<PAGE> 1
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).
March 31, 1997
Dear Shareholder:
We are pleased to bring you the second annual report of the Templeton Greater
European Fund for the 12 months ended March 31, 1997.
Despite lackluster economic growth in Europe during the reporting period, many
companies generated strong profits as a result of privatization, restructuring,
reducing costs, and implementing programs designed to enhance shareholder value.
Consequently, most European stock markets performed well. For example, the
United Kingdom's market rose 30.5%, Sweden's gained 33.2%, and Spain's
appreciated 26.2% during the fiscal year.* In Eastern Europe, the Polish stock
market strengthened, and Russian share prices experienced exceptional gains, as
the Russian equity market reached all-time highs.
*Source: Bloomberg. Price appreciation is measured in U.S. dollars and includes
reinvested dividends.
1
<PAGE> 2
TEMPLETON GREATER EUROPEAN FUND
Geographic Distribution on 3/31/97
Based on Total Net Assets
[PIE CHART]
<TABLE>
<S> <C>
United Kingdom 19.1%
France 12.2%
Spain 8.5%
Sweden 8.1%
Finland 6.1%
Germany 5.2%
Hungary 4.6%
Poland 3.0%
Other Countries 14.4%
Fixed-Income Securities 0.4%
Short-Term Obligations & Other Net Assets 18.4%
</TABLE>
Within this environment, the Fund's Class I shares delivered a one-year
cumulative total return of 21.70%, as shown in the Performance Summary on page
7. This performance was due, in large part, to significant weightings in the
United Kingdom, Sweden, and Spain. It was also helped by the Fund's high
exposure to the banking sector, which strengthened largely because of relatively
stable interest rates, cost reduction programs, and a decline in bad loans.
Purchasing stocks we considered to be bargains, we reduced our cash position
from 30.8% of total net assets on March 31, 1996, to 18.4% on March 31, 1997. We
bought shares of AXA-UAP SA, a large French insurance company whose subsidiaries
include Alliance Capital, Equitable Capital, National Mutual, and National
Mutual Asia. Despite the difficulties experienced by other French financial
firms during the period, AXA-UAP has become a global leader in its industry. We
also initiated a position in Telefonica de Espana SA, which benefited from its
domestic telecommunications business and continued expansion in Latin American
markets. In our opinion, this company has growth potential because it is
expected to become part of British Telecommunications' "Concert" venture, which
2
<PAGE> 3
could become the world's preeminent global telecommunications system.
Finding valuations we considered attractive in the banking sector, we purchased
shares of Merita Ltd., one of the largest banks in Finland. We also established
a position in Bank Slaski SA W Katowicach because we believed that Poland's
economic restructuring would benefit its financial sector. As a result, our
exposure to the banking industry increased, from 7.7% of total net assets on
March 31, 1996, to 11.4% at the end of the reporting period.
During the fiscal year, we realized gains by reducing our position in Peugeot
SA, a French automobile manufacturer. In our opinion, increased competition from
U.S. and Japanese companies could hinder this firm in the future. We also sold
some of our shares of Amer Group Ltd. at a profit, after its share price rose.
TEMPLETON GREATER EUROPEAN FUND
Top 10 Industries on 3/31/97
Based on Total Net Assets
<TABLE>
<CAPTION>
% OF TOTAL
INDUSTRY NET ASSETS
--------------------------------------------------------
<S> <C>
Banking 11.4%
Utilities-Electric & Gas 8.2%
Telecommunications 7.5%
Automobiles 6.5%
Energy Sources 6.5%
Metals & Mining 4.7%
Electrical & Electronics 4.5%
Forest Products & Paper 4.3%
Building Materials & Components 3.5%
Insurance 3.2%
</TABLE>
Looking forward, we believe that Europe will continue to be a fertile ground for
unearthing under-valued companies. Many European financial groups have adopted
international accounting standards, and some Finnish and German corporations are
fighting to overturn laws which make it illegal to buy back shares. Many
European countries are trying to meet requirements for
3
<PAGE> 4
TEMPLETON GREATER EUROPEAN FUND
Top 10 Holdings on 3/31/97
Based on Total Net Assets
<TABLE>
<CAPTION>
% OF TOTAL
INDUSTRY NET ASSETS
--------------------------------------------------------
<S> <C>
Philips Electronics NV
Electronics, Netherlands 2.4%
MOL Magyar Olay-Es Gazipari RT,
GDS, 144A
Energy Sources, Hungary 2.1%
Nokia AB, A
Telecommunications, Finland 1.8%
Merita Ltd., A
Banking, Finland 1.8%
Tiszai Vegyi Kombinat RT, GDR, 144A
Chemicals, Hungary 1.8%
Bank Slaski SA W Katowicach
Banking, Poland 1.7%
BICC
Electronic Components &
Instruments, United Kingdom 1.7%
Bank of Ireland
Banking, Ireland 1.6%
Volkswagen AG
Automobiles, Germany 1.5%
Repsol SA
Energy Sources, Spain 1.5%
</TABLE>
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 15 OF THIS REPORT.
membership in the European Monetary Union by striving to reduce budget deficits
to no more than 3% of gross domestic product by 1999. This appears to have
accelerated the privatization process, and resulted in a spate of
telecommunication companies, electricity providers, and other state assets being
put up for sale throughout Europe. In our opinion, global investors may benefit
should government interference continue to decrease and domestic participation
in equity markets increase.
This discussion reflects the strategies we employed for the Fund during the 12
months under review, 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.
It is important to remember that investing in markets concentrated in a single
region outside the U.S. 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
4
<PAGE> 5
investments are made. Emerging markets involve heightened risks related to the
same factors, in addition to risks 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 not normally associated
with other markets. These risks and other considerations are discussed in the
Fund's prospectus.
We thank you for your participation in the Templeton Greater European Fund, and
will continue to implement our rigorous investment techniques as we search for
stocks we consider bargains in Greater Europe. We welcome any comments or
suggestions you may have.
