<PAGE> 1
TEMPLETON LATIN
AMERICA FUND
YOUR FUND'S OBJECTIVE:
The Templeton Latin America Fund seeks long-term capital appreciation through
investing at least 65% of its total assets in equity and debt securities of
issuers in Latin America.
MARCH 31, 1997
Dear Shareholder:
We are pleased to bring you the annual report of the Templeton Latin America
Fund for the 12 months ended March 31, 1997. During this period, many Latin
American stock markets performed well in an environment of improved fiscal and
monetary policies, rising corporate earnings, and the increased level of capital
flows into the region. As shown in the Performance Summary on page 7, the Fund's
Class I shares delivered a one-year cumulative total return of 18.34%.
On March 31, 1997, Brazil was the Fund's largest geographic exposure. Although
its fiscal deficit increased during the reporting period, Brazil's economy
experienced strong growth and inflation was relatively low, compared with
previous years. Despite some currency weakness, the Brazilian stock market
appreciated 83.5% during the fiscal year, as shares of parastatals (state-owned
1
<PAGE> 2
TEMPLETON LATIN AMERICA FUND
Geographic Distribution on 3/31/97
Based on Total Net Assets
[PIE CHART]
<TABLE>
<S> <C>
Brazil 34.6%
Mexico 27.9%
Argentina 16.7%
Peru 6.8%
Colombia 4.1%
Chile 2.6%
Ecuador 1.1%
Short-Term Obligations &
Other Net Assets 6.2%
</TABLE>
companies) performed exceptionally well.(1) In our view, these stocks, primarily
telecommunications and electric utility companies, posted large gains because
many investors believed the Brazilian government would privatize most
parastatals in the near future. These investors seemed to think that, in order
to maximize the selling prices of these firms, the Brazilian government would
liberalize regulated tariff structures that historically had kept telephone and
electricity rates below international levels. During the period, these rates did
begin to rise, benefiting the Fund's top holding, Telebras-Telecomunicacoes
Brasileiras SA (Telebras), whose share price appreciated more than 105%, as
measured in U.S. dollars, during the twelve months under review.
Argentina was another area of strength for the Fund. After poor economic growth
in 1995, its gross domestic product increased at an estimated rate of 4.4% in
1996 -- more than most economists had forecast. This helped spark investor
interest, and drove Argentina's equity prices 39.6% higher than they had been at
the beginning of the Fund's fiscal year.(2)
During the reporting period, Mexico continued to recover from its December 1994
peso devaluation. It completed repayment to the U.S. Treasury of the entire
amount it had borrowed during this financial crisis. Mexico's interest rates and
inflation declined, and its trade balance also remained healthy. This
(1.) SOURCE: BLOOMBERG. PRICE APPRECIATION IS MEASURED IN U.S. DOLLARS, AND
INCLUDES REINVESTED DIVIDENDS.
(2.) SOURCE: BLOOMBERG. PRICE APPRECIATION IS MEASURED IN U.S. DOLLARS, AND
INCLUDES REINVESTED DIVIDENDS.
2
<PAGE> 3
combination of events boosted investor confidence, and the Mexican stock market
rose 17.1% from March 31, 1996, to March 31, 1997.(3)
Throughout the period, we maintained a conservative bottom-up investment
approach in searching for undervalued equities. We did not attempt to match
weightings of our benchmark index, and region asset allocation was simply a
result of individual stock selection. We added to our holdings of Telebras, and
initiated positions in Telecomunicacoes de Minas Gerais SA and Telecomunicacoes
de Sao Paulo SA because we believe that deregulation of Brazil's telephone
industry could benefit these companies. We also purchased shares of DESC SA, a
Mexican industrial conglomerate with an auto parts and petrochemical business
that has been growing, and increased our holdings of Grupo Financiero Banamex
Accival SA, Mexico's largest bank, and Empresas ICA Sociedad Controladora SA,
Latin America's biggest construction company. Expecting higher demand for oil,
we added to our positions of the Argentinean oil companies YPF Sociedad Anonima
and Perez Companc SA. As measured in U.S. dollars, the share price of the
latter, one of the Fund's top ten holdings, rose 36.6% during the twelve months
under review.
