TEMPLETON
LATIN AMERICA FUND
Annual Report
March 31, 1998
[LOGO] FRANKLIN TEMPLETON
PAGE
[LOGO] FRANKLIN TEMPLETON CELEBRATING OVER 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 OF MARK J. BEVERIDGE]
MARK R. BEVERIDGE, CFA, CIC
Portfolio Manager
Templeton Latin America Fund
PAGE
SHAREHOLDER LETTER
Your Fund's Objective: Templeton Latin America Fund seeks long-term capital
appreciation by investing primarily in equity and debt securities of issuers in
those Latin American countries listed in the Fund's prospectus.
Dear Shareholder:
We are pleased to bring you the annual report of Templeton Latin America Fund
for the fiscal year ended March 31, 1998. During the first half of the period
under review, Latin American equity markets generally performed well, as
increased exports sparked a strong economic recovery throughout the region.
However, during the latter half of the period, economic and stock market
declines in Asia prompted concerns among some investors that Latin American
currencies, especially Brazil's, would be attacked by speculators. Since most
Latin American countries are economically linked to Brazil, many emerging-market
investors reduced their exposure to the region. Although this drove down many
Latin American stock markets, some of them rebounded toward the end of the 12
months under review. Within this environment, the Fund's Class I shares
delivered a 12-month cumulative total return of 4.94%, as discussed in the
Performance Summary on page 5.
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 ........................... 5
Class II .......................... 8
Advisor Class ..................... 12
Financial Highlights &
Statement of Investments ............. 16
Financial Statements ................. 22
Notes to the Financial
Statements ........................... 25
Independent Auditor's Report ......... 29
Tax Designation ...................... 30
[GRAPH] PYRAMID
PAGE
INDUSTRY BREAKDOWN
Based on Total Net Assets
3/31/98
This chart shows in pie format the industry breakdown of the Fund's securities
on March 31, 1998, based on total net assets
[PIE CHART]
<TABLE>
<S> <C>
Services 21.4%
Materials 21.3%
Energy 19.6%
Finance 17.3%
Consumer Goods 8.1%
Multi-Industry 6.1%
Capital Equipment 3.6%
Other Net Assets 2.6%
</TABLE>
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
3/31/98
This chart shows in bar format the geopgraphic distribution breakdown of the
Fund's securities on March 31, 1998, based on total net assets.
[BAR GRAPH]
<TABLE>
<S> <C>
Brazil 46.7%
Mexico 26.7%
Argentina 12.2%
Chile 3.5%
Peru 3.2%
Colombia 2.3%
Venezuela 2.3%
Ecuador 0.5%
Other Net Assets 2.6%
</TABLE>
On March 31, 1998, Brazil was the Fund's largest geographic exposure. Even
though the Brazilian government raised interest rates in an effort to protect
its currency from devaluation, the Bovespa Index rose considerably, and the
share price of our largest holding, Telecomunicacoes Brasileiras SA (Telebras),
pfd., ADR, appreciated 27.2% during the fiscal year.(1) Due to moderate economic
growth and benign inflation, Mexico's stock market also rose substantially, and
we sold our shares of major retailer Cifra SA and food processor Herdez SA de CV
at a gain. Although the Colombian equity market fell 14.0%, our holdings of
Banco Ganadero SA, one of the country's largest banks, appreciated substantially
and we sold them at a profit during the fiscal year.(2)
Despite the fact that Argentina boasts one of Latin America's fastest-growing
economies and lowest inflation rates, the Asian currency crises affected it more
than other Latin American countries. Remembering the nation's 1991 banking
crisis and stock market collapse, many Argentineans were hesitant about
investing. Consequently, Argentina's equity market did not rebound as well as
many others in the region, and our relatively large exposure there hindered the
Fund's performance.
Throughout the reporting period, we maintained a conservative, bottom-up
approach in searching for undervalued equities. We did not attempt to match the
weightings of our benchmark index (International Finance Corporation Investable
Latin America Index), and regional allocation was simply a result of individual
stock selection.
