter.
Thank you for your participation in Franklin Templeton International Trust. We
appreciate your support, welcome your comments, and look forward to serving your
investment needs in the years to come.
Sincerely,
/s/ Rupert H. Johnson, Jr.
--------------------------------------
Rupert H. Johnson, Jr.
President
Franklin Templeton International Trust
(2) Source: Morgan Stanley Capital International. The MSCI World Index is an
arithmetic average, weighted by market value, of the performance of
approximately 1,450 securities listed on the stock exchanges of 22
countries including the U.S., Europe, Canada, Australia, New Zealand and
the Far East. The MSCI Europe Index includes approximately 600 companies
representing these 13 European countries: Austria, Belgium, Denmark,
Finland, France, Germany, Italy, Netherlands, Norway, Spain, Sweden,
Switzerland and the United Kingdom. The MSCI Pacific Index includes over
400 companies and the five countries of Australia, Hong Kong, Japan, New
Zealand and Singapore.
2
<PAGE>
TEMPLETON FOREIGN
SMALLER COMPANIES FUND
Your Fund's Goal: Templeton Foreign Smaller Companies Fund seeks to provide
long-term capital growth. Under normal market conditions, the Fund invests at
least 65% of its total assets in equity securities of smaller companies -- those
with market capitalizations of less than $2 billion -- located outside the
United States.
This annual report for Templeton Foreign Smaller Companies Fund covers the
fiscal year ended October 31, 2000. If ever a year could be split into two
contrasting periods, this would be it. During the early part of the reporting
period, international stock markets generally performed well, driven upward by
strength in the global economic environment. However, from the middle of March
2000, many stock markets declined due to rising interest rates, high oil prices,
the continuing slide of the euro, corporate earnings disappointments, investor
concerns that many technology and Internet valuations were unrealistic, and
fears of a potential slowdown in the U.S. economy.
In Europe, merger and acquisition activity increased, the number of private
companies listed on stock markets rose, and telecommunications, media and
technology shares generally appreciated until the middle of March, when the
tech-heavy U.S. Nasdaq Composite Index declined severely, casting a pall
The dollar value, number of shares or principal value, and complete legal titles
of all portfolio holdings are listed in the Fund's Statement of Investments
(SOI). The SOI begins on page 33.
GEOGRAPHIC DISTRIBUTION
Templeton Foreign Smaller
Companies Fund
Based on Total Net Assets
10/31/00
[PIE CHART]
<TABLE>
<S> <C>
Europe ....................................... 48.9%
Asia ......................................... 23.1%
North America ................................ 6.0%
Australia & New Zealand ...................... 3.8%
Latin America ................................ 3.2%
Mid-East & Africa ............................ 0.6%
Short Term Investments & Other New Assets .... 14.4%
</TABLE>
3
<PAGE>
TOP 10 HOLDINGS
Templeton Foreign
Smaller Companies Fund
10/31/00
<TABLE>
<CAPTION>
COMPANY % OF TOTAL
SECTOR, COUNTRY NET ASSETS
--------------- ----------
<S> <C>
Giordano International Ltd. 4.1%
Specialty Retail, Hong Kong
SA des Galeries Lafayette 3.0%
Multiline Retail, France
Li & Fung Ltd. 2.5%
Textiles & Apparel,
Hong Kong
Kardex AG, Br. 2.1%
Electronic Equipment &
Instruments, Switzerland
Dah Sing Financial
Holdings Ltd. 2.1%
Banks, Hong Kong
GTC Transcontinental
Group Ltd., B 2.1%
Commercial Services
& Supplies, Canada
Fletcher Challenge
Energy Ltd. 1.7%
Oil & Gas, New Zealand
Hugo Boss AG, pfd. 1.7%
Textiles & Apparel, Germany
Mutual Risk Management Ltd. 1.7%
Insurance, Bermuda
Geest PLC 1.6%
Food Products, U.K.
</TABLE>
over much of the global technology stock market.(1) In Asia, Japanese technology
stocks started declining in May, with leading Internet-related companies falling
90% or more in value by the end of the period. And in Latin America, where
Brazilian stocks generally appreciated, confidence in the economic fundamentals
of the region began to wane toward the end of the period.
Within this environment, Templeton Foreign Smaller Companies Fund - Class A
provided a +1.71% one-year cumulative total return as shown in the Performance
Summary beginning on page 8. During the period, we changed our benchmark to the
Salomon Brothers Global ex-U.S. less than $2 Billion Index, which delivered a
total return of -6.42% during the same time.(2) This change reflects the
increase in capitalization of global stock markets over the last few years and
gives the Fund the opportunity to invest in a greater number of dynamic, more
liquid smaller companies. The Fund's previous benchmark, the Salomon Brothers
Global ex-U.S. less than $1 Billion Index, declined 9.15% during the period,
while the broader Morgan Stanley Capital International Europe, Australasia, Far
East Index (MSCI EAFE(R)) fell 2.66%.(3),(4)
(1) The Nasdaq Composite Index measures all Nasdaq domestic and non-U.S.-based
common stocks listed on The Nasdaq Stock Market. The index is market-value
weighted and includes over 4,800 companies (as of 10/31/00).
(2) Source: Salomon Brothers. The Salomon Brothers Global ex-U.S. less than $2
Billion Index is designed to measure the performance of global stocks with
a market capitalization of less than $2 billion and includes all developed
and emerging countries except the U.S.
(3) Source: Salomon Brothers. The Salomon Brothers Global ex-U.S. less than $1
Billion Index is designed to measure the performance of global stocks with
a market capitalization of less than $1 billion and includes all developed
and emerging countries except the U.S.
(4) Source: Morgan Stanley Capital International. The Morgan Stanley Capital
International Europe, Australasia, Far East (MSCI EAFE) Index includes
approximately 1,000 companies representing the stock markets of 20
countries in Europe, Australia, New Zealand and the Far East. The average
company has a market capitalization of more than $3 billion.
Indexes are unmanaged and include reinvested dividends. One cannot invest
directly in an index, nor is an index representative of the Fund's
portfolio.
4
<PAGE>
During the period, our European holdings contributed significantly to Fund
performance. In the U.K., we benefited from our positions in produce and
prepared foods distributor Geest, international transportation conglomerate
Stagecoach, and department store chain Debenhams. On the continent, electronics
manufacturer Bang & Olufsen, fashion designer Hugo Boss, drug wholesaler Gehe,
industrial machinery builder Fives-Lille, and data storage producer Kardex all
performed well. Although we expect to continue discovering attractively valued
companies across a number of industries in Europe, we will be careful not to
fall into a "value trap" by purchasing stocks that are recognized as cheap but
are simply too small to be interesting to investors.
In Asia, the strong relative performance of Hong Kong holdings Li & Fung, Dah
Sing Financial and Techtronic Industries all boosted the Fund's performance.
Compared to the MSCI EAFE, we maintained an underweight exposure to the Japanese
market when telecommunications and technology stocks soared, and were gratified
to see their valuations retrench significantly over the last few months of the
period. However, in Latin America, the Fund gained from its exposure to the
telecommunications sector, particularly in Brazil's Telemig Celular.
Looking forward, we plan to focus on company fundamentals as the basis for stock
selection. Because we believe a stock's fundamental value is of the utmost
importance, we shall search for issues that trade at a discount to what we
believe are a company's future earnings. Based on the divergence in valuations
TOP 10 SECTORS
Templeton Foreign
Smaller Companies Fund
10/31/00
<TABLE>
<CAPTION>
% OF TOTAL
NET ASSETS
----------
<S> <C>
Specialty Retail 8.7%
Banks 6.0%
Marine 5.9%
Textiles & Apparel 5.3%
Commercial Services
& Supplies 5.0%
Machinery 4.4%
Chemicals 4.0%
Multiline Retail 4.0%
Household Durables 3.1%
Electronic Equipment
& Instruments 3.0%
</TABLE>
5
<PAGE>
between small- and large-cap sectors, we feel tremendous opportunities exist for
small-cap stocks globally, and we plan to continue applying our expertise and
research capabilities to our bottom-up approach for undervalued equities in that
sector. More specifically, we shall concentrate our search on companies able to
avert the threat of pricing pressure by producing value-added rather than
commodity products or services.
As you know, the outlook for the Fund is heavily dependent upon developments in
foreign economies. If the performance of foreign economies improves, the Fund's
holdings should do well. In our opinion, many European companies have developed
a renewed focus on delivering value to shareholders, and we believe that they
have the potential to deliver positive future earnings. We also believe China's
agreement with the U.S. on entry into the World Trade Organization may provide
interesting opportunities as direct foreign investment returns to the largest
nation in Asia. And although we remain cautious about Japan's economic
fundamentals, we shall continue to look for new entrepreneurial companies in
that country.
Of course, investing in a Fund that seeks long-term capital growth from
investments in small companies involves special risks such as relatively small
revenues, limited production lines and small market share. In addition,
investing in foreign markets involves special risks related to market and
currency volatility, and adverse economic, social and political developments.
Emerging market securities are subject to heightened risks, as well as those
associated with their relatively small size and lesser liquidity. Investing in
any emerging market means accepting a certain amount of volatility and, in some
cases, the
6
<PAGE>
consequences of severe market corrections. For example, Taiwan's equity market
has increased 1,026% in the last 15 years, but has suffered 11 declines of more
than 15% during that time.(5) While short-term volatility can be disconcerting,
declines in excess of 50% are not unusual in emerging markets.
Investors should also be aware that much of what occurs globally may very well
depend on what happens in the U.S. Many who invest only outside the U.S. believe
that since the U.S. economy has been such a catalyst in maintaining economic
activity the world over, significant declines in U.S. securities could
jeopardize global growth.
/s/ Simon Rudolph
------------------------------
Simon Rudolph
/s/ Peter A. Nori
------------------------------
Peter A. Nori
Portfolio Management Team
Templeton Foreign Smaller Companies Fund
(5) Source: Taiwan Weighted Index. Based on the quarterly percentage price
change over 15 years ended 9/30/00. Returns are measured in U.S. dollars
and do not include reinvested dividends.
This discussion reflects our views, opinions and portfolio holdings as of
October 31, 2000, the end of the reporting period. The information provided is
not a complete analysis of every aspect of any country, industry, security or
the Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance is
no guarantee of future results, these insights may help you understand our
investment and management philosophy.
7
<PAGE>
TEMPLETON FOREIGN
SMALLER COMPANIES FUND
PERFORMANCE SUMMARY AS OF 10/31/00
One-year total return represents the change in value of an investment for the
period indicated and does not include sales charges. Distributions will vary
based on earnings of the Fund's portfolio and any profits realized from the sale
of the portfolio's securities, as well as the level of operating expenses for
each class. Past distributions are not indicative of future trends. All total
returns include reinvested distributions at net asset value.
Class A: Subject to the current, maximum 5.75% initial sales charge. Prior to
1/2/97, Fund shares were offered at a lower initial sales charge. Thus, actual
total returns would have been higher.*
Class B: Subject to no initial sales charge, but subject to a contingent
deferred sales charge (CDSC) declining from 4% to 0% over six years. These
shares have higher annual fees and expenses than Class A shares.
Class C: Subject to 1% initial sales charge and 1% CDSC for shares redeemed
within 18 months of investment. These shares have higher annual fees and
expenses than Class A shares.
Advisor Class: No initial sales charge or Rule 12b-1 fees and are available to a
limited class of investors.*
* Past fee waivers and expense reimbursements by the Fund's manager increased
the Fund's total returns.
<TABLE>
<S> <C> <C>
CLASS A
One-Year Total Return +1.71%
Net Asset Value (NAV) $14.42 (10/31/00) $14.43 (10/31/99)
Change in NAV -$0.01
Distributions (11/1/99-10/31/00) Dividend Income $0.2681
CLASS B
One-Year Total Return +0.91%
Net Asset Value (NAV) $14.28 (10/31/00) $14.35 (10/31/99)
Change in NAV -$0.07
Distributions (11/1/99-10/31/00) Dividend Income $0.2095
CLASS C
One-Year Total Return +0.94%
Net Asset Value (NAV) $14.33 (10/31/00) $14.36 (10/31/99)
Change in NAV -$0.03
Distributions (11/1/99-10/31/00) Dividend Income $0.1728
ADVISOR CLASS
One-Year Total Return +2.01%
Net Asset Value (NAV) $14.45 (10/31/00) $14.45 (10/31/99)
Change in NAV --
Distributions (11/1/99-10/31/00) Dividend Income $0.3012
</TABLE>
Past performance does not guarantee future results.
8
<PAGE>
ADDITIONAL PERFORMANCE
As of 9/30/00
<TABLE>
<CAPTION>
SINCE
CHANGES IN
INVESTMENT
INCEPTION POLICIES
CLASS A 1-YEAR 5-YEAR (9/20/91) (10/1/96)(5)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) +7.19% +47.44% +130.73% +31.44%
Average Annual Total Return(2) +1.06% +6.81% +8.99% +5.50%
Value of $10,000 Investment(3) $10,106 $13,899 $21,747 $12,385
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS B 1-YEAR (1/1/99)
----------------------------------------------------------------------------------------
<S> <C> <C>
Cumulative Total Return(1) +6.33% +23.83%
Average Annual Total Return(2) +2.33% +10.90%
Value of $10,000 Investment(3) $10,233 $11,983
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 1-YEAR (7/1/98)
----------------------------------------------------------------------------------------
<S> <C> <C>
Cumulative Total Return(1) +6.33% +9.74%
Average Annual Total Return(2) +4.25% +3.76%
Value of $10,000 Investment(3) $10,425 $10,867
</TABLE>
<TABLE>
<CAPTION>
SINCE
CHANGES IN
INVESTMENT
INCEPTION POLICIES
ADVISOR CLASS(4) 1-YEAR 5-YEAR (9/20/91) (10/1/96)(5)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) +7.42% +49.72% +134.30% +33.48%
Average Annual Total Return(2) +7.42% +8.41% +9.89% +7.49%
Value of $10,000 Investment(3) $10,742 $14,972 $23,430 $13,348
</TABLE>
(1) Cumulative total return represents the change in value of an investment
over the periods indicated and does not include sales charges.
(2) Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the current,
applicable, maximum sales charge(s) for that class.
(3) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated and include the current, applicable,
maximum sales charge(s) for that class.
(4) Effective 1/2/97, the Fund began offering Advisor Class shares, which do
not have sales charges or Rule 12b-1 plans. Performance quotations for this
class reflect the following methods of calculation: (a) For periods prior
to 1/2/97, a restated figure is used based upon the Fund's Class A
performance, excluding the effect of Class A's maximum initial sales charge
and including the effect of the Class A Rule 12b-1 fees; and (b) for
periods after 1/1/97, an actual Advisor Class figure is used reflecting a
deduction of all charges and fees applicable to that class. Since 1/2/97
(commencement of sales), the cumulative and average annual total returns of
Advisor Class shares were +22.61% and +5.59%.
(5) Effective 10/1/96, the Fund's name was changed from Franklin International
Equity Fund to Templeton Foreign Smaller Companies Fund, and the Fund,
which until that date invested predominantly in large capitalization
foreign equity securities, shifted its emphasis to smaller capitalization
foreign equity securities.