TEMPLETON LATIN AMERICA FUND
Portfolio Breakdown on 3/31/97
Based on Total Net Assets
[PIE CHART]
<TABLE>
<S> <C>
Telecommunications 19.8%
Banking 14.4%
Metals & Mining 7.9%
Food & Household
Products 7.7%
Energy Sources 7.0%
Forest Products & Paper 6.4%
Multi-Industry 6.2%
Utilities - Electrical & Gas 3.5%
Merchandising 3.2%
Other Industries 17.7%
Short-Term Obligations &
Other Net Assets 6.2%
</TABLE>
Our quest for value took us into peripheral, as well as major markets. In
Ecuador, we initiated a position in La Cemento Nacional CA, which we considered
one of the world's most undervalued cement stocks. We also purchased shares of
Compania Boliviana de Energia Electrica SA, which we sold at a profit when the
company was
(3.) SOURCE: BLOOMBERG. PRICE APPRECIATION IS MEASURED IN U.S. DOLLARS, AND
INCLUDES REINVESTED DIVIDENDS.
3
<PAGE> 4
<TABLE>
<CAPTION>
TEMPLETON LATIN AMERICA FUND
Top 10 Holdings on 3/31/97
Based on Total Net Assets
<S> <C>
COMPANY, % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
Telebras-Telecomunicacoes Brasileiras SA
Telecommunications, Brazil 4.8%
Cia Vale do Rio Doce, pfd., ADR
Metals & Mining, Brazil 4.1%
Banco Ganadero SA
Banking, Colombia 3.9%
Grupo Financiero Banamex Accival SA, B
Banking, Mexico 3.9%
Telecomunicacoes de Minas Gerais SA
Telecommunications, Brazil 3.7%
Empaques Ponderosa SA de CV, B
Forest Products & Paper, Mexico 3.6%
Perez Companc SA, B
Energy Sources, Argentina 3.3%
Banco Bradesco SA, pfd
Banking, Brazil 3.0%
Credicorp. Ltd.
Banking, Peru 2.9%
Aracruz Celulose SA, ADR
Forest Products & Paper, Brazil 2.8%
</TABLE>
FOR A DETAILED LISTING OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 15 OF THIS REPORT.
bought out by Liberty Power and Cogentrix, two U.S.-based companies.
Since these markets were not included in any regional indices, this demonstrates
our commitment to the search for stocks we consider bargains throughout Latin
America.
Looking forward, we are optimistic about potential long-term investment
opportunities in Latin America. Many of the countries in the region appear to be
committed to market-oriented reforms, and have changed their spending habits and
rejuvenated their economies. In our opinion, the emphasis placed on savings by
Latin American governments may help to reduce dependence upon foreign capital,
and the region's economies may also benefit from the high percentage of young
people entering the work force.
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 emerging markets concentrated in a
single region involves special considerations, which may include risks related
to market and currency volatility,
4
<PAGE> 5
adverse economic, social and political developments, and the relatively small
size and lesser liquidity of these markets. These special risks and other
considerations are discussed in the Fund's prospectus. While short-term
volatility can be disconcerting, declines of as much as 30% to 40% are not
unusual in emerging markets. For example, the Mexican stock market has increased
more than 99.8% in the last five years, but has suffered four declines of more
than 10% during that time.(4)
We thank you for investing in the Templeton Latin America Fund, and welcome any
comments or suggestions you may have.
Sincerely,
/s/Stephen S. Oler
Stephen S. Oler
Portfolio Manager
Templeton Latin America Fund
(4.) SOURCE: BLOOMBERG. BASED ON QUARTERLY PERCENTAGE PRICE CHANGE OVER THE
FIVE-YEAR PERIOD ENDED MARCH 31, 1997.