Sincerely,
/s/ Mark Holowesko
Mark Holowesko, CFA
President
Templeton Global Investment Trust
Portfolio Manager
Templeton Greater European Fund
/s/ Jefferey A. Everett
Jeffrey A. Everett, CFA
Portfolio Manager
Templeton Greater European Fund
/s/ Richard Farrington
Richard Sean Farrington, CFA
Portfolio Manager
Templeton Greater European Fund
- -------------------------------------------------------------------------------
CELEBRATING 50 YEARS
This year marks 50 years of business for Franklin Templeton. Over these
years, we have experienced profound changes in technology, regulations and
customer expectations within the mutual fund industry. As one of the largest
mutual fund families, we're proud to be an innovative industry leader,
providing people like you with an opportunity to invest in companies and
governments around the globe.
In addition, we want to stress that all securities markets move both up and
down. Mixed in with the good years can be some bad years. Accordingly, mutual
fund share prices also move up and down. Every investor should expect such
fluctuations, which can be wide. When markets are going down, as well as up,
we encourage investors to maintain a long-term perspective. We thank you for
your past support and look forward to serving your investment needs in the
years ahead.
- -------------------------------------------------------------------------------
5
<PAGE> 6
PERFORMANCE SUMMARY
CLASS I
The Templeton Greater European Fund Class I shares provided a cumulative total
return of 21.70% for the one-year period ended March 31, 1997. Cumulative total
return measures the change in value of an investment, assuming reinvestment of
dividends and capital gains, and does not include the maximum 5.75% initial
sales charge. We always maintain a long-term perspective when managing the Fund,
and we encourage shareholders to view their investments in a similar manner.
The price of the Fund's shares, as measured by net asset value, increased $1.96,
from $10.39 on March 31, 1996, to $12.35 on March 31, 1997. During this time,
Class I shares paid distributions of 12.5 cents ($0.125) per share in dividend
income and 14 cents ($0.14) per share in short-term capital gains. Of course,
past performance is not predictive of future results. Distributions will vary
depending on income earned by the Fund, and any profits realized from the sale
of securities in the portfolio, as well as the level of the Fund's operating
expenses.
The graph on the following page compares the performance of the Fund's Class I
shares since inception with the unmanaged Morgan Stanley Capital
International(R) (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 an
index because an index is not managed according to any investment strategy, 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, and an index is not representative of
the Fund's portfolio.
6
<PAGE> 7
TEMPLETON GREATER EUROPEAN FUND
CLASS I
Total Return Index Comparison
$10,000 Investment (5/8/95-3/31/97)
<TABLE>
<CAPTION>
TEMPLETON GREATER
DATE EUROPEAN FUND - CLASS I MSCI EUROPE 14 INDEX MSCI TR*
---- ----------------------- -------------------- --------
<S> <C> <C> <C>
5/8/95 $ 9,425 $10,000
5/31/95 $ 9,444 $10,154 1.54%
6/30/95 $ 9,416 $10,254 0.98%
7/31/95 $ 9,472 $10,792 5.25%
8/31/95 $ 9,491 $10,378 -3.83%
9/29/95 $ 9,312 $10,696 3.06%
10/31/95 $ 9,171 $10,649 -0.44%
11/30/95 $ 9,142 $10,729 0.75%
12/29/95 $ 9,284 $11,072 3.20%
1/31/96 $ 9,877 $11,149 0.69%
2/29/96 $10,028 $11,356 1.86%
3/29/96 $ 9,793 $11,496 1.23%
4/30/96 $ 9,906 $11,583 0.76%
5/31/96 $10,066 $11,677 0.81%
6/28/96 $10,170 $11,810 1.14%
7/31/96 $ 9,924 $11,666 -1.22%
8/30/96 $10,407 $12,016 3.00%
9/30/96 $10,445 $12,273 2.14%
10/31/96 $10,643 $12,563 2.36%
11/29/96 $10,908 $13,203 5.10%
12/31/96 $11,271 $13,463 1.97%
1/31/97 $11,725 $13,504 0.30%
2/28/97 $11,831 $13,686 1.35%
3/31/97 $11,918 $14,132 3.26%
</TABLE>
* MSCI figures from Lisa Hall, Templeton Performance Dept.
<TABLE>
<S> <C>
Templeton Greater European Fund Class I (1)................. $11,918
MSCI Europe 14 Index (2).................................... $14,132
</TABLE>
1. INCLUDES ALL SALES CHARGES AND REPRESENTS THE CHANGE IN VALUE OF AN
INVESTMENT OVER THE PERIOD SHOWN, ASSUMING REINVESTMENT OF DIVIDENDS AND
CAPITAL GAINS. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
2. INDEX IS UNMANAGED AND INCLUDES REINVESTED DIVIDENDS.
TEMPLETON GREATER EUROPEAN FUND
CLASS I
Periods ended March 31, 1997
<TABLE>
<CAPTION>
Since
Inception
One-Year (5/8/95)
<S> <C> <C>
Cumulative Total Return(1) 21.70% 26.45%
Average Annual Total Return(2) 14.74% 9.69%
Value of $10,000 Investment(3) $11,474 $11,918
</TABLE>
1. CUMULATIVE TOTAL RETURN REPRESENTS THE CHANGE IN VALUE OF AN INVESTMENT OVER
THE INDICATED PERIODS AND DOES NOT INCLUDE THE INITIAL SALES CHARGE.
2. AVERAGE ANNUAL TOTAL RETURN REPRESENTS THE AVERAGE ANNUAL CHANGE IN VALUE OF
AN INVESTMENT OVER THE INDICATED PERIODS AND INCLUDES THE MAXIMUM 5.75% INITIAL
SALES CHARGE.
3. THESE FIGURES REPRESENT THE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN THE
FUND OVER THE INDICATED PERIODS AND INCLUDE THE MAXIMUM 5.75% INITIAL SALES
CHARGE.
