ANNUAL REPORT
March 31, 1999
TEMPLETON GREATER EUROPEAN FUND
[LOGO(R)]
FRANKLIN(R) TEMPLETON (R)
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.
[PICTURE OF MARK HOLOWESKO APPEARS HERE]
MARK G. HOLOWESKO, CFA
President
Templeton Global Investment Trust
PAGE
SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
Your Fund's Goal: Templeton Greater European Fund seeks to achieve long-term
capital appreciation by investing, under normal market conditions, at least 75%
of its total assets in equity securities of "Greater European companies," as
defined in the Fund's prospectus.
- --------------------------------------------------------------------------------
Dear Shareholder:
This annual report for Templeton Greater European Fund covers the fiscal year
ended March 31, 1999, a period encompassing significant change in Europe. During
most of this time, a relatively smooth transition to the euro helped boost
equity markets there. By the end of 1998, European equity markets were only 0.2%
below their all-time high, as measured by the Morgan Stanley Capital
International(R) (MSCI) Europe Index,(1) but during the first quarter of 1999
they weakened. Within this environment, the MSCI Europe Index, the Fund's
benchmark, increased 4.89%. Over the same period, Templeton Greater
1. Source: Standard and Poor's(R) Micropal. The unmanaged MSCI Europe Index
measures the performance of approximately 600 companies representing 15 European
countries: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy,
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United
Kingdom. It includes reinvested dividends. One cannot invest directly in an
index, nor is an index representative of the Fund's portfolio.
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 13 of
this report.
CONTENTS
<TABLE>
<S> <C>
Shareholder Letter ...................................................... 1
Performance Summaries ................................................... 6
Financial Highlights & Statement of Investments ......................... 10
Financial Statements .................................................... 17
Notes to Financial Statements ........................................... 20
Independent Auditors' Report ............................................ 24
Tax Designation ......................................................... 25
</TABLE>
[GRAPH] PYRAMID
PAGE
GEOGRAPHIC EXPOSURE
3/31/99
[THIS CHART SHOWS IN TABLE FORMAT THE GEOGRAPHIC EXPOSURE OF THE TEMPLETON
GREATER EUROPEAN FUND RELATIVE TO THE MSCI EUROPE INDEX AS OF MARCH 31, 1999,
BASED ON TOTAL NET ASSETS.]
MSCI -
COUNTRY FUND* EUROPE
- -------------------------------------------------------------------------
Austria 1.0% 0.5%
Belgium 1.0% 2.3%
Denmark 0.6% 1.1%
Finland 4.3% 2.5%
France 7.7% 13.2%
Germany 10.3% 13.4%
Hungary 0.3% 0.0%
Ireland 0.0% 0.7%
Italy 0.2% 7.1%
Netherlands 8.5% 8.3%
Norway 5.8% 0.6%
Portugal 0.0% 0.8%
Russia 1.0% 0.0%
Spain 4.0% 4.3%
Sweden 11.1% 3.8%
Switzerland 0.4% 10.4%
United Kingdom 35.1% 31.0%
Short-Term Investments and Other Net Assets 8.7% 0.0%
*Based on Total Net Assets
European Fund - Class A posted a - 7.12% one-year cumulative total return.
However, during the latter part of the reporting period, the Fund's performance
improved substantially, and it delivered a 13.35% cumulative total return for
the six months ended March 31, 1999, while the benchmark index returned 16.39%
over the same period.(2)
The Fund's underperformance relative to its benchmark over the year was due
largely to the fact that we are bottom-up, value investors and determine the
Fund's holdings by research on individual stocks. Consequently, our country
weightings differed from the index weightings, which are determined by market
size.(3) The table to the left shows the geographic exposure of the Fund and the
MSCI Europe Index as of March 31, 1999.
Compared with the index, the Fund was significantly overweighted in Norway and
Sweden, whose equity markets returned - 24.3% and 1.9%, respectively, during the
year in review. The Fund's largest Norwegian investment, Norsk Hydro AS, is
involved in mineral and petroleum processing as well as oil rig operation.
Although the company's stock declined more than 16% during the year as the price
of oil, gas and light metals declined significantly, improvements in commodity
prices have the potential to positively affect this stock. In addition,
management has announced cost-cutting measures that we believe could eventually
improve the company's prospects.
2. Source: Standard and Poor's Micropal.
3. Please remember that a Fund's performance also 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.
2
PAGE
The Fund's exposure to Italian and Swiss holdings was significantly lower than
that of the index. As of March 31, 1999, Italian stocks were generally selling
at a price-to-earnings (P/E) ratio of 37.2 times, (4) making it difficult for us
to find securities we considered bargains in that country. In Switzerland the
average P/E ratio was 35.8 times, (5) compared with the European average of 24.9
times, as measured by the MSCI Europe Index. (6) Despite our positive outlook
for the country, we were only able to find one security there that met our value
criteria.
Although the Fund's holdings in France were also below the index weighting, we
did find some bargain stocks in this market. We initiated a position in Alcatel
SA, which manufactures telecommunications equipment and provides
telecommunication services, and added to our holdings of Pechiny SA, A, a
company with mining operations. We believed Alcatel SA offered excellent
exposure to Europe's growing telecommunications sector, particularly in data
transmission.
In the Netherlands, our weighting remained fairly close to that of the index.
Our top holding in this country was Koninklijke Philips Electronics NV, a
manufacturer of consumer and industrial electronics, lighting and domestic
appliances. Although its stock price suffered because of weakness in display and
components segments, the company's balance sheet was secured by a large cash
position, and management continued to improve operations and sell assets in
non-core businesses.
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
3/31/99
[PIE CHART APPEARS HERE]
[THIS CHART SHOWS IN PIE CHART FORMAT THE GEOGRAPHIC DISTRIBUTION OF TEMPLETON
GREATER EUROPEAN FUND'S PORTFOLIO HOLDINGS ON MARCH 31, 1999, BASED ON TOTAL NET
ASSTS.]
United Kingdom 35.1%
Sweden 11.1%
Germany 10.3%
Netherlands 8.5%
France 7.7%
Norway 5.8%
Finland 4.3%
Spain 4.0%
Other Countries 4.5%
Short-Term Investments & Other Net Assets 8.7%
TOP 10 INDUSTRIES
3/31/99
[THIS CHART SHOWS IN TABLE FORMAT THE TOP 10 INDUSTRIES REPRESENTED IN TEMPLETON
GREATER EUROPEAN FUND AS OF MARCH 31, 1999, BASED ON TOTAL NET ASSETS.]
