ANNUAL REPORT
MARCH 31, 2000
TEMPLETON
INTERNATIONAL FUND
[Franklin Templeton Butterball logo}
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[PHOTO OF MARK G. HOLOWESKO APPEARS HERE]
MARK G. HOLOWESKO, CFA
PRESIDENT
TEMPLETON GLOBAL INVESTMENT TEAM
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective, and 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.
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WE'RE ON THE WEB -- Now you can access online information about your fund,
including this shareholder report. Find our Web site at
www.franklintempleton.com, your online resource for fund literature, prices and
performance, investor information and around-the-clock account services.
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SHAREHOLDER LETTER
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YOUR FUND'S GOAL: TEMPLETON INTERNATIONAL FUND SEEKS LONG-TERM CAPITAL
APPRECIATION. UNDER NORMAL MARKET CONDITIONS, THE FUND WILL INVEST AT LEAST 75%
OF ITS TOTAL ASSETS IN THE EQUITY SECURITIES OF COMPANIES LOCATED IN ANY
DEVELOPED COUNTRY OUTSIDE THE U.S. EFFECTIVE AUGUST 1, 1999, THE FUND'S BOARD OF
TRUSTEES APPROVED A CHANGE IN THE FUND'S NAME AND INVESTMENT FOCUS. BEFORE THAT
DATE, THE FUND'S NAME WAS TEMPLETON GREATER EUROPEAN FUND.
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Dear Shareholder:
This annual report of Templeton International Fund covers the 12 months ended
March 31, 2000. During this time, relatively low interest rates, benign
inflation and increasing productivity contributed to the positive performance of
many economies and equity markets, and yet, most investor attention focused on
the U.S., particularly the tech-heavy Nasdaq Composite(R) Index, which started
the reporting period at 2461 and reached a record high of 5048 on March 10,
2000, before closing the period at 4572.(1)
1. The Nasdaq Composite Index measures all Nasdaq domestic and non-U.S. based
common stocks listed on the Nasdaq Stock Market. The Index is market-value
weighted and includes over 5,000 companies (as of 3/31/00).
All portfolio holdings mentioned in the report are listed by their complete
legal titles in the Fund's Statement of Investments (SOI), a complete listing of
the Fund's portfolio holdings, including dollar value and number of shares or
principal amount. The SOI begins on page 15.
CONTENTS
Shareholder Letter 1
Performance Summary 8
Financial Highlights &
Statement of Investments 12
Financial Statements 20
Notes to Financial Statements 23
Independent Auditors' Report 27
Tax Designation 28
[GRAPHIC]
FUND CATEGORY
Global
Growth
Growth & Income
Income
Tax-Free Income
PAGE
[PIE CHART]
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
3/31/00
Europe 62.5%
Asia 12.8%
Australia & New Zealand 5.1%
North America 4.8%
Short-Term Investments &
Other Net Assets 14.8%
Within this environment, Templeton International Fund - Class A posted a
12-month cumulative total return of 9.61% as shown in the Performance Summary on
page 8. The Fund's benchmarks, the Morgan Stanley Capital International (MSCI)
Europe Index, and the MSCI Europe, Australasia, Far East Index (MSCI(R) EAFE)
rose 18.82% and 25.40%, respectively, during the same period.(2) The Fund's
performance was partially hindered as we adhered to our value-style strategy
throughout the period, investing in out-of-favor sectors of Asian and European
markets: cyclical stocks, industrial companies and select financial issues.
Performance benefited from the return of investors to Asia and sharp rallies in
France, Finland and Germany. Though we had a number of excellent gains in our
Japanese positions, the Fund's relative underweighting in that country compared
to the MSCI EAFE caused us to lag that index somewhat.
EUROPE
In Europe, where investor enthusiasm for the introduction of the euro helped
push continental stock prices higher, we continued to find opportunities in the
U.K. Its market has underperformed the continental European markets for the past
two years, with aerospace and retail stocks in particular performing poorly.
Despite this underperformance, we are still optimistic about the long-term
prospects of U.K. equities, and at the end of the reporting period, they
represented 37.8% of the Fund's European total net assets.
2. Source: Standard & Poor's Micropal. The unmanaged MSCI EAFE Index tracks the
performance of approximately 1,000 securities in 20 countries and includes
reinvested dividends. The unmanaged MSCI Europe Index tracks the performance of
approximately 600 securities in 15 European countries and includes reinvested
dividends. One cannot invest directly in an index, nor is the index
representative of the Fund's portfolio.