ALL CALCULATIONS ASSUME REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AT NET ASSET
VALUE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET
CONDITIONS, CURRENCIES AND THE ECONOMIC, SOCIAL AND POLITICAL CLIMATES OF
COUNTRIES WHERE INVESTMENTS ARE MADE. EMERGING MARKETS INVOLVE HEIGHTENED RISKS
RELATED TO THE SAME FACTORS, IN ADDITION TO THOSE ASSOCIATED WITH THE RELATIVELY
SMALL SIZE AND LESSER LIQUIDITY OF THESE MARKETS. YOU MAY HAVE A GAIN OR LOSS
WHEN YOU SELL YOUR SHARES. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
THE FUND'S INVESTMENT MANAGER AND FUND ADMINISTRATOR HAVE AGREED IN ADVANCE TO
REDUCE A PORTION OF THEIR RESPECTIVE FEES AND, IN THE CASE OF THE FUND
ADMINISTRATOR, TO MAKE CERTAIN PAYMENTS TO REDUCE EXPENSES, WHICH INCREASES
TOTAL RETURN TO SHAREHOLDERS. IF THEY HAD NOT TAKEN THIS ACTION, THE TOTAL
RETURNS FOR CLASS I SHARES WOULD HAVE BEEN LOWER. AFTER AUGUST 1, 1997, THE FEE
REDUCTION AND EXPENSE REIMBURSEMENTS MAY BE DISCONTINUED AT ANY TIME UPON NOTICE
TO THE FUND'S BOARD OF TRUSTEES.
7
<PAGE> 8
PERFORMANCE SUMMARY
CLASS II
The Templeton Greater European Fund Class II shares provided a cumulative total
return of 20.83% for the one-year period ended March 31, 1997. Cumulative total
return measures the change in value of an investment, assuming reinvestment of
dividends and capital gains, and does not include sales charges. We always
maintain a long-term perspective when managing the Fund, and we encourage
shareholders to view their investments in a similar manner.
The price of the Fund's shares, as measured by net asset value, increased $1.95,
from $10.32 on March 31, 1996, to $12.27 on March 31, 1997. During this time,
Class II shares paid distributions of 4.18 cents ($0.0418) per share in dividend
income and 14 cents ($0.14) per share in short-term capital gains. Of course,
past performance is not predictive of future results. Distributions will vary
depending on income earned by the Fund, and any profits realized from the sale
of securities in the portfolio, as well as the level of the Fund's operating
expenses.
The graph on the following page compares the performance of the Fund's Class II
shares since inception with the unmanaged Morgan Stanley Capital
International(R) (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 an
index because an index is not managed according to any investment strategy, 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, and an index is not representative of
the Fund's portfolio.
8
<PAGE> 9
TEMPLETON GREATER EUROPEAN FUND
CLASS II
Total Return Index Comparison
$10,000 Investment (5/8/95-3/31/97)
<TABLE>
<CAPTION>
TEMPLETON GREATER
DATE EUROPEAN FUND - CLASS I MSCI EUROPE 14 INDEX MSCI TR*
---- ----------------------- -------------------- --------
<S> <C> <C> <C>
5/8/95 $ 9,901 $10,000
5/31/95 $ 9,911 $10,154 1.54%
6/30/95 $ 9,881 $10,254 0.98%
7/31/95 $ 9,941 $10,792 5.25%
8/31/95 $ 9,950 $10,378 -3.83%
9/29/95 $ 9,762 $10,696 3.06%
10/31/95 $ 9,604 $10,649 -0.44%
11/30/95 $ 9,574 $10,729 0.75%
12/29/95 $ 9,713 $11,072 3.20%
1/31/96 $10,317 $11,149 0.69%
2/29/96 $10,475 $11,356 1.86%
3/29/96 $10,218 $11,496 1.23%
4/30/96 $10,337 $11,583 0.76%
5/31/96 $10,500 $11,677 0.81%
6/28/96 $10,599 $11,810 1.14%
7/31/96 $10,322 $11,666 -1.22%
8/30/96 $10,817 $12,016 3.00%
9/30/96 $10,847 $12,273 2.14%
10/31/96 $11,055 $12,563 2.36%
11/29/96 $11,322 $13,203 5.10%
12/31/96 $11,692 $13,463 1.97%
1/31/97 $12,155 $13,504 0.30%
2/28/97 $12,256 $13,686 1.35%
3/31/97 $12,346 $14,132 3.26%
</TABLE>
* MSCI figures from Lisa Hall, Templeton Performance Dept.
<TABLE>
<S> <C>
Templeton Greater European Fund Class II(1)...... $12,346
MSCI Europe 14 Index(2).......................... $14,132
</TABLE>
1. INCLUDES ALL SALES CHARGES AND REPRESENTS THE CHANGE IN VALUE OF AN
INVESTMENT OVER THE PERIOD SHOWN, ASSUMING REINVESTMENT OF DIVIDENDS AND
CAPITAL GAINS. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
2. INDEX IS UNMANAGED AND INCLUDES REINVESTED DIVIDENDS.
TEMPLETON GREATER EUROPEAN FUND
CLASS II
Periods ended March 31, 1997
<TABLE>
<CAPTION>
Since
Inception
One-Year (5/8/95)
<S> <C> <C>
Cumulative Total Return(1) 20.83% 24.70%
Average Annual Total Return(2) 18.68% 11.75%
Value of $10,000 Investment(3) $11,868 $12,346
</TABLE>
1. CUMULATIVE TOTAL RETURN REPRESENTS THE CHANGE IN VALUE OF AN INVESTMENT OVER
THE INDICATED PERIODS AND DOES NOT INCLUDE SALES CHARGES.
2. AVERAGE ANNUAL TOTAL RETURN REPRESENTS THE AVERAGE ANNUAL CHANGE IN VALUE OF
AN INVESTMENT OVER THE INDICATED PERIODS. IT INCLUDES THE DEDUCTION OF THE 1.0%
INITIAL SALES CHARGE AND THE 1.0% CONTINGENT DEFERRED SALES CHARGE APPLICABLE TO
SHARES REDEEMED WITHIN THE FIRST 18 MONTHS OF INVESTMENT.
3. THESE FIGURES REPRESENT THE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN THE
FUND OVER THE INDICATED PERIODS AND INCLUDE ALL SALES CHARGES.