- -------------------------------------------------------------------------------
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 Latin America Fund Class I shares provided a cumulative total
return of 18.34% 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 initial sales charge. We
always maintain a long-term perspective when managing the Fund, and encourage
our shareholders to view their investments in a similar manner.
The price of the Fund's shares, as measured by net asset value, increased $1.81,
from $10.53 on March 31, 1996, to $12.34 on March 31, 1997. During the reporting
period, Class I shares paid distributions of 7.5 cents ($0.075) per share in
income dividends and 3 cents ($0.03) 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 International Finance Corporation
Investable (IFCI) Latin America Index. This index measures the total return of
equities in seven Latin American countries (Argentina, Brazil, Chile, Colombia,
Mexico, Peru, and Venezuela) as if they were in one market, and includes
reinvested dividends. 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 LATIN AMERICA FUND
CLASS I
Total Return Index Comparison
$10,000 Investment (5/8/95-3/31/97)
TEMPLETON LATIN AMERICA FUND - CLASS I VS. IFCI LATIN AMERICA INDEX
$10,000 Investment from Inception
(5/8/95 - 3/31/97)
<TABLE>
<CAPTION>
DATE Templeton Latin America Fund - Class I IFCI Latin America Index
<S> <C> <C>
5/8/95 $ 9,425 $10,000
5/31/95 $ 9,453 $ 9,579
6/30/95 $ 9,406 $ 9,779
7/31/95 $ 9,482 $10,303
8/31/95 $ 9,604 $10,448
9/30/95 $ 9,632 $10,319
10/31/95 $ 9,340 $ 9,332
11/30/95 $ 9,284 $ 9,655
12/31/95 $ 9,464 $ 9,842
1/31/96 $10,226 $10,802
2/29/96 $ 9,940 $10,205
3/31/96 $10,035 $10,369
4/30/96 $10,369 $10,894
5/31/96 $10,621 $11,192
6/30/96 $10,678 $11,391
7/31/96 $10,210 $10,889
8/31/96 $10,544 $11,185
9/30/96 $10,583 $11,401
10/31/96 $10,277 $11,150
11/30/96 $10,449 $11,237
12/31/96 $10,567 $11,535
1/31/97 $11,586 $12,598
2/28/97 $12,230 $13,422
3/31/97 $11,865 $13,280
</TABLE>
* INCLUDES ALL SALES CHARGES.
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 AT NET ASSET VALUE. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE
RESULTS.
2. INDEX IS UNMANAGED AND INCLUDES REINVESTED DIVIDENDS.
TEMPLETON LATIN AMERICA FUND
CLASS I
Periods ended 3/31/97
<TABLE>
<CAPTION>
Since
Inception
One-Year (5/8/95)
<S> <C> <C>
Cumulative Total Return(1) 18.34% 25.89%
Average Annual Total Return(2) 11.54% 9.43%
Value of $10,000 Investment(3) $11,154 $11,865
</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 SPECIFIED 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 Latin America Fund Class II shares provided a cumulative total
return of 17.62% 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 encourage our
shareholders to view their investments in a similar manner.