2
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Among the Fund's largest U.K. holdings on March 31, 2000 were Rolls-Royce, a
manufacturer of industrial gas turbine engines for civil and military aircraft,
and Marks & Spencer, a major retail department store operator. Rolls-Royce's
stock price recently sold at only 11 times our expected earnings estimate for
2000. Because of a difficult operating environment, Marks & Spencer's share
price declined to a level that's close to the value of its real estate holdings
alone, implying its retail trading operations were virtually worthless. However,
investors received a 6% dividend yield while management restructured operations
in an effort to improve profitability. We believe the franchise of the company,
which has traditionally maintained a reputation as a top British retailer,
remains intact.
In Germany, we added to several holdings such as BMW, Veba and Adidas, which we
believed should benefit from possible tax rate reductions. Taxes are generally
much higher in Europe than in the United States, and although much of Europe has
experienced a year with a common currency, the region does not yet enjoy a
common level of taxation.(3) Recognizing that high and uneven taxation has
hampered investment and European competitiveness, politicians are debating
legislation to lower and standardize corporate and personal tax levels. If they
succeed, the result could be higher corporate profits.
Other large European holdings included Volvo (Sweden), Aventis (France), Philips
Electronics (Netherlands) and Iberdrola (Spain).
ASIA
During the reporting period, many Asian economies stabilized and showed signs of
solid growth. Hong Kong's economy
3. Source: Templeton Du Pont analysis.
TOP 10 COUNTRIES
3/31/00
% OF TOTAL
COUNTRY NET ASSETS
-------------------------------
United Kingdom 23.6%
Germany 8.0%
Japan 7.6%
France 7.0%
Sweden 6.8%
Netherlands 5.8%
Hong Kong 4.5%
Australia 4.3%
Spain 3.6%
Finland 3.3%
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TOP 10 INDUSTRIES
3/31/00
% OF TOTAL
INDUSTRY NET ASSETS
----------------------------------------
Banking 9.0%
Utilities Electrical & Gas 7.3%
Electrical & Electronics 7.0%
Automobiles 5.8%
Chemicals 5.7%
Machinery & Engineering 4.9%
Energy Sources 4.3%
Multi-Industry 3.9%
Transportation 3.7%
Insurance 3.6%
generally performed well, as property prices stabilized, tourism increased and
retail sales improved. Importantly for the entire region, the Japanese economy
has shown signs of improvement with domestic spending increasing and business
sentiment improving.
On March 31, 2000, our largest Asian positions were Nippon Telephone & Telegraph
(Japan), Hitachi (Japan) and HSBC Holdings (Hong Kong). During the reporting
period, we took advantage of rising stock prices to reduce many of our Pacific
Rim positions. However, compared to the MISCE EAFE Index, we still maintained an
overweight position in Hong Kong at period's end. One of our largest Hong Kong
positions, Cheung Kong Holdings, a real estate development and investment
company, was selling at a substantial discount to its investment in Hutchison
Whampoa. By the end of the reporting period, Cheung Kong's ownership of
Hutchison shares was valued in excess of Cheung Kong's total market value
despite the fact that Cheung Kong also has considerable land assets.
AUSTRALIA
Rising interest rates pushed down prices of Australian banking stocks, and we
used this weakness to build our position in National Australia Bank. One of the
largest and most competitive banks in Australia, its share price had fallen by
one-third, and was selling at only 10 times our projected 2000 earnings when we
bought it.
LOOKING FORWARD
Our analysis of equity markets during the reporting period revealed the
potential for dramatic divergence of performance between industry sectors. Many
stocks prices reflected unrealistic prospects while others were selling at
historically low
4
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valuations. The most overpriced stocks were providing the best performance, with
prices often defying logic.
Understandably, many professional investors have become nervous about the level
of these prices, the size and importance of the U.S. stock market relative to
the U.S. economy and the amount of speculation. Two examples of the extremes to
which this speculation has reached are the enormous rise in margin debt and the
willingness of investors to pay huge sums for stocks of companies with no
earnings and little revenue. Even those who invest only outside the U.S. worry
that a significant decline in U.S. stock prices will jeopardize global growth,
as the U.S. economy has been such a catalyst in maintaining economic activity
the world over.