ALL CALCULATIONS ASSUME REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AT NET ASSET
VALUE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET
CONDITIONS, CURRENCIES AND THE ECONOMIC, SOCIAL AND POLITICAL CLIMATES OF
COUNTRIES WHERE INVESTMENTS ARE MADE. EMERGING MARKETS INVOLVE HEIGHTENED RISKS
RELATED TO THE SAME FACTORS, IN ADDITION TO THOSE ASSOCIATED WITH THE RELATIVELY
SMALL SIZE AND LESSER LIQUIDITY OF THESE MARKETS. YOU MAY HAVE A GAIN OR LOSS
WHEN YOU SELL YOUR SHARES. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
THE FUND'S INVESTMENT MANAGER AND FUND ADMINISTRATOR HAVE AGREED IN ADVANCE TO
REDUCE A PORTION OF THEIR RESPECTIVE FEES AND, IN THE CASE OF THE FUND
ADMINISTRATOR, TO MAKE CERTAIN PAYMENTS TO REDUCE EXPENSES, WHICH INCREASES
TOTAL RETURN TO SHAREHOLDERS. IF THEY HAD NOT TAKEN THIS ACTION, THE TOTAL
RETURNS FOR CLASS II SHARES WOULD HAVE BEEN LOWER. AFTER AUGUST 1, 1997, THE FEE
REDUCTION AND EXPENSE REIMBURSEMENTS MAY BE DISCONTINUED AT ANY TIME UPON NOTICE
TO THE FUND'S BOARD OF TRUSTEES.
9
<PAGE> 10
PERFORMANCE SUMMARY
ADVISOR CLASS
The Templeton Greater European Fund Advisor Class shares produced an aggregate
total return of 6.92% from inception on January 1, 1997 through March 31, 1997.
The price of the Fund's shares, as measured by net asset value, increased 80
cents ($0.80), from $11.56 on January 2, 1997 (day of commencement of sales), to
$12.36 on March 31, 1997. Of course, past performance is not predictive of
future results.
TEMPLETON GREATER EUROPEAN FUND
ADVISOR CLASS
Period ended March 31, 1997
<TABLE>
<CAPTION>
Since
Inception
(1/1/97)
<S> <C>
Aggregate Total Return* 6.92%
</TABLE>
*AGGREGATE TOTAL RETURN REPRESENTS THE CHANGE IN VALUE OF AN INVESTMENT OVER THE
INDICATED PERIOD. SINCE ADVISOR CLASS SHARES HAVE BEEN IN EXISTENCE FOR LESS
THAN ONE YEAR, AVERAGE ANNUAL TOTAL RETURNS ARE NOT PROVIDED.
NOTE: INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET
CONDITIONS, CURRENCIES, AND THE ECONOMIC, SOCIAL AND POLITICAL CLIMATES OF
COUNTRIES WHERE INVESTMENTS ARE MADE. EMERGING MARKETS INVOLVE HEIGHTENED RISKS
RELATED TO THE SAME FACTORS, IN ADDITION TO THOSE ASSOCIATED WITH THE RELATIVELY
SMALL SIZE AND LESSER LIQUIDITY OF THESE MARKETS. YOU MAY HAVE A GAIN OR LOSS
WHEN YOU SELL YOUR SHARES. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
THE FUND'S INVESTMENT MANAGER AND FUND ADMINISTRATOR HAVE AGREED IN ADVANCE TO
REDUCE A PORTION OF THEIR RESPECTIVE FEES AND, IN THE CASE OF THE FUND
ADMINISTRATOR, TO MAKE CERTAIN PAYMENTS TO REDUCE EXPENSES, WHICH INCREASES
TOTAL RETURN TO SHAREHOLDERS. IF THEY HAD NOT TAKEN THIS ACTION, THE TOTAL
RETURNS FOR ADVISOR CLASS SHARES WOULD HAVE BEEN LOWER. AFTER AUGUST 1, 1997,
THE FEE REDUCTION AND EXPENSE REIMBURSEMENTS MAY BE DISCONTINUED AT ANY TIME
UPON NOTICE TO THE FUND'S BOARD OF TRUSTEES.
10
<PAGE> 11
Many investors have asked us about the activities of Sir John Templeton, since
his retirement from the funds. We asked Professor Robert Herrmann to update us
on Sir John's current activities and his comments follow.
THE NEW CAREER OF
SIR JOHN TEMPLETON
[PHOTO OF SIR JOHN TEMPLETON]
BY PROFESSOR
ROBERT HERRMANN
In 1992, Sir John Templeton retired after a 50-year career of helping investors
manage their money. Currently, he devotes all of his time and efforts to the
John Templeton Foundation. A major portion of his assets remain invested in
Templeton funds, managed by many of the investment professionals he selected and
trained. For sentimental reasons, he allows his name to be associated with the
funds, although he knows no more about their management and holdings than any
other investor.
Sir John Templeton established the Templeton Foundation in 1987, to foster the
acquisition of spiritual information through scientific research. Working with
scientists, theologians and others, he strives toward a new science that uses
empirical and statistical scientific methods to discover and test spiritual
knowledge. A crucial ingredient in his research is what Sir John calls "humility
theology," an attitude of humility toward the Creator, combined with
receptiveness to the theological significance of current scientific discoveries.
Universal spiritual laws, or "laws of life," are among the areas of
investigation. In his recent book, Worldwide Laws of Life, Sir John compiles 200
laws and proverbs from nearly all religions, and deeply embedded in human
history. For example, the Golden Rule taught by Jesus in the Sermon on the
Mount, states "Do unto others as you would have others do unto you," and is
affirmed by all major religions as an acceptable, universal law of life. Other
books which Sir John has authored or co-authored during the past few years
include: The Humble Approach, Is God the Only Reality, Evidence of Purpose,
Who's Who in Theology and Science and The God Who Would Be Known.
With an annual budget of more than $30 million, the Templeton Foundation
sponsors 60 programs focusing on spiritual progress and the benefits of freedom.
