ANNUAL REPORT
TEMPLETON GREATER EUROPEAN FUND
MARCH 31, 1998
[FRANKLIN TEMPLETON LOGO]
PAGE
[LOGO]CELEBRATING 50 YEARS
Thank you for investing with Franklin Templeton. We encourage our investors
to maintain a long-term perspective, and to expect that mixed in with the good
years can be some bad years. It's important to remember that all securities
markets move both up and down, as do mutual fund share prices. We appreciate
your past support and look forward to serving your investment needs in the years
ahead.
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 the Templeton funds, which are managed by many of the investment
professionals he selected and trained.
[PHOTO]
MARK G. HOLOWESKO, CFA
President
Templeton Global Investment Trust
PAGE
SHAREHOLDER LETTER
CONTENTS
Your Fund's Objective: Templeton Greater European Fund seeks to achieve
long-term capital appreciation by investing primarily in equity securities of
companies in "Greater European Companies," including Western, Central and
Eastern Europe and Russia, as defined in the Fund's prospectus.
Dear Shareholder:
We are pleased to bring you the annual report of Templeton Greater European Fund
for the fiscal year ended March 31, 1998. During this period, attempts by many
European governments to meet European Monetary Union (EMU) requirements led to
declining interest rates, more prudent fiscal spending and proposed tax
reductions. In the private sector, a number of European corporations announced
plans to cut costs, improve efficiency, reduce debt burdens and buy back shares.
All of these factors contributed to the advance of most Western European stock
markets, with Italy, Spain, and the United Kingdom (U.K.) among the top
performers. Although the Polish market fell, many Russian share prices rose
considerably. Within this environment, Templeton Greater European Fund's Class I
shares delivered a one-year cumulative total return of 28.25%, as discussed in
the Performance Summary on page 6.
You will find a complete listing of the Fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 19 of
this report.
CONTENTS
Shareholder Letter ................ 1
Performance Summaries
Class I ........................ 6
Class II ....................... 9
Advisor Class .................. 13
Financial Highlights &
Statement of Investments .......... 16
Financial Statements .............. 23
Notes to the Financial
Statements ........................ 26
Independent Auditor's Report ...... 30
Tax Designation ................... 31
[PYRAMID GRAPH]
PAGE
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
3/31/98
This chart shows in bar format the geographic distribution breakdown of the
Fund's securities on March 31, 1998, based on total net assets.
[BAR GRAPH]
<TABLE>
<S> <C>
United Kingdom 21.4%
France 8.5%
Spain 5.4%
Netherlands 5.0%
Sweden 5.0%
Italy 4.6%
Germany 3.6%
Finland 3.1%
Other Countries 10.2%
Fixed-Income Securities 0.4%
Short-term Investments & Other Net Assets 32.8%
</TABLE>
During the reporting period, the Fund profited from the performance of most of
its banking holdings, which rose in value as a result of falling interest rates
and improving business conditions. It also benefited from the appreciable gain
in share prices of Repsol SA, a Spanish energy company; Sandvik AB, a Swedish
tools producer; and Telecom Italia SpA.
Our largest geographic exposure on March 31, 1998 was the U.K. During the
reporting period, it was successful in reforming labor markets, deregulating
financial markets, and privatizing a number of state-owned enterprises. However,
stock valuation levels there appeared reasonable, and we established positions
in the Rank Group Plc., an operator of leisure establishments, and Peninsular &
Oriental Steam Navigation Co., a global shipping company. We also found stocks
meeting our bargain criteria in other parts of Europe. We initiated a position
in Italian luxury goods retailer Gucci Group NV, and purchased shares of Norsk
Hydro AS, Norway's largest industrial group.
On the sell side, we realized substantial gains by eliminating our holdings of
Alcatel Alsthom SA, a provider of French telecommunications equipment. We also
profited by liquidating our positions in Skandia Foersaekrings AB, a Swedish
insurance company, and VEBA AG, a German utilities firm.
Looking forward, we believe the remainder of the year will prove to be an
exciting period as Europe continues to move toward implementing the EMU. The EMU
may result in lower taxes and interest costs, which we feel should lead to
higher profits for European corporations. Some
2
PAGE
analysts believe that about one-half of the 14%-16% U.S. corporate earnings
growth during most of the 1990s was due to lower taxes and interest costs. If
history is a guide to the future, European companies could follow suit and
deliver substantial earnings.
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 investments are made. Emerging markets involve heightened risks related to
the same factors, in addition to risks associated with their relatively small
size and lesser liquidity. 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.
Please remember this discussion reflects our views, opinions and portfolio
holdings as of March 31, 1998, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the Fund's portfolio composition. Although historic
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
TOP 10 HOLDINGS
3/31/98
<TABLE>
<CAPTION>
COMPANY % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
----------------- ----------
<S> <C>
Telecom Italia SpA, di Risp
Telecommunications, Italy 1.8%
Volkswagen AG, pfd.
Automobiles, Germany 1.6%
British Telecommunications Plc.
Telecommunications,
United Kingdom 1.6%
Nokia AB, A
Telecommunications, Finland 1.5%
Axa-UAP
Financial Services, France 1.5%
Fiat SpA, pfd.
Automobiles, Italy 1.4%
Somerfield Plc.
Merchandising, United Kingdom 1.4%
National Westminster Bank Plc.
Banking, United Kingdom 1.3%
Societe Elf Aquitaine SA
Energy Sources, France 1.3%
Banque Nationale de Paris BNP
Banking, France 1.2%
</TABLE>
3
PAGE
TOP 10 INDUSTRIES
3/31/98
This table shows the top 10 industries of the Fund's securities on March 31,
1998, based on total net assets.
<TABLE>
<CAPTION>
% OF TOTAL
INDUSTRY NET ASSETS
<S> <C>
Banking 9.4%
Automobiles 6.7%
Telecommunications 6.4%
Utilities Electrical & Gas 5.0%
Energy Sources 3.9%
Forest Products & Paper 3.7%
Merchandising 3.4%
Transportation 3.4%
Electrical & Electronics 2.9%
Construction & Housing 2.7%
</TABLE>
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 G. Holowesko
Mark G. Holowesko, CFA
President
Templeton Global Investment Trust
Portfolio Manager
Templeton Greater European Fund
4
PAGE
THE EUROPEAN MONETARY UNION:
WHAT? WHEN? HOW?