AVERAGE STOCK VALUATION
Price to Earnings
Templeton International Fund vs. MSCI EAFE & NASDAQ
(4/1/99 - 3/31/00)
[LINE GRAPH]
This chart shows the average stock valuation based on price to earnings ratio of
Templeton International Fund versus the MSCI EAFE Index and NASDAQ Index from
4/1/99 to 3/31/00.*
<TABLE>
<CAPTION>
Price To Earnings
Templeton International Fund MSCI EAFE Index NASDAQ
<S> <C> <C> <C>
Apr-99 14.8 30.6 107.5
May-99 13.9 32.3 104.4
Jun-99 14.7 33.7 115.9
Jul-99 15.0 34.7 112.6
Aug-99 15.8 35.3 116.9
Sept-99 14.7 35.4 145.7
Oct-99 14.5 39.2 114.1
Nov-99 15.7 38.8 208.3
Dec-99 16.2 42.8 281.1
Jan-00 14.5 40.2 326.0
Feb-00 14.1 40.2 364.4
Mar-00 13.0 38.9 207.8
</TABLE>
*Sources: Nasdaq, MSCI.
We believe, however, that there is a significant difference between our holdings
and the general market. This difference is illustrated by the valuation table
above, which shows the average valuation of our holdings in the Fund compared to
the valuations of stocks in the Nasdaq(R) and MSCI EAFE Indexes. As the
TOP 10 HOLDINGS
3/31/00
COMPANY % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
-------------------------------------------
Nippon
Telegraph & Telephone Corp.
Telecommunications, Japan 2.1%
Hitachi Ltd.
Electrical & Electronics, Japan 2.0%
Veba AG
Utilities Electrical & Gas,
Germany 1.8%
National Australia Bank Ltd.
Banking, Australia 1.7%
HSBC Holdings PLC
Banking, Hong Kong 1.7%
Iberdrola SA, Br.
Utilities Electrical & Gas, Spain 1.6%
Fuji Photo Film Co. Ltd.
Electrical & Electronics, Japan 1.6%
Aventis SA
Health & Personal Care, France 1.6%
Shell Transport &
Trading Co. PLC
Energy Sources,
United Kingdom 1.6%
Bayerische Motorenwerke
(BMW) AG
Automobiles, Germany 1.6%
5
PAGE
chart reveals, in most cases we are holding or buying securities that are 50%
cheaper than the overall market. In our assessment, our approach provides
long-term possibilities not available to those who base investment decisions on
trends alone.
In the months to come, we will continue to search the globe for what we feel are
bargain stocks, employing our time-tested strategy of diversification which
should help us to spread risk over a number of countries and industries and to
expand the areas for discovering undervalued assets. Of course, there are
special risks involved with global investing related to market, currency,
economic, social, political and other factors. Investing in certain foreign
markets means accepting a certain amount of volatility, and, in some cases, the
consequences of severe market corrections. For example, Hong Kong's equity
market has increased 1,161% in U.S. dollars in the past 15 years, but has
suffered 6 declines of more than 15% during the same time.(4) While short-term
volatility can be disconcerting, declines in excess of 50% are not unusual in
some markets. These risks and considerations are discussed in the Fund's
prospectus.
4. Source: Hang Seng Index. Based on quarterly percentage price change over 15
years ended December 31, 1999. Market return is measured in U.S. dollar terms
and does not include reinvested dividends.
6
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Thank you for investing in Templeton International Fund. We welcome your
comments and look forward to serving you in the future.
Sincerely,
/s/MARK G. HOLOWESKO
Mark G. Holowesko, CFA
/s/JEFFREY A. EVERETT, CFA
Jeffrey A. Everett, CFA
/s/RICHARD SEAN FARRINGTON, CFA
Richard Sean Farrington, CFA
The Portfolio Management Team
Templeton International Fund
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This discussion reflects our views, opinions and portfolio holdings as of March
31, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change depending
on market and economic conditions. Although historical performance is no
guarantee of future results, these insights may help you understand our
investment and management philosophy.
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7
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CLASS A:
Subject to the current, maximum 5.75% initial sales charge.*
CLASS C:
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.*
* Past expense reductions by the fund's manager increased the fund's total
returns.
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ONE-YEAR PERFORMANCE SUMMARY
AS OF 3/31/00
ONE-YEAR TOTAL RETURN DOES NOT INCLUDE SALES CHARGES. 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'S OPERATING
EXPENSES. PAST DISTRIBUTIONS ARE NOT INDICATIVE OF FUTURE TRENDS. ALL TOTAL
RETURNS INCLUDE REINVESTED DISTRIBUTIONS AT NET ASSET VALUE.