Since markets can go down as well as up, investment return and principal value
will fluctuate with market conditions, currency volatility and the social,
economic and political climates of countries where the Fund invests. Emerging
markets involve heightened risks related to the same factors, in addition to
those associated with their relatively small size and lesser liquidity. You may
have a gain or loss when you sell your shares.
For updated performance figures, see "Prices and Performance" at
franklintempleton.com, or call Franklin Templeton Investments at 1-800/342-5236.
Past performance does not guarantee future results.
9
<PAGE>
TEMPLETON FOREIGN
SMALLER COMPANIES FUND
TOTAL RETURN INDEX COMPARISON
FOR HYPOTHETICAL $10,000 INVESTMENT
Total return represents the change in value of an investment over the periods
shown. It includes the current, applicable, maximum sales charges, Fund
expenses, account fees, and reinvested distributions. The unmanaged indexes
differ from the Fund in composition, do not pay management fees or expenses and
include reinvested dividends. One cannot invest directly in an index.
The MSCI EAFE/Salomon Brothers Global ex-U.S. less than $1 Billion Index is a
proprietary index developed by the Templeton organization and reflects MSCI EAFE
performance from the Fund's inception on 9/20/91 until 10/1/96, and the Salomon
index performance from 10/1/96 through 10/31/00. The proprietary index attempts
to reflect the Fund's original investment portfolio of large-capitalization
companies until it changed its name and focus on 10/1/96. The Fund's managers
now consider Salomon Brothers Global ex-U.S. less than $2 Billion Index a closer
match to the Fund's investments as of 10/31/00. Going forward, the Fund's
benchmark indexes will be the MSCI EAFE and the Salomon Brothers Global ex-U.S.
less than $2 Billion Index, and we will no longer show the proprietary index and
the Salomon Brothers Global ex-U.S. less than $1 Billion Index.
AVERAGE ANNUAL TOTAL RETURN
10/31/00
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------
<S> <C>
1-Year -4.13%
5-Year +6.26%
Since Inception (9/20/91) +8.22%
</TABLE>
CLASS A (9/20/91 - 10/31/00)
[GRAPH]
The following line graph compares the performance of Templeton Foreign Smaller
Companies Fund's Class A shares to that of the MSCI EAFE Index, the Salomon
Brothers Global ex-U.S. less than $2 Billion Index and the MSCI EAFE/Salomon
Brothers Global ex-U.S. less than $1 Billion Index based on a $10,000 investment
from 9/20/91 to 10/31/00.
<TABLE>
<CAPTION>
Templeton MSCI EAFE Index Salomon Global MSCI
Foreign Smaller ex US less than EAFE/Salomon
Companies Fund - $2 Billion Index Global ex US
Class A less than $1
Billion Index
<S> <C> <C> <C> <C>
09/20/91 $9,426 $10,000 $10,000 $10,000
09/30/91 $9,444 $10,189 $10,216 $10,189
10/31/91 $9,482 $10,336 $10,307 $10,336
11/30/91 $9,397 $9,856 $9,740 $9,856
12/31/91 $9,773 $10,369 $10,099 $10,369
01/31/92 $9,887 $10,150 $10,012 $10,150
02/29/92 $9,982 $9,790 $9,862 $9,790
03/31/92 $9,593 $9,146 $9,264 $9,146
04/30/92 $9,811 $9,192 $9,373 $9,192
05/31/92 $10,333 $9,810 $10,027 $9,810
06/30/92 $10,139 $9,348 $9,651 $9,348
07/31/92 $9,908 $9,111 $9,142 $9,111
08/31/92 $9,966 $9,686 $9,532 $9,686
09/30/92 $9,803 $9,498 $9,222 $9,498
10/31/92 $9,620 $9,002 $8,720 $9,002
11/30/92 $9,774 $9,090 $8,700 $9,090
12/31/92 $9,860 $9,140 $8,784 $9,140
01/31/93 $9,715 $9,142 $8,847 $9,142
02/28/93 $9,889 $9,420 $9,164 $9,420
03/31/93 $10,121 $10,245 $10,077 $10,245
04/30/93 $10,497 $11,220 $11,065 $11,220
05/31/93 $10,825 $11,460 $11,626 $11,460
06/30/93 $10,480 $11,284 $11,184 $11,284
07/31/93 $10,659 $11,681 $11,535 $11,681
08/31/93 $11,338 $12,314 $12,135 $12,314
09/30/93 $11,298 $12,039 $11,904 $12,039
10/31/93 $12,256 $12,413 $11,993 $12,413
11/30/93 $11,907 $11,330 $11,071 $11,330
12/31/93 $13,116 $12,151 $11,880 $12,151
01/31/94 $14,099 $13,181 $12,951 $13,181
02/28/94 $13,868 $13,147 $13,007 $13,147
03/31/94 $13,377 $12,583 $12,722 $12,583
04/30/94 $13,477 $13,120 $13,176 $13,120
05/31/94 $13,527 $13,048 $12,950 $13,048
06/30/94 $13,147 $13,236 $13,112 $13,236
07/31/94 $13,695 $13,365 $13,331 $13,365
08/31/94 $14,111 $13,685 $13,575 $13,685
09/30/94 $13,787 $13,256 $13,242 $13,256
10/31/94 $14,040 $13,701 $13,426 $13,701
11/30/94 $13,340 $13,046 $12,586 $13,046
12/31/94 $13,101 $13,130 $12,719 $13,130
01/31/95 $12,780 $12,629 $12,290 $12,629
02/28/95 $12,983 $12,596 $12,190 $12,596
03/31/95 $12,941 $13,386 $12,648 $13,386
04/30/95 $13,539 $13,893 $13,032 $13,893
05/31/95 $13,806 $13,731 $12,872 $13,731
06/30/95 $14,156 $13,493 $12,711 $13,493
07/31/95 $14,826 $14,336 $13,448 $14,336
08/31/95 $14,394 $13,793 $13,124 $13,793
09/30/95 $14,750 $14,066 $13,170 $14,066
10/31/95 $14,286 $13,692 $12,749 $13,692
11/30/95 $14,351 $14,077 $12,920 $14,077
12/31/95 $14,504 $14,647 $13,407 $14,647
01/31/96 $15,024 $14,710 $13,836 $14,710
02/29/96 $15,438 $14,763 $13,975 $14,763
03/31/96 $15,674 $15,080 $14,270 $15,080
04/30/96 $16,147 $15,522 $15,017 $15,522
05/31/96 $16,384 $15,239 $14,864 $15,239
06/30/96 $16,438 $15,329 $14,843 $15,329
07/31/96 $15,912 $14,885 $14,228 $14,885
08/31/96 $16,306 $14,921 $14,416 $14,921
09/30/96 $16,509 $15,320 $14,550 $15,320
10/31/96 $16,927 $15,167 $14,534 $15,336
11/30/96 $17,393 $15,774 $14,836 $15,630
12/31/96 $18,011 $15,575 $14,575 $15,363
01/31/97 $18,164 $15,033 $14,539 $15,474
02/28/97 $18,432 $15,283 $14,866 $15,839
03/31/97 $18,535 $15,342 $14,575 $15,493
04/30/97 $18,343 $15,427 $14,352 $15,190
05/31/97 $18,930 $16,434 $15,141 $16,005
06/30/97 $19,635 $17,344 $15,495 $16,343
07/31/97 $19,827 $17,629 $15,308 $16,101
08/31/97 $19,943 $16,316 $14,467 $15,254
09/30/97 $20,880 $17,232 $14,574 $15,286
10/31/97 $19,339 $15,912 $13,669 $14,369
11/30/97 $18,787 $15,753 $12,796 $13,317
12/31/97 $18,534 $15,895 $12,434 $12,912
01/31/98 $18,057 $16,626 $12,674 $13,189
02/28/98 $19,531 $17,697 $13,691 $14,298
03/31/98 $20,404 $18,246 $14,236 $14,800
04/30/98 $20,663 $18,393 $14,289 $14,850
05/31/98 $20,336 $18,309 $14,023 $14,549
06/30/98 $19,443 $18,452 $13,374 $13,811
07/31/98 $19,182 $18,644 $13,101 $13,516
08/31/98 $16,634 $16,337 $11,161 $11,525
09/30/98 $16,209 $15,841 $11,117 $11,521
10/31/98 $16,908 $17,496 $12,009 $12,321
11/30/98 $17,470 $18,397 $12,447 $12,844
12/31/98 $17,326 $19,127 $12,599 $13,076
01/31/99 $16,922 $19,076 $12,424 $12,872
02/28/99 $16,810 $18,626 $12,234 $12,684
03/31/99 $17,743 $19,408 $13,123 $13,659
04/30/99 $19,470 $20,198 $14,281 $15,005
05/31/99 $19,192 $19,162 $13,988 $14,766
06/30/99 $20,205 $19,913 $14,872 $15,785
07/31/99 $20,680 $20,510 $15,222 $16,124
08/31/99 $20,890 $20,590 $15,486 $16,471
09/30/99 $20,289 $20,802 $15,322 $16,825
10/31/99 $20,191 $21,586 $15,224 $16,648
11/30/99 $20,442 $22,342 $15,588 $16,980
12/31/99 $21,704 $24,351 $16,425 $17,759
01/31/00 $21,421 $22,807 $16,450 $17,999
02/29/00 $21,449 $23,425 $16,866 $18,611
03/31/00 $22,625 $24,338 $16,945 $18,600
04/30/00 $21,917 $23,063 $15,718 $17,078
05/31/00 $21,888 $22,505 $15,443 $16,663
06/30/00 $23,029 $23,389 $16,392 $17,678
07/31/00 $22,858 $22,414 $15,746 $16,962
08/31/00 $23,043 $22,613 $16,217 $17,442
09/30/00 $21,747 $21,517 $15,381 $16,497
10/31/00 $20,537 $21,013 $14,246 $15,126
</TABLE>
Past performance does not guarantee future results.
10
<PAGE>
CLASS B (1/1/99 - 10/31/00)
[GRAPH]
The following line graph compares the performance of Templeton Foreign Smaller
Companies Fund's Class B shares to that of the MSCI EAFE Index, the Salomon
Brothers Global ex-U.S. less than $2 Billion Index and the Salomon Brothers
Global ex-U.S. less than $1 Billion Index based on a $10,000 investment from
1/1/99 to 10/31/00.
<TABLE>
<CAPTION>
Templeton MSCI EAFE Index Salomon Global Salomon Global
Foreign Smaller ex US less than ex US less than
Companies Fund - $2 Billion Index $1 Billion Index
Class B
<S> <C> <C> <C> <C>
01/01/99 $10,000 $10,000 $10,000 $10,000
01/31/99 $9,767 $9,973 $9,879 $9,864
02/28/99 $9,703 $9,738 $9,728 $9,720
03/31/99 $10,233 $10,147 $10,435 $10,467
04/30/99 $11,198 $10,560 $11,355 $11,498
05/31/99 $11,037 $10,018 $11,122 $11,316
06/30/99 $11,613 $10,411 $11,825 $12,096
07/31/99 $11,880 $10,723 $12,103 $12,356
08/31/99 $12,001 $10,765 $12,314 $12,563
09/30/99 $11,646 $10,876 $12,183 $12,368
10/31/99 $11,581 $11,286 $12,105 $12,238
11/30/99 $11,718 $11,681 $12,395 $12,482
12/31/99 $12,426 $12,731 $13,060 $13,055
01/31/00 $12,263 $11,924 $13,080 $13,231
02/29/00 $12,271 $12,247 $13,411 $13,681
03/31/00 $12,932 $12,724 $13,474 $13,673
04/30/00 $12,516 $12,058 $12,498 $12,554
05/31/00 $12,492 $11,766 $12,280 $12,249
06/30/00 $13,136 $12,228 $13,034 $12,995
07/31/00 $13,029 $11,718 $12,520 $12,469
08/31/00 $13,127 $11,823 $12,894 $12,822
09/30/00 $12,383 $11,249 $12,230 $12,127
10/31/00 $11,287 $10,986 $11,328 $11,119
</TABLE>
CLASS C (7/1/98 - 10/31/00)
[GRAPH]
The following line graph compares the performance of Templeton Foreign Smaller
Companies Fund's Class C shares to that of the MSCI EAFE Index, the Salomon
Brothers Global ex-U.S. less than $2 Billion Index and the Salomon Brothers
Global ex-U.S. less than $1 Billion Index based on a $10,000 investment from
7/1/98 to 10/31/00.
<TABLE>
<CAPTION>
Templeton MSCI EAFE Index Salomon Global Salomon Global
Foreign Smaller ex US less than ex US less than
Companies Fund - $2 Billion Index $1 Billion Index
Class C
<S> <C> <C> <C> <C>
07/01/98 $9,903 $10,000 $10,000 $10,000
07/31/98 $9,743 $10,104 $9,802 $9,793
08/31/98 $8,441 $8,854 $8,351 $8,350
09/30/98 $8,225 $8,585 $8,318 $8,348
10/31/98 $8,573 $9,482 $8,985 $8,927
11/30/98 $8,852 $9,970 $9,313 $9,307
12/31/98 $8,782 $10,366 $9,427 $9,474
01/31/99 $8,570 $10,338 $9,296 $9,326
02/28/99 $8,507 $10,094 $9,154 $9,190
03/31/99 $8,965 $10,518 $9,819 $9,897
04/30/99 $9,833 $10,946 $10,685 $10,872
05/31/99 $9,685 $10,385 $10,466 $10,699
06/30/99 $10,192 $10,792 $11,128 $11,437
07/31/99 $10,425 $11,116 $11,389 $11,683
08/31/99 $10,531 $11,159 $11,587 $11,878
09/30/99 $10,220 $11,274 $11,464 $11,694
10/31/99 $10,156 $11,699 $11,391 $11,571
11/30/99 $10,284 $12,108 $11,663 $11,801
12/31/99 $10,911 $13,197 $12,290 $12,343
01/31/00 $10,761 $12,360 $12,308 $12,510
02/29/00 $10,768 $12,695 $12,619 $12,935
03/31/00 $11,352 $13,190 $12,679 $12,927
04/30/00 $10,982 $12,499 $11,761 $11,870
05/31/00 $10,961 $12,197 $11,555 $11,581
06/30/00 $11,525 $12,676 $12,264 $12,287
07/31/00 $11,432 $12,147 $11,781 $11,789
08/31/00 $11,518 $12,256 $12,133 $12,123
09/30/00 $10,867 $11,661 $11,509 $11,466
10/31/00 $10,252 $11,388 $10,659 $10,513
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
10/31/00
<TABLE>
<CAPTION>
CLASS B
--------------------------------------
<S> <C>
1-Year -3.07%
Since Inception (1/1/99) +6.83%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
10/31/00
<TABLE>
<CAPTION>
CLASS C
-------------------------------------
<S> <C>
1-Year -1.09%
Since Inception (7/1/98) +1.07%
</TABLE>
Past performance does not guarantee future results.