Sir John's first sizable investment in the programs was the Templeton Prize for
Progress in Religion. A panel of nine judges gives the annual award which now
exceeds $1.2 million to individuals who have shown extraordinary originality in
furthering the world's understanding of God or spirituality.
Recipients of the prize include Professor Paul Davies, author of The Mind of
God; the Right Honorable Lord Jacobovits, former Chief Rabbi of Great Britain
and The Commonwealth; the Reverend Dr. Billy Graham, world-renowned preacher and
presidential inauguration speaker; Mr. Nikkyo Nimano, founder of the World
Conference on Religion and Peace; and Sir Sarepalli Radhakrishnan, former
President of India, and Oxford professor of Eastern Religions and Ethics.
To encourage young people's and their parents' appreciation of spiritual laws of
life, Sir John established an essay contest for teenagers in his home county of
Franklin, Tennessee. Students submit essays about the spiritual life principles
they plan to follow, and prizes are offered semiannually. In 1996, more than 800
youth participated. Twenty-six similar programs have been launched in various
locations, with the support of generous local donors.
The Foundation also sponsors a worldwide program that awards college-level
faculty who teach courses integrating science and religion. During the program's
first two years, more than 200 courses were created. The Foundation maintains an
extensive program of research and education on the health benefits of
spirituality, including prizes for medical schools providing courses on
spirituality in medicine. Lastly, the Foundation publishes a newsletter with
over 2,000 subscribers. Free subscriptions are available to Templeton
shareholders by writing to the Foundation.
To contact Sir John Templeton or receive the free newsletter subscription,
please write to:
The John Templeton Foundation
2 Radnor Corporate Center #320
100 Matsonford Road
Radnor, PA 19087
11
<PAGE> 12
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
YEAR ENDED OF OPERATIONS) TO
MARCH 31, 1997 MARCH 31, 1996
-------------- ----------------
<S> <C> <C>
Net asset value, beginning of period $ 10.39 $ 10.00
------- -------
Income from investment operations:
Net investment income .14 .08
Net realized and unrealized gain 2.09 .31
------- -------
Total from investment operations 2.23 .39
------- -------
Distributions:
Dividends from net investment income (.13) --
Distributions from net realized gains (.14) --
------- -------
Total distributions (.27) --
------- -------
Change in net asset value 1.96 .39
------- -------
Net asset value, end of period $ 12.35 $ 10.39
======= =======
TOTAL RETURN* 21.70% 3.90%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 9,268 $ 4,308
Ratio of expenses to average net assets 2.63% 3.56%**
Ratio of expenses, net of reimbursement, to average net assets 1.85% 1.85%**
Ratio of net investment income to average net assets 1.72% 1.39%**
Portfolio turnover rate 30.58% 9.86%
Average commission rate paid (per share) $ .0264 $ .0205
</TABLE>
* TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED FOR
PERIODS OF LESS THAN ONE YEAR.
** ANNUALIZED.
12
<PAGE> 13
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
YEAR ENDED OF OPERATIONS) TO
MARCH 31, 1997 MARCH 31, 1996
-------------- ----------------
<S> <C> <C>
Net asset value, beginning of period $ 10.32 $ 10.00
------- -------
Income from investment operations:
Net investment income .11 .07
Net realized and unrealized gain 2.02 .25
------- -------
Total from investment operations 2.13 .32
------- -------
Distributions:
Dividends from net investment income (.04) --
Distributions from net realized gains (.14) --
------- -------
Total distributions (.18) --
------- -------
Change in net asset value 1.95 .32
------- -------
Net asset value, end of period $ 12.27 $ 10.32
======= =======
TOTAL RETURN* 20.83% 3.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 2,424 $ 1,431
Ratio of expenses to average net assets 3.29% 4.21%**
Ratio of expenses, net of reimbursement, to average net assets 2.50% 2.50%**
Ratio of net investment income to average net assets 1.45% 1.06%**
Portfolio turnover rate 30.58% 9.86%
Average commission rate paid (per share) $ .0264 $ .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.
13
<PAGE> 14
TEMPLETON GREATER EUROPEAN FUND
Financial Highlights (cont.)
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE -- ADVISOR CLASS
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 2, 1997+
THROUGH
MARCH 31, 1997
----------------
<S> <C>
Net asset value, beginning of period $ 11.56
-------
Income from investment operations:
Net investment income .07
Net realized and unrealized gain .73
-------
Total from investment operations .80
-------
Change in net asset value .80
-------
Net asset value, end of period $ 12.36
=======
TOTAL RETURN* 6.92%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 36
Ratio of expenses to average net assets 1.90%**
Ratio of expenses, net of reimbursement, to average net assets 1.50%**
Ratio of net investment income to average net assets 2.56%
Portfolio turnover rate 30.58%
Average commission rate paid (per share) $ .0264
</TABLE>
* NOT ANNUALIZED FOR PERIODS OF LESS THAN ONE YEAR.