[SPECIAL REPORT LOGO]
WHAT IS THE EUROPEAN MONETARY UNION?
The European Monetary Union (EMU) refers to the establishment of a common market
and a single European currency called the euro. Luxembourg and Finland have
already met the criteria for joining the EMU. Austria, Belgium, France, Germany,
Ireland, Italy, the Netherlands, Portugal, and Spain are also expected to join.
The United Kingdom has decided not to join with this first wave of countries.
Greece, Denmark, and Sweden will remain outside EMU for the time being.
WHEN WILL THE EMU TAKE EFFECT?
On March 25, 1998, the European Commission (EC) recommended countries for the
EMU. In early May, European Union heads of government and finance ministers will
confirm EC recommendations and announce exchange rates, which will be used to
fix conversion rates under EMU guidelines. On January 1, 1999, the euro will
become legal tender in qualifying countries.
HOW WILL IT BENEFIT THE EUROPEAN COMMUNITY?
The EMU is expected to result in lower transaction costs and higher mobility for
European workers. Consumers should benefit from increased competition of goods
and services, but this may intensify pricing pressure for corporations.
5
PAGE
PERFORMANCE SUMMARY
CLASS I
Templeton Greater European Fund - Class I produced a 28.25% cumulative total
return for the one-year period ended March 31, 1998. Cumulative total return
measures the change in value of an investment, assuming reinvestment of
dividends and capital gains, if any, and does not include the initial sales
charge.
The Fund's share price, as measured by net asset value, increased $1.91, from
$12.35 on March 31, 1997, to $14.26 on March 31, 1998. During the reporting
period, shareholders received per-share distributions of 22.5 cents ($0.225) in
income dividends, 23 cents ($0.23) in short-term capital gains, and 85.5 cents
($0.855) in long-term capital gains. Distributions will vary depending on income
earned by the Fund and any profits realized from the sale of securities in the
portfolio, as well as the level of the Fund's operating expenses.
The graph on page 7 compares the performance of the Fund's Class I shares since
inception with the unmanaged Morgan Stanley Capital International(R) (MSCI)
Europe Index, a market capitalization-weighted index consisting of large, medium
and small capitalization companies from 15 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
Past performance is not predictive of future results.
6
PAGE
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, nor is an index representative of the Fund's
portfolio.
The following line graph hypothetically compares the performance of the
Templeton Greater European Fund Class I shares to that of the MSCI Europe Index,
based on a $10,000 investment from 5/8/95 to 3/31/98
[LINE GRAPH]
<TABLE>
<CAPTION>
Total Return Index Comparison
<S> <C> <C>
Templeton Greater European Fund - Class I MSCI Europe
Index
----------------------------------------------------------------------
5/ 8/95 $9,425 $10,000
5/31/95 $9,444 $10,006
6/30/95 $9,416 $10,104
7/31/95 $9,472 $10,635
8/31/95 $9,491 $10,227
9/29/95 $9,312 $10,540
10/31/95 $9,171 $10,494
11/30/95 $9,142 $10,572
12/29/95 $9,284 $10,911
1/31/96 $9,877 $10,985
2/29/96 $10,028 $11,189
3/29/96 $9,793 $11,327
4/30/96 $9,906 $11,413
5/31/96 $10,066 $11,505
6/28/96 $10,170 $11,635
7/31/96 $9,924 $11,494
8/30/96 $10,407 $11,839
9/30/96 $10,445 $12,092
10/31/96 $10,643 $12,377
11/29/96 $10,908 $13,008
12/31/96 $11,271 $13,264
1/31/97 $11,725 $13,304
2/28/97 $11,831 $13,483
3/31/97 $11,918 $13,923
4/30/97 $11,754 $13,858
5/30/97 $11,956 $14,453
6/30/97 $12,493 $15,180
7/31/97 $12,881 $15,896
8/29/97 $12,622 $14,991
9/30/97 $13,597 $16,449
10/31/97 $13,120 $15,644
11/28/97 $12,981 $15,889
12/31/97 $13,033 $16,473
1/30/98 $13,183 $17,163
2/27/98 $14,105 $18,509
3/31/98 $15,284 $19,832
</TABLE>
AVERAGE ANNUAL TOTAL RETURN***
1-Year Since Inception
20.91% 15.77%
THE HISTORICAL PERFORMANCE SHOWN PERTAINS ONLY TO THE FUND'S CLASS I SHARES. THE
FUND OFFERS OTHER SHARE CLASSES SUBJECT TO DIFFERENT FEES AND EXPENSES, WHICH
AFFECT THEIR PERFORMANCE. SEE THE PROSPECTUS FOR DETAILS.
*Includes the sales charge 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.
**Index is unmanaged and includes reinvested dividends. One cannot invest
directly in an index.
***Please see total return information on page 8.
Past performance is not predictive of future results.
7
PAGE
CLASS I
Periods ended 3/31/98
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR (5/8/95)
<S> <C> <C>
Cumulative Total Return(1) 28.25% 62.17%
Average Annual Total Return(2) 20.91% 15.77%
Value of $10,000 Investment(3) $12,091 $15,284
3/31/97 3/31/98
One-Year Total Return(4) 21.70% 28.25%
</TABLE>
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include the sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and 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 periods indicated and include the maximum 5.75% initial sales
charge.
4. One-year total return represents the change in value of an investment over
the periods ended on the dates indicated and does not include the sales charge.
All calculations assume reinvestment of dividends and capital gains at net asset
value. Since markets can go down as well as up, investment return and principal
value will fluctuate with market conditions, currency volatility, and the
economic, social and political climates of countries where investments are made.
Emerging markets involve heightened risks related to the same factors, in
addition to those associated with their relatively small size and lesser
liquidity. You may have a gain or loss when you sell your shares.
The Fund's Investment Manager and Fund Administrator have agreed in advance to
waive 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 Fund's
total returns would have been lower. After August 1, 1998, the fee waivers and
expense reimbursements may be discontinued at any time upon notice to the Fund's
Board of Trustees.
Past performance is not predictive of future results.