11
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
10/31/00
<TABLE>
ADVISOR CLASS**
-----------------------------------------
<S> <C>
1-Year +2.01%
5-Year +7.88%
Since Inception (9/20/91) +9.12%
</TABLE>
ADVISOR CLASS (9/20/91 - 10/31/00)**
[GRAPH]
The following line graph compares the performance of Templeton Foreign Smaller
Companies Fund's Advisor Class shares to that of the MSCI EAFE Index, the
Salomon Brothers Global ex-U.S. less than $2 Billion Index and the MSCI
EAFE/Salomon Brothers Global ex-U.S. less than $1 Billion Index based on a
$10,000 investment from 9/20/91 to 10/31/00.
<TABLE>
<CAPTION>
Templeton MSCI EAFE Index Salomon Global MSCI
Foreign Smaller ex US less than EAFE/Salomon
Companies Fund - $2 Billion Index Global ex US
Advisor less than $1
Billion Index
<S> <C> <C> <C> <C>
09/20/91 $10,000 $10,000 $10,000 $10,000
09/30/91 $10,020 $10,189 $10,216 $10,189
10/31/91 $10,060 $10,336 $10,307 $10,336
11/30/91 $9,970 $9,856 $9,740 $9,856
12/31/91 $10,369 $10,369 $10,099 $10,369
01/31/92 $10,490 $10,150 $10,012 $10,150
02/29/92 $10,590 $9,790 $9,862 $9,790
03/31/92 $10,177 $9,146 $9,264 $9,146
04/30/92 $10,409 $9,192 $9,373 $9,192
05/31/92 $10,963 $9,810 $10,027 $9,810
06/30/92 $10,757 $9,348 $9,651 $9,348
07/31/92 $10,512 $9,111 $9,142 $9,111
08/31/92 $10,573 $9,686 $9,532 $9,686
09/30/92 $10,400 $9,498 $9,222 $9,498
10/31/92 $10,207 $9,002 $8,720 $9,002
11/30/92 $10,370 $9,090 $8,700 $9,090
12/31/92 $10,461 $9,140 $8,784 $9,140
01/31/93 $10,307 $9,142 $8,847 $9,142
02/28/93 $10,492 $9,420 $9,164 $9,420
03/31/93 $10,737 $10,245 $10,077 $10,245
04/30/93 $11,136 $11,220 $11,065 $11,220
05/31/93 $11,484 $11,460 $11,626 $11,460
06/30/93 $11,118 $11,284 $11,184 $11,284
07/31/93 $11,309 $11,681 $11,535 $11,681
08/31/93 $12,029 $12,314 $12,135 $12,314
09/30/93 $11,987 $12,039 $11,904 $12,039
10/31/93 $13,003 $12,413 $11,993 $12,413
11/30/93 $12,633 $11,330 $11,071 $11,330
12/31/93 $13,915 $12,151 $11,880 $12,151
01/31/94 $14,958 $13,181 $12,951 $13,181
02/28/94 $14,713 $13,147 $13,007 $13,147
03/31/94 $14,192 $12,583 $12,722 $12,583
04/30/94 $14,298 $13,120 $13,176 $13,120
05/31/94 $14,351 $13,048 $12,950 $13,048
06/30/94 $13,948 $13,236 $13,112 $13,236
07/31/94 $14,530 $13,365 $13,331 $13,365
08/31/94 $14,971 $13,685 $13,575 $13,685
09/30/94 $14,627 $13,256 $13,242 $13,256
10/31/94 $14,896 $13,701 $13,426 $13,701
11/30/94 $14,153 $13,046 $12,586 $13,046
12/31/94 $13,899 $13,130 $12,719 $13,130
01/31/95 $13,559 $12,629 $12,290 $12,629
02/28/95 $13,775 $12,596 $12,190 $12,596
03/31/95 $13,729 $13,386 $12,648 $13,386
04/30/95 $14,364 $13,893 $13,032 $13,893
05/31/95 $14,648 $13,731 $12,872 $13,731
06/30/95 $15,019 $13,493 $12,711 $13,493
07/31/95 $15,729 $14,336 $13,448 $14,336
08/31/95 $15,271 $13,793 $13,124 $13,793
09/30/95 $15,649 $14,066 $13,170 $14,066
10/31/95 $15,156 $13,692 $12,749 $13,692
11/30/95 $15,225 $14,077 $12,920 $14,077
12/31/95 $15,388 $14,647 $13,407 $14,647
01/31/96 $15,940 $14,710 $13,836 $14,710
02/29/96 $16,379 $14,763 $13,975 $14,763
03/31/96 $16,629 $15,080 $14,270 $15,080
04/30/96 $17,131 $15,522 $15,017 $15,522
05/31/96 $17,382 $15,239 $14,864 $15,239
06/30/96 $17,439 $15,329 $14,843 $15,329
07/31/96 $16,882 $14,885 $14,228 $14,885
08/31/96 $17,300 $14,921 $14,416 $14,921
09/30/96 $17,515 $15,320 $14,550 $15,320
10/31/96 $17,959 $15,167 $14,534 $15,336
11/30/96 $18,453 $15,774 $14,836 $15,630
12/31/96 $19,108 $15,575 $14,575 $15,363
01/31/97 $19,408 $15,033 $14,539 $15,474
02/28/97 $19,695 $15,283 $14,866 $15,839
03/31/97 $19,817 $15,342 $14,575 $15,493
04/30/97 $19,599 $15,427 $14,352 $15,190
05/31/97 $20,240 $16,434 $15,141 $16,005
06/30/97 $21,005 $17,344 $15,495 $16,343
07/31/97 $21,226 $17,629 $15,308 $16,101
08/31/97 $21,349 $16,316 $14,467 $15,254
09/30/97 $22,378 $17,232 $14,574 $15,286
10/31/97 $20,718 $15,912 $13,669 $14,369
11/30/97 $20,127 $15,753 $12,796 $13,317
12/31/97 $19,847 $15,895 $12,434 $12,912
01/31/98 $19,335 $16,626 $12,674 $13,189
02/28/98 $20,913 $17,697 $13,691 $14,298
03/31/98 $21,863 $18,246 $14,236 $14,800
04/30/98 $22,140 $18,393 $14,289 $14,850
05/31/98 $21,804 $18,309 $14,023 $14,549
06/30/98 $20,831 $18,452 $13,374 $13,811
07/31/98 $20,567 $18,644 $13,101 $13,516
08/31/98 $17,835 $16,337 $11,161 $11,525
09/30/98 $17,395 $15,841 $11,117 $11,521
10/31/98 $18,129 $17,496 $12,009 $12,321
11/30/98 $18,745 $18,397 $12,447 $12,844
12/31/98 $18,590 $19,127 $12,599 $13,076
01/31/99 $18,171 $19,076 $12,424 $12,872
02/28/99 $18,052 $18,626 $12,234 $12,684
03/31/99 $19,053 $19,408 $13,123 $13,659
04/30/99 $20,907 $20,198 $14,281 $15,005
05/31/99 $20,608 $19,162 $13,988 $14,766
06/30/99 $21,705 $19,913 $14,872 $15,785
07/31/99 $22,230 $20,510 $15,222 $16,124
08/31/99 $22,454 $20,590 $15,486 $16,471
09/30/99 $21,808 $20,802 $15,322 $16,825
10/31/99 $21,703 $21,586 $15,224 $16,648
11/30/99 $21,987 $22,342 $15,588 $16,980
12/31/99 $23,333 $24,351 $16,425 $17,759
01/31/00 $23,044 $22,807 $16,450 $17,999
02/29/00 $23,074 $23,425 $16,866 $18,611
03/31/00 $24,352 $24,338 $16,945 $18,600
04/30/00 $23,590 $23,063 $15,718 $17,078
05/31/00 $23,559 $22,505 $15,443 $16,663
06/30/00 $24,786 $23,389 $16,392 $17,678
07/31/00 $24,603 $22,414 $15,746 $16,962
08/31/00 $24,817 $22,613 $16,217 $17,442
09/30/00 $23,422 $21,517 $15,381 $16,497
10/31/00 $22,142 $21,013 $14,246 $15,126
</TABLE>
* Sources: Morgan Stanley Capital International; Salomon Brothers. The Morgan
Stanley Capital International Europe, Australasia, Far East (MSCI EAFE)
Index includes approximately 1,000 companies representing the stock markets
of 20 countries in Europe, Australia, New Zealand and the Far East. The
average company has a market capitalization of more than $3 billion. The
Salomon Brothers Global ex-U.S. less than $1 Billion Index is designed to
measure the performance of global stocks with a market capitalization of
less than $1 billion and includes all developed and emerging countries
except the U.S. The Salomon Brothers Global ex-U.S. less than $2 Billion
Index is designed to measure the performance of global stocks with a market
capitalization of less than $2 billion and includes all developed and
emerging countries except the U.S.
** Effective 1/2/97, the Fund began offering Advisor Class shares, which do
not have sales charges or Rule 12b-1 plans. Performance quotations for this
class reflect the following methods of calculation: (a) For periods prior
to 1/2/97, a restated figure is used based upon the Fund's Class A
performance, excluding the effect of Class A's maximum initial sales charge
and including the effect of the Class A Rule 12b-1 fees; and (b) for
periods after 1/1/97, an actual Advisor Class figure is used reflecting a
deduction of all charges and fees applicable to that class.
Past performance does not guarantee future results.
12
<PAGE>
TEMPLETON PACIFIC GROWTH FUND
Your Fund's Goal: Templeton Pacific Growth Fund seeks to provide long-term
capital growth. Under normal market conditions, the Fund invests at least 65% of
its total assets in equity securities that trade on Pacific Rim markets, as
defined in the Fund's prospectus, and are issued by companies that have their
principal activities in the Pacific Rim.
This annual report for Templeton Pacific Growth Fund covers the fiscal year
ended October 31, 2000. Many Asian economies performed well during the first
part of the 12 months under review, but grew at a slower pace for the remainder
of the period. Asian equity markets, which began the reporting period with such
great promise, also began to unravel substantially. However, this differed from
the 1998 Asian stock market crisis because prices declined slowly and did not
collapse.
The Japanese stock market lost ground, with the Topix Index declining 15.26%
during the 12 months under review and 21.17% from its high in February 2000.1
Contributing to this
TOP 10 SECTORS
TEMPLETON PACIFIC GROWTH FUND
10/31/00
<TABLE>
<CAPTION>
% OF TOTAL
NET ASSETS
--------------------------------------------
<S> <C>
Banks 13.2%
Real Estate 8.3%
Household Durables 4.9%
Diversified Financials 4.4%
Electrical Equipment 3.7%
Diversified
Telecommunication Services 3.6%
Construction Materials 2.4%
Metals & Mining 2.2%
Airlines 2.0%
Trading Companies
& Distributors 2.0%
</TABLE>
(1) Source: Topix Index. The Topix Index is a market capitalization-weighted
index that includes 150 highly liquid securities selected from each major
sector of the Tokyo market. The index represents approximately 70% of the
market value of the Japanese equity market.
The dollar value, number of shares or principal value, and complete legal
titles of all portfolio holdings are listed in the Fund's Statement of
Investments (SOI). The SOI begins on page 25.
13
<PAGE>
GEOGRAPHIC DISTRIBUTION
Templeton Pacific Growth Fund
Based on Total Net Assets
<TABLE>
<S> <C>
Hong Kong............................................. 18.6%
Japan................................................. 17.9%
Singapore............................................. 12.9%
South Korea........................................... 5.0%
Malaysia.............................................. 3.7%
Australia............................................. 2.0%
India................................................. 1.6%
New Zealand........................................... 1.4%
Indonesia............................................. 0.7%
Philippines........................................... 0.5%
China................................................. 0.4%
Thailand.............................................. 0.3%
Short Term Investments & Other Net Assets............. 35.0%
</TABLE>
selloff was a banking system suffering from extravagant non-performing loans,
efforts of the Japanese government to unload a huge chunk of Nippon Telegraph
and Telephone, and the global meltdown of technology stocks, with prices of some
leading Internet-related companies falling 90% or more.
Unlike Japan, Hong Kong's equity market produced a significant gain by rising
14.51% during the Fund's fiscal year due primarily to surging exports to China.
But even Hong Kong stocks suffered from the plunge in U.S. technology and
telecommunications stocks and rising short-term interest rates, and the Hang
Seng Index dropped sharply from its 1999 highs.(2) The performance of
Singapore's equity market also lagged from January through October 2000 after a
strong 1999. But even though the nation's exports to the U.S. electronics market
are expected to slow, its economic fundamentals appeared to exhibit signs of
resilience.
Within this environment, Templeton Pacific Growth Fund - Class A had a -18.33%
one-year cumulative total return as shown in the Performance Summary beginning
on page 18. The Fund's benchmark, the Morgan Stanley Capital International
(MSCI) Pacific Index, produced a -10.34% total return for the same period.(3)
(2) Source: Hang Seng Index. The Hang Seng Index is a capitalization-weighted
index of 33 companies that represent approximately 70% of the total market
capitalization of the Stock Exchange of Hong Kong. The components of the
index are divided into four subindexes: Commerce and Industry, Finance,
Utilities and Properties.
(3) Source: Morgan Stanley Capital International. The unmanaged MSCI Pacific
Index includes over 400 companies and the five countries of Australia, Hong
Kong, Japan, New Zealand and Singapore. The index is unmanaged and includes
reinvested dividends. One cannot invest directly in an index, nor is an
index representative of the Fund's portfolio.
14
<PAGE>
During the year under review, the Fund remained predominantly invested in Japan,
Hong Kong and Singapore. We initially increased our Japanese holdings but
decreased our weighting in that country as Japanese stocks started to weaken. By
the end of the period under review, our Japan holdings represented 17.9% of
total net assets, compared with 20.4% on October 31, 1999. Even before Japanese
technology stocks started to decline, we trimmed our shares in Sony and
reinvested the proceeds in Toshiba, a global supplier of semiconductors. We also
participated in Japan's pharmaceutical industry, one of the country's few
sectors that performed well, by purchasing shares in Ono Pharmaceutical, a
developer of respiratory and heart medications.
In Hong Kong, we added to our position in Hutchison Whampoa, one of our top
holdings, because of its substantial stake in VoiceStream Wireless in the U.S.
and its winning bid for the largest mobile telecommunications license in the
U.K. And when technology stocks took a nosedive in the spring of 2000, we
purchased shares in Creative Technology, a Singaporean electronics company that
specializes in multimedia solutions for PCs. In our opinion, it is poised to
benefit from increasing demand for audio and personal digital entertainment
products worldwide.
TOP 10 HOLDINGS
TEMPLETON PACIFIC GROWTH FUND
10/31/00
<TABLE>
<CAPTION>
COMPANY % OF TOTAL
SECTOR, COUNTRY NET ASSETS
----------------------------------------------
<S> <C>
Johnson Electric
Holdings Ltd. 3.7%
Electrical Equipment,
Hong Kong
City Developments Ltd. 3.6%
Real Estate, Singapore
Overseas Union Bank Ltd. 3.1%
Banks, Singapore
DBS Group Holdings Ltd. 2.9%
Banks, Singapore
HSBC Holdings PLC 2.9%
Banks, Hong Kong
Matsushita Electrical
Industrial Co. Ltd. 2.7%
Household Durables, Japan
Commerce
Asset-Holding Bhd. 2.3%
Banks, Malaysia
Cheung Kong Holdings Ltd. 2.3%
Real Estate, Hong Kong
Singapore Airlines Ltd. 2.0%
Airlines, Singapore
Nomura Securities Co. Ltd. 2.0%
Diversified Financials, Japan
</TABLE>
15
<PAGE>
Looking forward, we are monitoring the reaction of Asian markets to a slowdown
in the U.S. economy and the effects of rising oil prices on international trade.