The price of the Fund's shares, as measured by net asset value, increased $1.79,
from $10.49 on March 31, 1996, to $12.28 on March 31, 1997. During the reporting
period, Class II shares paid distributions of 2.06 cents ($0.0206) per share in
income dividends and 3 cents ($0.03) 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 International Finance Corporation
Investable (IFCI) Latin America Index. This index measures the total return of
equities in seven Latin American countries (Argentina, Brazil, Chile, Colombia,
Mexico, Peru, and Venezuela) as if they were in one market, and includes
reinvested dividends. 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 LATIN AMERICA FUND
CLASS II
Total Return Index Comparison
$10,000 Investment (5/8/95-3/31/97)
TEMPLETON LATIN AMERICA FUND - CLASS II VS. IFCI LATIN AMERICA INDEX
$10,000 Investment from Inception
(5/8/95 - 3/31/97)
<TABLE>
<CAPTION>
DATE Templeton Latin America Fund - Class II IFCI Latin America Index
<S> <C> <C>
5/8/95 $ 9,901 $10,000
5/31/95 $ 9,911 $ 9,579
6/30/95 $ 9,861 $ 9,779
7/31/95 $ 9,941 $10,303
8/31/95 $10,059 $10,448
9/30/95 $10,089 $10,319
10/31/95 $ 9,772 $ 9,332
11/30/95 $ 9,713 $ 9,655
12/31/95 $ 9,903 $ 9,842
1/31/96 $10,691 $10,802
2/29/96 $10,392 $10,205
3/31/96 $10,482 $10,369
4/30/96 $10,811 $10,894
5/31/96 $11,078 $11,192
6/30/96 $11,128 $11,391
7/31/96 $10,628 $10,889
8/31/96 $10,968 $11,185
9/30/96 $11,008 $11,401
10/31/96 $10,688 $11,150
11/30/96 $10,868 $11,237
12/31/96 $10,972 $11,535
1/31/97 $12,035 $12,598
2/28/97 $12,696 $13,422
3/31/97 $12,315 $13,280
</TABLE>
* INCLUDES ALL SALES CHARGES.
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 AT NET ASSET VALUE. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE
RESULTS.
2. INDEX IS UNMANAGED AND INCLUDES REINVESTED DIVIDENDS.
TEMPLETON LATIN AMERICA FUND
CLASS II
Periods ended 3/31/97
<TABLE>
<CAPTION>
Since
Inception
One-Year (5/8/95)
<S> <C> <C>
Cumulative Total Return(1) 17.62% 24.29%
Average Annual Total Return(2) 15.44% 11.54%
Value of $10,000 Investment(3) $11,544 $12,305
</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 SPECIFIED PERIODS AND INCLUDE ALL SALES CHARGES.
ALL CALCULATIONS ASSUME REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS IN 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 Latin America Fund Advisor Class shares produced an aggregate
total return of 13.09% from inception on January 1, 1997 through March 31, 1997.
The price of the Fund's shares, as measured by net asset value, increased $1.43,
from $10.92 on January 2, 1997 (day of commencement of sales), to $12.35 on
March 31, 1997. Of course, past performance is not predictive of future results.
TEMPLETON LATIN AMERICA FUND
ADVISOR CLASS
Period ended March 31, 1997
<TABLE>
<CAPTION>
Since
Inception
(1/1/97)
<S> <C>
Aggregate Total Return* 13.09%
</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
RETURN FOR THE 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 LATIN AMERICA 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 $ 10.53 $ 10.00
------- ------
Income from investment operations:
Net investment income .06 .12
Net realized and unrealized gain 1.86 .51
------- ------
Total from investment operations 1.92 .63
------- ------
Distributions:
Dividends from net investment income (.08) (.10)
Distributions from net realized gains (.03) --
------- ------
Total distributions (.11) (.10)
------- ------
Change in net asset value 1.81 .53
------- ------
Net asset value, end of period $ 12.34 $ 10.53
======= ======
TOTAL RETURN* 18.34% 6.37%
RATIOS /SUPPLEMENTAL DATA
Net assets, end of period (000) $ 18,923 $ 5,150
Ratio of expenses to average net assets 3.10% 4.02%**
Ratio of expenses, net of reimbursement, to average net assets 2.35% 2.35%**
Ratio of net investment income to average net assets .50% 1.71%**
Portfolio turnover rate 3.72% --
Average commission rate paid (per share) $ .0003 $ .0004
</TABLE>
* TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED FOR PERIODS
OF LESS THAN ONE YEAR.