% OF TOTAL
INDUSTRY NET ASSETS
- ----------------------------------------------
Chemicals 9.9%
Energy Sources 9.3%
Electrical & Electronics 8.2%
Machinery & Engineering 8.0%
Automobiles 7.0%
Utilities Electrical & Gas 5.6%
Merchandising 5.1%
Transportation 5.1%
Metals & Mining 4.7%
Industrial Components 4.6%
4. Source: Bloomberg.
5. Source: Bloomberg.
6. Source: Standard & Poor's Micropal.
3
PAGE
TOP 10 HOLDINGS
3/31/99
[THIS CHART LISTS THE TOP 10 HOLDINGS, INCLUDING INDUSTRY AND COUNTRY, OF
TEMPLETON GLOBAL INFRASTRUCTURE FUND, BASED ON TOTAL NET ASSETS AS OF 3/31/99.]
COMPANY, % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
- --------------------------------------------------
Norsk Hydro AS
Energy Sources, Norway 2.8%
ABB AB, A&B
Electrical & Electronics,
Sweden 2.6%
Koninklijke Philips
Electronics NV
Electrical & Electronics,
Netherlands 2.4%
BTR Siebe PLC
Machinery & Engineering,
United Kingdom 2.2%
Alcatel SA
Electrical & Electronics,
France 2.1%
BASF AG
Chemicals, Germany 2.0%
Societe Elf Aquitaine SA, Br
Energy Sources, France 2.0%
Volvo AB, B
Automobiles, Sweden 2.0%
Repsol SA
Energy Sources, Spain 1.9%
Volkswagen AG, pfd
Automobiles, Germany 1.9%
Looking forward, we are optimistic about long-term prospects for European
economies and Templeton Greater European Fund. The advent of the euro may help
to increase the availability of capital while lowering its cost, and
consolidations and cost-cutting could accelerate as European companies are
forced to compete with cross-border competitors. However, for the euro to be a
long-term success, we believe European countries must reduce unemployment and
spur job creation by cutting regulations and making cheaper capital available to
entrepreneurs. Job mobility is another issue that must be addressed. In our
opinion, a freer movement of labor from slower growth regions to higher growth
areas will be a key determinant of the common currency's long-term success. Now
that the euro has been launched, policymakers must keep the euro strong enough
to solidify confidence in the new currency while being careful to avoid choking
the competitive positions of European exports.
It is important to remember that investing in foreign markets concentrated in a
single region 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
the Fund invests. Emerging market securities involve heightened risks related to
the same factors, in addition to those associated with the relatively small size
and lesser liquidity of those markets. In addition, investing in any emerging
market means accepting a certain amount of volatility and, in some cases, the
consequences of severe market corrections. These risks and other considerations
are discussed in the Fund's prospectus.
4
PAGE
This discussion reflects our views, opinions and portfolio holdings as of March
31, 1999, 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 past performance is
not predictive of future results, these insights may give you a better
understanding of our investment and management philosophy.
We thank you for your participation in Templeton Greater European Fund.
Sincerely,
/s/ Mark G. Holowesko
- ---------------------------
Mark G. Holowesko, CFA
/s/ Jeffrey A. Everett
- ---------------------------
Jeffrey A. Everett, CFA
/s/ Richard Sean Farrington
- ---------------------------
Richard Sean Farrington, CFA
The Portfolio Management Team
Templeton Greater European Fund
5
PAGE
- --------------------------------------------------------------------------------
CLASS A (formerly Class I):
Subject to the maximum 5.75% initial sales charge.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
ADVISOR CLASS:
No initial sales charge or Rule 12b-1 fees and are available to a limited class
of investors.
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, total returns
would have been lower. After July 31, 1999, the fee waiver and expense
reimbursements may be discontinued at any time upon notice to the Fund's Board
of Trustees.
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY AS OF 3/31/99
Distributions will vary based on earnings of the Fund's portfolio and any
profits realized from the sale of the portfolio's securities, as well as the
level of each class' operating expenses. Past distributions are not indicative
of future trends. All total returns include reinvested distributions at net
asset value.
PRICE AND DISTRIBUTION INFORMATION (4/1/98 - 3/31/99)
<TABLE>
<CAPTION>
CLASS A CHANGE 3/31/99 3/31/98
- ----------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value - $1.65 $12.61 $14.26
DISTRIBUTIONS
--------------------------------
Dividend Income $0.2200
Long-Term Capital Gain $0.3250
Short-Term Capital Gain $0.0700
TOTAL $0.6150
</TABLE>
<TABLE>
<CAPTION>
CLASS C CHANGE 3/31/99 3/31/98
- ----------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value - $1.67 $12.49 $14.16
DISTRIBUTIONS
--------------------------------
Dividend Income $0.1633
Long-Term Capital Gain $0.3250
Short-Term Capital Gain $0.0700
TOTAL $0.5583
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS CHANGE 3/31/99 3/31/98
- ----------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value - $1.64 $12.66 $14.30
DISTRIBUTIONS
--------------------------------
Dividend Income $0.2562
Long-Term Capital Gain $0.3250
Short-Term Capital Gain $0.0700
TOTAL $0.6512
</TABLE>
Templeton Greater European Fund paid distributions derived from long-term
capital gains of 32.5 cents ($0.325) per share during the fiscal year ended
March 31, 1999. The Fund hereby designates such distributions as capital gain
dividends per Internal Revenue Code Section 852 (b)(3).
Past performance is not predictive of future results.
6
PAGE
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 1-YEAR 3-YEAR (5/8/95)
- ----------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) - 7.12% 44.97% 50.62%
Average Annual Total Return(2) -12.46% 10.98% 9.40%
Value of $10,000 Investment(3) $8,754 $13,668 $14,196
3/31/97 3/31/98 3/31/99
------- ------- -------
One-Year Total Return(4) 21.70% 28.25% - 7.12%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 1-YEAR 3-YEAR (5/8/95)
- ----------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) - 7.73% 42.20% 46.75%
Average Annual Total Return(2) - 9.51% 12.09% 10.06%
Value of $10,000 Investment(3) $9,049 $14,084 $14,530
3/31/97 3/31/98 3/31/99
------- ------- -------
One-Year Total Return(4) 20.83% 27.55% - 7.73%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
ADVISOR CLASS(5) 1-YEAR 3-YEAR (5/8/95)
- ----------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) - 6.76% 46.37% 52.07%
Average Annual Total Return(2) - 6.76% 13.54% 11.35%
Value of $10,000 Investment(3) $9,324 $14,637 $15,207
3/31/97 3/31/98 3/31/99
------- ------- -------
One-Year Total Return(4) 21.80% 28.88% - 6.76%
</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 applicable, maximum
sales charge(s) for that class.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include the applicable, maximum sales
charge(s) for that class.