8
PAGE
CLASS II
Templeton Greater European Fund - Class II produced a 27.55%
cumulative total return for the one-year period ended March 31, 1998. Cumulative
total return measures the change in value of an investment, assuming
reinvestment of dividends and capital gains, if any, and does not include sales
charges.
The Fund's share price, as measured by net asset value, increased $1.89, from
$12.27 on March 31, 1997, to $14.16 on March 31, 1998. During the reporting
period, shareholders received per-share distributions of 15.59 cents ($0.1559)
in income dividends, 23 cents ($0.23) in short-term capital gains, and 85.5
cents ($0.855) in long-term capital gains. Distributions will vary depending on
income earned by the Fund and any profits realized from the sale of securities
in the portfolio, as well as the level of the Fund's operating expenses.
Past performance is not predictive of future results.
9
PAGE
The graph on page 11 compares the performance of the Fund's Class II shares
since inception with the unmanaged Morgan Stanley Capital International (MSCI)
Europe Index, a market capitalization-weighted index consisting of large, medium
and small capitalization companies from 15 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, nor is an index representative of the Fund's portfolio.
Past performance is not predictive of future results.
10
PAGE
CLASS II
Total Return Index Comparison
$10,000 Investment (5/8/95 - 3/31/98)
[LINE GRAPH]
The following line graph hypothetically compares the performance of the
Templeton Greater European Fund Class II shares to that of the MSCI Europe
Index, based on a $10,000 investment from 5/8/95 to 3/31/98.
<TABLE>
<CAPTION>
Total Return Index Comparison
<S> <C> <C>
Templeton Greater European Fund - Class II MSCI Europe
Index
-----------------------------------------------------------------------
5/ 8/95 $9,901 $10,000
5/31/95 $9,911 $10,006
6/30/95 $9,881 $10,104
7/31/95 $9,941 $10,635
8/31/95 $9,951 $10,227
9/29/95 $9,762 $10,540
10/31/95 $9,604 $10,494
11/30/95 $9,574 $10,572
12/29/95 $9,713 $10,911
1/31/96 $10,317 $10,985
2/29/96 $10,475 $11,189
3/29/96 $10,218 $11,327
4/30/96 $10,337 $11,413
5/31/96 $10,500 $11,505
6/28/96 $10,599 $11,635
7/31/96 $10,322 $11,494
8/30/96 $10,817 $11,839
9/30/96 $10,847 $12,092
10/31/96 $11,055 $12,377
11/29/96 $11,322 $13,008
12/31/96 $11,692 $13,264
1/31/97 $12,155 $13,304
2/28/97 $12,256 $13,483
3/31/97 $12,346 $13,923
4/30/97 $12,165 $13,858
5/30/97 $12,378 $14,453
6/30/97 $12,917 $15,180
7/31/97 $13,310 $15,896
8/29/97 $13,041 $14,991
9/30/97 $14,035 $16,449
10/31/97 $13,538 $15,644
11/28/97 $13,414 $15,889
12/31/97 $13,468 $16,473
1/30/98 $13,613 $17,163
2/27/98 $14,547 $18,509
3/31/98 $15,746 $19,832
</TABLE>
AVERAGE ANNUAL TOTAL RETURN***
<TABLE>
<CAPTION>
1-Year Since Inception
------ ---------------
<S> <C>
25.33% 16.97%
</TABLE>
THE HISTORICAL PERFORMANCE SHOWN PERTAINS ONLY TO THE FUND'S CLASS II SHARES.
THE FUND OFFERS OTHER SHARE CLASSES SUBJECT TO DIFFERENT FEES AND EXPENSES,
WHICH AFFECT THEIR PERFORMANCE. SEE THE PROSPECTUS FOR DETAILS.
*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.
**Index is unmanaged and includes reinvested dividends. One cannot invest
directly in an index.
***Please see total return information on page 12.
Past performance is not predictive of future results.
11
PAGE
CLASS II
Periods ended 3/31/98
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR (5/8/95)
- ------------------------------------------------------------------------
<S> <C> <C>
Cumulative Total Return(1) 27.55% 59.05%
Average Annual Total Return(2) 25.33% 16.97%
Value of $10,000 Investment(3) $ 12,533 $ 15,746
3/31/97 3/31/98
- ------------------------------------------------------------------------
One-Year Total Return(4) 20.83% 27.55%
</TABLE>
(1) Cumulative total return represents the change in value of an investment
over the periods indicated and does not include sales charges.
(2) Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the 1.0% initial sales
charge and the 1.0% contingent deferred sales charge applicable to shares
redeemed within 18 months of investment.
(3) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated and include all sales charges.
(4) One-year total return represents the change in value of an investment over
the periods ended on the dates indicated and does not include the sales charges.
All calculations assume reinvestment of dividends and capital gains at net asset
value. Since markets can go down as well as up, investment return and principal
value will fluctuate with market conditions, currency volatility, and the
economic, social and political climates of countries where investments are made.
Emerging markets involve heightened risks related to the same factors, in
addition to those associated with their relatively small size and lesser
liquidity. You may have a gain or loss when you sell your shares.
The Fund's Investment Manager and Fund Administrator have agreed in advance to
waive 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 Fund's
total returns would have been lower. After August 1, 1998, the fee waivers and
expense reimbursements may be discontinued at any time upon notice to the Fund's
Board of Trustees.
Past performance is not predictive of future results.
12
PAGE
ADVISOR CLASS
Templeton Greater European Fund - Advisor Class produced a 28.88% cumulative
total return for the one-year period ended March 31, 1998. Cumulative total
return measures the change in value of an investment, assuming reinvestment of
dividends and capital gains, if any.
The Fund's share price, as measured by net asset value, increased $1.94, from
$12.36 on March 31, 1997, to $14.30 on March 31, 1998. During the reporting
period, shareholders received per-share distributions of 26.55 cents ($0.2655)
in income dividends, 23 cents ($0.23) in short-term capital gains, and 85.5
cents ($0.855) in long-term capital gains. Distributions will vary depending on
income earned by the Fund and any profits realized from the sale of securities
in the portfolio, as well as the level of the Fund's operating expenses.