1. Price appreciation is measured in U.S. dollars.
2. Market return is measured in U.S. dollars.
2
PAGE
For example, we purchased shares of Carulla SA, ADR, the Colombian supermarket
chain, which, in our opinion, should benefit if the standard of living continues
to rise in Colombia. We also initiated a position in Unibanco Uniao de Bancos
Brasileiros SA, GDR, a major Brazilian bank serving individuals and businesses,
because we believe it has long-term growth potential.
Looking forward, we are optimistic about investment opportunities in Latin
America. In our opinion, relatively low corporate debt and high foreign currency
reserves may help Latin American countries avoid bankruptcy and support their
currencies, despite the Asian turmoil. However, if these nations raise interest
rates to shelter their currencies, it could dampen economic growth in the near
future.
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, adverse economic, social and political
developments in the region and countries where investments are made, 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 183% in the last five years, but has suffered two declines
of more than 10% during that time.(3)
TOP 10 HOLDINGS
3/31/98
<TABLE>
<CAPTION>
COMPANY, % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
----------------- ----------
<S> <C>
Telecomunicacoes Brasileiras SA
(Telebras), pfd., ADR
Telecommunications, Brazil 4.5%
Petrobras-Petroleo
Brasileiro SA, pfd.
Energy Sources, Brazil 4.2%
Telecomunicacoes de Minas
Gerais SA, pfd., B
Telecommunications, Brazil 4.1%
Banco Bradesco SA, pfd.
Banking, Brazil 3.9%
Banco Itau SA, pfd.
Banking, Brazil 3.7%
YPF Sociedad Anonima, ADR
Energy Sources, Argentina 3.5%
Telecomunicacoes de Sao Paulo
SA (Telesp)
Telecommunications, Brazil 3.1%
DESC SA, B
Multi-Industry, Mexico 2.9%
Alfa SA de CV, A
Multi-Industry, Mexico 2.7%
Grupo Financiero Banamex
Accival SA, B
Banking, Mexico 2.7%
</TABLE>
3. Source:Bloomberg. Market return is measured in local currency terms, and is
based on quarterly percentage price change over the five-year period ended March
31, 1998.
3
PAGE
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.
We thank you for your continued investment in the Fund, and would like to
reaffirm our dedication and commitment to searching for the best possible Latin
American securities for the Fund's portfolio.
Sincerely,
/s/ Mark R. Beveridge
Mark R. Beveridge, CFA, CIC
Portfolio Manager
Templeton Latin America Fund
4
PAGE
PERFORMANCE SUMMARY
CLASS I
Templeton Latin America Fund - Class I produced a 4.94% 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. However,
we have always managed the Fund with a long-term perspective, and encourage you
to view your investments in the same way. As you can see from the table on page
7, the Fund delivered a cumulative total return of more than 32% since its
inception on May 8, 1995.
The Fund's share price, as measured by net asset value, increased 38 cents
($0.38), from $12.34 on March 31, 1997, to $12.72 on March 31, 1998. During the
reporting period, shareholders received per-share distributions of 7 cents
($0.07) in income dividends, 1 cent ($0.01) in short-term capital gains, and 14
cents ($0.14) 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 6 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
Past performance is not predictive of future results.
5
PAGE
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, nor is an index representative of the Fund's portfolio.
CLASS I
Total Return Index Comparison
$10,000 Investment (5/8/95 - 3/31/98)
LINE GRAPH COMPARING PERFORMANCE OF TEMPLETON LATIN AMERICA FUND*
WITH IFCI LATER AMERICA INDEX**
The following line graph hypothetically compares the performance of the
Templeton Latin America Fund Class I shares to that of the IFCI Latin America
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 Latin America Fund - Class I IFCI Latin America Index
----------------------------------------------------------------------------------------
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
9/29/95 $9,632 $10,319
10/31/95 $9,340 $9,332
11/30/95 $9,284 $9,655
12/29/95 $9,464 $9,842
1/31/96 $10,226 $10,802
2/29/96 $9,940 $10,205
3/29/96 $10,035 $10,369
4/30/96 $10,369 $10,894
5/31/96 $10,621 $11,192
6/28/96 $10,678 $11,391
7/31/96 $10,210 $10,889
8/30/96 $10,544 $11,185
9/30/96 $10,583 $11,401
10/31/96 $10,277 $11,150
11/29/96 $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
4/30/97 $12,221 $13,834
5/30/97 $12,606 $14,953
6/30/97 $13,425 $16,153
7/31/97 $14,205 $17,039
8/29/97 $13,396 $15,568
9/30/97 $14,302 $16,879
10/31/97 $11,594 $13,736
11/28/97 $11,661 $14,145
12/31/97 $12,520 $14,912
1/30/98 $11,218 $13,186
2/27/98 $11,571 $13,838
3/31/98 $12,461 $14,748
</TABLE>
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. Total return assumes reinvestment of dividends and
capital gains at net asset value. Past performance is not predictive of future
results.