But we are optimistic about long-term prospects for equity securities trading in
Pacific Rim markets and for Templeton Pacific Growth Fund. We believe there may
be significant volatility in the near future, but it could present our analysts
with unique opportunities to discover undervalued stocks with the potential to
provide attractive long-term returns for Fund shareholders.
Of course, it is important to remember that investing in foreign markets
concentrated in a single region involves special considerations not associated
with more broadly diversified investments, such as market and currency
volatility, and adverse economic, social and political developments in the
region and countries where the Fund invests. Emerging market securities involve
heightened risks related to the same factors, in addition to those associated
with the relatively small size and lesser liquidity of
16
<PAGE>
those markets. In addition, investing in an emerging market means accepting a
certain amount of volatility, and, in some cases, the consequences of severe
market corrections. For example, Taiwan's equity market has increased 1,026% in
the last 15 years, but has suffered 11 declines of more than 15% during that
time.(4) While short-term volatility can be disconcerting, declines in excess of
50% are not unusual in emerging markets.
/s/ William Howard
-------------------------------
William Howard
/s/ Mark R. Beveridge
-------------------------------
Mark R. Beveridge
/s/ Peter A. Nori
-------------------------------
Peter A. Nori
Portfolio Management Team
Templeton Pacific Growth Fund
(4) Source: Taiwan Weighted Index. Based on the quarterly percentage price
change over 15 years ended 9/30/00. Returns are measured in U.S. dollars
and do not include reinvested dividends.
This discussion reflects our views, opinions and portfolio holdings as of
October 31, 2000, the end of the reporting period. The information provided is
not a complete analysis of every aspect of any country, industry, security or
the Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance is
no guarantee of future results, these insights may help you understand our
investment and management philosophy.
17
<PAGE>
TEMPLETON PACIFIC
GROWTH FUND
PERFORMANCE SUMMARY AS OF 10/31/00
One-year total return represents the change in value of an investment for the
period indicated and does not include sales charges. Distributions will vary
based on earnings of the Fund's portfolio and any profits realized from the sale
of the portfolio's securities, as well as the level of operating expenses for
each class. Past distributions are not indicative of future trends. All total
returns include reinvested distributions at net asset value.
CLASS A: Subject to the current, maximum 5.75% initial sales charge. Prior to
1/2/97, Fund shares were offered at a lower initial sales charge. Thus, actual
total returns would have been higher.*
CLASS C: Subject to 1% initial sales charge and 1% contingent deferred sales
charge for shares redeemed within 18 months of investment. These shares have
higher annual fees and expenses than Class A shares.
ADVISOR CLASS: No initial sales charge or Rule 12b-1 fees and are available to a
limited class of investors.*
*Past fee waivers and expense reimbursements by the Fund's manager increased the
Fund's total returns.
<TABLE>
<S> <C> <C>
CLASS A
One-Year Total Return -18.33%
Net Asset Value (NAV) $8.33 (10/31/00) $10.20 (10/31/99)
Change in NAV -$1.87
CLASS C
One-Year Total Return -19.11%
Net Asset Value (NAV) $8.21 (10/31/00) $10.15 (10/31/99)
Change in NAV -$1.94
ADVISOR CLASS
One-Year Total Return -18.14%
Net Asset Value (NAV) $8.44 (10/31/00) $10.31 (10/31/99)
Change in NAV -$1.87
</TABLE>
Past performance does not guarantee future results.
18
<PAGE>
ADDITIONAL PERFORMANCE
AS OF 9/30/00
<TABLE>
<CAPTION>
INCEPTION
CLASS A 1-YEAR 5-YEAR (9/20/91)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) -11.40% -31.63% +11.58%
Average Annual Total Return(2) -16.53% -8.42% +0.56%
Value of $10,000 Investment(3) $8,347 $6,443 $10,517
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 1-YEAR 3-YEAR (1/2/97)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) -11.95% -34.43% -40.01%
Average Annual Total Return(2) -13.69% -13.42% -12.97%
Value of $10,000 Investment(3) $8,631 $6,491 $5,940
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
ADVISOR CLASS(4) 1-YEAR 5-YEAR (9/20/91)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) -10.89% -30.07% +14.12%
Average Annual Total Return(2) -10.89% -6.90% +1.47%
Value of $10,000 Investment(3) $8,911 $6,993 $11,412
</TABLE>
(1) Cumulative total return represents the change in value of an investment over
the periods indicated and does not include sales charges.
(2) Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the current, applicable,
maximum sales charge(s) for that class.
(3) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated and include the current, applicable, maximum
sales charge(s) for that class.
(4) Effective 1/2/97, the Fund began offering Advisor Class shares, which do not
have sales charges or Rule 12b-1 plans. Performance quotations for this class
reflect the following methods of calculation: (a) For periods prior to 1/2/97, a
restated figure is used based upon the Fund's Class A performance, excluding the
effect of Class A's maximum initial sales charge and including the effect of the
Class A Rule 12b-1 fees; and (b) for periods after 1/1/97, an actual Advisor
Class figure is used reflecting a deduction of all charges and fees applicable
to that class. Since 1/2/97 (commencement of sales), the cumulative and average
annual total returns of Advisor Class shares were -37.57% and -11.81%.
Since markets can go down as well as up, investment return and principal value
will fluctuate with market conditions, currency volatility and the social,
economic and political climates of countries where the Fund invests. Emerging
markets involve heightened risks related to the same factors, in addition to
those associated with their relatively small size and lesser liquidity. You may
have a gain or loss when you sell your shares.
For updated performance figures, see "Prices and Performance" at
franklintempleton.com, or call Franklin Templeton Investments at 1-800/342-5236.
Past performance does not guarantee future results.
19
<PAGE>
TEMPLETON PACIFIC
GROWTH FUND
TOTAL RETURN INDEX COMPARISON
FOR HYPOTHETICAL $10,000 INVESTMENT
Total return represents the change in value of an investment over the periods
shown. It includes the current, applicable, maximum sales charge(s), Fund
expenses, account fees and reinvested distributions. The unmanaged index differs
from the Fund in composition, does not pay management fees or expenses and
includes reinvested dividends. One cannot invest directly in an index.
AVERAGE ANNUAL TOTAL RETURN
10/31/00
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------------
<S> <C>
1-Year -23.08%
5-Year -8.97%
Since Inception (9/20/91) -0.22%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
10/31/00
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------------------------
<S> <C>
1-Year -20.70%
3-Year -8.38%
Since Inception (1/2/97) -14.37%
</TABLE>
CLASS A (9/20/91-10/31/00)
[GRAPH}
The following line graph compares the performance of Templeton Pacific Growth
Fund's Class A shares to that of the MSCI Pacific Index based on a $10,000
investment from 9/20/91 to 10/31/00.
<TABLE>
<CAPTION>
TEMPLETON PACIFIC
DATE GROWTH FUND - A MSCI PACIFIC INDEX
-------------------------------------------------------------------------
<S> <C> <C>
09/20/91 $ 9,426 $10,000
09/30/91 $ 9,444 $10,263
10/31/91 $ 9,482 $10,701
11/30/91 $ 9,426 $10,015
12/31/91 $ 9,768 $10,325
01/31/92 $ 9,816 $ 9,926
02/29/92 $10,015 $ 9,232
03/31/92 $ 9,816 $ 8,356
04/30/92 $ 9,968 $ 7,975
05/31/92 $10,452 $ 8,599
06/30/92 $10,819 $ 7,925
07/31/92 $10,160 $ 7,816
08/31/92 $ 9,893 $ 8,888
09/30/92 $ 9,931 $ 8,687
10/31/92 $10,409 $ 8,382
11/30/92 $10,313 $ 8,542
12/31/92 $10,125 $ 8,446
01/31/93 $10,293 $ 8,432
02/28/93 $10,718 $ 8,843
03/31/93 $10,718 $ 9,912
04/30/93 $11,458 $11,493
05/31/93 $12,012 $11,830
06/30/93 $11,757 $11,639
07/31/93 $12,007 $12,329
08/31/93 $12,725 $12,695
09/30/93 $12,865 $12,221
10/31/93 $14,412 $12,495
11/30/93 $14,342 $10,735
12/31/93 $16,294 $11,485
01/31/94 $16,465 $12,816
02/28/94 $15,941 $13,148
03/31/94 $14,693 $12,424
04/30/94 $14,904 $12,963
05/31/94 $15,599 $13,273
06/30/94 $15,114 $13,709
07/31/94 $15,520 $13,417
08/31/94 $16,210 $13,652
09/30/94 $15,530 $13,312
10/31/94 $15,631 $13,650
11/30/94 $14,464 $12,890
12/31/94 $14,553 $12,979
01/31/95 $13,295 $12,161
02/28/95 $13,898 $11,862
03/31/95 $14,293 $12,775
04/30/95 $14,470 $13,321
05/31/95 $15,021 $12,791
06/30/95 $14,744 $12,251
07/31/95 $15,340 $13,137
08/31/95 $15,152 $12,644
09/30/95 $15,382 $12,763
10/31/95 $14,775 $12,144
11/30/95 $14,786 $12,743
12/31/95 $15,404 $13,367
01/31/96 $16,589 $13,391
02/29/96 $16,523 $13,242
03/31/96 $16,434 $13,650
04/30/96 $17,132 $14,348
05/31/96 $17,154 $13,728
06/30/96 $16,917 $13,733
07/31/96 $16,033 $13,104
08/31/96 $16,350 $12,761
09/30/96 $16,735 $13,180
10/31/96 $16,429 $12,569
11/30/96 $17,381 $12,913
12/31/96 $17,229 $12,244
01/31/97 $16,921 $11,215
02/28/97 $16,990 $11,451
03/31/97 $16,192 $11,033
04/30/97 $16,261 $11,265
05/31/97 $17,399 $12,368
06/30/97 $17,565 $13,137
07/31/97 $18,033 $12,824
08/31/97 $15,534 $11,554
09/30/97 $15,853 $11,512
10/31/97 $12,418 $10,115
11/30/97 $11,368 $ 9,560
12/31/97 $10,720 $ 9,141
01/31/98 $10,010 $ 9,638
02/28/98 $11,254 $ 9,985
03/31/98 $11,126 $ 9,436
04/30/98 $10,429 $ 9,251
05/31/98 $ 9,231 $ 8,625
06/30/98 $ 8,478 $ 8,609
07/31/98 $ 8,431 $ 8,461
08/31/98 $ 7,041 $ 7,461
09/30/98 $ 7,520 $ 7,438
10/31/98 $ 9,143 $ 8,728
11/30/98 $ 9,809 $ 9,130
12/31/98 $ 9,835 $ 9,386
01/31/99 $ 9,517 $ 9,455
02/28/99 $ 9,294 $ 9,272
03/31/99 $ 9,894 $10,442
04/30/99 $11,893 $11,142
05/31/99 $11,482 $10,480
06/30/99 $12,635 $11,446
07/31/99 $12,599 $12,320
08/31/99 $12,293 $12,196
09/30/99 $11,870 $12,761
10/31/99 $12,011 $13,256
11/30/99 $12,905 $13,916
12/31/99 $14,105 $14,828
01/31/00 $13,164 $14,115
02/29/00 $12,682 $13,807
03/31/00 $13,235 $14,766
04/30/00 $12,258 $13,742
05/31/00 $10,858 $12,945
06/30/00 $11,835 $13,945
07/31/00 $11,376 $12,619
08/31/00 $11,588 $13,308
09/30/00 $10,517 $12,608
10/31/00 $ 9,799 $11,886
</TABLE>
CLASS C (1/29/97 - 10/31/00)
[GRAPH]
The following line graph compares the performance of Templeton Pacific Growth
Fund's Class C shares to that of the MSCI Pacific Index based on a $10,000
investment from 1/2/97 to 10/31/00.
<TABLE>
<CAPTION>
TEMPLETON PACIFIC
DATE GROWTH FUND - C MSCI PACIFIC INDEX
-------------------------------------------------------------------------
<S> <C> <C>
01/02/97 $ 9,902 $10,000
01/31/97 $ 9,731 $ 9,160
02/28/97 $ 9,764 $ 9,352
03/31/97 $ 9,298 $ 9,011
04/30/97 $ 9,331 $ 9,200
05/31/97 $ 9,987 $10,102
06/30/97 $10,071 $10,729
07/31/97 $10,327 $10,474
08/31/97 $ 8,882 $ 9,437
09/30/97 $ 9,059 $ 9,402
10/31/97 $ 7,102 $ 8,262
11/30/97 $ 6,504 $ 7,808
12/31/97 $ 6,128 $ 7,466
01/31/98 $ 5,734 $ 7,872
02/28/98 $ 6,442 $ 8,156
03/31/98 $ 6,375 $ 7,707
04/30/98 $ 5,967 $ 7,556
05/31/98 $ 5,272 $ 7,044
06/30/98 $ 4,847 $ 7,032
07/31/98 $ 4,820 $ 6,910
08/31/98 $ 4,017 $ 6,094
09/30/98 $ 4,291 $ 6,075
10/31/98 $ 5,222 $ 7,129
11/30/98 $ 5,597 $ 7,457
12/31/98 $ 5,611 $ 7,666
01/31/99 $ 5,429 $ 7,723
02/28/99 $ 5,302 $ 7,573
03/31/99 $ 5,638 $ 8,529
04/30/99 $ 6,780 $ 9,100
05/31/99 $ 6,545 $ 8,559
06/30/99 $ 7,190 $ 9,349
07/31/99 $ 7,170 $10,062
08/31/99 $ 6,995 $ 9,961
09/30/99 $ 6,747 $10,422
10/31/99 $ 6,820 $10,827
11/30/99 $ 7,331 $11,366
12/31/99 $ 8,003 $12,111
01/31/00 $ 7,466 $11,528
02/29/00 $ 7,183 $11,277
03/31/00 $ 7,499 $12,060
04/30/00 $ 6,935 $11,223
05/31/00 $ 6,142 $10,572
06/30/00 $ 6,693 $11,390
07/31/00 $ 6,431 $10,307
08/31/00 $ 6,545 $10,869
09/30/00 $ 5,940 $10,298
10/31/00 $ 5,517 $ 9,708
</TABLE>
Past performance does not guarantee future results.
20
<PAGE>
ADVISOR CLASS (9/20/91 - 10/31/00)**
The following line graph compares the performance of Templeton Pacific Growth
Fund's Advisor Class shares to that of the MSCI Pacific Index based on a $10,000
investment from 9/20/91 to 10/31/00.