<TABLE>
<CAPTION>
<S> <C> <C>
CLASS A
One-Year Total Return 9.61%
Net Asset Value (NAV) $12.91 (3/31/00) $12.61 (3/31/99)
Change in NAV +$0.30
Distributions (4/1/99 - 3/31/00) Dividend Income $0.2932
Short-Term Capital Gain $0.2317
Long-Term Capital Gain $0.3909
------------------------------------
TOTAL $0.9158
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
CLASS C
One-Year Total Return 8.99%
Net Asset Value (NAV) $12.78 (3/31/00) $12.49 (3/31/99)
Change in NAV +$0.29
Distributions (4/1/99 - 3/31/00) Dividend Income $0.2164
Short-Term Capital Gain $0.2317
Long-Term Capital Gain $0.3909
------------------------------------
TOTAL $0.8390
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
ADVISOR CLASS
One-Year Total Return 9.90%
Net Asset Value (NAV) $12.95 (3/31/00) $12.66 (3/31/99)
Change in NAV +$0.29
Distributions (4/1/99 - 3/31/00) Dividend Income $0.3445
Short-Term Capital Gain $0.2317
Long-Term Capital Gain $0.3909
------------------------------------
TOTAL S$0.9671
</TABLE>
Templeton International Fund paid distributions derived from long-term capital
gains totaling 39.09 cents ($0.3909) per share in May and December 1999. The
fund hereby designates such distributions as capital gain dividends per Internal
Revenue Code Section 852 (b)(3).
Past performance does not guarantee future results.
8
PAGE
ADDITIONAL PERFORMANCE
AS OF 3/31/00
<TABLE>
<CAPTION>
INCEPTION
CLASS A 1-YEAR 3-YEAR (5/8/95)
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<S> <C> <C> <C>
Cumulative Total Return(1) 9.61% 30.56% 65.09%
Average Annual Total Return(2) 3.30% 7.17% 9.44%
Value of $10,000 Investment(3) $10,330 $12,308 $15,560
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 1-YEAR 3-YEAR (5/8/95)
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 8.99% 28.27% 59.95%
Average Annual Total Return(2) 6.88% 8.30% 9.84%
Value of $10,000 Investment(3) $10,688 $12,703 $15,837
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
ADVISOR CLASS(4) 1-YEAR 3-YEAR (5/8/95)
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 9.90% 32.06% 68.86%
Average Annual Total Return(2) 9.90% 9.71% 11.29%
Value of $10,000 Investment(3) $10,990 $13,206 $16,886
</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 current, 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 current, applicable, maximum
sales charge(s) for that class.
4. 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 that class. Since
January 2, 1997 (commencement of sales), the cumulative and average annual total
returns of Advisor Class shares were 41.20% and 11.21% respectively.
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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. You may
have a gain or loss when you sell your shares.
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For updated performance figures, see "Prices and Performance" on the Internet at
www.franklintempleton.com, or call Franklin Templeton at 1-800/342-5236.
Past performance does not guarantee future results. 9
PAGE
TOTAL RETURN INDEX COMPARISON
FOR HYPOTHETICAL $10,000 INVESTMENT
Total return represents the change in value of an investment over the periods
shown. It includes the applicable, maximum sales charge(s), Fund expenses,
account fees and reinvested distributions. The unmanaged indexes differ from the
Fund in composition, do not pay management fees or expenses and include
reinvested dividends. One cannot invest directly in an index.