** Source: Standard and Poor's(R) Micropal. Index is unmanaged and includes
reinvested dividends. One cannot invest directly in an index.
Past performance is not predictive of future results.
6
PAGE
CLASS I
Periods ended 3/31/98
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR (5/8/95)
------ --------
<S> <C> <C>
Cumulative Total Return(1) 4.94% 32.21%
Average Annual Total Return(2) -1.07% 7.89%
Value of $10,000 Investment(3) $9,893 $12,461
3/31/97 3/31/98
------- -------
One-Year Total Return(4) 18.34% 4.94%
</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.
7
PAGE
CLASS II
Templeton Latin America Fund - Class II produced a 4.23% 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. However, we have
always managed the Fund with a long-term perspective, and encourage you to view
your investments in the same way. As you can see from the table on page 11, the
Fund delivered a cumulative total return of more than 29% since its inception on
May 8, 1995.
The Fund's share price, as measured by net asset value, increased 35 cents
($0.35), from $12.28 on March 31, 1997, to $12.63 on March 31, 1998. During the
reporting period, shareholders received per-share distributions of 1.26 cents
($0.0126) in income dividends, 1 cent ($0.01) in short-term capital gains, and
14 cents ($0.14) 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.
8
PAGE
The graph on page 10 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, nor is an index representative of the
Fund's portfolio.
Past performance is not predictive of future results.
9
PAGE
CLASS II
Total Return Index Comparison
$10,000 Investment (5/8/95 - 3/31/98)
LINE GRAPH COMPARING TEMPLETON LATIN AMERICA FUND*
WITH IFCI LATIN AMERICAN INDEX**
The following line graph hypothetically compares the performance of the
Templeton Latin America Fund Class II shares to that of the IFCI Latin America
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 Latin America Fund - Class II IFCI Latin America Index
-----------------------------------------------------------------------------------------
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
9/29/95 $10,089 $10,319
10/31/95 $9,772 $9,332
11/30/95 $9,713 $9,655
12/29/95 $9,903 $9,842
1/31/96 $10,691 $10,802
2/29/96 $10,392 $10,205
3/29/96 $10,482 $10,369
4/30/96 $10,811 $10,894
5/31/96 $11,077 $11,192
6/28/96 $11,127 $11,391
7/31/96 $10,628 $10,889
8/30/96 $10,968 $11,185
9/30/96 $11,008 $11,401
10/31/96 $10,688 $11,150
11/29/96 $10,868 $11,237
12/31/96 $10,972 $11,535
1/31/97 $12,034 $12,598
2/28/97 $12,696 $13,422
3/31/97 $12,315 $13,280
4/30/97 $12,666 $13,834
5/30/97 $13,061 $14,953
6/30/97 $13,904 $16,153
7/31/97 $14,706 $17,039
8/29/97 $13,863 $15,568
9/30/97 $14,786 $16,879
10/31/97 $11,978 $13,736
11/28/97 $12,038 $14,145
12/31/97 $12,917 $14,912
1/30/98 $11,567 $13,186
2/27/98 $11,922 $13,838
3/31/98 $12,836 $14,748
</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. Total return assumes reinvestment of dividends and
capital gains at net asset value. Past performance is not predictive of future
results.
** Source: Standard and Poor's(R) Micropal. Index is unmanaged and includes
reinvested dividends. One cannot invest directly in an index.
Past performance is not predictive of future results.