** ANNUALIZED.
12
<PAGE> 13
TEMPLETON LATIN AMERICA 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 $ 10.49 $ 10.00
------- ------
Income from investment operations:
Net investment income (loss) (.01) .08
Net realized and unrealized gain 1.85 .48
------- ------
Total from investment operations 1.84 .56
------- ------
Distributions:
Dividends from net investment income (.02) (.07)
Distributions from net realized gains (.03) --
------- ------
Total distributions (.05) (.07)
------- ------
Change in net asset value 1.79 .49
------- ------
Net asset value, end of period $ 12.28 $ 10.49
======= ======
TOTAL RETURN* 17.62% 5.67%
RATIOS /SUPPLEMENTAL DATA
Net assets, end of period (000) $ 3,524 $ 1,351
Ratio of expenses to average net assets 3.84% 4.67%**
Ratio of expenses, net of reimbursement, to average net assets 3.00% 3.00%**
Ratio of net investment income (loss) to average net assets (.15)% 1.14%**
Portfolio turnover rate 3.72% --
Average commission rate paid (per share) $ .0003 $ .0004
</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 LATIN AMERICA 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 $10.92
-------
Income from investment operations:
Net investment income .02
Net realized and unrealized gain 1.41
-------
Total from investment operations 1.43
-------
Change in net asset value 1.43
-------
Net asset value, end of period $12.35
=======
TOTAL RETURN* 13.09%
RATIOS /SUPPLEMENTAL DATA
Net assets, end of period (000) $ 71
Ratio of expenses to average net assets 2.08%**
Ratio of expenses, net of reimbursement, to average net assets 2.00%**
Ratio of net investment income to average net assets .82%**
Portfolio turnover rate 3.72%
Average commission rate paid (per share) $.0003
</TABLE>
* NOT ANNUALIZED FOR PERIODS OF LESS THAN ONE YEAR.
** ANNUALIZED.
+ COMMENCEMENT OF SALES.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 15
TEMPLETON LATIN AMERICA FUND
Investment Portfolio, March 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
COMMON STOCKS: 62.4%
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AUTOMOBILES: 2.6%
*Ciadea SA Arg. 98,500 $ 438,391
*Consorcio G Grupo Dina SA de CV, ADR Mex. 59,000 147,500
-----------
585,891
- ---------------------------------------------------------------------------------------------------------------------
BANKING: 9.5%
Banco de Galicia y Buenos Aires SA, B Arg. 21,645 132,487
Banco Ganadero SA, ADR Col. 13,800 434,700
Corporacion Financiera del Valle, ADR, B, 144A Col. 8,906 33,399
Credicorp, Ltd. Per. 27,900 652,162
*Grupo Financiero Banamex Accival SA, B Mex. 386,000 880,116
-----------
2,132,864
- ---------------------------------------------------------------------------------------------------------------------
BEVERAGES & TOBACCO:
1.1%
Cristalerias de Chile SA, ADR Chil. 12,200 257,725
- ---------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS &
COMPONENTS: 0.7%
*Corcemar Corp. Arg. 11,626 70,348
*Mirgor SA Comercial Industrial Financiera
Inmobiliari Agropecuaria, ADR, 144A Arg. 34,000 89,250
-----------
159,598
- ---------------------------------------------------------------------------------------------------------------------
CONSTRUCTION & HOUSING:
2.3%
*Empresas ICA Sociedad Controladora SA, ADR Mex. 32,500 515,937
- ---------------------------------------------------------------------------------------------------------------------
ENERGY SOURCES: 6.6%
Perez Companc SA, B Arg. 96,710 747,680
Transportadora de Gas del Sur SA, ADR B Arg. 9,200 118,450
YPF Sociedad Anonima, ADR Arg. 23,300 617,450
-----------
1,483,580
- ---------------------------------------------------------------------------------------------------------------------
FOOD & HOUSEHOLD
PRODUCTS: 5.0%
Grupo industrial Maseca SA de CV, ADR B Mex. 9,700 151,562
Herdez SA de CV, A Mex. 300,000 127,499
Panamerican Beverages Inc., A Mex. 9,600 257,400
*Pepsi-Gemex SA de CV Mex. 43,500 73,510