AVERAGE ANNUAL TOTAL RETURN
3/31/00
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------------
<S> <C>
1-Year 3.30%
3-Year 7.17%
Since Inception (5/8/95) 9.44%
</TABLE>
[LINE GRAPH]
The following line graph compares the performance of Templeton International
Fund's Class A shares to that of the MSCI EAFE Index and the MSCI Europe Index
based on a $10,000 investment from 5/8/95 to 3/31/00.*
<TABLE>
<CAPTION>
TEMPLETON INTERNATIONAL MSCI EAFE MSCI EUROPE
FUND - CLASS A* INDEX INDEX
---------------------------------------------------------------
<S> <C> <C> <C>
5/8/95 $9,425 $10,000 $10,000
5/95 $9,444 $9,913 $10,006
6/95 $9,416 $9,742 $10,104
7/95 $9,472 $10,351 $10,635
8/95 $9,491 $9,959 $10,227
9/95 $9,312 $10,156 $10,540
10/95 $9,171 $9,885 $10,494
11/95 $9,142 $10,163 $10,572
12/95 $9,284 $10,575 $10,911
1/96 $9,877 $10,621 $10,985
2/96 $10,028 $10,660 $11,189
3/96 $9,793 $10,889 $11,327
4/96 $9,906 $11,208 $11,413
5/96 $10,066 $11,005 $11,505
6/96 $10,170 $11,069 $11,635
7/96 $9,924 $10,748 $11,494
8/96 $10,407 $10,775 $11,839
9/96 $10,445 $11,063 $12,092
10/96 $10,643 $10,953 $12,377
11/96 $10,908 $11,392 $13,008
12/96 $11,271 $11,248 $13,264
1/97 $11,725 $10,857 $13,304
2/97 $11,831 $11,037 $13,483
3/97 $11,918 $11,080 $13,923
4/97 $11,754 $11,141 $13,858
5/97 $11,956 $11,869 $14,453
6/97 $12,493 $12,526 $15,180
7/97 $12,881 $12,731 $15,896
8/97 $12,622 $11,783 $14,991
9/97 $13,597 $12,446 $16,449
10/97 $13,120 $11,492 $15,644
11/97 $12,981 $11,377 $15,889
12/97 $13,033 $11,480 $16,473
1/98 $13,183 $12,007 $17,163
2/98 $14,105 $12,780 $18,509
3/98 $15,284 $13,177 $19,832
4/98 $15,595 $13,284 $20,222
5/98 $15,679 $13,223 $20,636
6/98 $15,280 $13,325 $20,867
7/98 $15,139 $13,464 $21,284
8/98 $13,389 $11,799 $18,612
9/98 $12,524 $11,440 $17,873
10/98 $13,313 $12,636 $19,309
11/98 $13,702 $13,286 $20,341
12/98 $13,757 $13,813 $21,236
1/99 $13,633 $13,776 $21,104
2/99 $13,712 $13,451 $20,573
3/99 $14,196 $14,015 $20,803
4/99 $15,491 $14,586 $21,428
5/99 $14,904 $13,839 $20,404
6/99 $15,433 $14,381 $20,753
7/99 $16,045 $14,812 $20,951
8/99 $16,268 $14,869 $21,170
9/99 $15,857 $15,022 $21,012
10/99 $15,527 $15,589 $21,790
11/99 $15,857 $16,133 $22,383
12/99 $16,946 $17,584 $24,682
1/00 $15,584 $16,470 $22,929
2/00 $14,957 $16,916 $24,130
3/00 $15,560 $17,576 $24,718
</TABLE>
* Source: Standard and Poor's Micropal.
AVERAGE ANNUAL TOTAL RETURN
3/31/00
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------------------------
<S> <C>
1-Year 6.88%
3-Year 8.30%
Since Inception (5/8/95) 9.84%
</TABLE>
[LINE GRAPH]
The following line graph compares the performance of Templeton International
Fund's Class C shares to that of the MSCI EAFE Index and the MSCI Europe Index
based on a $10,000 investment from 5/8/95 to 3/31/00.*
<TABLE>
<CAPTION>
TEMPLETON INTERNATIONAL MSCI EAFE MSCI EUROPE
FUND - CLASS C* INDEX INDEX
----------------------------------------------------------
<S> <C> <C> <C>
5/8/95 $9,901 $10,000 $10,000
5/95 $9,911 $9,913 $10,006
6/95 $9,881 $9,742 $10,104
7/95 $9,941 $10,351 $10,635
8/95 $9,950 $9,959 $10,227
9/95 $9,762 $10,156 $10,540
10/95 $9,604 $9,885 $10,494
11/95 $9,574 $10,163 $10,572
12/95 $9,713 $10,575 $10,911
1/96 $10,317 $10,621 $10,985
2/96 $10,475 $10,660 $11,189
3/96 $10,218 $10,889 $11,327
4/96 $10,337 $11,208 $11,413
5/96 $10,500 $11,005 $11,505
6/96 $10,599 $11,069 $11,635
7/96 $10,322 $10,748 $11,494
8/96 $10,817 $10,775 $11,839
9/96 $10,847 $11,063 $12,092
10/96 $11,055 $10,953 $12,377
11/96 $11,322 $11,392 $13,008
12/96 $11,692 $11,248 $13,264
1/97 $12,155 $10,857 $13,304
2/97 $12,256 $11,037 $13,483
3/97 $12,346 $11,080 $13,923
4/97 $12,165 $11,141 $13,858
5/97 $12,378 $11,869 $14,453
6/97 $12,917 $12,526 $15,180
7/97 $13,310 $12,731 $15,896
8/97 $13,041 $11,783 $14,991
9/97 $14,035 $12,446 $16,449
10/97 $13,538 $11,492 $15,644
11/97 $13,414 $11,377 $15,889
12/97 $13,468 $11,480 $16,473
1/98 $13,613 $12,007 $17,163
2/98 $14,547 $12,780 $18,509
3/98 $15,748 $13,177 $19,832
4/98 $16,059 $13,284 $20,222
5/98 $16,124 $13,223 $20,636