10
PAGE
<TABLE>
<CAPTION>
CLASS II
Periods ended 3/31/98
SINCE
INCEPTION
1-YEAR (5/8/95)
------ --------
<S> <C> <C>
Cumulative Total Return(1) 4.23% 29.64%
Average Annual Total Return(2) 2.23% 9.00%
Value of $10,000 Investment(3) $10,223 $12,836
3/31/97 3/31/98
One-Year Total Return(4) 17.62% 4.23%
</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 one-year 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.
11
PAGE
ADVISOR CLASS
Templeton Latin America Fund - Advisor Class produced a 5.43% 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 40 cents
($0.40), from $12.35 on March 31, 1997, to $12.75 on March 31, 1998. During the
reporting period, shareholders received per-share distributions of 10.83 cents
($0.1083) in income dividends, 1 cent ($0.01) in short-term capital gains, and
14 cents ($0.14) 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.
12
PAGE
The graph on page 14 compares the performance of the Fund's Advisor Class shares
since the Fund's 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 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
Table Return Index Comparison
$10,000 Investment (5/8/95-3/31/98)
LINE GRAPH COMPARING TEMPLETON LATIN AMERICA FUND*
WITH IFCI LATIN AMERICA INDEX**
The following line graph hypothetically compares the performance of the
Templeton Latin America Fund Advisor Class shares to that of the IFCI Latin
America 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 Latin America Fund- Advisor Class IFCI Latin America
Index
----------------------------------------------------------------------------------
5/ 8/95 $10,000 $10,000
5/31/95 $10,030 $9,579
6/30/95 $9,980 $9,779
7/31/95 $10,060 $10,303
8/31/95 $10,190 $10,448
9/29/95 $10,220 $10,319
10/31/95 $9,910 $9,332
11/30/95 $9,850 $9,655
12/29/95 $10,041 $9,842
1/31/96 $10,849 $10,802
2/29/96 $10,546 $10,205
3/29/96 $10,647 $10,369
4/30/96 $11,001 $10,894
5/31/96 $11,269 $11,192
6/28/96 $11,329 $11,391
7/31/96 $10,833 $10,889
8/30/96 $11,188 $11,185
9/30/96 $11,228 $11,401
10/31/96 $10,904 $11,150
11/29/96 $11,086 $11,237
12/31/96 $11,212 $11,535
1/31/97 $12,293 $12,598
2/28/97 $12,986 $13,422
3/31/97 $12,608 $13,280
4/30/97 $12,995 $13,834
5/30/97 $13,411 $14,953
6/30/97 $14,280 $16,153
7/31/97 $15,119 $17,039
8/29/97 $14,260 $15,568
9/30/97 $15,232 $16,879
10/31/97 $12,358 $13,736
11/28/97 $12,430 $14,145
12/31/97 $13,344 $14,912
1/30/98 $11,959 $13,186
2/27/98 $12,335 $13,838
3/31/98 $13,293 $14,748
</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
periods 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.
**Source: Standard and Poor's Micropal. 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) 5.43% 19.33%
Average Annual Total Return(1) 5.43% 15.42%
Value of $10,000 Investment(2) $10,542 $13,293
3/31/97 3/31/98
------- -------
One-Year Total Return*(3) 13.09% 5.43%
</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 19.32%.