** ANNUALIZED.
+ COMMENCEMENT OF SALES.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 15
TEMPLETON GREATER EUROPEAN FUND
Investment Portfolio, March 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS: 79.1%
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AUTOMOBILES: 6.5%
*Debica SA, A Pol. 5,800 $ 153,749
Peugeot SA Fr. 1,000 114,169
Regie Nationale des Usines Renault SA Fr. 6,681 169,212
Volkswagen AG Ger. 322 177,740
Volvo AB, B Swe. 5,342 143,192
-----------
758,062
- ------------------------------------------------------------------------------------------------------------------------
BANKING: 11.4%
Argentaria Corporacion Bancaria de Espana SA Sp. 3,500 152,610
Bank of Ireland Irl. 18,900 188,876
Bank Slaski SA W Katowicach Pol. 2,160 203,740
Banque Nationale de Paris Fr. 3,600 160,363
Deutsche Bank AG Ger. 2,089 118,444
Merita Ltd., A Fin. 59,800 208,396
National Westminster Bank PLC U.K. 9,600 108,413
Unidanmark AS, A Den. 2,225 119,445
Union Bank of Norway, Primary Capital Certificate Nor. 2,500 71,704
-----------
1,331,991
- ------------------------------------------------------------------------------------------------------------------------
BROADCASTING &
PUBLISHING: 0.4%
Wace Group PLC U.K. 30,000 43,675
- ------------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS &
COMPONENTS: 3.5%
Anglian Group PLC U.K. 26,400 105,748
Cristaleria Espanola SA Sp. 1,830 150,260
*Hepworth PLC U.K. 38,500 160,232
-----------
416,240
- ------------------------------------------------------------------------------------------------------------------------
BUSINESS & PUBLIC
SERVICES: 1.1%
Lex Service PLC U.K. 22,600 125,101
- ------------------------------------------------------------------------------------------------------------------------
CHEMICALS: 2.6%
Courtaulds PLC U.K. 17,000 100,954
*Tiszai Vegyi Kombinat RT, GDR, 144A Hun. 16,840 208,395
-----------
309,349
- ------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION &
HOUSING: 1.4%
Dragados y Construcciones SA Sp. 7,800 123,674
European Techniki Gr. 14,200 44,623
-----------
168,297
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
TEMPLETON GREATER EUROPEAN FUND
Investment Portfolio, March 31, 1997 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ELECTRICAL &
ELECTRONICS: 4.5%
ABB AB, B Swe. 1,190 $ 134,855
Alcatel Alsthom SA Fr. 960 115,928
Philips Electronics NV Neth. 6,000 279,933
-----------
530,716
- ------------------------------------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS &
INSTRUMENTS: 1.6%
BICC U.K. 43,710 193,779
- ------------------------------------------------------------------------------------------------------------------------
ENERGY SOURCES: 6.5%
Gazprom, ADR, Reg S Russ. 2,302 38,501
MOL Magyar Olay-Es Gazipari RT, GDS 144A Hun. 14,547 250,208
Repsol SA Sp. 4,200 175,403
Societe Elf Aquitane SA Fr. 1,520 156,210
Total SA, B Fr. 1,680 145,693
-----------
766,015
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES: 1.2%
AXA-UAP SA Fr. 1,600 106,097
Banca Fideuram Spa Itl. 14,000 36,309
-----------
142,406
- ------------------------------------------------------------------------------------------------------------------------
FOOD & HOUSEHOLD
PRODUCTS: 1.5%
Northern Foods PLC U.K. 25,000 85,540
Pick Szeged RT Hun. 1,300 85,598
-----------
171,138
- ------------------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS &
PAPER: 4.3%
Assidomaen AB Swe. 5,200 138,005
*Enso OY, R Fin. 12,200 105,183
Mo Och Domsjoe AB, B Swe. 2,931 91,011
*UPM-Kymmene Corp. Fin. 7,500 165,431
-----------
499,630
- ------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL COMPONENTS: 2.3%
Sandvik AB, A Swe. 5,400 143,671
Sandvik AB, B Swe. 1,000 26,539
SKF AB, B Swe. 4,000 105,096
-----------
275,306
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
TEMPLETON GREATER EUROPEAN FUND
Investment Portfolio, March 31, 1997 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INSURANCE: 3.2%
Skandia Foersaekrings AB, free Swe. 5,350 $ 168,608
*Ste Centrale Du Groupe Des Asurances Nationales Fr. 2,990 85,740
Zuerich Versicherung, new Swtz. 400 126,052
-----------
380,400
- ------------------------------------------------------------------------------------------------------------------------
MERCHANDISING: 2.3%
Macintosh NV Neth. 240 5,119
Somerfield PLC U.K. 35,000 102,484
W.H. Smith Group U.K. 22,000 162,675
-----------
270,278
- ------------------------------------------------------------------------------------------------------------------------
METALS & MINING: 4.7%
Boehler Uddeholm AG Aust. 988 68,337
British Steel PLC U.K. 55,000 147,249
Eramet SA Fr. 1,980 100,508
Pechiney SA, A Fr. 1,879 76,472
Vallourec Fr. 2,500 154,065
-----------
546,631
- ------------------------------------------------------------------------------------------------------------------------
MULTI-INDUSTRY: 2.0%
*Amer Group Ltd., A Fin. 1,507 31,267
BTR PLC U.K. 27,500 120,558
Compagnie Generale D' Industrie Et de Participati Fr. 150 46,220
Harrisons & Crosfield PLC U.K. 15,800 33,399
-----------
231,444
- ------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS: 7.5%
British Telecommunications PLC U.K. 22,430 164,378
Nokia AB, A Fin. 3,460 209,790
*SPT Telecom AS Csk. 1,010 120,197
Tele Danmark AS, B Den. 2,050 107,791
Telecom Italia Spa, di Risp Itl. 77,000 164,276
Telefonica de Espana SA Sp. 4,800 116,029
-----------
882,461
- ------------------------------------------------------------------------------------------------------------------------
TEXTILES & APPAREL: 0.7%
Dawson International PLC U.K. 72,800 80,237
- ------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION: 1.1%
Transport Development Group PLC U.K. 40,000 126,995
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
TEMPLETON GREATER EUROPEAN FUND
Investment Portfolio, March 31, 1997 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UTILITIES-ELECTRICAL &
GAS: 8.2%
BG PLC U.K. 40,000 $ 106,925
*Centrica PLC U.K. 30,000 31,337
Empresa Nacional Hidroelectrica del Ribagorzana SA, B Sp. 5,500 131,003
Iberdrola SA Sp. 13,200 145,758
*Mosenergo, ADR, 144A Russ. 4,500 171,000
National Grid Holdings PLC U.K. 30,000 103,389
Thames Water Group PLC U.K. 12,755 139,216
VEBA AG Ger. 2,394 137,604
-----------
966,232
- ------------------------------------------------------------------------------------------------------------------------
WHOLESALE & INTERNATIONAL
TRADE: 0.6%
Computer 2000 AG Ger. 310 65,471
-----------
TOTAL COMMON STOCKS
($8,074,850) 9,281,854
- ------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS: 2.1%
- ------------------------------------------------------------------------------------------------------------------------
Baumax AG, pfd. Aust. 1,860 56,758
Fiat Spa, pfd. Itl. 50,000 84,151
Krones AG Herman Kronseder Maschinen Fabrik, pfd. Ger. 274 105,214
-----------
TOTAL PREFERRED STOCKS
(cost $283,614) 246,123
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL IN
LOCAL CURRENCY**
- ------------------------------------------------------------------------------------------------------------------------
BOND: 0.4% (cost $50,313)
- ------------------------------------------------------------------------------------------------------------------------
Government of Italy, 5.00%, 6/28/01 Itl. 50,000 49,375
- ------------------------------------------------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS:
19.7% (cost $2,308,151)
- ------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bills, 4.93% to 5.23% with
maturities to 6/19/97 U.S. 2,321,000 2,308,111
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS:
101.3% (cost $10,716,928) 11,885,463
OTHER ASSETS, LESS
LIABILITIES: (1.3%) (157,016)
-----------
TOTAL NET ASSETS: 100.0% $11,728,447
===========
</TABLE>
* NON-INCOME PRODUCING.
