<PAGE>
TEMPLETON GREATER EUROPEAN FUND
YOUR FUND'S OBJECTIVE:
The Templeton Greater European Fund seeks to achieve long-term capital
appreciation by investing primarily in equity securities of companies in Greater
Europe (Western, Central and Eastern Europe and Russia).
May 15, 1996
Dear Shareholder:
We are pleased to bring you the first annual report of the Templeton Greater
European Fund, which covers the period from its inception on May 8, 1995,
through March 31, 1996. The Fund's Class I shares, as discussed in the
Performance Summary on page 5, provided a total return of 3.90% for this
abbreviated fiscal year.
As you know, the Fund's objective is to achieve long-term capital appreciation
by investing primarily in stocks of companies in the Greater European region,
which consists of approximately 20 countries. This broad, regional mandate
allows us to invest in the more mature and stable, core European countries such
as France, Germany, and the United Kingdom, while also seeking opportunities in
the newly emerging markets of Central and Eastern Europe, including the Czech
Republic, Hungary, Poland, and Russia.
1
<PAGE>
================================================================================
TEMPLETON GREATER EUROPEAN FUND
Geographic Distribution on 3/31/96
Based on Total Net Assets
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
France 18.2%
Germany 10.0%
United Kingdom 9.9%
Hungary 7.1%
Spain 6.1%
Poland 4.4%
Denmark 3.6%
Other Countries 9.9%
Short-Term Obligations &
Other Net Assets 30.8%
</TABLE>
Since our last report, we have utilized our long-term, value-oriented investment
approach as we purchased bargain-priced stocks for the Fund in countries such as
Hungary, Spain, Poland, Ireland, Sweden, Switzerland, and the Netherlands. This
reduced our cash position significantly, from 56.0% of total net assets on
September 30, 1995, to 30.8% on March 31, 1996. At the close of the reporting
period, the Fund was invested in 14 countries, with our largest geographic
concentration of securities in France, Germany, and the United Kingdom.
Throughout the reporting period, consumer spending and confidence in these core
countries remained relatively low due to their uncertain economic prospects.
Although record-low inflation levels resulted in lower interest rates in these
countries, economic growth was depressed, in part by the spending restrictions
required for membership in the European Monetary Union. This came at a time when
growth was already faltering and unemployment was rising. Nevertheless, the
German stock index (DAX), responding to possibilities of further interest rate
cuts and a more competitive local currency, performed well for the first three
months of 1996.
During this same time, Eastern European equity markets appreciated significantly
as investors re-focused their attention on emerging markets. This benefited the
Fund's three largest holdings -- Gedeon Richter Ltd., Magyar Olay (MOL), and
Debica SA -- all of which were added to the portfolio earlier in the reporting
period. Gedeon Richter, a Hungarian multi-industry company that manufactures
pharmaceuticals, has low production costs and a growing market presence in the
Commonwealth of
2
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Templeton Greater European Fund
Top 10 Holdings on 3/31/96
Based on Total Net Assets
% of Total
Company, Industry, Country Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Gedeon Richter Ltd., GDR 144A
Multi-Industry, Hungary 4.4%
- --------------------------------------------------------------------------------
MOL Magyar Olay - Es Gazipari RT, GDS 144A
Energy Sources, Hungary 2.7%
- --------------------------------------------------------------------------------
Debica SA, A
Automobiles, Poland 2.5%
- --------------------------------------------------------------------------------
W.H. Smith Group
Merchandising, United Kingdom 2.3%
- --------------------------------------------------------------------------------
Alcatel Cable SA
Telecommunications, France 2.2%
- --------------------------------------------------------------------------------
Bank of Ireland
Banking, Ireland 2.2%
- --------------------------------------------------------------------------------
Ecco SA
Business & Public Services, France 2.2%
- --------------------------------------------------------------------------------
Iberdrola SA
Utilities -- Electrical & Gas, Spain 2.1%
- --------------------------------------------------------------------------------
BICC
Electronic Components & Instruments,
United Kingdom 2.1%
- --------------------------------------------------------------------------------
Cristaleria Espanola SA
Building Materials & Components, Spain 2.1%
- --------------------------------------------------------------------------------
For a complete list of portfolio holdings, please see page 11 of this report.
</TABLE>
Independent States (formerly the Soviet Union). It is also one of the few U.S.