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 LATIN AMERICA 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.......................... $12.34 $10.53 $10.00
--------------------------------
Income from investment operations:
Net investment income...................................... .07 .06 .12
Net realized and unrealized gains.......................... .53 1.86 .51
--------------------------------
Total from investment operations............................ .60 1.92 .63
--------------------------------
Less distributions from:
Net investment income...................................... (.07) (.08) (.10)
Net realized gains......................................... (.15) (.03) --
--------------------------------
Total distributions......................................... (.22) (.11) (.10)
--------------------------------
Net asset value, end of year................................ $12.72 $12.34 $10.53
================================
Total Return*............................................... 4.94% 18.34% 6.37%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)............................. $28,714 $18,923 $5,150
Ratios to average net assets:
Expenses................................................... 2.35% 2.35% 2.35%**
Expenses, excluding waiver and payments by affiliate....... 2.57% 3.10% 4.02%**
Net investment income...................................... .59% .50% 1.71%**
Portfolio turnover rate..................................... 45.82% 3.72% --
Average commission rate paid***............................. $.0003 $.0003 $.0004
</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 LATIN AMERICA FUND
Financial Highlights
<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.......................... $12.28 $10.49 $10.00
------------------------------
Income from investment operations:
Net investment income (loss)............................... -- (.01) .08
Net realized and unrealized gains.......................... .51 1.85 .48
------------------------------
Total from investment operations............................ .51 1.84 .56
------------------------------
Less distributions from:
Net investment income...................................... (.01) (.02) (.07)
Net realized gains......................................... (.15) (.03) --
------------------------------
Total distributions......................................... (.16) (.05) (.07)
------------------------------
Net asset value, end of year................................ $12.63 $12.28 $10.49
==============================
Total Return*............................................... 4.23% 17.62% 5.67%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)............................. $7,170 $3,524 $1,351
Ratios to average net assets:
Expenses................................................... 3.00% 3.00% 3.00%**
Expenses, excluding waiver and payments by affiliate....... 3.22% 3.84% 4.67%**
Net investment income (loss)............................... (.01)% (.15)% 1.14%**
Portfolio turnover rate..................................... 45.82% 3.72% --
Average commission rate paid***............................. $.0003 $.0003 $.0004
</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 LATIN AMERICA FUND
Financial Highlights
<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.......................... $12.35 $10.92
---------------------
Income from investment operations:
Net investment income...................................... .07 .02
Net realized and unrealized gains.......................... .59 1.41
---------------------
Total from investment operations............................ .66 1.43
---------------------
Less distributions from:
Net investment income...................................... (.11) --
Net realized gains......................................... (.15) --
---------------------
Total distributions......................................... (.26) --
---------------------
Net asset value, end of year................................ $12.75 $12.35
=====================
Total Return*............................................... 5.43% 13.09%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)............................. $139 $71
Ratios to average net assets:
Expenses................................................... 2.00% 2.00%**
Expenses, excluding waiver and payments by affiliate....... 2.22% 2.08%**
Net investment income...................................... .45% .82%**
Portfolio turnover rate..................................... 45.82% 3.72%
Average commission rate paid***............................. $.0003 $.0003
</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 LATIN AMERICA FUND
STATEMENT OF INVESTMENTS, MARCH 31, 1998
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 59.7%
AUTOMOBILES 2.6%
Sanluis Corporacion SA de CV................................ Mexico 186,100 $ 941,642
-----------
BANKING 7.0%
Credicorp Ltd............................................... Peru 22,748 366,812
*Grupo Financiero Banamex Accival SA, B..................... Mexico 386,000 983,353
Nortel Inversora SA, ADR.................................... Argentina 22,000 635,250
Unibanco Uniao de Bancos Brasileiros SA, GDR................ Brazil 14,700 532,875
-----------
2,518,290
-----------
BUILDING MATERIALS & COMPONENTS 4.2%