** CURRENCY OF COUNTRY INDICATED.
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE> 19
TEMPLETON GREATER EUROPEAN FUND
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1997
<TABLE>
<S> <C>
Assets:
Investments in securities, at value
(identified cost $10,716,928) $11,885,463
Receivables:
Fund shares sold 25,187
Dividends and interest 37,570
Other assets 2,095
Unamortized organization costs 41,081
-----------
Total assets 11,991,396
-----------
Liabilities:
Payables:
Investment securities purchased 155,425
Fund shares redeemed 10,726
Funds advanced by custodian 58,521
Accrued expenses 38,277
-----------
Total liabilities 262,949
-----------
Net assets, at value $11,728,447
===========
Net assets consist of:
Undistributed net investment income $ 62,137
Net unrealized appreciation 1,168,535
Accumulated net realized gain 318,047
Net capital paid in on shares of
beneficial interest 10,179,728
-----------
Net assets, at value $11,728,447
===========
Class I
Net asset value per share ($9,268,185
divided by 750,484 shares
outstanding) $ 12.35
===========
Maximum offering price ($12.35
divided by 94.25%) $ 13.10
===========
Class II
Net asset value per share ($2,423,886
divided by 197,611
shares outstanding) $ 12.27
===========
Maximum offering price ($12.27
divided by 99.00%) $ 12.39
===========
Advisor Class
Net asset value per share
($36,376 divided by 2,942
shares outstanding) $ 12.36
===========
</TABLE>
STATEMENT OF OPERATIONS
for the year ended March 31, 1997
<TABLE>
<S> <C> <C>
Investment income:
(net of $21,842 foreign taxes
withheld)
Dividends $197,834
Interest 90,800
--------
Total income $ 288,634
Expenses:
Management fees (Note 3) 59,263
Administrative fees (Note 3) 11,851
Distribution fees (Note 3)
Class I 21,721
Class II 16,896
Transfer agent fees (Note 3) 14,600
Custodian fees 5,700
Reports to shareholders 15,500
Audit fees 9,700
Legal fees 1,770
Registration and filing fees 45,500
Trustees' fees and expenses 1,800
Amortization of organization
costs 13,243
Other 1,186
--------
Total expenses 218,730
Less expenses reimbursed
(Note 3) (61,738)
--------
Total expenses less
reimbursement 156,992
----------
Net investment income 131,642
Realized and unrealized gain:
Net realized gain on:
Investments 486,959
Foreign currency transactions 5,568
--------
492,527
Net unrealized appreciation on
investments 940,661
--------
Net realized and unrealized
gain 1,433,188
----------
Net increase in net assets
resulting from operations $1,564,830
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE> 20
TEMPLETON GREATER EUROPEAN FUND
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MAY 8, 1995
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MARCH 31, 1997 MARCH 31, 1996
-------------- ----------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 131,642 $ 42,720
Net realized gain (loss) on investment and foreign currency transactions 492,527 (106,081)
Net unrealized appreciation 940,661 227,874
----------- ----------
Net increase in net assets resulting from operations 1,564,830 164,513
Distributions to shareholders:
From net investment income
Class I (68,343) --
Class II (6,497) --
From net realized gain
Class I (84,294) --
Class II (21,490) --
Fund share transactions (Note 2)
Class I 3,848,810 4,185,581
Class II 722,889 1,388,181
Advisor class 34,267 --
----------- ----------
Net increase in net assets 5,990,172 5,738,275
Net assets:
Beginning of period 5,738,275 --
----------- ----------
End of period $ 11,728,447 $ 5,738,275
=========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 21
TEMPLETON GREATER EUROPEAN FUND
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton Greater European Fund (the Fund) is a separate diversified series of
Templeton Global Investment Trust (the Trust), a Delaware business trust, which
is an open-end management investment company registered under the Investment
Company Act of 1940. The 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). 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
securities 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 in good faith by
management and approved 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 currencies
are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customarily
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
foreign currencies, currency gains or losses realized between the trade and
settlement 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
securities is recorded as soon as information is available to the Fund. Interest
income 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.