Tablex SA de CV Mex. 145,000 512,012
-----------
1,121,983
- ---------------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER:
6.4%
*Aracruz Celulose SA, ADR Braz. 35,050 639,662
*Empaques Ponderosa SA de CV, B Mex. 1,291,500 807,849
-----------
1,447,511
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
TEMPLETON LATIN AMERICA FUND
Investment Portfolio, March 31, 1997 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL COMPONENTS: 1.5%
Madeco Manufacturera de Cobre SA, ADR Chil. 12,100 $ 323,675
- ---------------------------------------------------------------------------------------------------------------------
MERCHANDISING: 2.4%
Cifra SA de CV, A Mex. 25,073 34,023
Cifra SA, C Mex. 362,000 506,741
-----------
540,764
- ---------------------------------------------------------------------------------------------------------------------
METALS & MINING: 3.8%
Companhia Siderurgica Nacional Braz. 9,700,000 347,890
*Grupo Mexico SA de CV, B Mex. 117,000 391,008
*Grupo Simec SA de CV, ADR Mex. 35,000 122,500
-----------
861,398
- ---------------------------------------------------------------------------------------------------------------------
MULTI-INDUSTRY: 6.2%
Alfa SA de CV, A Mex. 45,000 252,822
Alfa SA de CV, A 144A Mex. 37,000 207,876
Banco De Credito del Peru Per. 98,898 169,774
Banco Wiese, ADR Per. 18,000 112,500
*DESC SA, B Mex. 61,600 411,728
La Cemento Nacional CA, GDR Ecu. 820 197,620
La Cemento Nacional CA, GDR, 144a Ecu. 200 48,200
-----------
1,400,520
- ---------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS: 10.7%
Cpt-Telefonica del Peru SA, B Per. 266,000 590,108
Telebras-Telecomunicacoes Brasileiras SA Braz. 611,975 61,697
Telecom Argentina Stet France SA, ADR Arg. 10,900 501,400
Telecomunicacoes de Minas Gerais SA Braz. 1,635,113 219,199
Telefonica de Argentina SA, B, ADR Arg. 17,100 502,313
Telesp-Telecomunicacoes de Sao Paulo SA Braz. 16,587 4,150
Telmex-Telefonos de Mexico SA, L, ADR Mex. 13,500 519,750
-----------
2,398,617
- ---------------------------------------------------------------------------------------------------------------------
TEXTILES & APPAREL: 0.1%
Coteminas Cia Tecidos Norte de Minas Braz. 70,000 26,434
- ---------------------------------------------------------------------------------------------------------------------
TRANSPORTATION: 1.7%
Transportacion Maritima Mexicana SA de CV, ADR, A Mex. 38,400 168,000
Transportacion Maritima Mexicana SA de CV, L, ADR Mex. 36,900 202,950
-----------
370,950
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
TEMPLETON LATIN AMERICA 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: 1.8%
Central Costanera SA, ADR, 144A Arg. 9,100 $ 324,188
Central Puerto SA, ADR Arg. 4,700 75,211
-----------
399,399
-----------
TOTAL COMMON STOCKS
(cost $12,942,980) 14,026,846
- ---------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS: 31.4%
- ---------------------------------------------------------------------------------------------------------------------
Banco Bradesco SA, pfd. Braz. 80,450,730 664,568
Banco Ganadero SA, pfd., ADR C Col. 17,600 446,600
Ceval Alimentos SA, pfd. Braz. 58,500,000 629,596
Cia Brasileira de Petroleo Ipiranga, pfd. Braz. 39,710,000 629,812
Cia de Inversiones en Telecomunicaciones SA,
7.00%, conv., pfd. Arg. 2,350 137,475
Cia Energetica de Minas Gerais, pfd., ADR Braz. 9,200 391,920
Cia Vale do Rio Doce, pfd., ADR Braz. 40,400 919,179
Coteminas Cia Tecidos Norte de Minas, pfd. Braz. 1,491,000 596,822
Lojas Americanas SA, pfd. Braz. 13,100,000 175,615
Petrobras-Petroleo Brasileiro SA, pfd. Braz. 480,000 95,388
Telebras-Telecomunicacoes Brasileiras SA, pfd. Braz. 10,429 1,079
Telebras-Telecomunicacoes Brasileiras SA, pfd., ADR Braz. 9,850 1,008,394
Telecomunicacoes de Minas Gerais SA, pfd. Braz. 4,585,000 621,145
Telesp-Telecomunicacoes de Sao Paulo SA, pfd. Braz. 1,177,057 298,917
Weg SA, pfd. Braz. 839,600 459,721