4. One-year total return represents the change in value of an investment over
the one-year periods ended on the specified dates and does not include sales
charges.
5. 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
Class A performance, excluding the effect of the Class A sales charge, but
including the effect of Rule 12b-1 fees and other Class A expenses; 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 and average annual
total returns of Advisor Class shares were 28.48% and 11.83%, respectively.
- --------------------------------------------------------------------------------
Since markets can go down as well as up, investment return and principal value
will fluctuate with market conditions, currency volatility and the social,
economic and political climates of countries where the Fund invests. 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.
- --------------------------------------------------------------------------------
Past performance is not predictive of future results.
7
PAGE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
3/31/99
<TABLE>
<CAPTION>
CLASS A
- --------------------------------------------------------------------------------
<S> <C>
1-Year - 12.46%
3-Year 10.98%
Since Inception (5/8/95) 9.40%
</TABLE>
- --------------------------------------------------------------------------------
TOTAL RETURN INDEX COMPARISON
FOR HYPOTHETICAL $10,000 INVESTMENT
The unmanaged index differs from the Fund in composition, does not pay
management fees or expenses and includes reinvested dividends. One cannot invest
directly in an index. Total return represents the change in value of an
investment over the periods shown. It includes the applicable, maximum sales
charges, Fund expenses, account fees, and reinvested distributions.
CLASS A
Total Return Index Comparison
$10,000 Investment (5/8/95-3/31/99)
[TOTAL RETURN INDEX COMPARISON CLASS A LINE GRAPH]
[THE FOLLOWING CHART SHOWS IN LINE GRAPH FORMAT THE CUMULTIVE TOTAL RETURN OF A
$10,000 INVESTMENT IN THE FUND - CLASS A, MAY 8, 1995 (INCEPTION) AS OF MARCH
31, 1999.]
TEMPLETON GREATER MSCI
EUROPEAN FUND EUROPE
- CLASS A* INDEX
- ---------------------------------------------------------------------------
5/8/95 $9,425 $10,000
5/95 $9,444 $10,006
6/95 $9,416 $10,104
7/95 $9,472 $10,635
8/95 $9,491 $10,227
9/95 $9,312 $10,540
10/95 $9,171 $10,494
11/95 $9,142 $10,572
12/95 $9,284 $10,911
1/96 $9,877 $10,985
2/96 $10,028 $11,189
3/96 $9,793 $11,327
4/96 $9,906 $11,413
5/96 $10,066 $11,505
6/96 $10,170 $11,635
7/96 $9,924 $11,494
8/96 $10,407 $11,839
9/96 $10,445 $12,092
10/96 $10,643 $12,377
11/96 $10,908 $13,008
12/96 $11,271 $13,264
1/97 $11,725 $13,304
2/97 $11,831 $13,483
3/97 $11,918 $13,923
4/97 $11,754 $13,858
5/97 $11,956 $14,453
6/97 $12,493 $15,180
7/97 $12,881 $15,896
8/97 $12,622 $14,991
9/97 $13,597 $16,449
10/97 $13,120 $15,644
11/97 $12,981 $15,889
12/97 $13,033 $16,473
1/98 $13,183 $17,163
2/98 $14,105 $18,509
3/98 $15,284 $19,832
4/98 $15,595 $20,222
5/98 $15,679 $20,636
6/98 $15,280 $20,867
7/98 $15,139 $21,284
8/98 $13,389 $18,612
9/98 $12,524 $17,873
10/98 $13,313 $19,309
11/98 $13,702 $20,341
12/98 $13,757 $21,236
1/99 $13,633 $21,104
2/99 $13,712 $20,573
3/99 $14,196 $20,803
Past performance is not predictive of future results
8
PAGE
CLASS C
Total Return Index Comparison
$10,000 Investment (5/8/95-3/31/99)
[TOTAL RETURN INDEX COMPARISON CLASS C LINE GRAPH]
[THE FOLLOWING CHART SHOWS IN LINE GRAPH FORMAT THE CUMULATIVE TOTAL RETURN OF A
$10,000 INVESTMENT IN THE FUND - CLASS C, MAY 8, 1995 (INCEPTION) AS OF MARCH
31, 1999.]
TEMPLETON GREATER MSCI
EUROPEAN FUND - CLASS C* EUROPE INDEX
-----------------------------------------------------------------
5/8/95 $9,901 $10,000
5/95 $9,911 $10,006
6/95 $9,881 $10,104
7/95 $9,941 $10,635
8/95 $9,950 $10,227
9/95 $9,762 $10,540
10/95 $9,604 $10,494
11/95 $9,574 $10,572
12/95 $9,713 $10,911
1/96 $10,317 $10,985
2/96 $10,475 $11,189
3/96 $10,218 $11,327
4/96 $10,337 $11,413
5/96 $10,500 $11,505
6/96 $10,599 $11,635
7/96 $10,322 $11,494
8/96 $10,817 $11,839
9/96 $10,847 $12,092
10/96 $11,055 $12,377
11/96 $11,322 $13,008
12/96 $11,692 $13,264
1/97 $12,155 $13,304
2/97 $12,256 $13,483
3/97 $12,346 $13,923
4/97 $12,165 $13,858
5/97 $12,378 $14,453
6/97 $12,917 $15,180
7/97 $13,310 $15,896
8/97 $13,041 $14,991
9/97 $14,035 $16,449
10/97 $13,538 $15,644
11/97 $13,414 $15,889
12/97 $13,468 $16,473
1/98 $13,613 $17,163
2/98 $14,547 $18,509
3/98 $15,748 $19,832
4/98 $16,059 $20,222
5/98 $16,124 $20,636
6/98 $15,709 $20,867
7/98 $15,553 $21,284
8/98 $13,737 $18,612
9/98 $12,852 $17,873
10/98 $13,637 $19,309
11/98 $14,051 $20,341
12/98 $14,088 $21,236
1/99 $13,960 $21,104
2/99 $14,041 $20,573
3/99 $14,530 $20,803
AVERAGE ANNUAL TOTAL RETURN
3/31/99
<TABLE>
<CAPTION>
CLASS C
- --------------------------------------------------------------------------------
<S> <C>
1-Year - 9.51%
3-Year 12.09%
Since Inception (5/8/95) 10.06%
</TABLE>
ADVISOR CLASS**
Total Return Index Comparison
$10,000 Investment (5/8/95-3/31/99)
[TOTAL RETURN INDEX COMPARISON ADVISOR CLASS LINE GRAPH]
[THE FOLLOWING CHART SHOWS IN GRAPH FORMAT THE CUMULATIVE TOTAL RETURN OF A
$10,000 INVESTMENT IN THE FUND-ADVISOR CLASS, MAY 8, 1995 (INCEPTION) AS OF
MARCH 31, 1999.]