<TABLE>
TEMPLETON PACIFIC
GROWTH FUND - ADVISOR
DATE CLASS MSCI PACIFIC INDEX
-------------------------------------------------------------------------
<S> <C> <C>
09/20/91 $10,000 $10,000
09/30/91 $10,020 $10,263
10/31/91 $10,060 $10,701
11/30/91 $10,000 $10,015
12/31/91 $10,364 $10,325
01/31/92 $10,414 $ 9,926
02/29/92 $10,626 $ 9,232
03/31/92 $10,414 $ 8,356
04/30/92 $10,575 $ 7,975
05/31/92 $11,089 $ 8,599
06/30/92 $11,479 $ 7,925
07/31/92 $10,780 $ 7,816
08/31/92 $10,496 $ 8,888
09/30/92 $10,537 $ 8,687
10/31/92 $11,043 $ 8,382
11/30/92 $10,942 $ 8,542
12/31/92 $10,742 $ 8,446
01/31/93 $10,920 $ 8,432
02/28/93 $11,371 $ 8,843
03/31/93 $11,371 $ 9,912
04/30/93 $12,157 $11,493
05/31/93 $12,744 $11,830
06/30/93 $12,474 $11,639
07/31/93 $12,738 $12,329
08/31/93 $13,501 $12,695
09/30/93 $13,649 $12,221
10/31/93 $15,290 $12,495
11/30/93 $15,216 $10,735
12/31/93 $17,287 $11,485
01/31/94 $17,468 $12,816
02/28/94 $16,913 $13,148
03/31/94 $15,588 $12,424
04/30/94 $15,812 $12,963
05/31/94 $16,550 $13,273
06/30/94 $16,035 $13,709
07/31/94 $16,466 $13,417
08/31/94 $17,198 $13,652
09/30/94 $16,476 $13,312
10/31/94 $16,584 $13,650
11/30/94 $15,346 $12,890
12/31/94 $15,440 $12,979
01/31/95 $14,105 $12,161
02/28/95 $14,745 $11,862
03/31/95 $15,164 $12,775
04/30/95 $15,352 $13,321
05/31/95 $15,936 $12,791
06/30/95 $15,643 $12,251
07/31/95 $16,275 $13,137
08/31/95 $16,075 $12,644
09/30/95 $16,320 $12,763
10/31/95 $15,676 $12,144
11/30/95 $15,687 $12,743
12/31/95 $16,343 $13,367
01/31/96 $17,600 $13,391
02/29/96 $17,529 $13,242
03/31/96 $17,435 $13,650
04/30/96 $18,176 $14,348
05/31/96 $18,199 $13,728
06/30/96 $17,948 $13,733
07/31/96 $17,010 $13,104
08/31/96 $17,347 $12,761
09/30/96 $17,755 $13,180
10/31/96 $17,431 $12,569
11/30/96 $18,440 $12,913
12/31/96 $18,279 $12,244
01/31/97 $17,988 $11,215
02/28/97 $18,060 $11,451
03/31/97 $17,226 $11,033
04/30/97 $17,298 $11,265
05/31/97 $18,521 $12,368
06/30/97 $18,682 $13,137
07/31/97 $19,168 $12,824
08/31/97 $16,510 $11,554
09/30/97 $16,861 $11,512
10/31/97 $13,207 $10,115
11/30/97 $12,090 $ 9,560
12/31/97 $11,418 $ 9,141
01/31/98 $10,675 $ 9,638
02/28/98 $12,025 $ 9,985
03/31/98 $11,901 $ 9,436
04/30/98 $11,158 $ 9,251
05/31/98 $ 9,871 $ 8,625
06/30/98 $ 9,081 $ 8,609
07/31/98 $ 9,044 $ 8,461
08/31/98 $ 7,549 $ 7,461
09/30/98 $ 8,060 $ 7,438
10/31/98 $ 9,816 $ 8,728
11/30/98 $10,539 $ 9,130
12/31/98 $10,559 $ 9,386
01/31/99 $10,231 $ 9,455
02/28/99 $ 9,993 $ 9,272
03/31/99 $10,646 $10,442
04/30/99 $12,822 $11,142
05/31/99 $12,395 $10,480
06/30/99 $13,639 $11,446
07/31/99 $13,589 $12,320
08/31/99 $13,275 $12,196
09/30/99 $12,810 $12,761
10/31/99 $12,961 $13,256
11/30/99 $13,942 $13,916
12/31/99 $15,238 $14,828
01/31/00 $14,232 $14,115
02/29/00 $13,704 $13,807
03/31/00 $14,321 $14,766
04/30/00 $13,265 $13,742
05/31/00 $11,757 $12,945
06/30/00 $12,839 $13,945
07/31/00 $12,335 $12,619
08/31/00 $12,575 $13,308
09/30/00 $11,418 $12,608
10/31/00 $10,608 $11,886
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
10/31/00
<TABLE>
<CAPTION>
ADVISOR CLASS**
--------------------------------------------------------------------------------
<S> <C>
1-Year -18.14%
5-Year -7.51%
Since Inception (9/20/91) +0.65%
</TABLE>
*Source: Morgan Stanley Capital International. The index includes over 400
companies and the five countries of Australia, Hong Kong, Japan, New Zealand and
Singapore. The average company has a market capitalization of about $5.1
billion.
**Effective 1/2/97, the Fund began offering Advisor Class shares, which do not
have sales charges or Rule 12b-1 plans. Performance quotations for this class
reflect the following methods of calculation: (a) For periods prior to 1/2/97, a
restated figure is used based upon the Fund's Class A performance, excluding the
effect of Class A's maximum initial sales charge and including the effect of the
Class A Rule 12b-1 fees; and (b) for periods after 1/1/97, an actual Advisor
Class figure is used reflecting a deduction of all charges and fees applicable
to that class.
Past performance does not guarantee future results.
21
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Financial Highlights
TEMPLETON PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------
2000 1999 1998 1997 1996
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE+
(For a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 10.20 $ 7.83 $ 10.88 $ 14.50 $ 14.11
---------------------------------------------------------------------
Income from investment operations:
Net investment income ................................ .03 .01 .13 .14 .12
Net realized and unrealized gains (losses) ........... (1.90) 2.42 (2.98) (3.65) 1.41
---------------------------------------------------------------------
Total from investment operations ...................... (1.87) 2.43 (2.85) (3.51) 1.53
---------------------------------------------------------------------
Less distributions from:
Net investment income ................................ -- (.06) (.13) (.11) (.21)
Net realized gains ................................... -- -- (.07) -- (.93)
---------------------------------------------------------------------
Total distributions ................................... -- (.06) (.20) (.11) (1.14)
---------------------------------------------------------------------
Net asset value, end of year .......................... $ 8.33 $ 10.20 $ 7.83 $ 10.88 $ 14.50
=====================================================================
Total return* ......................................... (18.33)% 31.23% (26.37)% (24.42)% 11.27%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $59,292 $73,160 $42,200 $40,958 $59,740
Ratios to average net assets:
Expenses ............................................. 1.81% 1.92% 1.90% 1.63% 1.52%
Net investment income ................................ .31% .10% 1.43% .97% 1.06%
Portfolio turnover rate ............................... 36.56% 39.33% 19.61% 24.79% 13.48%
</TABLE>
*Total return does not reflect sales commissions.
+Based on average weighted shares outstanding effective year ended October 31,
1999.
22
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Financial Highlights (continued)
TEMPLETON PACIFIC GROWTH FUND (CONT.)
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------
2000 1999 1998 1997+
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE++
(For a share outstanding throughout the year)
Net asset value, beginning of year ...................... $ 10.15 $ 7.80 $ 10.81 $ 15.10
---------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) ........................... (.05) (.07) .08 .05
Net realized and unrealized gains (losses) ............. (1.89) 2.45 (2.92) (4.31)
---------------------------------------------------------------------
Total from investment operations ........................ (1.94) 2.38 (2.84) (4.26)
---------------------------------------------------------------------
Less distributions from:
Net investment income .................................. -- (.03) (.10) (.03)
Net realized gains ..................................... -- -- (.07) --
---------------------------------------------------------------------
Total distributions ..................................... -- (.03) (.17) (.03)
---------------------------------------------------------------------
Net asset value, end of year ............................ $ 8.21 $ 10.15 $ 7.80 $ 10.81
=====================================================================
Total return* ........................................... (19.11)% 30.61% (26.47)% (28.28)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ......................... $ 7,605 $ 11,925 $ 6,183 $ 2,307
Ratios to average net assets:
Expenses ............................................... 2.60% 2.70% 2.63% 2.48%**
Net investment income (loss) ........................... (.51)% (.71)% .67% .93%**
Portfolio turnover rate ................................. 36.56% 39.33% 19.61% 24.79%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge and is not annualized.
**Annualized.
+For the period January 2, 1997 (effective date) to October 31, 1997.
++Based on average weighted shares outstanding effective year ended October 31,
1999.
23
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Financial Highlights (continued)
TEMPLETON PACIFIC GROWTH FUND (CONT.)
<TABLE>
<CAPTION>
ADVISOR CLASS
----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------
2000 1999 1998 1997+
----------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE++
(For a share outstanding throughout the year)
Net asset value, beginning of year.......................... $ 10.31 $ 7.88 $ 10.88 $ 15.10
----------------------------------------------------------------
Income from investment operations:
Net investment income...................................... .04 .04 .15 .12
Net realized and unrealized gains (losses)................. (1.91) 2.46 (2.93) (4.30)
----------------------------------------------------------------
Total from investment operations............................ (1.87) 2.50 (2.78) (4.18)
----------------------------------------------------------------
Less distributions from:
Net investment income...................................... -- (.07) (.15) (.04)
Net realized gains......................................... -- -- (.07) --
----------------------------------------------------------------
Total distributions......................................... -- (.07) (.22) (.04)
----------------------------------------------------------------
Net asset value, end of year................................ $ 8.44 $ 10.31 $ 7.88 $ 10.88
================================================================
Total return*............................................... (18.14)% 32.15% (25.68)% (27.74)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)............................. $ 1,286 $ 7,252 $ 1,454 $ 1,357
Ratios to average net assets:
Expenses................................................... 1.61% 1.71% 1.62% 1.48%**
Net investment income...................................... .33% .40% 1.78% 1.55%**
Portfolio turnover rate..................................... 36.56% 39.33% 19.61% 24.79%
</TABLE>
*Total return is not annualized.
**Annualized.
+For the period January 2, 1997 (effective date) to October 31, 1997.
++Based on average weighted shares outstanding effective year ended October 31,
1999.
See notes to financial statements.
24
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000
<TABLE>
<CAPTION>
SHARES/
TEMPLETON PACIFIC GROWTH FUND COUNTRY WARRANTS VALUE
----------------------------- ------- -------- -----
<S> <C> <C> <C>
COMMON STOCKS 65.0%
AIRLINES 2.0%
Singapore Airlines Ltd. .................... Singapore 139,030 $1,393,864
----------
AUTOMOBILES .3%
Tata Engineering & Locomotive Co. Ltd., GDR India 107,860 175,273
----------
BANKS 13.2%
Australia & New Zealand Banking Group Ltd. . Australia 106,690 787,762
*Bangkok Bank Public Co. Ltd., fgn. ......... Thailand 93,650 79,843
Commerce Asset-Holding Bhd. ................ Malaysia 629,260 1,597,989
*Commerce Asset-Holding Bhd., wts., 6/16/02 . Malaysia 29,500 17,700
DBS Group Holdings Ltd. .................... Singapore 170,064 2,005,312
HSBC Holdings PLC. ......................... Hong Kong 141,920 1,974,371
Overseas Union Bank Ltd. ................... Singapore 437,923 2,120,390
*Philippine National Bank ................... Philippines 76,992 56,446
Public Finance Bhd., fgn. .................. Malaysia 214,040 190,383
*Thai Farmers Bank Public Co. Ltd. .......... Thailand 31,170 14,350
*Thai Farmers Bank Public Co. Ltd., fgn. .... Thailand 240,030 124,149
----------
8,968,695
----------
CHEMICALS .4%
Sinopec Shanghai Petrochemical Co. Ltd., H . China 2,425,000 245,637
----------
COMMUNICATIONS EQUIPMENT 1.0%
VTech Holdings Ltd. ........................ Hong Kong 356,000 668,718
----------
COMPUTERS & PERIPHERALS 1.6%
Creative Technology Ltd. ................... Singapore 31,500 531,563
Toshiba Corp. .............................. Japan 76,000 542,907
----------
1,074,470
----------
CONSTRUCTION & ENGINEERING 1.7%
Kurita Water Industries Ltd. ............... Japan 43,000 699,011
Okumura Corp. .............................. Japan 163,000 477,699
----------
1,176,710
----------
CONSTRUCTION MATERIALS 2.4%
Cheung Kong Infrastructure Holdings Ltd. ... Hong Kong 732,000 1,135,670
Gujarat Ambuja Cements Ltd., GDR, Reg S .... India 160,720 445,998
*Union Cement Corp. ......................... Philippines 3,035,580 43,026
----------
1,624,694
----------
DIVERSIFIED FINANCIALS 4.4%
Hutchison Whampoa Ltd. ..................... Hong Kong 105,070 1,303,423
Nomura Securities Co. Ltd. ................. Japan 64,000 1,356,901
Swire Pacific Ltd., A ...................... Hong Kong 52,500 323,787
----------
2,984,111
----------
DIVERSIFIED TELECOMMUNICATION SERVICES 3.6%
Nippon Telegraph & Telephone Corp. ......... Japan 135 1,227,722
*Pacific Century Cyberworks Ltd. ............ Hong Kong 341,241 262,523
</TABLE>
25
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
SHARES/
TEMPLETON PACIFIC GROWTH FUND COUNTRY WARRANTS VALUE
----------------------------- ------- -------- -----
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
DIVERSIFIED TELECOMMUNICATION SERVICES (CONT.)