Federal Drug Administration-approved suppliers of the active ingredient in
Tagamet(R), an over-the-counter antacid product sold in the United States. MOL,
Hungary's major oil and gas company, has the potential to benefit from raising
its domestic gas prices to international levels. And Debica, Poland's leading
tire producer, may be well-positioned for future growth following the
acquisition of a majority of its stock by Goodyear Tire & Rubber Co.
Despite the recent surge in Eastern European stock prices, we believe the
region's potential long-term outlook remains strong because of its generally
declining levels of inflation, strong overall real GDP growth, and its
competitive local currencies and labor costs. This is evidenced by the recent
record levels of foreign direct investment (FDI) into the region. For example,
1995 FDI in Eastern Europe nearly doubled to $14 billion, an amount that could,
according to some experts, be sustained for the remainder of the decade.
Looking forward, we will continue to implement our rigorous investment
techniques as we search for bargain-priced stocks across all countries and
industries in the Greater European region. We believe that the Fund has the
potential to benefit from lower European interest rates in the near term,
greater economic unity over the long term, and the continuing transition of
emerging economies into developed markets.
Of course, investing in foreign securities involves special risks, such as
market and currency volatility and adverse economic, social and political
developments in the countries where investments are made. Developing markets
involve similar but heightened risks, in addition to risks
3
<PAGE>
associated with the relatively small size and lesser liquidity of these markets.
For example, Russia's system of share registration and custody creates certain
risks of loss that are not normally associated with other markets. These risks
are discussed in the Fund's prospectus.
This discussion reflects the strategies we employed for the fund during the
fiscal period, and includes our opinions as of the close of the period. Since
economic and market conditions are constantly changing, our strategies and our
evaluations, conclusions and decisions regarding portfolio holdings may change
as new circumstances arise. Although past performance of a specific investment
or sector cannot guarantee future performance, such information can be useful in
analyzing securities we purchase or sell for the Fund.
We thank you for your participation in the Fund and look forward to serving your
investment needs in the years to come.
Sincerely,
/s/ Mark Holowesko
Mark Holowesko, CFA
President
Templeton Global Investment Trust
/s/ Dorian B. Foyil
Dorian B. Foyil
Portfolio Manager
Templeton Greater European Fund
4
<PAGE>
Performance Summary
Class I
The Templeton Greater European Fund Class I shares reported a cumulative total
return of 3.90% since its inception on May 8, 1995. Cumulative total return
represents the change in value of an investment and does not include the maximum
5.75% initial sales charge.
The price of the Fund's Class I shares, as measured by net asset value,
increased from $10.00 on May 8, 1995 to $10.39 on March 31, 1996. During the
abbreviated fiscal year, holders of Class I shares received no distributions.
The Fund intends to pay a dividend at least annually, representing substantially
all of its net investment income and any net realized capital gains. The Fund
expects to pay its first distribution in May 1996. Of course, past performance
does not guarantee future results, and distributions will vary depending on
income earned by the Fund, as well as any profits realized from the sale of
securities in the portfolio.
The graph on the following page compares the Fund's performance since May 8,
1995, with that of the unmanaged Morgan Stanley Capital International (MSCI)
Europe 14 Index, a market capitalization-weighted index consisting of large,
medium and small capitalization companies from 14 European countries. Please
remember that the Fund's performance differs from that of the index because the
index does not contain cash (the Fund generally carries a certain percentage of
cash at any given time) and includes no sales charges or management expenses.
Of course, one cannot invest directly in an index.
5
<PAGE>
Periods ended 3/31/96
[GRAPH APPEARS HERE COMPARISON BETWEEN TEMPLETON GREATER EUROPEAN FUND CLASS I
AND THE MSCI EUROPE 14 INDEX **]
<TABLE>
<CAPTION>
<S> <C> <C>
Templeton Greater European Fund $10,000 $ 9,793
MSCI Europe 14 Index $10,000 $11,327
</TABLE>
<TABLE>
<CAPTION>
Templeton Greater European Fund
Class I
Since
Inception
Six-Month (5/8/95)
<S> <C> <C>
Cumulative
Total Return/1/ 5.16% 3.90%
Aggregate
Total Return/2/ 0.86% 2.07%
</TABLE>
1. Cumulative total return represents the change in value of an investment over
the specified periods and does not reflect the maximum 5.75% initial sales
change.