Templeton Greater MSCI Europe Index
European Fund - Advisor
Class
---------------------------------------------------------------------
5/8/95 $10,000 $10,000
5/95 $10,020 $10,006
6/95 $9,990 $10,104
7/95 $10,050 $10,635
8/95 $10,070 $10,227
9/95 $9,880 $10,540
10/95 $9,730 $10,494
11/95 $9,700 $10,572
12/95 $9,850 $10,911
1/96 $10,480 $10,985
2/96 $10,640 $11,189
3/96 $10,390 $11,327
4/96 $10,510 $11,413
5/96 $10,680 $11,505
6/96 $10,791 $11,635
7/96 $10,530 $11,494
8/96 $11,042 $11,839
9/96 $11,082 $12,092
10/96 $11,293 $12,377
11/96 $11,574 $13,008
12/96 $11,959 $13,264
1/97 $12,440 $13,304
2/97 $12,552 $13,483
3/97 $12,655 $13,923
4/97 $12,491 $13,858
5/97 $12,705 $14,453
6/97 $13,285 $15,180
7/97 $13,708 $15,896
8/97 $13,433 $14,991
9/97 $14,479 $16,449
10/97 $13,972 $15,644
11/97 $13,845 $15,889
12/97 $13,915 $16,473
1/98 $14,074 $17,163
2/98 $15,055 $18,509
3/98 $16,310 $19,832
4/98 $16,663 $20,222
5/98 $16,736 $20,636
6/98 $16,322 $20,867
7/98 $16,172 $21,284
8/98 $14,309 $18,612
9/98 $13,389 $17,873
10/98 $14,229 $19,309
11/98 $14,654 $20,341
12/98 $14,715 $21,236
1/99 $14,583 $21,104
2/99 $14,679 $20,573
3/99 $15,207 $20,803
AVERAGE ANNUAL TOTAL RETURN
3/31/99
ADVISOR CLASS**
- -----------------------------------------------------------------
1-Year - 6.76%
3-Year 13.54%
Since Inception (5/8/95) 11.35%
*Source: Standard and Poor's(R) Micropal. The unmanaged MSCI Europe Index
measures the performance of approximately 600 companies representing 15 European
countries: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy,
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United
Kingdom. It includes reinvested dividends. One cannot invest directly in an
index, nor is an index representative of the Fund's portfolio.
**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
Class A performance, excluding the effect of the Class A sales charge, but
including the effect of Rule 12b-1 fees and other Class A expenses; and (b) for
periods after January 1, 1997, figures reflect actual Advisor Class performance,
including the deduction of all fees and expenses applicable to Advisor Class
shares.
Past performance is not predictive of future results.
9
PAGE
TEMPLETON GREATER EUROPEAN FUND
Financial Highlights
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------
YEAR ENDED MARCH 31,
--------------------------------------------
1999 1998 1997 1996+
------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year.......................... $14.26 $12.35 $10.39 $10.00
--------------------------------------------
Income from investment operations:
Net investment income...................................... .21 .23 .14 .08
Net realized and unrealized gains (losses)................. (1.24) 2.99 2.09 .31
--------------------------------------------
Total from investment operations............................ (1.03) 3.22 2.23 .39
--------------------------------------------
Less distributions from:
Net investment income...................................... (.22) (.23) (.13) --
Net realized gains......................................... (.40) (1.08) (.14) --
--------------------------------------------
Total distributions......................................... (.62) (1.31) (.27) --
--------------------------------------------
Net asset value, end of year................................ $12.61 $14.26 $12.35 $10.39
============================================
Total Return*............................................... (7.12)% 28.25% 21.70% 3.90%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)............................. $39,509 $19,455 $9,268 $4,308
Ratios to average net assets:
Expenses................................................... 1.73% 1.85% 1.85% 1.85%**
Expenses, excluding waiver and payments by affiliate....... 1.73% 2.41% 2.63% 3.56%**
Net investment income...................................... 1.91% 2.04% 1.72% 1.39%**
Portfolio turnover rate..................................... 38.57% 27.59% 30.58% 9.86%
</TABLE>
*Total return does not reflect sales commissions and is not annualized.
**Annualized.
+For the period May 8, 1995 (commencement of operations) to March 31, 1996.
10
PAGE
TEMPLETON GREATER EUROPEAN FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------
YEAR ENDED MARCH 31,
-------------------------------------------
1999 1998 1997 1996+
-----------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year.......................... $14.16 $12.27 $10.32 $10.00
-------------------------------------------
Income from investment operations:
Net investment income...................................... .11 .12 .11 .07
Net realized and unrealized gains (losses)................. (1.22) 3.01 2.02 .25
-------------------------------------------
Total from investment operations............................ (1.11) 3.13 2.13 .32
-------------------------------------------
Less distributions from:
Net investment income...................................... (.16) (.16) (.04) --
Net realized gains......................................... (.40) (1.08) (.14) --
-------------------------------------------
Total distributions......................................... (.56) (1.24) (.18) --
-------------------------------------------
Net asset value, end of year................................ $12.49 $14.16 $12.27 $10.32
===========================================
Total Return*............................................... (7.73)% 27.55% 20.83% 3.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)............................. $14,222 $5,929 $2,424 $1,431
Ratios to average net assets:
Expenses................................................... 2.37% 2.50% 2.50% 2.50%**
Expenses, excluding waiver and payments by affiliate....... 2.37% 3.05% 3.29% 4.21%**
Net investment income...................................... 1.26% 1.31% 1.45% 1.06%**
Portfolio turnover rate..................................... 38.57% 27.59% 30.58% 9.86%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge and is not annualized.