6/98 $15,709 $13,325 $20,867
7/98 $15,553 $13,464 $21,284
8/98 $13,737 $11,799 $18,612
9/98 $12,852 $11,440 $17,873
10/98 $13,637 $12,636 $19,309
11/98 $14,051 $13,286 $20,341
12/98 $14,088 $13,813 $21,236
1/99 $13,960 $13,776 $21,104
2/99 $14,041 $13,451 $20,573
3/99 $14,530 $14,015 $20,803
4/99 $15,845 $14,586 $21,428
5/99 $15,238 $13,839 $20,404
6/99 $15,772 $14,381 $20,753
7/99 $16,392 $14,812 $20,951
8/99 $16,610 $14,869 $21,170
9/99 $16,185 $15,022 $21,012
10/99 $15,845 $15,589 $21,790
11/99 $16,173 $16,133 $22,383
12/99 $17,262 $17,584 $24,682
1/00 $15,874 $16,470 $22,929
2/00 $15,217 $16,916 $24,130
3/00 $15,837 $17,576 $24,718
</TABLE>
* Source: Standard and Poor's Micropal.
10 Past performance does not guarantee future results.
PAGE
AVERAGE ANNUAL TOTAL RETURN
3/31/00
ADVISOR CLASS**
--------------------------------------------------------------------------------
1-Year 9.90%
3-Year 9.71%
Since Inception (5/8/95) 11.29%
[LINE GRAPH]
The following line graph compares the performance of Templeton International
Fund's Advisor Class shares to that of the MSCI EAFE Index and the MSCI Europe
Index based on a $10,000 investment from 5/8/95 to 3/31/00.*
<TABLE>
<CAPTION>
TEMPLETON INTERNATIONAL MSCI EAFE MSCI EUROPE
FUND - ADVISOR CLASS INDEX INDEX
--------------------------------------------------------
<S> <C> <C> <C>
5/8/95 $10,000 $10,000 $10,000
5/95 $10,020 $9,913 $10,006
6/95 $9,990 $9,742 $10,104
7/95 $10,050 $10,351 $10,635
8/95 $10,070 $9,959 $10,227
9/95 $9,880 $10,156 $10,540
10/95 $9,730 $9,885 $10,494
11/95 $9,700 $10,163 $10,572
12/95 $9,850 $10,575 $10,911
1/96 $10,480 $10,621 $10,985
2/96 $10,640 $10,660 $11,189
3/96 $10,390 $10,889 $11,327
4/96 $10,510 $11,208 $11,413
5/96 $10,680 $11,005 $11,505
6/96 $10,791 $11,069 $11,635
7/96 $10,530 $10,748 $11,494
8/96 $11,042 $10,775 $11,839
9/96 $11,082 $11,063 $12,092
10/96 $11,293 $10,953 $12,377
11/96 $11,574 $11,392 $13,008
12/96 $11,959 $11,248 $13,264
1/97 $12,569 $10,857 $13,940
2/97 $12,683 $11,037 $13,483
3/97 $12,787 $11,080 $13,923
4/97 $12,622 $11,141 $13,858
5/97 $12,838 $11,869 $14,453
6/97 $13,425 $12,526 $15,180
7/97 $13,852 $12,731 $15,896
8/97 $13,575 $11,783 $14,991
9/97 $14,631 $12,446 $16,449
10/97 $14,119 $11,492 $15,644
11/97 $13,990 $11,377 $15,889
12/97 $14,060 $11,480 $16,473
1/98 $14,222 $12,007 $17,163
2/98 $15,213 $12,780 $18,509
3/98 $16,480 $13,177 $19,832
4/98 $16,838 $13,284 $20,222
5/98 $16,912 $13,223 $20,636
6/98 $16,494 $13,325 $20,867
7/98 $16,343 $13,464 $21,284
8/98 $14,460 $11,799 $18,612
9/98 $13,530 $11,440 $17,873
10/98 $14,379 $12,636 $19,309
11/98 $14,809 $13,286 $20,341
12/98 $14,869 $13,813 $21,236
1/99 $14,735 $13,776 $21,104
2/99 $14,833 $13,451 $20,573
3/99 $15,367 $14,015 $20,803
4/99 $16,774 $14,586 $21,428
5/99 $16,144 $13,839 $20,404
6/99 $16,715 $14,381 $20,753
7/99 $17,400 $14,812 $20,951
8/99 $17,642 $14,869 $21,170
9/99 $17,198 $15,022 $21,012
10/99 $16,830 $15,589 $21,790
11/99 $17,198 $16,133 $22,383
12/99 $18,374 $17,584 $24,682
1/00 $16,914 $16,470 $22,929
2/00 $16,222 $16,916 $24,130
3/00 $16,886 $17,576 $24,718
</TABLE>
* Source: Standard and Poor's Micropal. The unmanaged MSCIEAFE Index includes
approximately 1,000 companies representing the stock markets of 20 countries in
Europe, Australia, New Zealand and the Far East. 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. Both indexes include reinvested dividends. One cannot invest directly
in an index, nor is an index representative of the Fund's portfolio. Prior to
August 1, 1999, the Fund: (a) was named the Templeton Greater European Fund; (b)
invested at least 75% of its total assets in equity securities of Western,
Central and Eastern European companies; and (c) considered the MSCI Europe Index
its benchmark to measure performance against. Effective August 1, 1999, the
Fund: (a) changed its name; (b) shifted its focus to its current strategy; and
(c) considers the MSCIEAFE Index its benchmark index to measure performance
against. The MSCI Europe Index will be excluded from next year's report.