The graph on page 14 compares the performance of the Fund's Advisor Class shares
since the Fund's inception with the unmanaged Morgan Stanley Capital
International (MSCI) Europe Index, a market capitalization-weighted index
consisting of large, medium and small capitalization companies from 15 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 management expenses. Of course, one cannot invest
directly in an index, nor is an index representative of the Fund's portfolio.
Past performance is not predictive of future results.
13
PAGE
ADVISOR CLASS
Total Return Index Comparison
$10,000 Investment (5/8/95 - 3/3/98)
The following line graph hypothetically compares the performance of the
Templeton Greater European Fund Advisor Class shares to that of the MSCI Europe
Index, based on a $10,000 investment from 5/8/95 to 3/31/98.
<TABLE>
<CAPTION>
Total Return Index Comparison
<S> <C> <C>
Templeton Greater European - Advisor Class MSCI Europe
-------------------------------------------------------------------------------
5/ 8/95 $10,000 $10,000
5/31/95 $10,020 $10,006
6/30/95 $9,990 $10,104
7/31/95 $10,050 $10,635
8/31/95 $10,070 $10,227
9/29/95 $9,880 $10,540
10/31/95 $9,730 $10,494
11/30/95 $9,700 $10,572
12/29/95 $9,850 $10,911
1/31/96 $10,480 $10,985
2/29/96 $10,640 $11,189
3/29/96 $10,390 $11,327
4/30/96 $10,510 $11,413
5/31/96 $10,680 $11,505
6/28/96 $10,791 $11,635
7/31/96 $10,530 $11,494
8/30/96 $11,042 $11,839
9/30/96 $11,082 $12,092
10/31/96 $11,293 $12,377
11/29/96 $11,574 $13,008
12/31/96 $11,959 $13,264
1/31/97 $12,440 $13,304
2/28/97 $12,553 $13,483
3/31/97 $12,656 $13,923
4/30/97 $12,491 $13,858
5/30/97 $12,705 $14,453
6/30/97 $13,286 $15,180
7/31/97 $13,708 $15,896
8/29/97 $13,434 $14,991
9/30/97 $14,479 $16,449
10/31/97 $13,972 $15,644
11/28/97 $13,845 $15,889
12/31/97 $13,914 $16,473
1/30/98 $14,074 $17,163
2/27/98 $15,055 $18,509
3/31/98 $16,310 $19,832
</TABLE>
THE HISTORICAL PERFORMANCE SHOWN PERTAINS ONLY TO THE FUND'S ADVISOR CLASS
SHARES. THE FUND OFFERS OTHER SHARE CLASSES SUBJECT TO DIFFERENT FEES AND
EXPENSES, WHICH AFFECT THEIR PERFORMANCE. SEE THE PROSPECTUS FOR DETAILS.
*Performance figures represent the change in value of an investment over the
period shown, assuming reinvestment of dividends and capital gains at net asset
value. On January 2, 1997, the Fund began selling Advisor Class shares to
certain eligible investors as described in the prospectus. This share class does
not have sales charges or a Rule 12b-1 plan. Performance quotations have been
calculated as follows: (a) For periods prior to January 2, 1997, figures reflect
the Fund's Class I performance, excluding the effect of the Class I sales
charge, but including the effect of Class I expenses, including Rule 12b-1 fees;
and (b) for periods after January 1, 1997, figures reflect actual Advisor Class
performance, including the deduction of all fees and expenses applicable only to
that class. Past performance is not predictive of future results.
**Index is unmanaged and includes reinvested dividends. One cannot invest
directly in an index.
Past performance is not predictive of future results.
14
PAGE
ADVISOR CLASS
Periods ended 3/31/98
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR* (5/8/95)*
- ----------------------------------------------------------------------------
<S> <C> <C>
Cumulative Total Return(1) 28.88% 63.10%
Average Annual Total Return(1) 28.88% 18.44%
Value of $10,000 Investment(2) $12,888 $16,310
3/31/97 3/31/98
- ----------------------------------------------------------------------------
One-Year Total Return(3) 21.80% 28.88%
</TABLE>
*On January 2, 1997, the Fund began selling Advisor Class shares to certain
eligible investors as described in the prospectus. This share class does not
have sales charges or a Rule 12b-1 plan. Performance quotations have been
calculated as follows: (a) For periods prior to January 2, 1997, figures reflect
the Fund's Class I performance, excluding the effect of the Class I sales
charge, but including the effect of Class I expenses, including Rule 12b-1 fees;
and (b) for periods after January 1, 1997, figures reflect actual Advisor Class
performance, including the deduction of all fees and expenses applicable only to
that class. Since January 2, 1997 (commencement of sales), the cumulative total
return of Advisor Class shares was 37.80%.
1. Cumulative total return represents the change in value of an investment over
the periods indicated. Average annual total return represents the average annual
change in value of an investment over the periods indicated.
2. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated.
3. One-year total return represents the change in value of an investment over
the periods ended on the dates indicated.
All calculations assume reinvestment of dividends and capital gains at net asset
value. Since markets can go down as well as up, investment return and principal
value will fluctuate with market conditions, currency volatility and the
economic, social and political climates of countries where investments are made.
Emerging markets involve heightened risks related to the same factors, in
addition to those associated with their relatively small size and lesser
liquidity. You may have a gain or loss when you sell your shares.
The Fund's Investment Manager and Fund Administrator have agreed in advance to
waive 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 Fund's
total returns would have been lower. After August 1, 1998, the fee waivers and
expense reimbursements may be discontinued at any time upon notice to the Fund's
Board of Trustees.
Past performance is not predictive of future results.
15
PAGE
TEMPLETON GREATER EUROPEAN FUND
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------
1998 1997 1996+
---------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE - CLASS I
(For a share outstanding throughout the year)
Net asset value, beginning of year.......................... $12.35 $10.39 $10.00
---------------------------
Income from investment operations:
Net investment income...................................... .23 .14 .08
Net realized and unrealized gains.......................... 2.99 2.09 .31
---------------------------
Total from investment operations............................ 3.22 2.23 .39
---------------------------
Less distributions from:
Net investment income...................................... (.23) (.13) --
Net realized gains......................................... (1.08) (.14) --
---------------------------
Total distributions......................................... (1.31) (.27) --
---------------------------
Net asset value, end of year................................ $14.26 $12.35 $10.39
===========================
Total Return*............................................... 28.25% 21.70% 3.90%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)............................. $19,455 $9,268 $4,308
Ratios to average net assets:
Expenses................................................... 1.85% 1.85% 1.85%**
Expenses, excluding waiver and payments by affiliate....... 2.41% 2.63% 3.56%**
Net investment income...................................... 2.04% 1.72% 1.39%**
Portfolio turnover rate..................................... 27.59% 30.58% 9.86%
Average commission rate paid***............................. $.0213 $.0264 $.0205
</TABLE>
*Total return does not reflect sales commissions and is not annualized.