Cementos Diamante SA, ADR, 144A............................. Colombia 50,100 419,588
*Cemex SA, B................................................ Mexico 140,800 760,366
*Mirgor Comercial Industrial Financiera Inmobiliari, ADR,
144A...................................................... Argentina 160,400 336,840
-----------
1,516,794
-----------
CONSTRUCTION & HOUSING .6%
Empresas ICA Sociedad Controladora SA, ADR.................. Mexico 17,100 205,200
-----------
ENERGY SOURCES 6.9%
Perez Companc SA, B......................................... Argentina 80,254 543,401
Transportadora de Gas del Sur SA, ADR, B.................... Argentina 57,500 672,031
YPF Sociedad Anonima, ADR................................... Argentina 36,900 1,254,600
-----------
2,470,032
-----------
FOOD & HOUSEHOLD PRODUCTS 3.2%
*Industrias Bachoco SA, ADR................................. Mexico 46,200 773,850
Panamerican Beverages Inc., A............................... Mexico 9,600 385,200
-----------
1,159,050
-----------
FOREST PRODUCTS & PAPER 5.2%
Aracruz Celulose SA, ADR.................................... Brazil 54,850 822,750
*Empaques Ponderosa SA de CV, B............................. Mexico 1,042,100 819,684
Maderas Y Sinteticos SA, ADR................................ Chile 22,100 227,906
-----------
1,870,340
-----------
INDUSTRIAL COMPONENTS .6%
Madeco Manufacturera de Cobre SA, ADR....................... Chile 12,100 209,481
-----------
MERCHANDISING 1.2%
Carulla SA, ADR............................................. Colombia 141,600 424,800
-----------
METALS & MINING 6.4%
Companhia Siderurgica Nacional.............................. Brazil 30,116,800 892,340
Grupo Mexico SA de CV, B.................................... Mexico 240,000 780,465
*Industrias Penoles SA...................................... Mexico 155,000 645,985
-----------
2,318,790
-----------
</TABLE>
19
PAGE
TEMPLETON LATIN AMERICA FUND
STATEMENT OF INVESTMENTS, MARCH 31, 1998 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MULTI-INDUSTRY 6.1%
Alfa SA de CV, A............................................ Mexico 175,500 $ 988,965
DESC SA, B.................................................. Mexico 141,700 1,031,392
La Cemento Nacional CA, GDR................................. Ecuador 820 147,600
La Cemento Nacional CA, GDR, 144A........................... Ecuador 200 36,000
-----------
2,203,957
-----------
REAL ESTATE 2.6%
Inversiones y Representacion SA............................. Argentina 252,666 955,221
-----------
TELECOMMUNICATIONS 7.4%
Telecomunicacoes de Sao Paulo SA (Telesp)................... Brazil 4,415,687 1,099,019
Telefonica del Peru SA, B................................... Peru 369,600 790,919
Telefonos de Mexico SA (Telmex), L, ADR..................... Mexico 13,500 761,063
-----------
2,651,001
-----------
TRANSPORTATION 1.5%
*Transportacion Maritima Mexicana SA de CV, A, ADR.......... Mexico 38,400 254,400
*Transportacion Maritima Mexicana SA de CV, L, ADR.......... Mexico 36,900 285,975
-----------
540,375
-----------
UTILITIES ELECTRICAL & GAS 4.2%
*Centrais Eletricas Brasileiras SA (Eletrobras), ADR........ Brazil 30,800 715,114
Electricidad de Caracas..................................... Venezuela 861,400 812,487
-----------
1,527,601
-----------
TOTAL COMMON STOCKS (COST $21,138,915)...................... 21,512,574
-----------
PREFERRED STOCKS 37.7%
Banco Bradesco SA, pfd...................................... Brazil 137,460,830 1,420,487
Banco Itau SA, pfd.......................................... Brazil 2,101,900 1,349,445
Ceval Alimentos SA, pfd..................................... Brazil 72,700,000 396,412
Cia Brasileira de Petroleo Ipiranga, pfd.................... Brazil 39,710,000 565,764
Cia Energetica de Minas Gerais, pfd., ADR................... Brazil 18,000 873,840
Cia Vale do Rio Doce, pfd., ADR............................. Brazil 27,000 648,256
Embotelladora Andina SA, pfd., ADR, B....................... Chile 21,000 420,000
*Empresa Nacional de Comercio Redito Participacoe, pfd...... Brazil 1,561,000 6,041
*Ericsson Telecomunicacoes SA, pfd.......................... Brazil 13,054,000 422,486
Petrobras Distribuidora SA, pfd............................. Brazil 38,046,000 677,570
Petrobras-Petroleo Brasileiro SA, pfd....................... Brazil 6,358,900 1,515,555
Sociedad Quimica y Minera de Chile SA, pfd., ADR............ Chile 9,100 400,400
Telecomunicacoes Brasileiras SA (Telebras), pfd., ADR....... Brazil 12,550 1,629,147
Telecomunicacoes de Minas Gerais SA, pfd., B................ Brazil 9,036,520 1,486,152
</TABLE>
20
PAGE
TEMPLETON LATIN AMERICA FUND
STATEMENT OF INVESTMENTS, MARCH 31, 1998 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------
<S> <C> <C> <C>
PREFERRED STOCKS (CONT.)
Usinas Siderurgicas De Minas Gerais SA, pfd................. Brazil 108,700 $ 879,504
Weg SA, pfd................................................. Brazil 1,332,900 890,905
-----------
TOTAL PREFERRED STOCKS (COST $13,345,982)................... 13,581,964
-----------
TOTAL INVESTMENTS (COST $34,484,897) 97.4%.................. 35,094,538
OTHER ASSETS, LESS LIABILITIES 2.6%......................... 928,515
-----------
TOTAL NET ASSETS 100.0%..................................... $36,023,053
===========
</TABLE>
*Non-income producing.