-----------
TOTAL PREFERRED STOCKS
(cost $6,610,481) 7,076,231
- ---------------------------------------------------------------------------------------------------------------------
PRINCIPAL IN
LOCAL CURRENCY**
- ---------------------------------------------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS:
9.5% (cost $2,148,390)
- ---------------------------------------------------------------------------------------------------------------------
U. S. Treasury Bills, 4.53% to 5.08% with
maturities to 6/19/97 U.S. 2,164,000 2,148,410
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS: 103.3%
(cost $21,701,851) 23,251,487
OTHER ASSETS, LESS
LIABILITIES: (3.3)% (733,330)
-----------
TOTAL NET ASSETS: 100.0% $22,518,157
===========
</TABLE>
* NON-INCOME PRODUCING.
** CURRENCY OF COUNTRY INDICATED.
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> 18
TEMPLETON LATIN AMERICA FUND
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1997
<TABLE>
<S> <C>
Assets:
Investments in securities, at value
(identified cost $21,701,851) $23,251,487
Cash 194,377
Receivables:
Fund shares sold 402,533
Dividends 43,308
Fee reimbursement 1,891
Unamortized organization costs 54,468
-----------
Total assets 23,948,064
-----------
Liabilities:
Payables:
Investment securities purchased 983,221
Fund shares redeemed 383,309
Accrued expenses 63,377
-----------
Total liabilities 1,429,907
-----------
Net assets, at value $22,518,157
===========
Net assets consist of:
Undistributed net investment income $ 3,128
Net unrealized appreciation 1,549,636
Dividends paid in excess of net realized
gains (856)
Net capital paid in on shares of
beneficial interest 20,966,249
-----------
Net assets, at value $22,518,157
===========
Class I
Net asset value per share
($18,923,209 divided by
1,533,851 shares outstanding) $ 12.34
===========
Maximum offering price
($12.34 divided by 94.25%) $ 13.09
===========
Class II
Net asset value per share
($3,523,806 divided by 286,940 shares
outstanding) $ 12.28
===========
Maximum offering price
($12.28 divided by 99.00%) $ 12.40
===========
Advisor Class
Net asset value per share
($71,142 divided by 5,759 shares
outstanding) $ 12.35
===========
</TABLE>
STATEMENT OF OPERATIONS
for the year ended March 31, 1997
<TABLE>
<S> <C> <C>
Investment income:
(net of $13,066 foreign
taxes withheld)
Dividends $ 216,811
Interest 87,245
----------
Total income $ 304,056
Expenses:
Management fees (Note 3) 133,551
Administrative fees (Note 3) 16,026
Distribution fees (Note 3)
Class I 29,850
Class II 21,504
Transfer agent fees (Note 3) 28,250
Custodian fees 11,750
Reports to shareholders 21,000
Audit fees 8,100
Legal fees 4,050
Registration and filing fees 53,700
Trustees' fees and expenses 225
Amortization of organization
costs 18,064
Other 519
----------
Total expenses 346,589
Less expenses reimbursed
(Note 3) (82,124)
----------
Total expenses less
reimbursement 264,465
----------
Net investment income 39,591
Realized and unrealized gain
(loss):
Net realized gain (loss) on:
Investments 49,055
Foreign currency
transactions (23,461)
----------
25,594
Net unrealized appreciation
on investments 1,357,093
----------
Net realized and
unrealized gain 1,382,687
----------
Net increase in net assets
resulting from operations $1,422,278
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE> 19
TEMPLETON LATIN AMERICA FUND
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MAY 8, 1995
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
MARCH 31, 1997 MARCH 31, 1996
-------------- -----------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 39,591 $ 56,599
Net realized gain on investment and foreign currency transaction 25,594 512
Net unrealized appreciation 1,357,093 192,543
----------- ----------
Net increase in net assets resulting from operations 1,422,278 249,654
Distributions to shareholders:
From net investment income
Class I (47,435) (35,519)