**Annualized.
***Relates to purchases and sales of equity securities.
+For the period May 8, 1995 (commencement of operations) to March 31, 1996.
16
PAGE
TEMPLETON GREATER EUROPEAN FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------
1998 1997 1996+
--------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE - CLASS II
(For a share outstanding throughout the year)
Net asset value, beginning of year.......................... $12.27 $10.32 $10.00
--------------------------
Income from investment operations:
Net investment income...................................... .12 .11 .07
Net realized and unrealized gains.......................... 3.01 2.02 .25
--------------------------
Total from investment operations............................ 3.13 2.13 .32
--------------------------
Less distributions from:
Net investment income...................................... (.16) (.04) --
Net realized gains......................................... (1.08) (.14) --
--------------------------
Total distributions......................................... (1.24) (.18) --
--------------------------
Net asset value, end of year................................ $14.16 $12.27 $10.32
==========================
Total Return*............................................... 27.55% 20.83% 3.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)............................. $5,929 $2,424 $1,431
Ratios to average net assets:
Expenses................................................... 2.49% 2.50% 2.50%**
Expenses, excluding waiver and payments by affiliate....... 3.05% 3.29% 4.21%**
Net investment income...................................... 1.31% 1.45% 1.06%**
Portfolio turnover rate..................................... 27.59% 30.58% 9.86%
Average commission rate paid***............................. $.0213 $.0264 $.0205
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge and is not annualized.
**Annualized.
***Relates to purchases and sales of equity securities.
+For the period May 8, 1995 (commencement of operations) to March 31, 1996.
17
PAGE
TEMPLETON GREATER EUROPEAN FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------
1998 1997+
---------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE - ADVISOR CLASS
(For a share outstanding throughout the year)
Net asset value, beginning of year.......................... $12.36 $11.56
---------------------
Income from investment operations:
Net investment income...................................... .56 .07
Net realized and unrealized gains.......................... 2.73 .73
---------------------
Total from investment operations............................ 3.29 .80
---------------------
Less distributions from:
Net investment income...................................... (.27) --
Net realized gains......................................... (1.08) --
---------------------
Total distributions......................................... (1.35) --
---------------------
Net asset value, end of year................................ $14.30 $12.36
=====================
Total Return*............................................... 28.88% 6.92%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)............................. $83 $36
Ratios to average net assets:
Expenses................................................... 1.50% 1.50%**
Expenses, excluding waiver and payments by affiliate....... 2.06% 1.90%**
Net investment income...................................... 2.38% 2.56%**
Portfolio turnover rate..................................... 27.59% 30.58%
Average commission rate paid***............................. $.0213 $.0264
</TABLE>
*Total return is not annualized.
**Annualized.
***Relates to purchases and sales of equity securities.
+For the period January 2, 1997 (effective date) to March 31, 1997.
See Notes to Financial Statements.
18
PAGE
TEMPLETON GREATER EUROPEAN FUND
STATEMENT OF INVESTMENTS, MARCH 31, 1998
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 62.4%
AUTOMOBILES 3.6%
Autoliv Inc................................................. Sweden 4,000 $ 124,085
Debica SA, A................................................ Poland 5,800 151,173
Peugeot SA.................................................. France 1,000 172,373
*Regie Nationale des Usines Renault SA...................... France 6,681 297,611
*Volkswagen AG, rts. ....................................... Germany 700 12,718
Volvo AB, B................................................. Sweden 5,342 170,059
-----------
928,019
-----------
BANKING 9.4%
Argentaria Corporacion Bancaria de Espana SA................ Spain 3,500 289,781
Bank of Ireland............................................. Irish Republic 10,000 197,428
Bank Slaski SA W Katowicach................................. Poland 2,160 156,386
Banque Nationale de Paris BNP............................... France 4,000 310,853
Credit Commercial de France CCF............................. France 2,800 230,025
Deutsche Bank AG............................................ Germany 4,089 306,562
HSBC Holdings Plc........................................... Hong Kong 10,000 305,874
National Westminster Bank Plc. ............................. United Kingdom 18,600 340,741
Unidanmark AS, A............................................ Denmark 2,225 176,743
Union Bank of Norway, Primary Capital Cert. ................ Norway 2,500 77,713
-----------
2,392,106
-----------
BUILDING MATERIALS & COMPONENTS 1.1%
Anglian Group Plc. ......................................... United Kingdom 26,400 104,330
Hepworth Plc. .............................................. United Kingdom 38,500 166,976
-----------
271,306
-----------
BUSINESS & PUBLIC SERVICES .8%
Lex Service Plc. ........................................... United Kingdom 22,600 204,360
-----------
CHEMICALS 2.6%
Courtaulds Plc. ............................................ United Kingdom 45,000 272,029
DSM NV...................................................... Netherlands 2,000 209,143
Imperial Chemical Industries Plc. .......................... United Kingdom 10,000 178,003
-----------
659,175
-----------
CONSTRUCTION & HOUSING 1.5%
Dragados y Construcciones SA................................ Spain 7,800 256,829
Hollandsche Beton Groep NV.................................. Netherlands 7,000 136,662
-----------
393,491
-----------
ELECTRICAL & ELECTRONICS 2.9%
ABB AB, A................................................... Sweden 5,000 71,612
ABB AB, B................................................... Sweden 11,900 165,226
General Electric Co. Plc. .................................. United Kingdom 25,000 198,119
Philips Electronics NV...................................... Netherlands 4,000 293,567
-----------
728,524
-----------
</TABLE>
19
PAGE
TEMPLETON GREATER EUROPEAN FUND
STATEMENT OF INVESTMENTS, MARCH 31, 1998 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
ELECTRONIC COMPONENTS & INSTRUMENTS .5%
BICC Plc. .................................................. United Kingdom 53,710 $ 134,010
-----------
ENERGY SOURCES 3.9%
Norsk Hydro AS.............................................. Norway 3,400 168,567