21
<PAGE> 22
TEMPLETON GREATER EUROPEAN FUND
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
F. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Effective January 2, 1997, the Fund offers three classes of shares: Class I,
Class II and Advisor Class shares. Prior to this date, only Class I and Class II
shares were offered. Shares of each class are identical except for their initial
sales load, a contingent deferred sales charge on Class II shares, distribution
fees, and voting rights on matters affecting a single class. At March 31, 1997,
there was an unlimited 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
YEAR ENDED OPERATIONS) THROUGH
MARCH 31, 1997 MARCH 31, 1996
--------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Shares sold 467,229 $ 5,350,835 507,085 $5,118,526
Shares issued on reinvestment of distributions 12,150 135,721 -- --
Shares redeemed (143,550) (1,637,746) (92,430) (932,945)
-------- ----------- ------- ----------
Net increase 335,829 $ 3,848,810 414,655 $4,185,581
======== =========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
CLASS II
-------------------------------------------
FOR THE PERIOD
MAY 8, 1995
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) THROUGH
MARCH 31, 1997 MARCH 31, 1996
--------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Shares sold 151,862 $ 1,709,987 139,004 $1,392,136
Share issued on reinvestment of distributions 2,448 27,356 -- --
Shares redeemed (95,315) (1,014,454) (388) (3,955)
-------- ---------- -------- ----------
Net increase 58,995 $ 722,889 138,616 $1,388,181
======== ========== ======== ==========
</TABLE>
22
<PAGE> 23
TEMPLETON GREATER EUROPEAN FUND
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADVISOR CLASS
---------------
FOR THE PERIOD
JANUARY 2, 1997
THROUGH
MARCH 31, 1997
---------------
SHARES AMOUNT
------ -------
<S> <C> <C>
Shares sold 2,942 $34,267
----- -------
Net increase 2,942 $34,267
===== =======
</TABLE>
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), Franklin Templeton Services, Inc. (FTSI), Franklin
Templeton Distributors, Inc. (FTD), and Franklin Templeton Investor Services,
Inc. (FTIS), the Fund's investment manager, administrative manager, principal
underwriter, 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 FTSI
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 FTSI have voluntarily
agreed to reduce their respective fees to the extent necessary to limit total
expenses to an annual rate of 1.85%, 2.50% and 1.50% of average net assets of
Class I, Class II and Advisor Class shares, respectively, through August 1,
1997. The amount of the reimbursement for the year ended March 31, 1997 is set
forth in the Statement of Operations. For the year ended March 31, 1997, FTD
paid net commissions of $15,811 from the sale of the Fund's shares and FTIS
received fees of $14,600.
Under the distribution plans for Class I and Class II shares, the Fund
reimburses FTD quarterly for FTD's costs and expenses in connection with any
activity 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, 1997, unreimbursed expenses amounted to $143,613. Class II
shares redeemed within 18 months are subject to a contingent deferred sales
charge. Contingent deferred sales charges of $6,203 were paid to FTD for the
year ended March 31, 1997.
An officer of the Fund is a partner of Dechert Price & Rhoads, legal counsel for
the Fund, which firm received legal fees for the year ended March 31, 1997.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the year
ended March 31, 1997 aggregated $5,910,853 and $1,731,390, 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
identified cost basis.
At March 31, 1997, 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 $1,461,039
Unrealized depreciation (292,504)
---------
Net unrealized appreciation $1,168,535
=========
</TABLE>
23
<PAGE> 24
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,
1997, and the related statement of operations for the year then ended, the
statements of changes in net assets, and the financial highlights for the
periods indicated in the accompanying financial statements. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights 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, 1997, 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
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Templeton Greater European Fund, as of March 31, 1997, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
New York, New York
April 25, 1997
24
<PAGE> 25
NOTES
--------
<PAGE> 26
NOTES
--------
<PAGE> 27
FRANKLIN TEMPLETON GROUP OF FUNDS
LITERATURE REQUEST - Call 1-800/DIAL BEN (1-800/342-5236) today for a free
descriptive brochure and prospectus on any of the funds listed below. The
prospectus contains more complete information, including fees, charges and
expenses, and should be read carefully before investing or sending money.
GLOBAL GROWTH
Franklin Global Health Care Fund
Franklin Templeton Japan Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton Global Infrastructure Fund
Templeton Global Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Franklin Templeton German Government Bond Fund
Franklin Templeton Global Currency Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and Income Fund
GLOBAL INCOME
Franklin Global Government Income Fund
Franklin Templeton Hard Currency Fund
Franklin Templeton High Income Currency Fund
Templeton Americas Government Securities Fund
GROWTH
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap Growth Fund
Mutual Discovery Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet Investment Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Rising Dividends Fund
Franklin Strategic Income Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Shares Fund
Templeton American Trust, Inc.
FUND ALLOCATOR SERIES:
Franklin Templeton Conservative Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton Growth Target Fund
INCOME
Franklin Adjustable Rate Securities Fund
Franklin Adjustable U.S. Government Securities Fund
Franklin's AGE High Income Fund
Franklin Investment Grade Income Fund
Franklin Short-Intermediate U.S. Government Securities Fund
Franklin U.S. Government Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
FOR NON-U.S. INVESTORS:
Franklin Tax-Advantaged High Yield Securities Fund
Franklin Tax-Advantaged International Bond Fund
Franklin Tax-Advantaged U.S. Government Securities Fund
FOR CORPORATIONS:
Franklin Corporate Qualified Dividend Fund
FRANKLIN FUNDS SEEKING TAX-FREE INCOME
Federal Intermediate-Term Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC FUNDS SEEKING TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan*
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
VARIABLE ANNUITIES+
Franklin Valuemark(R)
Franklin Templeton Valuemark Income Plus (an immediate annuity)
*TWO OR MORE FUND OPTIONS AVAILABLE: LONG-TERM PORTFOLIO, INTERMEDIATE-TERM
PORTFOLIO, A PORTFOLIO OF INSURED MUNICIPAL SECURITIES, AND/OR A HIGH YIELD
PORTFOLIO (CA) AND A MONEY MARKET PORTFOLIO (CA AND NY).
**THE FUND MAY INVEST UP TO 100% OF ITS ASSETS IN BONDS THAT PAY INTEREST
SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX.
***PORTFOLIO OF INSURED MUNICIPAL SECURITIES.
+FRANKLIN VALUEMARK AND FRANKLIN TEMPLETON VALUEMARK INCOME PLUS ARE ISSUED BY
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA OR BY ITS WHOLLY OWNED
SUBSIDIARY, PREFERRED LIFE INSURANCE COMPANY OF NEW YORK, AND DISTRIBUTED BY
NALAC FINANCIAL PLANS, LLC.
FGF 02/97
<PAGE> 28
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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 a 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.
[RECYCLE LOGO]
TL419 A97 5/97
TEMPLETON
GREATER
EUROPEAN
FUND
ANNUAL REPORT
MARCH 31, 1997
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