** 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 that class.
Past performance is not predictive of future results. 11
PAGE
TEMPLETON INTERNATIONAL FUND
Financial Highlights
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------
YEAR ENDED MARCH 31,
-------------------------------------------------------------
2000++ 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................... $12.61 $14.26 $12.35 $10.39 $10.00
-------------------------------------------------------------
Income from investment operations:
Net investment income............................... .27 .21 .23 .14 .08
Net realized and unrealized gains (losses).......... .94 (1.24) 2.99 2.09 .31
-------------------------------------------------------------
Total from investment operations..................... 1.21 (1.03) 3.22 2.23 .39
-------------------------------------------------------------
Less distributions from:
Net investment income............................... (.29) (.22) (.23) (.13) --
Net realized gains.................................. (.62) (.40) (1.08) (.14) --
-------------------------------------------------------------
Total distributions.................................. (.91) (.62) (1.31) (.27) --
-------------------------------------------------------------
Net asset value, end of year......................... $12.91 $12.61 $14.26 $12.35 $10.39
=============================================================
Total Return*........................................ 9.61% (7.12)% 28.25% 21.70% 3.90%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)...................... $40,201 $39,509 $19,455 $9,268 $4,308
Ratios to average net assets:
Expenses............................................ 1.86% 1.73% 1.85% 1.85% 1.85%**
Expenses, excluding waiver and payments by
affiliate......................................... 1.86% 1.73% 2.41% 2.63% 3.56%**
Net investment income............................... 2.03% 1.91% 2.04% 1.72% 1.39%**
Portfolio turnover rate.............................. 61.73% 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.
++Based on average weighted shares outstanding.
12
PAGE
TEMPLETON INTERNATIONAL FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------
YEAR ENDED MARCH 31,
------------------------------------------------------------
2000++ 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................... $12.49 $14.16 $12.27 $10.32 $10.00
------------------------------------------------------------
Income from investment operations:
Net investment income............................... .18 .11 .12 .11 .07
Net realized and unrealized gains (losses).......... .95 (1.22) 3.01 2.02 .25
------------------------------------------------------------
Total from investment operations..................... 1.13 (1.11) 3.13 2.13 .32
------------------------------------------------------------
Less distributions from:
Net investment income............................... (.22) (.16) (.16) (.04) --
Net realized gains.................................. (.62) (.40) (1.08) (.14) --
------------------------------------------------------------
Total distributions.................................. (.84) (.56) (1.24) (.18) --
------------------------------------------------------------
Net asset value, end of year......................... $12.78 $12.49 $14.16 $12.27 $10.32
============================================================
Total Return*........................................ 8.99% (7.73)% 27.55% 20.83% 3.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)...................... $14,051 $14,222 $5,929 $2,424 $1,431
Ratios to average net assets:
Expenses............................................ 2.49% 2.37% 2.50% 2.50% 2.50%**
Expenses, excluding waiver and payments by
affiliate......................................... 2.49% 2.37% 3.05% 3.29% 4.21%**
Net investment income............................... 1.34% 1.26% 1.31% 1.45% 1.06%**
Portfolio turnover rate.............................. 61.73% 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.