Rao Gazprom, ADR, Reg S..................................... Russia 6,302 133,602
Repsol SA................................................... Spain 4,200 214,260
Saga Petroleum AS, A........................................ Norway 8,175 145,824
Societe Elf Aquitane SA..................................... France 2,520 330,260
-----------
992,513
-----------
FINANCIAL SERVICES 1.8%
Axa-UAP..................................................... France 3,600 370,700
Banca Fideuram SpA.......................................... Italy 14,000 97,597
-----------
468,297
-----------
FOOD & HOUSEHOLD PRODUCTS 1.3%
*Express Dairies Plc. ...................................... United Kingdom 12,859 40,266
Northern Foods Plc. ........................................ United Kingdom 25,719 98,409
Tate & Lyle Plc. ........................................... United Kingdom 23,000 201,430
-----------
340,105
-----------
FOREST PRODUCTS & PAPER 3.7%
Assidomaen AB............................................... Sweden 4,800 130,890
Cartiere Burgo SpA.......................................... Italy 17,000 150,796
Enso OY, A.................................................. Finland 12,500 114,696
Enso OY, R.................................................. Finland 12,200 112,596
Mo Och Domsjoe AB, B........................................ Sweden 3,931 112,602
Svenska Cellulosa AB, B..................................... Sweden 4,500 123,835
UPM-Kymmene Corp. .......................................... Finland 7,500 191,086
-----------
936,501
-----------
INDUSTRIAL COMPONENTS 2.3%
BTR Plc. ................................................... United Kingdom 62,000 203,749
Sandvik AB, A............................................... Sweden 5,400 154,006
Sandvik AB, B............................................... Sweden 1,000 28,457
SKF AB, B................................................... Sweden 8,000 189,630
-----------
575,842
-----------
INSURANCE 1.2%
Ste Centrale Du Groupe Des Asurances Nationales............. France 2,990 83,728
Zuerich Versicherung, new................................... Switzerland 400 232,207
-----------
315,935
-----------
</TABLE>
20
PAGE
TEMPLETON GREATER EUROPEAN FUND
STATEMENT OF INVESTMENTS, MARCH 31, 1998 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
LEISURE & TOURISM 2.1%
Rank Group Plc. ............................................ United Kingdom 40,000 $ 270,438
Thistle Hotels Plc. ........................................ United Kingdom 90,000 266,000
-----------
536,438
-----------
MERCHANDISING 3.4%
*Gucci Group NV............................................. Netherlands 5,000 237,500
Somerfield Plc. ............................................ United Kingdom 61,500 368,168
W.H. Smith Group............................................ United Kingdom 28,100 260,211
-----------
865,879
-----------
METALS & MINING 2.0%
British Steel Plc. ......................................... United Kingdom 90,000 214,006
Eramet SA................................................... France 1,980 79,509
Pechiney SA, A.............................................. France 4,879 224,427
-----------
517,942
-----------
MULTI-INDUSTRY 2.4%
CGIP-Compagnie Generale Industrie de Participation.......... France 150 68,514
*Elementis Plc. ............................................ United Kingdom 48,066 111,476
Inchcape Plc. .............................................. United Kingdom 65,000 236,738
Pilkington Plc. ............................................ United Kingdom 90,000 183,864
-----------
600,592
-----------
RECREATION & OTHER CONSUMER GOODS .4%
Fila Holding SpA, ADR....................................... Italy 4,400 103,125
-----------
TELECOMMUNICATIONS 6.4%
British Telecommunications Plc. ............................ United Kingdom 37,430 407,720
Nokia AB, A................................................. Finland 3,460 372,036
Tele Danmark AS, B.......................................... Denmark 2,050 186,105
Telecom Italia SpA, di Risp................................. Italy 74,750 456,474
Telefonica de Espana SA..................................... Spain 4,800 211,547
-----------
1,633,882
-----------
TEXTILES & APPAREL .3%
Dawson International Plc. .................................. United Kingdom 74,822 63,899
-----------
TRANSPORTATION 3.4%
Koninklijke Nedlloyd Groep NV............................... Netherlands 6,250 150,201
Kvaerner Industrier AS, A................................... Norway 3,500 157,917
Peninsular & Oriental Steam Navigation Co. ................. United Kingdom 20,000 298,570
Stolt Nielsen SA, ADR....................................... Norway 6,000 119,250
Transport Development Group Plc. ........................... United Kingdom 40,000 135,638
-----------
861,576
-----------
</TABLE>
21
PAGE
TEMPLETON GREATER EUROPEAN FUND
STATEMENT OF INVESTMENTS, MARCH 31, 1998 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
UTILITIES ELECTRICAL & GAS 5.0%
BG Plc. .................................................... United Kingdom 35,294 $ 185,283
*Centrica Plc. ............................................. United Kingdom 30,000 56,767
Electrabel SA............................................... Belgium 750 191,088
Empresa Nacional Hidroelectrica del Ribagorzana SA, B....... Spain 5,500 128,204
Iberdrola SA................................................ Spain 18,200 276,451
Mosenergo, ADR, 144A........................................ Russia 4,500 165,375
National Grid Group Plc. ................................... United Kingdom 25,500 150,520
Thames Water Group Plc. .................................... United Kingdom 6,755 107,120
-----------
1,260,808
-----------
WHOLESALE & INTERNATIONAL TRADE .4%
*Computer 2000 AG........................................... Germany 310 112,477
-----------
TOTAL COMMON STOCKS (COST $12,086,003)...................... 15,896,802
-----------
PREFERRED STOCKS 4.4%
Ballast Nedam NV, cvt., pfd. ............................... Netherlands 5,000 247,038
Baumax AG, pfd. ............................................ Austria 1,953 35,724
Fiat SpA, pfd. ............................................. Italy 139,500 368,393
Krones AG Herman Kronseder Maschinen Fabrik, pfd. .......... Germany 274 86,674
Volkswagen AG, pfd. ........................................ Germany 700 396,680
-----------
TOTAL PREFERRED STOCKS (COST $1,023,228).................... 1,134,509
-----------
PRINCIPAL
AMOUNT**
--------
BONDS (COST $50,313) .4%
Government of Italy, 5.00%, cvt., 6/28/01................... Italy $ 50,000 95,625
-----------
SHORT TERM INVESTMENTS (COST $7,838,481) 30.8%
U.S. Treasury Bills, 4.92% to 5.15%, with maturities to
6/25/98................................................... United States 7,911,000 7,839,725
-----------
TOTAL INVESTMENTS (COST $20,998,025) 98.0%.................. 24,966,661
OTHER ASSETS, LESS LIABILITIES 2.0%......................... 499,828
-----------
TOTAL NET ASSETS 100.0%..................................... $25,466,489
===========
</TABLE>
*Non-income producing.