2. Aggregate total return represents the change in value of an investment over
the specified periods and includes the maximum 5.75% initial sales change.
Since the Fund has existed for less than one year, average annual total returns
are not provided.
All total return calculations reflect the deduction of a proportional share of
Fund expenses on an annual basis. The Fund's Investment Manager and Business
Manager have agreed in advance to reduce their respective fees and to make
certain payments to reduce expenses, which increases total return to
shareholders. If the Managers had not taken this action, the Fund's total
return would have been lower. The fee waiver may be discontinued at any time
upon notice to the Fund's Board of Trustees.
Investment return and principal value will fluctuate with market conditions,
currencies, and the economic and political climate where investments are made,
so that your shares, when redeemed, may be worth more or less than their
original cost. Past performance is not predictive of future results.
6
<PAGE>
Performance Summary
Class II
The Templeton Greater European Fund Class II shares reported a cumulative total
return of 3.20% since its inception on May 8, 1995. Cumulative total return
represents the change in value of an investment and does not include sales
charges.
The price of the Fund's Class II shares, as measured by net asset value,
increased from $10.00 on May 8, 1995 to $10.32 on March 31, 1996. During the
abbreviated fiscal year, holders of Class II shares received no distributions.
The Fund intends to pay a dividend at least annually, representing substantially
all of its net investment income and any net realized capital gains. The Fund
expects to pay its first distribution in May 1996. Of course, past performance
does not guarantee future results, and distributions will vary depending on
income earned by the Fund, as well as any profits realized from the sale of
securities in the portfolio.
The graph on the following page compares the Fund's performance since May 8,
1995, with that of the unmanaged Morgan Stanley Capital International (MSCI)
Europe 14 Index, a market capitalization-weighted index consisting of large,
medium and small capitalization companies from 14 European countries. Please
remember that the Fund's performance differs from that of the index because the
index does not contain cash (the Fund generally carries a certain percentage of
cash at any given time) and includes no sales charges or management expenses. Of
course, one cannot invest directly in an index.
7
<PAGE>
[GRAPH APPEARS HERE SHOWING COMPARISON BETWEN TEMPLETON GREATER EUROPEAN FUND
CLASS II AND THE MSCI EUROPE 14 INDEX **]
5/95 3/96
Templeton Greater European Fund - Class II $10,000 $10,119
MSCC Europe 14 Index $10,000 $11,327
Templeton Greater European Fund
Class II
Periods ended 3/31/96
<TABLE>
<CAPTION>
Since
Inception
Six-Month (5/8/95)
<S> <C> <C>
Cumulative
Total Return/1/ 4.67% 3.20%
Aggregate
Total Return/2/ 2.62% 1.19%
</TABLE>
1. Cumulative total return represents the change in value of an investment over
the specified periods and does not reflect the 1.0% initial sales charge or the
1.0% contingent deferred sales charge (CDSC), applicable to shares redeemed
within the first 18 months of investment.
2. Aggregate total return represents the change in value of an investment over
the specified periods and includes the 1.0% initial sales charge or the 1.0%
contingent deferred sales charge (CDSC), applicable to shares redeemed within
the first 18 months of investment. Since the Fund has existed for less than one
year, average annual total returns are not provided.
All total return calculations reflect the deduction of a proportional share of
Fund expenses on an annual basis. The Fund's Investment Manager and Business
Manager have agreed in advance to reduce their respective fees and to make
certain payments to reduce expenses, which increases total return to
shareholders. If the Managers had not taken this action, the Fund's total
return would have been lower. The fee waiver may be discontinued at any time
upon notice to the Fund's Board of Trustees.
Investment return and principal value will fluctuate with market conditions,
currencies, and the economic and political climate where investments are made,
so that your shares, when redeemed, may be worth more or less than their
original cost. Past performance is not predictive of future results.