PT Indosat TBK, ADR ................... Indonesia 56,120 $ 396,347
Telecom Corp. of New Zealand Ltd. ..... New Zealand 262,890 582,151
----------
2,468,743
----------
ELECTRIC UTILITIES .4%
CLP Holdings Ltd. ..................... Hong Kong 58,000 270,698
----------
ELECTRICAL EQUIPMENT 3.7%
Johnson Electric Holdings Ltd. ........ Hong Kong 1,264,200 2,512,482
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS 1.3%
Hitachi Ltd. .......................... Japan 83,200 891,510
----------
FOOD PRODUCTS .5%
Golden Hope Plantations Bhd ........... Malaysia 379,180 363,215
----------
GAS UTILITIES .7%
Gas Authority of India Ltd., GDR, 144A India 86,940 456,435
----------
HEALTH CARE PROVIDERS & SERVICES .4%
Parkway Holdings Ltd. ................. Singapore 128,950 264,437
----------
HOUSEHOLD DURABLES 4.9%
LG Electronics Inc. ................... South Korea 39,230 546,633
Matsushita Electric Industrial Co. Ltd. Japan 64,000 1,858,046
Sony Corp. ............................ Japan 11,800 942,357
----------
3,347,036
----------
INDUSTRIAL CONGLOMERATES .5%
SIME Darby Bhd ........................ Malaysia 275,350 344,912
----------
LEISURE EQUIPMENT & PRODUCTS 1.2%
Fuji Photo Film Co. Ltd. .............. Japan 22,000 816,009
----------
MARINE 1.2%
Hong Kong Ferry Holdings Co. Ltd. ..... Hong Kong 1,037,000 791,136
----------
MEDIA .3%
South China Morning Post Ltd. ......... Hong Kong 310,000 212,653
----------
METALS & MINING 2.2%
BHP Ltd. .............................. Australia 60,730 588,438
Nittetsu Mining Co. Ltd. .............. Japan 197,000 386,098
*Onesteel Ltd. ......................... Australia 15,182 7,237
Pohang Iron & Steel Co. Ltd. .......... South Korea 9,320 541,584
----------
1,523,357
----------
MULTILINE RETAIL .6%
Matsuzakaya Co. Ltd. .................. Japan 185,000 425,268
Takashimaya Co. Ltd. .................. Japan 551 4,022
----------
429,290
----------
</TABLE>
26
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
SHARES/
TEMPLETON PACIFIC GROWTH FUND COUNTRY WARRANTS VALUE
----------------------------- ------- -------- -----
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
PAPER & FOREST PRODUCTS .5%
Carter Holt Harvey Ltd. .................... New Zealand 485,588 $ 321,819
PT Tjiwi Kimia TBK ......................... Indonesia 345,179 27,659
*PT Tjiwi Kimia TBK, wts., 7/15/02 .......... Indonesia 56,765 2,062
-----------
351,540
-----------
PHARMACEUTICALS 1.8%
Ono Pharmaceutical Co. Ltd. ................ Japan 31,000 1,235,003
-----------
REAL ESTATE 8.3%
Cheung Kong Holdings Ltd. .................. Hong Kong 143,300 1,584,750
City Developments Ltd. ..................... Singapore 531,950 2,454,455
*Filinvest Land Inc. ........................ Philippines 9,485,020 200,270
*Hon Kwok Land Investment Co. Ltd. .......... Hong Kong 1,414,364 52,591
New World Development Co. Ltd. ............. Hong Kong 450,664 534,503
Wheelock and Company Ltd. .................. Hong Kong 1,117,000 802,041
-----------
5,628,610
-----------
ROAD & RAIL 1.1%
East Japan Railway Co. ..................... Japan 134 769,466
-----------
SEMICONDUCTOR EQUIPMENT & PRODUCTS .6%
*Hyundai Electronics Industries Co. ......... South Korea 69,890 429,478
-----------
TEXTILES & APPAREL .1%
PT Indorama Synthetics ..................... Indonesia 618,372 51,201
-----------
TRADING COMPANIES & DISTRIBUTORS 2.0%
Mitsubishi Corp. ........................... Japan 72,000 593,461
Samsung Corp. .............................. South Korea 137,760 762,978
-----------
1,356,439
-----------
TRANSPORTATION INFRASTRUCTURE .4%
Road King Infrastructure Ltd. .............. Hong Kong 577,520 244,364
*Road King Infrastructure Ltd., wts., 9/05/03 Hong Kong 115,504 4,443
-----------
248,807
-----------
WIRELESS TELECOMMUNICATION SERVICES 1.7%
SK Telecom Co. Ltd., ADR ................... South Korea 45,465 1,139,467
Smartone Telecommunications Holdings Ltd. .. Hong Kong 18,500 27,397
-----------
1,166,864
-----------
TOTAL COMMON STOCKS (COST $48,100,816) ..... 44,241,493
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT**
--------
<S> <C> <C> <C>
SHORT TERM INVESTMENT (COST $4,932,356) 7.2%
U.S. Treasury Bill, 6.165%, 1/18/01 .......... United States $5,000,000 4,933,375
----------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS
(COST $53,033,172) ........................ 49,174,868
----------
</TABLE>
27
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
TEMPLETON PACIFIC GROWTH FUND COUNTRY AMOUNT** VALUE
----------------------------- ------- -------- -----
<S> <C> <C> <C>
(a)REPURCHASE AGREEMENTS 7.3%
Deutsche Bank Securities, 6.58%, 11/01/00 (Maturity Value $2,500,457)
Collateralized by U.S. Treasury Notes and Bonds .................... United States $ 2,500,000 $ 2,500,000
Lehman Securities Inc., 6.55%, 11/01/00 (Maturity Value $2,500,455)
Collateralized by U.S. Treasury Notes and Bonds .................... United States 2,500,000 2,500,000
-----------
TOTAL REPURCHASE AGREEMENTS (COST $5,000,000) ....................... 5,000,000
-----------
TOTAL INVESTMENTS (COST $58,033,172) 79.5% .......................... 54,174,868
OTHER ASSETS, LESS LIABILITIES 20.5% ................................ 14,008,115
-----------
TOTAL NET ASSETS 100.0% ............................................. $68,182,983
===========
</TABLE>
* Non-income producing securities.
** Securities denominated in U.S. dollars.
(a) At October 31, 2000, all repurchase agreements held by the Fund had been
entered into on the last business day of the month.
See notes to financial statements.
28
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Financial Highlights
TEMPLETON FOREIGN SMALLER COMPANIES FUND
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE+
(For a share outstanding throughout the year)
Net asset value, beginning of year ........ $ 14.43 $ 12.33 $ 15.06 $ 14.18 $ 13.23
------- -------- -------- -------- -------
Income from investment operations:
Net investment income .................... .31 .24 .26 .27 .35
Net realized and unrealized gains (losses) (.05) 2.13 (2.08) 1.64 1.88
------- -------- -------- -------- -------
Total from investment operations .......... .26 2.37 (1.82) 1.91 2.23
------- -------- -------- -------- -------
Less distributions from:
Net investment income .................... (.27) (.27) (.24) (.32) (.25)
Net realized gains ....................... -- -- (.67) (.71) (1.03)
------- -------- -------- -------- -------
Total distributions ....................... (.27) (.27) (.91) (1.03) (1.28)
------- -------- -------- -------- -------
Net asset value, end of year .............. $ 14.42 $ 14.43 $ 12.33 $ 15.06 $ 14.18
======= ======== ======== ======== =======
Total return* ............................. 1.71% 19.51% (12.64)% 14.25% 18.49%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ........... $99,179 $102,684 $113,964 $121,619 $67,967
Ratios to average net assets:
Expenses ................................. 1.58% 1.65% 1.48% 1.48% 1.53%
Expenses, excluding waiver and payments
by affiliate ........................... 1.58% 1.65% 1.50% 1.58% 1.53%
Net investment income .................... 1.99% 1.78% 1.23% 2.01% 2.50%
Portfolio turnover rate ................... 37.22% 18.76% 22.82% 33.62% 40.46%
</TABLE>
* Total return does not reflect sales commissions.
+ Based on average weighted shares outstanding effective year ended October 31,
1999.
29
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Financial Highlights (continued)
TEMPLETON FOREIGN SMALLER COMPANIES FUND (CONT.)
<TABLE>
<CAPTION>
CLASS B
--------------------------------------
YEAR ENDED PERIOD ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999+
---------------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE++
(For a share outstanding throughout the year)
Net asset value, beginning of year ............. $ 14.35 $ 12.44
------- -------
Income from investment operations:
Net investment income ......................... .22 .08
Net realized and unrealized gains (losses) .... (.08) 1.89
------- -------
Total from investment operations ............... .14 1.97
------- -------
Less distributions from net investment income... (.21) (.06)
------- -------
Net asset value, end of year ................... $ 14.28 $ 14.35
======= =======
Total return* .................................. .91% 15.81%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ................ $ 482 $ 201
Ratios to average net assets:
Expenses ...................................... 2.37% 1.99%**
Net investment income ......................... 1.42% .59%**
Portfolio turnover rate ........................ 37.22% 18.76%
</TABLE>
* Total return does not reflect the contingent deferred sales charge and is not
annualized.
** Annualized.
+ For the period January 1, 1999 (effective date) to October 31, 1999.
++ Based on average weighted shares outstanding.
30
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Financial Highlights (continued)
TEMPLETON FOREIGN SMALLER COMPANIES FUND (CONT.)
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------
2000 1999 1998+
--------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE++
(For a share outstanding throughout the year)
Net asset value, beginning of year ............. $ 14.36 $ 12.32 $ 14.23
------- ------- -------
Income from investment operations:
Net investment income ......................... .18 .13 .01
Net realized and unrealized gains (losses) .... (.04) 2.11 (1.92)
------- ------- -------
Total from investment operations ............... .14 2.24 (1.91)
------- ------- -------
Less distributions from net investment income .. (.17) (.20) --
------- ------- -------
Net asset value, end of year ................... $ 14.33 $ 14.36 $ 12.32
======= ======= =======
Total return* .................................. .94% 18.46% (13.42)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ................ $ 894 $ 631 $ 450
Ratios to average net assets:
Expenses ...................................... 2.36% 2.40% 2.54%**
Net investment income ......................... 1.18% .94% 1.08%**
Portfolio turnover rate ........................ 37.22% 18.76% 22.82%
</TABLE>
* Total return does not reflect sales commissions or the contingent deferred
sales charge and is not annualized.
** Annualized.
+ For the period July 1, 1998 (effective date) to October 31, 1998.
++ Based on average weighted shares outstanding effective year ended October 31,
1999.
31
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Financial Highlights (continued)
TEMPLETON FOREIGN SMALLER COMPANIES FUND (CONT.)
<TABLE>
<CAPTION>
ADVISOR CLASS
-----------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------
2000 1999 1998 1997+
---- ---- ---- -----
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE++
(For a share outstanding throughout the year)
Net asset value, beginning of year .................. $ 14.45 $12.34 $ 15.09 $14.00
------- ------ ------- ------
Income from investment operations:
Net investment income .............................. .35 .26 .32 .20
Net realized and unrealized gains (losses) ......... (.05) 2.14 (2.13) .98
------- ------ ------- ------
Total from investment operations .................... .30 2.40 (1.81) 1.18
------- ------ ------- ------
Less distributions from:
Net investment income .............................. (.30) (.29) (.27) (.09)
Net realized gains ................................. -- -- (.67) --
------- ------ ------- ------
Total distributions ................................. (.30) (.29) (.94) (.09)
------- ------ ------- ------
Net asset value, end of year ........................ $ 14.45 $14.45 $ 12.34 $15.09
======= ====== ======= ======
Total return* ....................................... 2.01% 19.81% (12.55)% 8.43%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ..................... $10,708 $9,841 $12,402 $3,726
Ratios to average net assets:
Expenses ........................................... 1.38% 1.43% 1.31% 1.24%**
Expenses, excluding waiver and payments
by affiliate ...................................... 1.38% 1.43% 1.33% 1.36%**
Net investment income .............................. 2.31% 1.94% 1.43% 2.66%**
Portfolio turnover rate ............................. 37.22% 18.76% 22.82% 33.62%
</TABLE>
* Total return is not annualized.
** Annualized.
+ For the period January 2, 1997 (effective date) to October 31, 1997.
++ Based on average weighted shares outstanding effective year ended October 31,
1999.
See notes to financial statements.
32
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000
<TABLE>
<CAPTION>
TEMPLETON FOREIGN SMALLER COMPANIES FUND COUNTRY SHARES VALUE
---------------------------------------- ------- ------ -----
<S> <C> <C> <C>
COMMON STOCKS 82.0%
AIRLINES .5%
*Grupo Aeroportuario del Sereste, B,
ADR .................................. Mexico 38,800 $ 577,150
----------
AUTO COMPONENTS 1.3%
Laird Group PLC ....................... United Kingdom 351,900 1,394,969
----------
BANKS 6.0%
Banco de Andalucia SA ................. Spain 10,000 219,444
Banco de Valencia SA .................. Spain 36,517 264,638
Bank Austria AG, 144A ................. Austria 24,250 1,310,339
Dah Sing Financial Holdings Ltd. ...... Hong Kong 549,600 2,360,734
Erste Bank der Oester Sparkassen AG ... Austria 25,565 1,040,108
Laurentian Bank of Canada ............. Canada 92,100 1,477,411
----------
6,672,674
----------
BEVERAGES .4%
Grupo Continental SA .................. Mexico 405,000 478,188
----------
BUILDING PRODUCTS 3.0%
Caradon PLC ........................... United Kingdom 542,794 1,489,633
Uralita SA ............................ Spain 149,431 782,746
Zehnder Holding AG, Br ................ Switzerland 1,820 1,037,484
----------
3,309,863
----------
CHEMICALS 4.0%
Elementis PLC ......................... United Kingdom 705,000 747,299
Energia e Industrias Aragonesas
Eia SA .............................. Spain 196,000 760,875
McBride PLC ........................... United Kingdom 1,160,160 1,406,653
Sarna Kunststoff Holding AG ........... Switzerland 330 348,701
Schuttersveld NV ...................... Netherlands 42,295 553,872
Yule Catto & Company PLC .............. United Kingdom 286,600 582,622
----------
4,400,022
----------
COMMERCIAL SERVICES & SUPPLIES 5.0%
Arcadis NV ............................ Netherlands 189,602 1,366,009
GTC Transcontinental Group Ltd., B .... Canada 200,000 2,291,626
Observer AB, B ........................ Sweden 49,200 643,234
Samas-Groep NV ........................ Netherlands 49,150 537,409
*Stepstone ASA ......................... Norway 306,434 668,847
----------
5,507,125
----------
COMMUNICATIONS EQUIPMENT .7%
VTech Holdings Ltd. ................... Hong Kong 429,000 805,843
----------
CONSTRUCTION & ENGINEERING 2.3%
Fives-Lille Cie De .................... France 16,530 1,232,955
Leighton Holdings Ltd. ................ Australia 368,490 1,277,535
----------
2,510,490
----------
CONSTRUCTION MATERIALS 1.6%
Gujarat Ambuja Cements Ltd. ........... India 403,350 1,153,167
*Siam City Cement Public Co. Ltd., fgn.. Thailand 284,513 672,715
----------
1,825,882
----------
</TABLE>
33
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
TEMPLETON FOREIGN SMALLER COMPANIES FUND COUNTRY SHARES VALUE
---------------------------------------- ------- ------ -----
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
DIVERSIFIED FINANCIALS 3.0%
Athlon Groep NV .............................................. Netherlands 66,820 $ 722,118
BPI-Socieda de Gestora Participacoes Socias SA ............... Portugal 359,040 1,165,556
*BPI-Socieda de Gestora Participacoes Socias SA, rts., 11/13/00 Portugal 359,040 50,594
Housing Development Finance Corp. Ltd. ....................... India 133,780 1,344,941
----------
3,283,209
----------
ELECTRIC UTILITIES .5%
Guangdong Electric Power Development Co. Ltd., B ............. China 1,520,632 598,574
----------
ELECTRICAL EQUIPMENT 1.0%
Twentsche Kabel Holdings NV .................................. Netherlands 37,711 1,144,307
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS 3.0%
Dae Duck Electronics Co. Ltd. ................................ South Korea 13,560 108,480
Kardex AG, Br. ............................................... Switzerland 5,857 2,377,849
Varitronix International Ltd. ................................ Hong Kong 760,000 872,152
----------
3,358,481
----------
FOOD & DRUG RETAILING 1.0%
North West Company Fund ...................................... Canada 148,750 1,061,596
----------
FOOD PRODUCTS 2.2%
Geest PLC .................................................... United Kingdom 218,700 1,725,961
Perkins Foods PLC ............................................ United Kingdom 729,200 772,951
----------
2,498,912
----------
GAS UTILITIES .7%
Gas Authority of India Ltd., GDR, 144A ....................... India 142,500 748,125
----------
HEALTH CARE EQUIPMENT & SUPPLIES 1.4%
*Medison Co. Ltd. ............................................. South Korea 157,000 585,213
Moulin International Holdings Ltd. ........................... Hong Kong 12,285,000 945,109
----------
1,530,322
----------
HEALTH CARE PROVIDERS & SERVICES 2.6%
Apothekers Cooperatie OPG VA ................................. Netherlands 55,550 1,344,255
Gehe AG ...................................................... Germany 43,980 1,593,613
----------
2,937,868
----------
HOUSEHOLD DURABLES 3.1%
Bang & Olufsen Holding AS, B ................................. Denmark 32,970 1,607,001
Guangdong Kelon Electrical Holdings Ltd., H, 144A ............ China 440,000 81,804
Konka Group Co. Ltd., B ...................................... China 362,736 249,759
Techtronic Industries Co. Ltd. ............................... Hong Kong 6,266,000 1,542,578
----------
3,481,142
----------
INDUSTRIAL CONGLOMERATES 2.9%
Aalberts Industries NV ....................................... Netherlands 71,680 1,670,792
Cookson Group PLC ............................................ United Kingdom 564,000 1,547,831
----------
3,218,623
----------
</TABLE>
34