**Annualized.
+For the period May 8, 1995 (commencement of operations) to March 31, 1996.
11
PAGE
TEMPLETON GREATER EUROPEAN FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
ADVISOR CLASS
-------------------------------
YEAR ENDED MARCH 31,
-------------------------------
1999 1998 1997+
-----------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year.......................... $14.30 $12.36 $11.56
-------------------------------
Income from investment operations:
Net investment income...................................... .74 .56 .07
Net realized and unrealized gains (losses)................. (1.73) 2.73 .73
-------------------------------
Total from investment operations............................ (.99) 3.29 .80
-------------------------------
Less distributions from:
Net investment income...................................... (.25) (.27) --
Net realized gains......................................... (.40) (1.08) --
-------------------------------
Total distributions......................................... (.65) (1.35) --
-------------------------------
Net asset value, end of year................................ $12.66 $14.30 $12.36
===============================
Total Return*............................................... (6.76)% 28.88% 6.92%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)............................. $265 $83 $36
Ratios to average net assets:
Expenses................................................... 1.38% 1.50% 1.50%**
Expenses, excluding waiver and payments by affiliate....... 1.38% 2.06% 1.90%**
Net investment income...................................... 2.49% 2.38% 2.56%**
Portfolio turnover rate..................................... 38.57% 27.59% 30.58%
</TABLE>
*Total return is not annualized.
**Annualized.
+For the period January 2, 1997 (effective date) to March 31, 1997.
See Notes to Financial Statements.
12
PAGE
TEMPLETON GREATER EUROPEAN FUND
STATEMENT OF INVESTMENTS, MARCH 31, 1999
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 88.1%
AEROSPACE & MILITARY TECHNOLOGY 1.3%
Rolls-Royce PLC............................................. United Kingdom 162,738 $ 690,926
-----------
AUTOMOBILES 4.3%
Autoliv Inc., SDR........................................... Sweden 16,400 624,249
Bayerische Motorenwerke AG.................................. Germany 1,000 648,839
Volvo AB, B................................................. Sweden 41,142 1,078,208
-----------
2,351,296
-----------
BANKING 3.8%
Banco Popular Espanol SA.................................... Spain 4,231 272,240
Deutsche Bank AG, Br........................................ Germany 12,089 630,376
National Westminster Bank PLC............................... United Kingdom 28,600 653,757
Unidanmark AS, A............................................ Denmark 4,725 322,572
Union Bank of Norway........................................ Norway 10,000 194,081
-----------
2,073,026
-----------
BUILDING MATERIALS & COMPONENTS 3.3%
Anglian Group PLC........................................... United Kingdom 88,000 399,897
Caradon PLC................................................. United Kingdom 261,800 576,885
Hepworth PLC................................................ United Kingdom 38,500 104,103
Heywood Williams Group PLC.................................. United Kingdom 175,700 680,722
-----------
1,761,607
-----------
BUSINESS & PUBLIC SERVICES 1.1%
Kardex AG, Br............................................... Switzerland 800 218,364
Lex Service PLC............................................. United Kingdom 59,700 396,580
-----------
614,944
-----------
CHEMICALS 9.8%
Akzo Nobel NV............................................... Netherlands 20,000 740,605
BASF AG..................................................... Germany 30,000 1,091,474
Bayer AG, Br................................................ Germany 15,000 557,883
Cookson Group PLC........................................... United Kingdom 272,638 631,575
DSM NV, Br.................................................. Netherlands 5,064 434,907
Imperial Chemical Industries PLC............................ United Kingdom 67,600 605,111
Kemira OY................................................... Finland 100,000 626,167
Rhone-Poulenc SA, A......................................... France 14,000 633,293
-----------
5,321,015
-----------
CONSTRUCTION & HOUSING .1%
Hollandsche Beton Groep NV.................................. Netherlands 7,233 76,135
-----------
</TABLE>
13
PAGE
TEMPLETON GREATER EUROPEAN FUND
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
ELECTRICAL & ELECTRONICS 8.2%
ABB AB, A................................................... Sweden 15,000 $ 186,063
ABB AB, B................................................... Sweden 96,900 1,201,970
Alcatel SA.................................................. France 10,000 1,149,773
General Electric Co. PLC.................................... United Kingdom 63,000 566,986
Koninklijke Philips Electronics NV.......................... Netherlands 16,000 1,303,292
-----------
4,408,084
-----------
ELECTRONIC COMPONENTS & INSTRUMENTS .1%
BICC PLC.................................................... United Kingdom 47,432 71,593
-----------
ENERGY SOURCES 9.3%
Norsk Hydro AS.............................................. Norway 36,900 1,503,930
Rao Gazprom, ADR, Reg S..................................... Russia 12,302 127,018
Repsol SA................................................... Spain 20,200 1,040,237
Saga Petroleum AS........................................... Norway 18,175 198,711
Shell Transport & Trading Co. PLC........................... United Kingdom 154,000 1,035,434
Shell Transport & Trading Co. PLC, ADR...................... United Kingdom 1,000 40,625
Societe Elf Aquitaine SA, Br................................ France 8,020 1,089,225
-----------
5,035,180
-----------
FOOD & HOUSEHOLD PRODUCTS 1.6%
Northern Foods PLC.......................................... United Kingdom 25,719 46,085
Pick Szeged RT.............................................. Hungary 4,900 148,538
Tate & Lyle PLC............................................. United Kingdom 97,000 651,406
-----------
846,029
-----------
FOREST PRODUCTS & PAPER 3.6%
Assidomaen AB............................................... Sweden 4,800 97,483
Mo Och Domsjoe AB, B........................................ Sweden 18,931 419,001
Stora Enso OYJ, A........................................... Finland 47,500 456,400
Stora Enso OYJ, R........................................... Finland 12,200 121,174
Svenska Cellulosa AB, B..................................... Sweden 4,500 97,683
UPM-Kymmene Corp............................................ Finland 27,500 757,069