8
<PAGE>
Templeton Greater European Fund
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE--CLASS I (For a share outstanding throughout
the period)
<TABLE>
<CAPTION>
MAY 8, 1995
(COMMENCEMENT OF
OPERATIONS) TO
MARCH 31, 1996
----------------
<S> <C>
Net asset value, begin-
ning of period $10.00
------
Income from investment
operations:
Net investment income .08
Net realized and
unrealized gain .31
------
Total from investment
operations .39
------
Net asset value, end of
period $10.39
======
TOTAL RETURN* 3.90%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of pe-
riod (000) $4,308
Ratio of expenses to av-
erage net assets 3.56%**
Ratio of expenses, net
of reimbursement, to
average net assets 1.85%**
Ratio of net investment
income to average net
assets 1.39%**
Portfolio turnover rate 9.86%
Average commission rate
paid (per share) $.0205
</TABLE>
*TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED FOR PERIODS OF
LESS THAN ONE YEAR.
**ANNUALIZED.
9
<PAGE>
Templeton Greater European Fund
Financial Highlights (cont.)
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE--CLASS II
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
MAY 8, 1995
(COMMENCEMENT OF
OPERATIONS) TO
MARCH 31, 1996
----------------
<S> <C>
Net asset value, begin-
ning of period $10.00
------
Income from investment
operations:
Net investment income .07
Net realized and
unrealized gain .25
------
Total from investment
operations .32
------
Net asset value, end of
period $10.32
======
TOTAL RETURN* 3.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of pe-
riod (000) $1,431
Ratio of expenses to av-
erage net assets 4.21%**
Ratio of expenses, net
of reimbursement, to
average net assets 2.50%**
Ratio of net investment
income to average net
assets 1.06%**
Portfolio turnover rate 9.86%
Average commission rate
paid (per share) $.0205
</TABLE>
*TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS OR THE CONTINGENT DEFERRED
SALES CHARGE. NOT ANNUALIZED FOR PERIODS OF LESS THAN ONE YEAR.
**ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
Templeton Greater European Fund
Investment Portfolio, March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS: 66.2%
- -------------------------------------------------------------------------------
Automobiles: 8.3%
Debica SA, A Pol. 5,800 $ 141,206
Peugeot SA Fr. 760 115,867
Volkswagen AG Ger. 322 112,531
Volvo AB, B Swe. 4,542 105,739
----------
475,343
- -------------------------------------------------------------------------------
Banking: 7.7%
Bank of Ireland Irl. 18,900 124,908
Bank Slaski SA W Katowicach Pol. 1,560 110,322
Deutsche Bank AG Ger. 2,089 105,023
Unidanmark AS, A Den. 2,225 100,711
----------
440,964
- -------------------------------------------------------------------------------
Building Materials & Components: 4.0%
Anglian Group PLC U.K. 53,400 110,031
*Cristaleria Espanola SA Sp. 1,830 120,923
----------
230,954
- -------------------------------------------------------------------------------
Business & Public Services: 4.1%
Ecco SA Fr. 540 124,455
Lex Service PLC U.K. 22,600 109,347
----------
233,802
- -------------------------------------------------------------------------------
Chemicals: 2.0%
Rhone-Poulenc SA, A Fr. 4,418 113,925
- -------------------------------------------------------------------------------
Construction & Housing: 3.2%
Dragados y Construcciones SA Sp. 7,800 105,911
European Techniki Gr. 14,200 78,420
----------
184,331
- -------------------------------------------------------------------------------
Electronic Components & Instruments: 2.1%
BICC U.K. 23,710 121,232
- -------------------------------------------------------------------------------
Energy Sources: 6.5%
*MOL Magyar Olay-Es Gazipari RT, GDS
144A Hun. 14,547 154,926
Societe Elf Aquitane SA Fr. 1,520 103,043
Total SA, B Fr. 1,680 113,390
----------
371,359
- -------------------------------------------------------------------------------
Insurance: 1.3%
Muenchener Rueckversicherungs-
Gesellschaft Ger. 41 72,198
- -------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Templeton Greater European Fund
Investment Portfolio, March 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS: (CONT.)