See Notes to Financial Statements.
21
PAGE
TEMPLETON LATIN AMERICA FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $34,484,897)..... $35,094,538
Cash....................................................... 342,130
Receivables:
Investment securities sold................................ 420,186
Fund shares sold.......................................... 182,606
Dividends and interest.................................... 151,522
Organization costs......................................... 36,429
Other assets............................................... 19,785
-----------
Total assets.......................................... 36,247,196
-----------
Liabilities:
Payables:
Investment securities purchased........................... 6,388
Fund shares redeemed...................................... 115,005
To affiliates............................................. 42,068
Distributions to shareholders.............................. 785
Accrued expenses........................................... 59,897
-----------
Total liabilities..................................... 224,143
-----------
Net assets, at value........................................ $36,023,053
===========
Net assets consist of:
Undistributed net investment income........................ $ 10,641
Net unrealized appreciation................................ 609,641
Accumulated net realized gain.............................. 25,896
Beneficial shares.......................................... 35,376,875
-----------
Net assets, at value........................................ $36,023,053
===========
CLASS I:
Net asset value per share ($28,713,786 / 2,256,768 shares
outstanding)............................................. $12.72
===========
Maximum offering price per share ($12.72 / 94.25%)......... $13.50
===========
CLASS II:
Net asset value per share ($7,169,924 / 567,719 shares
outstanding)*............................................ $12.63
===========
Maximum offering price per share ($12.63 / 99.00%)......... $12.76
===========
ADVISOR CLASS:
Net asset value and maximum offering price per share
($139,343 / 10,932 shares outstanding)................... $12.75
===========
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
sales charge.
See Notes to Financial Statements.
22
PAGE
TEMPLETON LATIN AMERICA 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 $95,447)
Dividends.................................................. $929,773
Interest................................................... 123,777
--------
Total investment income............................... $1,053,550
----------
Expenses:
Management fees (Note 3)................................... 447,715
Administrative fees (Note 3)............................... 53,726
Distribution fees (Note 3)
Class I................................................... 103,742
Class II.................................................. 58,876
Transfer agent fees (Note 3)............................... 93,021
Custodian fees............................................. 29,376
Reports to shareholders.................................... 81,600
Registration and filing fees............................... 49,600
Professional fees (Note 3)................................. 16,690
Trustees' fees and expenses................................ 3,300
Amortization of organization costs......................... 18,039
Other...................................................... 876
--------
Total expenses........................................ 956,561
Expenses waived/paid by affiliate (Note 3)............ (77,600)
----------
Net expenses...................................... 878,961
----------
Net investment income........................... 174,589
----------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments............................................... 495,691
Foreign currency transactions............................. (14,744)
--------
Net realized gain...................................... 480,947
Net unrealized depreciation on investments............. (939,995)
----------
Net realized and unrealized loss............................ (459,048)
----------
Net decrease in net assets resulting from operations........ $ (284,459)
==========
</TABLE>
See Notes to Financial Statements.
23
PAGE
TEMPLETON LATIN AMERICA 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..................................... $ 174,589 $ 39,591
Net realized gain from investments and foreign currency
transactions............................................ 480,947 25,594
Net unrealized appreciation (depreciation) on
investments.............................................. (939,995) 1,357,093
-----------------------------
Net increase (decrease) in net assets resulting from
operations............................................ (284,459) 1,422,278
Distributions to shareholders from:
Net investment income:
Class I.................................................. (162,244) (47,435)
Class II................................................. (6,110) (3,376)
Advisor Class............................................ (1,395) --
Net realized gains:
Class I.................................................. (369,781) (20,552)
Class II................................................. (82,777) (5,898)
Advisor Class............................................ (1,637) --
Capital share transactions (Note 2):
Class I.................................................. 10,648,892 12,752,973
Class II................................................. 3,764,207 1,850,205
Advisor Class............................................ 200 68,505
-----------------------------
Net increase in net assets.............................. 13,504,896 16,016,700
Net assets:
Beginning of year.......................................... 22,518,157 6,501,457
-----------------------------
End of year................................................ $36,023,053 $22,518,157
=============================
Undistributed net investment income included in net assets:
End of year................................................ $ 10,641 $ 3,128
=============================
</TABLE>
See Notes to Financial Statements.