-----------
1,948,810
-----------
INDUSTRIAL COMPONENTS 4.5%
Krones AG................................................... Germany 822 21,210
Michelin SA, B.............................................. France 13,352 598,935
Otra NV..................................................... Netherlands 39,300 517,624
Sandvik AB, A............................................... Sweden 21,900 436,775
Sandvik AB, B............................................... Sweden 11,000 219,385
SKF AB, A................................................... Sweden 26,000 365,195
SKF AB, B................................................... Sweden 8,000 113,827
Sylea SA.................................................... France 3,300 167,446
-----------
2,440,397
-----------
LEISURE & TOURISM .3%
Rank Group PLC.............................................. United Kingdom 38,000 138,484
-----------
</TABLE>
14
PAGE
TEMPLETON GREATER EUROPEAN FUND
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MACHINERY & ENGINEERING 8.0%
BTR Siebe PLC............................................... United Kingdom 269,551 $ 1,189,016
Bullough PLC................................................ United Kingdom 584,800 731,637
Laird Group PLC............................................. United Kingdom 186,500 666,867
Mckechnie Group PLC......................................... United Kingdom 78,400 552,442
Rauma OY.................................................... Finland 29,600 341,931
VA Technologie AG, Br....................................... Austria 5,900 424,536
Vickers Group PLC........................................... United Kingdom 190,000 409,470
-----------
4,315,899
-----------
MERCHANDISING 5.1%
Gucci Group NV.............................................. Netherlands 7,600 611,800
House of Fraser PLC......................................... United Kingdom 231,400 293,238
Marks & Spencer PLC......................................... United Kingdom 86,000 565,041
Moebel Walther AG........................................... Germany 5,600 96,732
Safeway PLC................................................. United Kingdom 200,000 782,940
Storehouse.................................................. United Kingdom 178,312 407,309
-----------
2,757,060
-----------
METALS & MINING 4.7%
Billiton PLC................................................ United Kingdom 300,000 728,861
British Steel PLC........................................... United Kingdom 180,000 367,578
Elkem ASA, A................................................ Norway 61,900 913,033
Pechiney SA, A.............................................. France 14,879 538,122
-----------
2,547,594
-----------
MULTI-INDUSTRY 2.9%
Elementis PLC............................................... United Kingdom 48,983 73,539
Inchcape PLC................................................ United Kingdom 198,900 455,942
Pilkington PLC.............................................. United Kingdom 424,900 565,884
*Saab AB, B................................................. Sweden 58,700 467,573
-----------
1,562,938
-----------
REAL ESTATE 1.2%
*Wereldhave NV.............................................. Netherlands 10,920 629,426
-----------
RECREATION & OTHER CONSUMER GOODS .1%
Fila Holding SpA, ADR....................................... Italy 4,400 36,300
-----------
TELECOMMUNICATIONS 1.9%
British Telecommunications PLC.............................. United Kingdom 37,430 610,883
Rostelecom.................................................. Russia 168,000 131,040
Rostelecom, ADR............................................. Russia 56,000 262,500
-----------
1,004,423
-----------
TEXTILES & APPAREL .9%
*Adidas-Salomon AG.......................................... Germany 5,500 487,493
*Dawson International PLC................................... United Kingdom 74,822 20,836
-----------
508,329
-----------
</TABLE>
15
PAGE
TEMPLETON GREATER EUROPEAN FUND
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
TRANSPORTATION 5.1%
British Airways PLC......................................... United Kingdom 140,000 $ 971,249
Koninklijke Nedlloyd Groep NV............................... Netherlands 6,250 144,734
Kvaerner ASA, A............................................. Norway 18,400 327,349
Peninsular & Oriental Steam Navigation Co. ................. United Kingdom 40,300 586,811
Transport Development Group PLC............................. United Kingdom 22,608 76,642
Vosper Thornycroft Holdings PLC............................. United Kingdom 43,000 620,573
-----------
2,727,358
-----------
UTILITIES ELECTRICAL & GAS 5.6%
Electrabel SA............................................... Belgium 1,486 532,622
Empresa Nacional Hidroelectrica del Ribagorzana SA, B....... Spain 5,500 144,882
Iberdrola SA, Br. .......................................... Spain 48,200 713,943
*Mosenergo, ADR............................................. Russia 13,500 32,063
National Power PLC.......................................... United Kingdom 70,000 537,605
Powergen PLC................................................ United Kingdom 40,000 440,384
Veba AG..................................................... Germany 12,000 631,565
-----------
3,033,064
-----------
WHOLESALE & INTERNATIONAL TRADE 1.3%
Dahl International AB....................................... Sweden 44,500 684,574
-----------
TOTAL COMMON STOCKS (COST $53,431,116)...................... 47,584,491
-----------
PREFERRED STOCKS 3.2%
Ballast Nedam NV, pfd. ..................................... Netherlands 5,000 148,445
Baumax AG, pfd. ............................................ Austria 6,953 113,723
BBS Kraftfahrzeugtechnik AG, pfd. .......................... Germany 1,500 288,253
Fiat SpA, pfd. ............................................. Italy 42,900 72,297
Krones AG, pfd. ............................................ Germany 1,918 49,696
Volkswagen AG, pfd. ........................................ Germany 26,000 1,038,574
-----------
TOTAL PREFERRED STOCKS (COST $2,370,201).................... 1,710,988
-----------
<CAPTION>
PRINCIPAL
AMOUNT**
--------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS (COST $4,535,888) 8.4%
U.S. Treasury Bills, 4.34% to 4.43%, with maturities to
8/19/99................................................... United States $ 4,602,000 4,536,506
-----------
TOTAL INVESTMENTS (COST $60,337,205) 99.7%.................. 53,831,985
OTHER ASSETS, LESS LIABILITIES .3%.......................... 164,123
-----------
TOTAL NET ASSETS 100.0%..................................... $53,996,108
===========
</TABLE>
*Non-income producing.
**Securities denominated in U.S. dollars.
See Notes to Financial Statements.