Class II (3,376) (7,244)
From net realized gain
Class I (20,552) --
Class II (5,898) --
Fund share transactions (Note 2)
Class I 12,752,973 4,989,263
Class II 1,850,205 1,305,303
Advisor Class 68,505 --
----------- ----------
Net increase in net assets 16,016,700 6,501,457
Net assets:
Beginning of period 6,501,457 --
----------- ----------
End of period $ 22,518,157 $ 6,501,457
=========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE> 20
TEMPLETON LATIN AMERICA FUND
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton Latin America 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 and debt obligations of issuers in
Latin American countries. 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.
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.
20
<PAGE> 21
TEMPLETON LATIN AMERICA FUND
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
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 1,760,552 $21,123,956 601,968 $ 6,143,719
Shares issued on reinvestment of distributions 5,419 57,611 3,013 29,565
Shares redeemed (721,346) (8,428,594) (115,755) (1,184,021)
--------- ---------- -------- -----------
Net increase 1,044,625 $12,752,973 489,226 $ 4,989,263
========= ========== ======== ===========
</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 173,080 $ 2,019,340 131,412 $ 1,332,030
Shares issued on reinvestment of distributions 840 8,969 738 7,232
Shares redeemed (15,804) (178,104) (3,326) (33,959)
--------- ---------- -------- -----------
Net increase 158,116 $ 1,850,205 128,824 $ 1,305,303
========= ========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
----------------------
FOR THE PERIOD
JANUARY 2, 1997
THROUGH
MARCH 31, 1997
----------------------
SHARES AMOUNT
-------- -----------
<S> <C> <C>
Shares sold 6,077 $72,544
Shares redeemed (318) (4,039)
----- -------
Net increase 5,759 $68,505
===== =======
</TABLE>
21
<PAGE> 22
TEMPLETON LATIN AMERICA 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
Investment Counsel, Inc. (TICI), 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 TICI equal, on an annual
basis, to 1.25% 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. TICI and FTSI have voluntarily
agreed to reduce their respective fees to the extent necessary to limit total
expenses to an annual rate of 2.35%, 3.00% and 2.00% 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
received net commissions of $35,174 from the sale of the Fund's shares and FTIS
received fees of $28,250.
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 $180,742. Class II
shares redeemed within 18 months are subject to a contingent deferred sales
charge. Contingent deferred sales of $852 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 $14,609,160 and $342,114, 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 $2,153,752
Unrealized depreciation (604,116)
---------
Net unrealized appreciation $1,549,636
=========
</TABLE>
22
<PAGE> 23
TEMPLETON LATIN AMERICA FUND
Independent Auditor's Report
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
Templeton Latin America Fund
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of Templeton Latin America 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 Latin America 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
23
<PAGE> 24
[MAP OF WORLD]
Templeton Latin America 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 is preceded or accompanied by a current prospectus of the Templeton
Latin America Fund, which contains more complete information, including charges
and expenses. Like any investment in securities, the ability 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
Managere, 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 the 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]
TL418 A97 5/97
TEMPLETON
LATIN
AMERICA
FUND
Annual Report
March 31, 1997
[FRANKLIN TEMPLETON 50 YEARS LOGO]
[FRANKLIN TEMPLETON LOGO]