**Securities traded in U.S. dollars.
22 See Notes to Financial Statements.
PAGE
TEMPLETON GREATER EUROPEAN FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $20,998,025)..... $24,966,661
Receivables:
Investment securities sold................................ 23,980
Fund shares sold.......................................... 444,802
Dividends and interest.................................... 131,420
Organization costs......................................... 25,267
-----------
Total assets.......................................... 25,592,130
-----------
Liabilities:
Payables:
Fund shares redeemed...................................... 38,443
To affiliates............................................. 21,725
Funds advanced by custodian................................ 5,410
Accrued expenses........................................... 60,063
-----------
Total liabilities..................................... 125,641
-----------
Net assets, at value........................................ $25,466,489
===========
Net assets consist of:
Undistributed net investment income........................ $ 109,067
Net unrealized appreciation................................ 3,968,636
Accumulated net realized gain.............................. 226,294
Beneficial shares.......................................... 21,162,492
-----------
Net assets, at value........................................ $25,466,489
===========
CLASS I:
Net asset value per share ($19,454,779 / 1,364,405 shares
outstanding).............................................. $14.26
===========
Maximum offering price per share ($14.26 / 94.25%)......... $15.13
===========
CLASS II:
Net asset value per share ($5,928,562 / 418,773 shares
outstanding)*............................................. $14.16
===========
Maximum offering price per share ($14.16 / 99.00%)......... $14.30
===========
ADVISOR CLASS:
Net asset value and maximum offering price per share
($83,148 / 5,813 shares outstanding)...................... $14.30
===========
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
sales charge.
See Notes to Financial Statements.
23
PAGE
TEMPLETON GREATER EUROPEAN FUND
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1998
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $70,418)
Dividends.................................................. $ 432,496
Interest................................................... 182,538
----------
Total investment income............................... $ 615,034
----------
Expenses:
Management fees (Note 3)................................... 119,267
Administrative fees (Note 3)............................... 23,853
Distribution fees (Note 3)
Class I................................................... 42,301
Class II.................................................. 36,352
Transfer agent fees (Note 3)............................... 34,108
Custodian fees............................................. 8,140
Reports to shareholders.................................... 53,375
Registration and filing fees............................... 56,000
Professional fees (Note 3)................................. 13,011
Trustees' fees and expenses................................ 1,900
Amortization of organization costs......................... 15,814
Other...................................................... 1,749
----------
Total expenses........................................ 405,870
Expenses waived/paid by affiliate (Note 3)............ (89,309)
----------
Net expenses...................................... 316,561
----------
Net investment income........................... 298,473
----------
Realized and unrealized gains:
Net realized gain from:
Investments............................................... 1,209,436
Foreign currency transactions............................. 4,342
----------
Net realized gain...................................... 1,213,778
Net unrealized appreciation on investments............. 2,800,101
----------
Net realized and unrealized gain............................ 4,013,879
----------
Net increase in net assets resulting from operations........ $4,312,352
==========
</TABLE>
See Notes to Financial Statements.
24
PAGE
TEMPLETON GREATER EUROPEAN FUND
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
-----------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 298,473 $ 131,642
Net realized gain from investments and foreign currency
transactions............................................. 1,213,778 492,527
Net unrealized appreciation on investments................ 2,800,101 940,661
-----------------------------
Net increase in net assets resulting from operations.... 4,312,352 1,564,830
Distributions to shareholders from:
Net investment income:
Class I.................................................. (207,163) (68,343)
Class II................................................. (43,475) (6,497)
Advisor Class............................................ (905) --
Net realized gains:
Class I.................................................. (998,765) (84,294)
Class II................................................. (303,072) (21,490)
Advisor Class............................................ (3,694) --
Fund share transactions (Note 2):
Class I.................................................. 8,101,372 3,848,810
Class II................................................. 2,853,411 722,889
Advisor Class............................................ 27,981 34,267
-----------------------------
Net increase in net assets.............................. 13,738,042 5,990,172
Net assets:
Beginning of year.......................................... 11,728,447 5,738,275
-----------------------------
End of year................................................ $25,466,489 $11,728,447
=============================
Undistributed net investment income included in net assets:
End of year................................................ $ 109,067 $ 62,137
=============================
</TABLE>
See Notes to Financial Statements.
25
PAGE
TEMPLETON GREATER EUROPEAN FUND
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Greater European Fund (the Fund) is a separate, diversified series of
Templeton Global Investment Trust (the Trust), which is an open-end 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. SECURITY VALUATION:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Trustees.
b. FOREIGN CURRENCY TRANSLATION:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date. When
the Fund purchases or sells foreign securities it will customarily enter into a
foreign exchange contract to minimize foreign exchange risk from the trade date
to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the recorded amounts of
dividends, interest, and foreign withholding taxes, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign currency denominated assets and liabilities other than investments in
securities held at the end of the reporting period.
c. INCOME TAXES:
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income.
26
PAGE
TEMPLETON GREATER EUROPEAN FUND
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Certain income from foreign securities is recorded as soon as information is
available to the Fund. Interest income and estimated expenses are accrued daily.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
Common expenses incurred by the Trust are allocated among the funds based on the
ratio of net assets of each fund to the combined net assets. Other expenses are
charged to each fund on a specific identification basis.
e. ORGANIZATION COSTS:
Organization costs are amortized on a straight line basis over five years.
f. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. BENEFICIAL SHARES
The Fund offers three classes of shares: Class I, Class II, and Advisor Class
shares. The shares differ by their initial sales load, distribution fees, voting
rights on matters affecting a single class and the exchange privilege of each
class.