16
PAGE
TEMPLETON GREATER EUROPEAN FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $60,337,205)..... $53,831,985
Cash....................................................... 115
Receivables:
Investment securities sold................................ 1,918,765
Fund shares sold.......................................... 54,547
Dividends................................................. 585,990
Other assets............................................... 12,025
-----------
Total assets.......................................... 56,403,427
-----------
Liabilities:
Payables:
Investment securities purchased........................... 5,305
Fund shares redeemed...................................... 2,231,181
To affiliates............................................. 111,584
Accrued expenses........................................... 59,249
-----------
Total liabilities..................................... 2,407,319
-----------
Net assets, at value........................................ $53,996,108
===========
Net assets consist of:
Undistributed net investment income........................ $ 258,835
Net unrealized depreciation................................ (6,505,220)
Accumulated net realized gain.............................. 2,032,754
Beneficial shares.......................................... 58,209,739
-----------
Net assets, at value........................................ $53,996,108
===========
CLASS A:
Net asset value per share ($39,508,991 / 3,132,005 shares
outstanding)............................................. $12.61
===========
Maximum offering price per share ($12.61 / 94.25%)......... $13.38
===========
CLASS C:
Net asset value per share ($14,222,470 / 1,138,455 shares
outstanding)*............................................ $12.49
===========
Maximum offering price per share ($12.49 / 99.00%)......... $12.62
===========
ADVISOR CLASS:
Net asset value and maximum offering price per share
($264,647 / 20,898 shares outstanding).................... $12.66
===========
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
sales charge.
See Notes to Financial Statements.
17
PAGE
TEMPLETON GREATER EUROPEAN FUND
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1999
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $206,000)
Dividends.................................................. $1,325,029
Interest................................................... 729,802
----------
Total investment income............................... $ 2,054,831
Expenses:
Management fees (Note 3)................................... 423,088
Administrative fees (Note 3)............................... 84,618
Distribution fees (Note 3)
Class A................................................... 147,854
Class C................................................... 128,946
Transfer agent fees (Note 3)............................... 118,300
Custodian fees............................................. 20,600
Reports to shareholders.................................... 49,500
Registration and filing fees............................... 40,700
Professional fees.......................................... 18,300
Trustees' fees and expenses................................ 6,700
Amortization of organization costs......................... 13,242
Other...................................................... 2,725
----------
Total expenses........................................ 1,054,573
------------
Net investment income........................... 1,000,258
------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments............................................... 3,679,038
Foreign currency transactions............................. (37,717)
----------
Net realized gain..................................... 3,641,321
Net unrealized depreciation on investments............ (10,473,856)
------------
Net realized and unrealized loss............................ (6,832,535)
------------
Net decrease in net assets resulting from operations........ $ (5,832,277)
============
</TABLE>
See Notes to Financial Statements.
18
PAGE
TEMPLETON GREATER EUROPEAN FUND
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 1,000,258 $ 298,473
Net realized gain from investments and foreign currency
transactions............................................ 3,641,321 1,213,778
Net unrealized appreciation (depreciation) on
investments.............................................. (10,473,856) 2,800,101
------------------------------
Net increase (decrease) in net assets resulting from
operations............................................ (5,832,277) 4,312,352
Distributions to shareholders from:
Net investment income:
Class A.................................................. (731,302) (207,163)
Class C.................................................. (182,376) (43,475)
Advisor Class............................................ (10,692) (905)
Net realized gains:
Class A.................................................. (1,305,179) (998,765)
Class C.................................................. (437,976) (303,072)
Advisor Class............................................ (17,826) (3,694)
Fund share transactions (Note 2):
Class A.................................................. 26,750,423 8,101,372
Class C.................................................. 10,148,300 2,853,411
Advisor Class............................................ 148,524 27,981
------------------------------
Net increase in net assets.............................. 28,529,619 13,738,042
Net assets:
Beginning of year.......................................... 25,466,489 11,728,447
------------------------------
End of year................................................ $ 53,996,108 $25,466,489
==============================
Undistributed net investment income included in net assets:
End of year................................................ $ 258,835 $ 109,067
==============================
</TABLE>
See Notes to Financial Statements.
19
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, under normal market
conditions, at least 75% of its total assets in equity securities of Greater
European companies as defined in the Fund's prospectus. 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 and 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.
20
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 comprising
the Trust 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. 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 A, Class C, and Advisor Class
shares. Effective January 1, 1999, Class I and Class II shares were renamed
Class A and Class C, respectively. 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, 1999, there was an unlimited number of shares of beneficial
interest authorized ($0.01 par value). Transactions in the Fund's shares were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------------
1999 1998
------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES:
Shares sold................................................ 11,427,434 $ 148,355,385 1,202,564 $15,820,682
Shares issued on reinvestment of distributions............. 152,278 1,853,465 92,488 1,117,164
Shares redeemed............................................ (9,812,112) (123,458,427) (681,131) (8,836,474)
------------------------------------------------------------
Net increase............................................... 1,767,600 $ 26,750,423 613,921 $ 8,101,372
============================================================
</TABLE>
21
PAGE
TEMPLETON GREATER EUROPEAN FUND
Notes to Financial Statements (continued)
2. BENEFICIAL SHARES (CONT.)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------------------------------
1999 1998
---------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS C SHARES:
Shares sold................................................. 1,614,772 $ 21,466,567 283,511 $ 3,671,637
Shares issued on reinvestment of distributions.............. 44,862 540,863 27,106 325,541
Shares redeemed............................................. (939,952) (11,859,130) (89,455) (1,143,767)
---------------------------------------------------------
Net increase................................................ 719,682 $ 10,148,300 221,162 $ 2,853,411
=========================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------------------------------
1999 1998
---------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------
<S> <C> <C> <C> <C>
ADVISOR CLASS SHARES:
Shares sold................................................. 796,091 $ 11,069,182 186,400 $ 2,341,970
Shares issued on reinvestment of distributions.............. 1,992 27,214 380 4,600
Shares redeemed............................................. (782,998) (10,947,872) (183,909) (2,318,589)
---------------------------------------------------------
Net increase................................................ 15,085 $ 148,524 2,871 $ 27,981
=========================================================
</TABLE>
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, 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 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 A, Class C, and Advisor Class shares,
respectively, through August 1, 1999. For the year ended March 31, 1999, no
reimbursement was necessary.
22
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 assets of Class A and Class C shares, respectively, for costs incurred
in marketing the Fund's Class A and Class C shares. Under the Class A
distribution plan, costs exceeding the maximum may be reimbursed in subsequent
periods. At March 31, 1999, unreimbursed costs were $225,324. Distributors
received net commissions on sales of Fund shares and received contingent
deferred sales charges for the period of $33,785 and $19,819, respectively.