- -------------------------------------------------------------------------------
Merchandising: 3.3%
*Interdiscount Holding AG Swtz. 2,430 $ 51,589
Macintosh NV Neth. 240 5,942
W.H. Smith Group U.K. 19,000 129,484
----------
187,015
- -------------------------------------------------------------------------------
Metals & Mining: 6.7%
*Boehler Uddeholm AG Aust. 488 37,910
Eramet SA Fr. 1,580 114,795
*Pechiney SA, A Fr. 2,723 113,785
*Vallourec Fr. 2,500 118,660
----------
385,150
- -------------------------------------------------------------------------------
Multi-Industry: 6.1%
Amer Group Ltd., A Fin. 6,307 100,715
*Gedeon Richter Ltd., GDR 144A Hun. 7,050 252,038
----------
352,753
- -------------------------------------------------------------------------------
Telecommunications: 4.1%
Alcatel Cable SA Fr. 1,420 127,722
Tele Danmark AS, B Den. 2,050 106,816
----------
234,538
- -------------------------------------------------------------------------------
Textiles & Apparel: 1.7%
Dawson International PLC U.K. 72,800 98,336
- -------------------------------------------------------------------------------
Utilities--Electrical & Gas: 3.6%
Iberdrola SA Sp. 13,200 121,794
VEBA AG Ger. 1,794 87,215
----------
209,009
- -------------------------------------------------------------------------------
Wholesale & International Trade: 1.5%
Computer 2000 AG Ger. 310 85,662
----------
TOTAL COMMON STOCKS (cost $3,545,958) 3,796,571
- -------------------------------------------------------------------------------
PREFERRED STOCKS: 3.0%
- -------------------------------------------------------------------------------
Baumax AG, pfd. Aust. 1,860 62,464
Krones AG Herman Kronseder Maschinen
Fabrik, pfd. Ger. 274 111,344
----------
TOTAL PREFERRED STOCKS (cost $196,448) 173,808
- -------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
Templeton Greater European Fund
Investment Portfolio, March 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
INDUSTRY ISSUE COUNTRY LOCAL CURRENCY** VALUE
<C> <S> <C> <C> <C>
- -----------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 30.1% (cost
$1,725,768)
- -----------------------------------------------------------------------------
U.S. Treasury Bills, 4.59% to
5.08%, with
maturities to 6/06/96 U.S. 1,738,000 $1,725,669
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS: 99.3% (cost
$5,468,174) 5,696,048
OTHER ASSETS, LESS LIABILITIES: 0.7% 42,227
----------
TOTAL NET ASSETS: 100.0% $5,738,275
==========
</TABLE>
*NON-INCOME PRODUCING.
**CURRENCY OF COUNTRY INDICATED.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
Templeton Greater European Fund
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996
<TABLE>
<S> <C>
Assets:
Investments in
securities, at value
(identified cost
$5,468,174) $5,696,048
Cash 734
Receivables:
Investment
securities sold 210,361
Fund shares sold 22,814
Dividends 6,042
Unamortized organiza-
tion costs 54,324
----------
Total assets 5,990,323
----------
Liabilities:
Payables:
Investment
securities
purchased 205,245
Fund shares
redeemed 1,626
Accrued expenses 45,177
----------
Total liabilities 252,048
----------
Net assets, at value $5,738,275
==========
Net assets consist of:
Undistributed net in-
vestment income $ 42,720
Net unrealized appre-
ciation 227,874
Accumulated net real-
ized loss (106,081)
Net capital paid in
on shares of
beneficial interest 5,573,762
----------
Net assets, at value $5,738,275
==========
Class I
Net asset value per
share
($4,307,627 / 414,655
shares outstanding) $ 10.39
==========
Maximum offering
price
($10.39 / 94.25%) $ 11.02
==========
Class II
Net asset value per
share
($1,430,648 / 138,616
shares outstanding) $ 10.32
==========
Maximum offering
price
($10.32 / 99.00%) $ 10.42
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
for the period May 8, 1995 (commencement of operations) to March 31, 1996
<TABLE>
<S> <C> <C>
Investment income: (net of $3,525 foreign taxes withheld)
Dividends $ 20,975
Interest 89,093
---------
Total income $110,068
Expenses:
Management fees (Note 3) 24,741
Administrative fees (Note 3) 4,949
Distribution fees (Note 3)
Class I 8,157
Class II 9,132
Transfer agent fees (Note 3) 5,025
Custodian fees 850
Reports to shareholders 31,400
Audit fees 9,000
Legal fees (Note 3) 9,700
Registration and filing fees 6,665
Trustees' fees and expenses 1,700
Amortization of organization costs 11,656
Other 871
---------
Total expenses 123,846
Less expenses reimbursed (Note 3) (56,498)
---------
Total expenses less reimbursement 67,348
--------
Net investment income 42,720
Realized and unrealized gain (loss):
Net realized loss on:
Investments (68,696)
Foreign currency transactions (37,385)
---------
(106,081)
Net unrealized appreciation on investments 227,874
---------
Net realized and unrealized gain 121,793
--------
Net increase in net assets resulting from operations $164,513
========
</TABLE>
14
<PAGE>
Templeton Greater European Fund
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MAY 8, 1995
(COMMENCEMENT OF
OPERATIONS) TO
MARCH 31, 1996
----------------
<S> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 42,720
Net realized loss on investment and foreign currency
transactions (106,081)
Net unrealized appreciation 227,874
----------
Net increase in net assets resulting from operations 164,513
Fund share transactions (Note 2)
Class I 4,185,581
Class II 1,388,181
----------
Net increase in net assets 5,738,275
Net assets:
Beginning of period --
----------
End of period $5,738,275
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
Templeton Greater European Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton Greater European Fund (the Fund) is a separate series of Templeton
Global Investment Trust (the Trust), a Delaware business trust, which is an
open-end diversified management investment company registered under the Invest-
ment Company Act of 1940. The Fund seeks to achieve long-term capital apprecia-
tion by investing primarily in equity securities of companies in Greater Europe
(Western, Central and Eastern Europe and Russia). The following summarizes the
Fund's significant accounting policies.