24
PAGE
TEMPLETON LATIN AMERICA FUND
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Latin America 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
long-term capital appreciation by investing primarily in equity and debt
securities of issuers in Latin American countries. 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.
The Brazilian government has exercised and may continue to exercise substantial
influence over the exchange of Brazilian currency. Under current Brazilian law,
whenever there occurs a serious imbalance of Brazil's balance of payments or
serious reasons to foresee the imminence of such an imbalance, Brazil's National
Monetary Council may, for a limited period, impose restrictions on foreign
capital remittances abroad. Exchange control regulations may restrict
repatriation of investment income, capital, or the proceeds of securities sales
by foreign investors. The Fund has investments in Brazilian companies with a
value of approximately $17 million as of March 31, 1998.
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.
25
PAGE
TEMPLETON LATIN AMERICA 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................................................. 2,407,845 $ 32,334,164 1,760,552 $21,123,956
Shares issued on reinvestment of distributions.............. 38,541 468,870 5,419 57,611
Shares redeemed............................................. (1,723,469) (22,154,142) (721,346) (8,428,594)
-----------------------------------------------------------
Net increase................................................ 722,917 $ 10,648,892 1,044,625 $12,752,973
===========================================================
</TABLE>
26
PAGE
TEMPLETON LATIN AMERICA 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................................................. 504,918 $ 6,603,184 173,080 $2,019,340
Shares issued on reinvestment of distributions.............. 6,731 81,260 840 8,969
Shares redeemed............................................. (230,870) (2,920,237) (15,804) (178,104)
-----------------------------------------------------
Net increase................................................ 280,779 $ 3,764,207 158,116 $1,850,205
=====================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------------------------
1998 1997*
-----------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------
<S> <C> <C> <C> <C>
ADVISOR CLASS SHARES:
Shares sold................................................. 93,506 $ 1,297,364 6,077 $ 72,544
Shares issued on reinvestment of distributions.............. 244 3,006 -- --
Shares redeemed............................................. (88,577) (1,300,170) (318) (4,039)
-----------------------------------------------------
Net increase................................................ 5,173 $ 200 5,759 $ 68,505
=====================================================
</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
Investment Counsel, Inc. (TICI), Franklin Templeton Services, Inc. (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 TICI of 1.25% 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>
TICI and FT Services agreed in advance to reduce fees to the extent necessary to
limit total expenses to an annual rate of 2.35%, 3.00%, and 2.00% of the Fund's
average daily net assets of Class I, Class II and Advisor Class shares,
respectively, through August 1, 1998.
27
PAGE
TEMPLETON LATIN AMERICA 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 $214,970. Distributors paid
net commissions on sales of Fund shares and received contingent deferred sales
charges for the period of $75,850 and $6,014, respectively.
Included in professional fees are legal fees of $5,963 that were paid to a law
firm in which a partner is an officer of the Fund.
4. INCOME TAXES
At March 31, 1998, the net unrealized appreciation based on the cost of
investments for income tax purposes of $34,488,864, was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 3,227,893
Unrealized depreciation..................................... (2,622,219)
-----------
Net unrealized appreciation................................. $ 605,674
===========
</TABLE>
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended March 31, 1998 aggregated $29,260,778 and $14,823,594, respectively.
28
PAGE
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 statement of investments, of Templeton Latin America 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 audit 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 Latin America Fund, as of March 31, 1998, the results of its
operations, the changes in its net assets and the financial highlights for the
period indicated, in conformity with generally accepted accounting principles.
McGLADREY & PULLEN LLP
New York, New York
April 24, 1998
29
PAGE
TEMPLETON LATIN AMERICA 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................................ $204,898
20% Rate Gain................................ 228,698
--------
Total........................................ $433,596
========
</TABLE>
30
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 LATIN AMERICA 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 a current prospectus of the
Templeton Latin America 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.
418 A98 5/98 [LOGO] Printed on recycled paper