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, 1999, the net unrealized depreciation
based on the cost of investments for income tax purposes was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 3,109,807
Unrealized depreciation..................................... (9,615,027)
-----------
Net unrealized depreciation................................. $(6,505,220)
===========
</TABLE>
At March 31, 1999, the Fund has deferred currency losses occurring subsequent to
October 31, 1998 of $37,000. For tax purposes, such losses will be reflected in
the year ending March 31, 2000.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended March 31, 1999 aggregated $54,994,461 and $16,005,708, respectively.
6. SUBSEQUENT EVENT
The Fund's Board of Trustees approved a proposal to change the Fund's name to
the Templeton International Fund and to modify the Fund's investment policies to
require investments exclusively in developed countries. It is anticipated that
the effective date of these changes will occur in late 1999.
23
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,
1999, 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, 1999, 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, 1999, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
New York, New York
April 30, 1999
24
PAGE
TEMPLETON GREATER EUROPEAN FUND
Tax Designation
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Templeton Greater
European Fund hereby designates $2,982,156 as a capital gain dividend for the
fiscal year ended March 31, 1999.
At March 31, 1999, more than 50% of the Templeton Greater European Fund's total
assets were invested in securities of foreign issuers. In most instances,
foreign taxes were withheld from dividends paid to the fund on these
investments. As in prior years, the Fund intends to make an election under
Section 853 of the Internal Revenue Code. This election will allow shareholders
to treat their proportionate share of foreign taxes paid by the Fund as having
been paid directly by them.
In January 2000, shareholders will receive Form 1099-DIV, which will include
their share of taxes withheld and foreign source income distributed during the
calendar year 1999.
The following table provides a breakdown by country of foreign source income and
foreign taxes paid to Class A, Class C, and Advisor Class shareholders in May
1999.
<TABLE>
<CAPTION>
CLASS A CLASS C ADVISOR CLASS
------------------------------------- -------------------------------------- ------------------
FOREIGN TAXES FOREIGN SOURCE FOREIGN TAXES FOREIGN SOURCE FOREIGN TAXES
COUNTRY WITHHELD PER SHARE INCOME PER SHARE WITHHELD PER SHARE INCOME PER SHARE WITHHELD PER SHARE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Austria.............. $0.0002 $0.0009 $0.0002 $0.0007 $0.0002
Belgium.............. 0.0004 0.0016 0.0004 0.0014 0.0004
Denmark.............. 0.0006 0.0025 0.0006 0.0022 0.0006
Finland.............. 0.0032 0.0141 0.0032 0.0121 0.0032
France............... 0.0012 0.0102 0.0012 0.0087 0.0012
Germany.............. 0.0006 0.0042 0.0006 0.0036 0.0006
Hong Kong............ 0.0009 0.0104 0.0009 0.0089 0.0009
Italy................ 0.0008 0.0038 0.0008 0.0033 0.0008
Netherlands.......... 0.0034 0.0153 0.0034 0.0130 0.0034
Norway............... 0.0018 0.0084 0.0018 0.0072 0.0018
Poland............... 0.0001 0.0004 0.0001 0.0004 0.0001
Spain................ 0.0016 0.0082 0.0016 0.0070 0.0016
Sweden............... 0.0061 0.0284 0.0061 0.0242 0.0061
Switzerland.......... 0.0009 0.0042 0.0009 0.0036 0.0009
United Kingdom....... 0.0272 0.1331 0.0272 0.1137 0.0272
--------------------------------------------------------------------------------------------------
TOTAL................ $0.0490 $0.2457 $0.0490 $0.2100 $0.0490
==================================================================================================
<CAPTION>
ADVISOR CLASS
----------------
FOREIGN SOURCE
COUNTRY INCOME PER SHARE
- ---------------------
<S> <C>
Austria.............. $0.0010
Belgium.............. 0.0018
Denmark.............. 0.0028
Finland.............. 0.0155
France............... 0.0112
Germany.............. 0.0047
Hong Kong............ 0.0115
Italy................ 0.0042
Netherlands.......... 0.0168
Norway............... 0.0093
Poland............... 0.0005
Spain................ 0.0090
Sweden............... 0.0313
Switzerland.......... 0.0046
United Kingdom....... 0.1467
-------
TOTAL................ $0.2709
=======
</TABLE>
25
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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 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
Mutual European Fund
Templeton Global Bond Fund
GLOBAL INCOME
Franklin Global Government Income Fund
Franklin Templeton Global Currency Fund
Franklin Templeton Hard 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(1)
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund(1)
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Rising Dividends Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund
FUND ALLOCATOR SERIES
Franklin Templeton Conservative Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton Growth Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund
Franklin's AGE High Income Fund
Franklin Bond Fund
Franklin Floating Rate Trust
Franklin Short-Intermediate U.S. Government Securities Fund
Franklin Strategic Income Fund
Franklin U.S. Government Securities Fund
Franklin Federal Money Fund(2)
Franklin Money Fund(2)
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(2)
STATE-SPECIFIC TAX-FREE INCOME
Alabama
Arizona(3)
California(3)
Colorado
Connecticut
Florida(3)
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(4)
Michigan(4)
Minnesota(4)
Missouri
New Jersey
New York(3)
North Carolina
Ohio(4)
Oregon
Pennsylvania
Tennessee(5)
Texas
Virginia
VARIABLE ANNUITIES(6)
Franklin Valuemark(R)
Franklin Templeton Valuemark Income Plus (an immediate annuity)
1. These funds are now closed to new accounts, with the exception of retirement
plan accounts.
2. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
3. Two or more fund options available: long-term portfolio; portfolio of insured
securities; high yield portfolio (CA); intermediate-term and money market
portfolios (CA and NY).
4. Portfolio of insured municipal securities.
5. The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
6. 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.
PAGE
[FRANKLIN TEMPLETON LOGO] -----------------
Templeton Greater European Fund Bulk Rate
777 Mariners Island Blvd., P.O. Box 7777 U.S. Postage
San Mateo, CA 94403-7777 PAID
Permit No. 75
Bell, CA
-----------------
ANNUAL REPORT
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
1-800/DIAL BEN(R)
www.franklin-templeton.com
SHAREHOLDER SERVICES
1-800/632-2301
FUND INFORMATION
1-800/342-5236
This report must be preceded or accompanied by the current Templeton Greater
European Fund prospectus, 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 A99 05/99 [RECYCLE LOGO] Printed on recycled paper