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
TEMPLETON FOREIGN SMALLER COMPANIES FUND COUNTRY SHARES VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
INSURANCE 1.7%
Mutual Risk Management Ltd. ......................................... Bermuda 101,550 $1,840,594
----------
INTERNET SOFTWARE & SERVICES .1%
*Sohu.com Inc. ....................................................... China 37,500 113,672
----------
MACHINERY 4.4%
Draka Holding NV .................................................... Netherlands 16,600 970,139
METSO OYJ ........................................................... Finland 162,660 1,240,837
Swisslog Holding AG ................................................. Switzerland 2,650 1,459,040
Weir Group PLC ...................................................... United Kingdom 414,100 1,262,720
----------
4,932,736
----------
MARINE 5.9%
Koninklijke Nedlloyd Groep NV ....................................... Netherlands 69,660 1,293,062
*Neptune Orient Lines Ltd. ........................................... Singapore 1,081,000 917,511
Orient Overseas International Ltd. .................................. Hong Kong 4,167,000 1,709,736
Sea Containers Ltd., A .............................................. United Kingdom 63,900 1,373,850
Stolt Nielsen SA, ADR ............................................... Norway 66,800 1,235,800
----------
6,529,959
----------
METALS & MINING 1.0%
Iluka Resources Ltd. ................................................ Australia 520,100 1,086,046
----------
MULTILINE RETAIL 4.0%
Debenhams PLC ....................................................... United Kingdom 374,900 1,160,879
SA des Galeries Lafayette ........................................... France 20,600 3,319,258
----------
4,480,137
----------
OIL & GAS 1.7%
Fletcher Challenge Energy Ltd. ...................................... New Zealand 584,720 1,914,383
----------
PHARMACEUTICALS .9%
Ono Pharmaceutical Co. Ltd. ......................................... Japan 26,000 1,035,809
----------
REAL ESTATE .4%
*Corporacion Geo SA, Series B ........................................ Mexico 404,000 458,434
----------
ROAD & RAIL 1.4%
Stagecoach Holdings PLC ............................................. United Kingdom 1,177,110 1,187,912
*Transportes Azkar SA ................................................ Spain 67,770 413,582
----------
1,601,494
----------
SEMICONDUCTOR EQUIPMENT & PRODUCTS .2%
*ST Assembly Test Services Ltd., ADR.................................. Singapore 11,500 193,344
----------
SPECIALTY RETAIL 8.7%
Best Denki Co. Ltd. ................................................. Japan 137,000 767,873
Bilia AB, A ......................................................... Sweden 115,500 907,747
Danske Traelast AS .................................................. Denmark 16,000 1,649,006
Dickson Concepts International Ltd. ................................. Hong Kong 1,374,000 695,888
Giordano International Ltd. ......................................... Hong Kong 7,834,000 4,595,473
Lex Service PLC ..................................................... United Kingdom 196,000 1,114,219
----------
9,730,206
----------
</TABLE>
35
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
TEMPLETON FOREIGN SMALLER COMPANIES FUND COUNTRY SHARES VALUE
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
TEXTILES & APPAREL 3.6%
Gamma Holding NV ................................................. Netherlands 16,800 $ 595,932
Li & Fung Ltd. ................................................... Hong Kong 1,502,000 2,792,502
*Tefron Ltd. ...................................................... Israel 87,020 636,334
------------
4,024,768
------------
TRADING COMPANIES & DISTRIBUTORS 1.8%
Internatio-Muller NV ............................................. Netherlands 62,500 1,218,427
Samsung Corp. .................................................... South Korea 138,230 765,582
------------
1,984,009
------------
TOTAL COMMON STOCKS (COST $88,382,129) ........................... 91,268,956
------------
PREFERRED STOCKS 3.6%
Hugo Boss AG, pfd. ............................................... Germany 7,210 1,866,973
Telemig Celular Participacoes SA, ADR, pfd........................ Brazil 19,218 1,008,940
Weg SA, pfd. ..................................................... Brazil 1,755,900 1,085,649
------------
TOTAL PREFERRED STOCKS (COST $2,273,437) ......................... 3,961,562
------------
<CAPTION>
PRINCIPAL
AMOUNT**
-----------
<S> <C> <C> <C>
SHORT TERM INVESTMENT (COST $3,649,944) 3.3%
U.S. Treasury Bill, 6.165%, 1/18/01 ............................. United States $3,700,00 3,650,697
------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $94,305,510) 98,881,215
------------
(a)REPURCHASE AGREEMENTS 9.7%
Deutsche Bank AG, 6.58%, 11/01/00 (Maturity Value $5,400,987)
Collateralized by U.S. Treasury Notes and Bonds ................ United States 5,400,000 5,400,000
Lehman Brothers Inc., 6.55%, 11/01/00 (Maturity Value $5,400,983)
Collateralized by U.S. Treasury Notes and Bonds ................ United States 5,400,000 5,400,000
------------
TOTAL REPURCHASE AGREEMENTS (COST $ 10,800,000) ................. 10,800,000
------------
TOTAL INVESTMENTS (COST $105,105,510) 98.6% ..................... 109,681,215
OTHER ASSETS, LESS LIABILITIES 1.4% ............................. 1,582,069
------------
TOTAL NET ASSETS 100.0% ......................................... $111,263,284
============
</TABLE>
* Non-income producing securities.
** Securities denominated in U.S. dollars.
(a)At October 31, 2000, all repurchase agreements held by the fund had
been entered into on the last business day of the month.
See notes to financial statements.
36
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 2000
<TABLE>
<CAPTION>
TEMPLETON TEMPLETON
PACIFIC FOREIGN SMALLER
GROWTH FUND COMPANIES FUND
-----------------------------------------
<S> <C> <C>
Assets:
Investments in securities:
Cost ........................................................................ $ 53,033,172 $ 94,305,510
-----------------------------------------
Value ....................................................................... 49,174,868 98,881,215
Repurchase agreement, at value and cost ....................................... 5,000,000 10,800,000
Cash ......................................................................... 242,586 50,089
Receivables:
Investment securities sold .................................................. -- 168,078
Beneficial shares sold ...................................................... 14,065,858 2,035,491
Dividends and interest ...................................................... 60,613 269,399
-----------------------------------------
Total assets ............................................................. 68,543,925 112,204,272
-----------------------------------------
Liabilities:
Payables:
Investment securities purchased ............................................. -- 81,977
Beneficial shares redeemed .................................................. 181,657 608,341
To affiliates ............................................................... 129,254 185,022
To shareholders ............................................................. 3,139 --
Accrued expenses ............................................................. 46,892 65,648
-----------------------------------------
Total liabilities ........................................................ 360,942 940,988
-----------------------------------------
Net assets, at value .......................................................... $ 68,182,983 $111,263,284
=========================================
Net assets consist of:
Undistributed net investment income .......................................... $ 150,046 $ 1,871,318
Net unrealized appreciation (depreciation) ................................... (3,858,304) 4,575,705
Accumulated net realized gain (loss) ......................................... (5,826,441) 579,553
Beneficial shares ............................................................ 77,717,682 104,236,708
-----------------------------------------
Net assets, at value .......................................................... $ 68,182,983 $111,263,284
=========================================
</TABLE>
See notes to financial statements.
37
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Financial Statements (continued)
STATEMENTS OF ASSETS AND LIABILITIES (CONT.)
OCTOBER 31, 2000
<TABLE>
<CAPTION>
TEMPLETON TEMPLETON
PACIFIC FOREIGN SMALLER
GROWTH FUND COMPANIES FUND
-------------------------------
<S> <C> <C>
CLASS A:
Net assets, at value................................................................. $59,292,057 $ 99,179,404
==============================
Shares outstanding .................................................................. 7,120,298 6,878,063
==============================
Net asset value per share ........................................................... $ 8.33 $ 14.42
==============================
Maximum offering price per share (Net asset value per share / 94.25%) ............... $ 8.84 $ 15.30
==============================
CLASS B:
Net asset, at value ................................................................. $ 481,750
==============
Shares outstanding .................................................................. 33,735
==============
Net asset value and maximum offering price per share* ............................... $ 14.28
==============
CLASS C:
Net assets, at value ................................................................ $ 7,605,400 $ 894,368
==============================
Shares outstanding .................................................................. 926,468 62,417
==============================
Net asset value per share* .......................................................... $ 8.21 $ 14.33
==============================
Maximum offering price per share (Net asset value per share / 99.00%) ............... $ 8.29 $ 14.47
==============================
ADVISOR CLASS:
Net assets, at value ................................................................ $ 1,285,526 $ 10,707,762
==============================
Shares outstanding .................................................................. 152,350 741,277
==============================
Net asset value and maximum offering price per share ................................ $ 8.44 $ 14.45
==============================
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
sales charge.
See notes to financial statements.
38
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Financial Statements (continued)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2000
<TABLE>
<CAPTION>
TEMPLETON TEMPLETON
PACIFIC FOREIGN SMALLER
GROWTH FUND COMPANIES FUND
------------------------------------------
<S> <C> <C>
Investment Income:
Dividends* ................................................................... $ 1,352,849 $ 3,547,920
Interest ..................................................................... 232,591 562,959
------------------------------------------
Total investment income .................................................. 1,585,440 4,110,879
------------------------------------------
Expenses:
Management fees (Note 3) ..................................................... 750,029 1,132,346
Distribution fees (Note 3)
Class A ..................................................................... 124,257 207,809
Class B ..................................................................... -- 4,383
Class C ..................................................................... 107,752 9,199
Transfer agent fees (Note 3) ................................................. 231,300 295,800
Custodian fees ............................................................... 63,500 51,300
Reports to shareholders ...................................................... 38,000 45,600
Registration and filing fees ................................................. 105,500 34,956
Professional fees ............................................................ 13,300 12,300
Trustees' fees and expenses .................................................. 3,700 7,800
------------------------------------------
Other ........................................................................ 1,915 1,383
Total expenses ........................................................... 1,439,253 1,802,876
------------------------------------------
Net investment income ................................................... 146,187 2,308,003
------------------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ................................................................... 766,337 14,598,828
Foreign currency transactions ................................................. 3,861 (50,315)
------------------------------------------
Net realized gain ............................................................ 770,198 14,548,513
Net unrealized depreciation on investments ................................... (4,169,015) (11,824,278)
------------------------------------------
Net realized and unrealized gain (loss) ....................................... (3,398,817) 2,724,235
------------------------------------------
Net increase (decrease) in net assets resulting from operations ............... $ (3,252,630) $ 5,032,238
==========================================
</TABLE>
*Net of foreign taxes of $113,816 and $327,984 for the Pacific Growth Fund and
Foreign Smaller Companies Fund, respectively.
See notes to financial statements.
39
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED OCTOBER 31, 2000 AND 1999
<TABLE>
<CAPTION>
TEMPLETON TEMPLETON
PACIFIC GROWTH FUND FOREIGN SMALLER COMPANIES FUND
-------------------------------------------------------------------------
2000 1999 2000 1999
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income (loss) ...................... $ 146,187 $ (3,065) $ 2,308,003 $ 2,114,539
Net realized gain (loss) from investments and
foreign currency transactions .................... 770,198 104,347 14,548,513 (5,652,897)
Net unrealized appreciation (depreciation)
on investments ................................... (4,169,015) 17,711,991 (11,824,278) 24,688,618
-------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations .................. (3,252,630) 17,813,273 5,032,238 21,150,260
Distributions to shareholders from:
Net investment income:
Class A ......................................... -- (300,300) (1,763,733) (2,246,219)
Class B ......................................... -- -- (4,990) (317)
Class C ......................................... -- (26,778) (9,121) (7,818)
Advisor Class ................................... -- (8,257) (212,793) (198,057)
-------------------------------------------------------------------------
Total distributions to shareholders ............... -- (335,335) (1,990,637) (2,452,411)
Beneficial share transactions (Note 2):
Class A .......................................... (11,738,363) 15,916,675 (6,646,240) (28,393,015)
Class B .......................................... -- -- 297,472 196,595
Class C .......................................... (2,777,205) 3,739,284 285,857 118,168
Advisor Class .................................... (6,385,974) 5,366,059 928,319 (4,079,946)
-------------------------------------------------------------------------
Total beneficial share transactions ............... (20,901,542) 25,022,018 (5,134,592) (32,158,198)
Net increase (decrease) in net assets ........ (24,154,172) 42,499,956 (2,092,991) (13,460,349)
Net assets:
Beginning of year ................................ 92,337,155 49,837,199 113,356,275 126,816,624
-------------------------------------------------------------------------
End of year ...................................... $ 68,182,983 $ 92,337,155 $ 111,263,284 $ 113,356,275
=========================================================================
Undistributed net investment income included in
net assets:
End of year ................................... $ 150,046 $ -- $ 1,871,318 $ 1,293,703
=========================================================================
</TABLE>
See notes to financial statements.
40
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Templeton International Trust (the Trust) is registered under the
Investment Company Act of 1940 as an open-end, diversified investment company,
consisting of two Funds. The Funds and their investment policies are:
Templeton Pacific Growth Fund -- Seeks to achieve long-term capital growth by
investing, under normal market conditions, at least 65% of its total assets in
equity securities that trade on Pacific Rim markets as defined in the Fund's
prospectus, and are issued by companies that have their principal activities in
the Pacific Rim.
Templeton Foreign Smaller Companies Fund -- Seeks to achieve long-term capital
growth by investing, under normal market conditions, at least 65% of its total
assets in equity securities of smaller capitalization companies outside the
United States.
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 a
foreign exchange contract 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 dividends, interest, and foreign withholding taxes, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign currency denominated assets and liabilities other than investments in
securities held at the end of the reporting period.
c. 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.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
41
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONT.)
c. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS: (CONT.)
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.
d. 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 classes of shares offered within each of the Funds are indicated below. The
shares differ by their initial sales load, distribution fees, voting rights on
matters affecting a single class and the exchange privilege of each class.