a. Securities Valuations:
Securities listed or traded on a recognized national or foreign exchange or
NASDAQ are valued at the last reported sales prices on the principal exchange
on which the securities are traded. Over-the-counter securities and listed se-
curities for which no sale is reported are valued at the mean between the last
current bid and asked prices. Securities for which market quotations are not
readily available are valued at fair value as determined by management and ap-
proved in good faith by the Board of Trustees.
b. Foreign Currency Transactions:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign curren-
cies are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customar-
ily enters into a foreign exchange contract to minimize foreign exchange risk
between the trade date and the settlement date of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of for-
eign currencies, currency gains or losses realized between the trade and set-
tlement dates on securities transactions, the differences between the amounts
of dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at the end
of the fiscal period, resulting from changes in the exchange rates.
c. Income Taxes:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to its shareholders. Therefore, no provision has been made for
income taxes.
d. Unamortized Organization Costs:
Organization costs are being amortized on a straight line basis over five
years.
e. Security Transactions, Investment Income, Distributions, and Expenses:
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Certain dividend income on foreign securi-
ties is recorded as soon as information is available to the Fund. Interest in-
come and estimated expenses are accrued daily. Distributions to shareholders,
which are determined in accordance with income tax regulations, are recorded on
the ex-dividend date.
f. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
16
<PAGE>
Templeton Greater European Fund
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
2. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Fund offers two classes of shares: Class I shares and Class II shares.
Shares of each class are identical except for their initial sales load, a con-
tingent deferred sales charge on Class II shares, distribution fees, and voting
rights on matters affecting a single class. At March 31, 1996, there was an un-
limited number of shares of beneficial interest authorized ($.01 par value).
Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
CLASS I
---------------------
FOR THE PERIOD
MAY 8, 1995
(COMMENCEMENT OF
OPERATIONS) THROUGH
MARCH 31, 1996
---------------------
SHARES AMOUNT
--------- -----------
<S> <C> <C>
Shares sold 507,085 $ 5,118,526
Shares redeemed (92,430) (932,945)
-------- -----------
Net increase 414,655 $ 4,185,581
======== ===========
<CAPTION>
CLASS II
---------------------
FOR THE PERIOD
MAY 8, 1995
(COMMENCEMENT OF
OPERATIONS) THROUGH
MARCH 31, 1996
---------------------
SHARES AMOUNT
--------- -----------
<S> <C> <C>
Shares sold 139,004 $ 1,392,136
Shares redeemed (388) (3,955)
-------- -----------
Net increase 138,616 $ 1,388,181
======== ===========
</TABLE>
Templeton Global Investors, Inc., the Fund's administrative manager, is the
record owner of 49,955 Class I shares and 49,955 Class II shares as of March
31, 1996.
17
<PAGE>
Templeton Greater European Fund
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also directors or officers of Templeton Global
Advisors Ltd. (TGAL), Templeton Global Investors, Inc. (TGII), Franklin Temple-
ton Distributors, Inc. (FTD), and Franklin Templeton Investor Services, Inc.
(FTIS), the Fund's investment manager, administrative manager, principal under-
writer, and transfer agent, respectively.