At March 31, 1998, there was an unlimited number of shares authorized ($0.01 par
value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------------------------
1998 1997
--------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS I SHARES:
Shares sold................................................. 1,202,564 $15,820,682 467,229 $ 5,350,835
Shares issued on reinvestment of distributions.............. 92,488 1,117,164 12,150 135,721
Shares redeemed............................................. (681,131) (8,836,474) (143,550) (1,637,746)
--------------------------------------------------------
Net increase................................................ 613,921 $ 8,101,372 335,829 $ 3,848,810
========================================================
</TABLE>
27
PAGE
TEMPLETON GREATER EUROPEAN FUND
Notes to Financial Statements (continued)
2. BENEFICIAL SHARES (CONT.)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------
1998 1997
------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS II SHARES:
Shares sold................................................. 283,511 $ 3,671,637 151,862 $ 1,709,987
Shares issued on reinvestment of distributions.............. 27,106 325,541 2,448 27,356
Shares redeemed............................................. (89,455) (1,143,767) (95,315) (1,014,454)
------------------------------------------------------
Net increase................................................ 221,162 $ 2,853,411 58,995 $ 722,889
======================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------
1998 1997*
------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------
<S> <C> <C> <C> <C>
ADVISOR CLASS SHARES:
Shares sold................................................. 186,400 $ 2,341,970 2,942 $ 34,267
Shares issued on reinvestment of distributions.............. 380 4,600 -- --
Shares redeemed............................................. (183,909) (2,318,589) -- --
------------------------------------------------------
Net increase................................................ 2,871 $ 27,981 2,942 $ 34,267
======================================================
</TABLE>
*Effective date of Advisor Class shares was January 2, 1997.
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Fund are also officers or directors of Templeton Global
Advisors Ltd. (TGAL), Franklin Templeton Services (FT Services),
Franklin/Templeton Distributors, Inc. (Distributors), and Franklin/Templeton
Investor Services, Inc. (Investor Services), the Fund's investment manager,
administrative manager, principal underwriter, and transfer agent, respectively.
The Fund pays an investment management fee to TGAL of 0.75% per year of the
average daily net assets of the Fund. The Fund pays its allocated share of an
administrative fee to FT Services based on the Trust's aggregate average daily
net assets as follows:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
- -----------------------------------------------------------------
<S> <C>
0.15% First $200 million
0.135% Over $200 million, up to and including $700 million
0.10% Over $700 million, up to and including $1.2 billion
0.075% Over $1.2 billion
</TABLE>
TGAL and FT Services agreed in advance to reduce fees to the extent necessary to
limit total expenses to an annual rate of 1.85%, 2.50%, and 1.50% of the Fund's
average daily net assets of Class I shares, Class II shares and Advisor Class
shares, respectively, through August 1, 1998.
28
PAGE
TEMPLETON GREATER EUROPEAN FUND
Notes to Financial Statements (continued)
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONT.)
The Fund reimburses Distributors up to 0.35% and 1.00% per year of the average
daily net asset of Class I and Class II shares, respectively, for costs incurred
in marketing the Fund's Class I and Class II shares. Under the Class I
distribution plan, costs exceeding the maximum may be reimbursed in subsequent
periods. At March 31 1998, unreimbursed costs were $183,818. Distributors paid
net commissions on sales of Fund shares, and received contingent deferred sales
charges for the period of $19,388 and $3,342, respectively.
Included in professional fees are legal fees of $2,960 that were paid to a law
firm in which a partner is an officer of the Fund.
4. INCOME TAXES
The cost of securities for income tax purposes is the same as that shown in the
Statement of Investments. At March 31, 1998, the net unrealized appreciation
based on the cost of investments for income tax purposes was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $4,537,976
Unrealized depreciation..................................... (569,340)
----------
Net unrealized appreciation................................. $3,968,636
==========
</TABLE>
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended March 31, 1998 aggregated $6,961,754 and $3,421,031, respectively.
29
PAGE
TEMPLETON GREATER EUROPEAN FUND
Independent Auditor's Report
THE BOARD OF TRUSTEES AND SHAREHOLDERS
TEMPLETON GREATER EUROPEAN FUND
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Templeton Greater European Fund as of March 31,
1998, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended 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
audit.
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, 1998, 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, 1998, 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.
McGLADREY & PULLEN LLP
New York, New York
April 24, 1998
30
PAGE
TEMPLETON GREATER EUROPEAN FUND
Tax Designation
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby
designates the following amounts as capital gain dividends for the fiscal year
ended March 31, 1998:
<TABLE>
<S> <C>
28% Rate Gain................................ $616,726
20% Rate Gain................................ 374,870
--------
Total........................................ $991,596
========
</TABLE>
31
PAGE
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PAGE
LITERATURE REQUEST
For a free brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Templeton Fund Information at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending money. 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.
FRANKLIN TEMPLETON GROUP
GLOBAL GROWTH
Franklin Global Health Care Fund
Mutual Discovery 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
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and Income Fund
GLOBAL INCOME
Franklin Global Government Income Fund
Franklin Templeton Global Currency Fund
Franklin Templeton Hard Currency Fund
Franklin Templeton High Income Currency Fund
Templeton Americas Government Securities Fund
GROWTH
Franklin Biotechnology Discovery Fund
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
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 Financial Services 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 Floating Rate Trust
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
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)
*These funds are now closed to new accounts, with the exception of retirement
plan accounts.
**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. The Franklin Valuemark Funds are managed by Franklin
Advisers, Inc. and its Templeton and Franklin affiliates.
05/98
PAGE
TEMPLETON GREATER EUROPEAN FUND
AUDITORS
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017-2416
PRINCIPAL UNDERWRITER
Franklin/Templeton Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, California 94404-1585
SHAREHOLDER SERVICES
1-800-632-2301
FUND INFORMATION
1-800-342-5236
This report must be preceded or accompanied by the current prospectus of the
Templeton Greater European Fund, which contains more complete information,
including risk factors, 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.
419 A98 5/98 [RECYCLE LOGO] Printed on recycled paper