<TABLE>
<CAPTION>
FUND CLASS
------------------------------------------------------------------------
<S> <C>
Templeton Pacific Growth Fund A, C & Advisor
Templeton Foreign Smaller Companies Fund A, B, C & Advisor
</TABLE>
At October 31, 2000, there were an unlimited number of shares authorized ($.01
par value). Transactions in the Funds' shares were as follows:
<TABLE>
<CAPTION>
TEMPLETON TEMPLETON
CLASS A SHARES: PACIFIC GROWTH FUND FOREIGN SMALLER COMPANIES FUND
----------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended October 31, 2000
Shares sold .................................. 82,695,936 $ 824,492,810 40,601,117 $ 629,952,891
Shares issued on reinvestment of distributions -- -- 103,437 1,558,181
Shares redeemed .............................. (82,745,286) (836,231,173) (40,943,186) (638,157,312)
----------------------------------------------------------------------------
Net decrease ................................. (49,350) $ (11,738,363) (238,632) $ (6,646,240)
============================================================================
Year ended October 31, 1999
Shares sold .................................. 33,071,521 $ 317,841,820 11,706,921 $ 163,733,450
Shares issued on reinvestment of distributions 32,336 261,576 161,671 2,027,136
Shares redeemed .............................. (31,324,839) (302,186,721) (13,997,159) (194,153,601)
----------------------------------------------------------------------------
Net increase (decrease) ...................... 1,779,018 $ 15,916,675 (2,128,567) $ (28,393,015)
============================================================================
</TABLE>
42
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Notes to Financial Statements (continued)
2. BENEFICIAL SHARES (CONT.)
<TABLE>
<CAPTION>
TEMPLETON
FOREIGN SMALLER COMPANIES FUND
----------------------------------
CLASS B SHARES: SHARES AMOUNT
----------------------------------
<S> <C> <C>
Year ended October 31, 2000
Shares sold .................................................................. 24,753 $ 373,853
Shares issued on reinvestment of distributions ............................... 289 4,348
Shares redeemed .............................................................. (5,288) (80,729)
----------------------------------
Net increase ................................................................. 19,754 $ 297,472
==================================
For the period ended October 31, 1999+
Shares sold .................................................................. 15,528 $ 219,412
Shares issued on reinvestment of distributions ............................... 15 218
Shares redeemed .............................................................. (1,562) (23,035)
----------------------------------
Net increase ................................................................. 13,981 $ 196,595
==================================
</TABLE>
+ Effective date of Class B shares was January 1, 1999.
<TABLE>
<CAPTION>
TEMPLETON TEMPLETON
PACIFIC GROWTH FUND FOREIGN SMALLER COMPANIES FUND
----------------------------------------------------------------------
CLASS C SHARES: SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended October 31, 2000
Shares sold ........................................... 3,068,804 $ 31,768,714 469,911 $ 7,278,245
Shares issued on reinvestment of distributions ........ -- -- 537 8,095
Shares redeemed ....................................... (3,317,099) (34,545,919) (451,942) (7,000,483)
----------------------------------------------------------------------
Net increase (decrease) ............................... (248,295) $ (2,777,205) 18,506 $ 285,857
======================================================================
Year ended October 31, 1999
Shares sold ........................................... 1,762,300 $ 17,204,215 82,420 $ 1,070,968
Shares issued on reinvestment of distributions ........ 3,045 24,607 579 7,207
Shares redeemed ....................................... (1,383,677) (13,489,538) (75,620) (960,007)
----------------------------------------------------------------------
Net increase .......................................... 381,668 $ 3,739,284 7,379 $ 118,168
======================================================================
ADVISOR CLASS SHARES:
Year ended October 31, 2000
Shares sold ........................................... 1,466,324 $ 14,980,018 315,759 $ 4,931,871
Shares issued on reinvestment of distributions ........ -- -- 12,803 192,583
Shares redeemed ....................................... (2,017,062) (21,365,992) (268,275) (4,196,135)
----------------------------------------------------------------------
Net increase (decrease) ............................... (550,738) $ (6,385,974) 60,287 $ 928,319
======================================================================
Year ended October 31, 1999
Shares sold ........................................... 1,851,074 $ 17,373,701 478,789 $ 6,810,287
Shares issued on reinvestment of distributions ........ 1,003 8,160 14,987 188,697
Shares redeemed ....................................... (1,333,463) (12,015,802) (817,593) (11,078,930)
----------------------------------------------------------------------
Net increase (decrease) ............................... 518,614 $ 5,366,059 (323,817) $ (4,079,946)
======================================================================
</TABLE>
43
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Notes to Financial Statements (continued)
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Trust are also officers and/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.
The Funds pay an investment management fee to Advisers based on the average
daily net assets of each Fund as follows:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
<S> <C>
1.00% First $100 million
0.90% Over $100 million, up to and including $250 million
0.80% Over $250 million, up to and including $500 million
0.75% Over $500 million
</TABLE>
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 based on the average daily
net assets of each Fund as follows:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
<S> <C>
0.50% First $100 million
0.40% Over $100 million, up to and including $250 million
0.30% Over $250 million, up to and including $500 million
0.25% Over $500 million
</TABLE>
Templeton Pacific Growth Fund reimburses Distributors for costs incurred in
marketing the Fund's shares up to 0.25% and 1.00% per year of the average daily
net assets of Class A and Class C shares, respectively. Templeton Foreign
Smaller Companies Fund reimburses Distributors for costs incurred in marketing
the Fund's shares up to 0.25%, 1.00%, and 1.00% per year of the average daily
net assets of Class A, Class B, and Class C shares, respectively.
Distributors received net commissions on sales of Fund shares and paid
commissions to other dealers for the year ended October 31, 2000 as follows:
<TABLE>
<CAPTION>
TEMPLETON TEMPLETON
PACIFIC FOREIGN SMALLER
GROWTH FUND COMPANIES FUND
<S> <C> <C>
Total commissions received...... $ 303,634 $ 223,803
Paid to other dealers........... $ 317,116 $ 301,852
</TABLE>
4. 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.
44
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Notes to Financial Statements (continued)
4. INCOME TAXES (CONT.)
The cost of securities for income tax purposes is $58,048,285 for Templeton
Pacific Growth Fund and $105,590,135 for Templeton Foreign Smaller Companies
Fund. At October 31, 2000, the net unrealized appreciation (depreciation) based
on the cost of investments for income tax purposes was as follows:
<TABLE>
<CAPTION>
TEMPLETON TEMPLETON
PACIFIC FOREIGN SMALLER
GROWTH FUND COMPANIES FUND
<S> <C> <C>
Unrealized appreciation..................... $ 9,966,224 $ 19,992,991
Unrealized depreciation..................... (13,839,641) (15,901,911)
-----------------------------
Net unrealized appreciation (depreciation).. $ (3,873,417) $ 4,091,080
=============================
</TABLE>
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of passive foreign investment companies, wash sales,
and foreign currency transactions.
At October 31, 2000, the Funds had tax basis capital losses which may be carried
over to offset future capital gains as follows:
<TABLE>
<CAPTION>
TEMPLETON TEMPLETON
PACIFIC FOREIGN SMALLER
GROWTH FUND COMPANIES FUND
<S> <C> <C>
Capital loss carryover expiring in:
2006.................................... $5,811,328 $ --
</TABLE>
5. INVESTMENT TRANSACTION
Purchases and sales of securities (excluding short-term securities) for the year
ended October 31, 2000 were as follows:
<TABLE>
<CAPTION>
TEMPLETON TEMPLETON
PACIFIC FOREIGN SMALLER
GROWTH FUND COMPANIES FUND
<S> <C> <C>
Purchases............. $26,440,469 $39,249,104
Sales................. $52,066,985 $58,439,047
</TABLE>
45
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Independent Auditors' Report
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
In our opinion, the accompanying statements of assets and liabilities, including
the statements of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the funds included in this
report constituting the Franklin Templeton International Trust (hereafter
referred to as the "Trust") at October 31, 2000, the results of their operations
for the year then ended, the changes in 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 accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's 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 auditing standards
generally accepted in the United States of America, 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, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
November 21, 2000
46
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
Tax Designation
TEMPLETON PACIFIC GROWTH FUND
At October 31, 2000, more than 50% of the Templeton Pacific Growth Fund's total
assets were invested in securities of foreign issuers. In most instances,
foreign taxes were withheld from dividends paid to the fund on these
investments. The Fund intends to make an election under Section 853 of the
Internal Revenue Code. This election will allow shareholders to treat their
proportionate share of foreign taxes paid by the Fund as having been paid
directly by them.
The following table provides a breakdown by country of foreign source income and
foreign taxes paid, as designated by the Fund to Class A, Class C, and Advisor
Class shareholders of record on December 14, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS C ADVISOR CLASS
-------------------------------------------------------------------------------------------------
FOREIGN FOREIGN FOREIGN FOREIGN FOREIGN FOREIGN
TAX PAID SOURCE INCOME TAX PAID SOURCE INCOME TAX PAID SOURCE INCOME
COUNTRY PER SHARE PER SHARE PER SHARE PER SHARE PER SHARE PER SHARE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Australia....................... $0.0018 $0.0098 $0.0018 $0.0000 $0.0018 $0.0141
China........................... 0.0000 0.0014 0.0000 0.0000 0.0000 0.0021
Hong Kong....................... 0.0000 0.0189 0.0000 0.0000 0.0000 0.0271
India........................... 0.0000 0.0024 0.0000 0.0000 0.0000 0.0034
Indonesia....................... 0.0015 0.0019 0.0015 0.0000 0.0015 0.0028
Japan........................... 0.0043 0.0057 0.0043 0.0000 0.0043 0.0083
Malaysia........................ 0.0014 0.0025 0.0014 0.0000 0.0014 0.0037
New Zealand..................... 0.0022 0.0029 0.0022 0.0000 0.0022 0.0043
Singapore....................... 0.0080 0.0065 0.0080 0.0000 0.0080 0.0094
South Korea..................... 0.0008 0.0009 0.0008 0.0000 0.0008 0.0013
Thailand........................ 0.0011 0.0022 0.0011 0.0000 0.0011 0.0032
-------------------------------------------------------------------------------------------------
TOTAL............................ $0.0211 $0.0551 $0.0211 $0.0000 $0.0211 $0.0797
=================================================================================================
</TABLE>
In January 2001, shareholders will receive Form 1099-DIV which will include
their share of taxes withheld and foreign source income distributed during the
calendar year 2000. Shareholders are advised to check with their tax advisors
for information on the treatment of these amounts on their individual income tax
returns.
47
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
TAX DESIGNATION (continued)
TEMPLETON FOREIGN SMALLER COMPANIES FUND
Under Section 852(b)(3)(C) of the Internal Revenue Code, the fund hereby
designates $600,113 as a capital gain dividend for the fiscal year ended October
31, 2000.
At October 31, 2000, more than 50% of the Templeton Foreign Smaller Companies
Fund's total assets were invested in securities of foreign issuers. In most
instances, foreign taxes were withheld from dividends paid to the fund on these
investments. The Fund intends to make an election under Section 853 of the
Internal Revenue Code. This election will allow shareholders to treat their
proportionate share of foreign taxes paid by the Fund as having been paid
directly by them.
The following table provides a breakdown by country of foreign source income and
foreign taxes paid, as designated by the Fund to Class A, Class B, Class C, and
Advisor Class shareholders of record on December 14, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C ADVISOR CLASS
-----------------------------------------------------------------------------------------------------------
FOREIGN FOREIGN FOREIGN FOREIGN FOREIGN FOREIGN FOREIGN FOREIGN
TAX PAID SOURCE INCOME TAX PAID SOURCE INCOME TAX PAID SOURCE INCOME TAX PAID SOURCE INCOME
COUNTRY PER SHARE PER SHARE PER SHARE PER SHARE PER SHARE PER SHARE PER SHARE PER SHARE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Australia............... $0.0016 $0.0167 $0.0016 $0.0126 $0.0016 $0.0118 $0.0016 $0.0182
Austria................. 0.0012 0.0048 0.0012 0.0036 0.0012 0.0034 0.0012 0.0053
Bermuda................. 0.0000 0.0234 0.0000 0.0176 0.0000 0.0166 0.0000 0.0255
Brazil.................. 0.0057 0.0223 0.0057 0.0168 0.0057 0.0158 0.0057 0.0243
Canada.................. 0.0042 0.0167 0.0042 0.0126 0.0042 0.0118 0.0042 0.0182
China................... 0.0000 0.0078 0.0000 0.0059 0.0000 0.0055 0.0000 0.0085
Denmark................. 0.0013 0.0050 0.0013 0.0038 0.0013 0.0036 0.0013 0.0055
France.................. 0.0008 0.0041 0.0008 0.0031 0.0008 0.0029 0.0008 0.0044
Germany................. 0.0005 0.0032 0.0005 0.0024 0.0005 0.0023 0.0005 0.0035
Hong Kong............... 0.0000 0.0536 0.0000 0.0403 0.0000 0.0380 0.0000 0.0583
India................... 0.0000 0.0150 0.0000 0.0113 0.0000 0.0106 0.0000 0.0163
Indonesia............... 0.0005 0.0018 0.0005 0.0013 0.0005 0.0013 0.0005 0.0019
Italy................... 0.0012 0.0048 0.0012 0.0036 0.0012 0.0034 0.0012 0.0052
Japan................... 0.0008 0.0030 0.0008 0.0023 0.0008 0.0021 0.0008 0.0033
Luxembourg.............. 0.0002 0.0013 0.0002 0.0010 0.0002 0.0009 0.0002 0.0014
Mexico.................. 0.0001 0.0006 0.0001 0.0004 0.0001 0.0004 0.0001 0.0006
Netherlands............. 0.0091 0.0357 0.0091 0.0269 0.0091 0.0253 0.0091 0.0389
Norway.................. 0.0008 0.0044 0.0008 0.0033 0.0008 0.0031 0.0008 0.0048
Portugal................ 0.0010 0.0030 0.0010 0.0022 0.0010 0.0021 0.0010 0.0032
South Africa............ 0.0000 0.0045 0.0000 0.0034 0.0000 0.0032 0.0000 0.0049
South Korea............. 0.0003 0.0010 0.0003 0.0007 0.0003 0.0007 0.0003 0.0011
Spain................... 0.0028 0.0112 0.0028 0.0085 0.0028 0.0080 0.0028 0.0122
Sweden.................. 0.0011 0.0042 0.0011 0.0031 0.0011 0.0030 0.0011 0.0045
Switzerland............. 0.0023 0.0090 0.0023 0.0068 0.0023 0.0064 0.0023 0.0098
Thailand................ 0.0003 0.0018 0.0003 0.0014 0.0003 0.0013 0.0003 0.0020
United Kingdom.......... 0.0111 0.0738 0.0111 0.0556 0.0111 0.0521 0.0111 0.0802
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TOTAL $0.0469 $0.3327 $0.0469 $0.2505 $0.0469 $0.2356 $0.0469 $0.3620
===========================================================================================================
</TABLE>
48
<PAGE>
FRANKLIN TEMPLETON INTERNATIONAL TRUST
TAX DESIGNATION (continued)
TEMPLETON FOREIGN SMALLER COMPANIES FUND (cont.)
In January 2001, shareholders will receive Form 1099-DIV which will include
their share of taxes withheld and foreign source income distributed during the
calendar year 2000. Shareholders are advised to check with their tax advisors
for information on the treatment of these amounts on their individual income tax
returns.
49
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