The Fund pays monthly an investment management fee to TGAL equal, on an annual
basis, to 0.75% of the Fund's average daily net assets. The Fund pays TGII
monthly its allocated share of an administrative fee of 0.15% per annum of the
first $200 million of the Trust's aggregate average daily net assets, 0.135% of
the next $500 million, 0.10% of the next $500 million, and 0.075% per annum of
average net assets in excess of $1.2 billion. TGAL and TGII have voluntarily
agreed to reduce their respective fees to the extent necessary to limit total
expenses to an annual rate of 1.85% and 2.50% of average net assets of Class I
and II shares, respectively, through December 31, 1996. The amount of the reim-
bursement for the period ended March 31, 1996 is set forth in the Statement of
Operations. For the period ended March 31, 1996, FTD paid net commissions of
$1,130 from the sale of the Fund's shares and FTIS received fees of $5,025.
Under the distribution plans for Class I and Class II shares, the Fund reim-
burses FTD quarterly for FTD's costs and expenses in connection with any activ-
ity that is primarily intended to result in a sale of Fund shares, subject to a
maximum of 0.35% and 1.00% per annum of the average daily net assets of Class I
and Class II shares, respectively. Under the Class I distribution plan, costs
and expenses exceeding the maximum may be reimbursed in subsequent periods. At
March 31, 1996, unreimbursed expenses amounted to $81,058. Class II shares re-
deemed within 18 months are subject to a contingent deferred sales charge. Con-
tingent deferred sales charges of $14 were paid to FTD for the period ended
March 31, 1996.
An officer of the Fund is a partner of Dechert Price & Rhoads, legal counsel
for the Fund, which firm received fees of $9,700 for the period ended March 31,
1996.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the pe-
riod ended March 31, 1996 aggregated $4,008,589 and $197,657, respectively. The
cost of securities for federal income tax purposes is the same as that shown in
the Investment Portfolio. Realized gains and losses are reported on an identi-
fied cost basis.
At March 31, 1996, the aggregate gross unrealized appreciation and depreciation
of portfolio securities, based on cost for federal income tax purposes, was as
follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 468,462
Unrealized depreciation (240,588)
---------
Net unrealized appreciation $ 227,874
=========
</TABLE>
18
<PAGE>
Templeton Greater European Fund
Independent Auditor's Report
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
Templeton Greater European Fund
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of Templeton Greater European Fund as of March 31,
1996, and the related statement of operations, the statement of changes in net
assets and the financial highlights for the period from May 8, 1995 (commence-
ment of operations) to March 31, 1996. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial high-
lights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
March 31, 1996, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement pre-
sentation. We believe that our audit provides a reasonable basis for our opin-
ion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Tem-
pleton Greater European Fund, as of March 31, 1996, the results of its opera-
tions, the changes in its net assets and the financial highlights for the pe-
riod indicated, in conformity with generally accepted accounting principles.
[SIGNATURE OF MCGLADREY & PULLEN, LLP APPEARS HERE]
New York, New York
April 26, 1996
19
<PAGE>
- --------------------------
TEMPLETON GREATER
EUROPEAN FUND
Auditors
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017-2416
PRINCIPAL UNDERWRITER:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Shareholder Services
1-800-632-2301
Fund Information
1-800-342-5236
This report must be
preceded or accompanied
by the current
prospectus of the
Templeton Greater
European Fund, which
contains more complete
information including
charges and expenses.
Like any investment in
securities, the value
of the Fund's portfolio
will be subject to the
risk of loss from
market, currency,
economic, political,
and other factors, as
well as investment
decisions by the
investment manager
which will not always
be profitable or wise.
The Fund and its
investors are not
protected from such
losses by the
investment manager.
Therefore, investors
who cannot accept this
risk should not invest
in shares of the Fund.
To ensure the highest
quality of service,
telephone calls to or
from our service
departments may be
monitored, recorded,
and accessed. These
calls can be determined
by the presence of
a regular beeping tone.
- --------------------------
TL419 A96 05/96
[LOGO OF RECYCLED
PAPER APPEARS HERE]
TEMPLETON
GREATER
EUROPEAN
FUND
Annual Report
March 31, 1996
[LOGO OF FRANKLIN TEMPLETON
APPEARS HERE]