++Based on average weighted shares outstanding.
13
PAGE
TEMPLETON INTERNATIONAL FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
ADVISOR CLASS
---------------------------------------------
YEAR ENDED MARCH 31,
---------------------------------------------
2000++ 1999 1998 1997+
---------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year.......................... $12.66 $14.30 $12.36 $11.56
---------------------------------------------
Income from investment operations:
Net investment income...................................... .26 .74 .56 .07
Net realized and unrealized gains (losses)................. 1.00 (1.73) 2.73 .73
---------------------------------------------
Total from investment operations............................ 1.26 (.99) 3.29 .80
---------------------------------------------
Less distributions from:
Net investment income...................................... (.35) (.25) (.27) --
Net realized gains......................................... (.62) (.40) (1.08) --
---------------------------------------------
Total distributions......................................... (.97) (.65) (1.35) --
---------------------------------------------
Net asset value, end of year................................ $12.95 $12.66 $14.30 $12.36
=============================================
Total Return*............................................... 9.90% (6.76)% 28.88% 6.92%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)............................. $544 $265 $83 $36
Ratios to average net assets:
Expenses................................................... 1.51% 1.38% 1.50% 1.50%**
Expenses, excluding waiver and payments by affiliate....... 1.51% 1.38% 2.06% 1.90%**
Net investment income...................................... 1.93% 2.49% 2.38% 2.56%**
Portfolio turnover rate..................................... 61.73% 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.
++Based on average weighted shares outstanding.
See Notes to Financial Statements.
14
PAGE
TEMPLETON INTERNATIONAL FUND
STATEMENT OF INVESTMENTS, MARCH 31, 2000
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 83.2%
AEROSPACE & MILITARY TECHNOLOGY 2.7%
BAE Systems PLC............................................. United Kingdom 147,213 $ 826,670
Rolls-Royce PLC............................................. United Kingdom 205,089 664,174
-----------
1,490,844
-----------
AUTOMOBILES 4.7%
Autoliv Inc., SDR........................................... Sweden 3,900 107,882
Bayerische Motorenwerke AG.................................. Germany 27,800 869,881
Regie Nationale des Usines Renault SA....................... France 17,000 732,029
Volvo AB, B................................................. Sweden 31,142 839,825
-----------
2,549,617
-----------
BANKING 9.0%
Australia & New Zealand Banking Group Ltd. ................. Australia 100,000 631,279
Banco Popular Espanol SA.................................... Spain 16,946 518,901
Bank Austria AG............................................. Austria 1,300 63,318
Deutsche Bank AG............................................ Germany 10,000 664,568
Foreningssparbanken AB, A................................... Sweden 30,000 407,986
HSBC Holdings PLC........................................... Hong Kong 78,000 911,578
National Australia Bank Ltd. ............................... Australia 72,519 932,321
Unidanmark AS, A............................................ Denmark 4,725 303,036
Union Bank of Norway........................................ Norway 20,000 376,813
Westpac Banking Corp. Ltd. ................................. Australia 20,000 125,200
-----------
4,935,000
-----------
BUILDING MATERIALS & COMPONENTS 3.1%
Anglian Group PLC........................................... United Kingdom 70,400 175,203
Caradon PLC................................................. United Kingdom 261,800 582,622
CSR Ltd. ................................................... Australia 130,000 273,028
Hepworth PLC................................................ United Kingdom 38,500 97,657
Heywood Williams Group PLC.................................. United Kingdom 175,700 556,385
-----------
1,684,895
-----------
BUSINESS & PUBLIC SERVICES 1.4%
Kardex AG, Br............................................... Switzerland 800 336,802
Lex Service PLC............................................. United Kingdom 59,700 414,292
-----------
751,094
-----------
CHEMICALS 5.7%
Akzo Nobel NV............................................... Netherlands 15,000 640,167
BASF AG..................................................... Germany 10,000 475,580
Cookson Group PLC........................................... United Kingdom 169,038 491,468
DSM NV, Br.................................................. Netherlands 20,192 729,782
Imperial Chemical Industries PLC............................ United Kingdom 57,600 477,825
Kemira OY................................................... Finland 50,000 279,894
-----------
3,094,716
-----------
</TABLE>
15
PAGE
TEMPLETON INTERNATIONAL FUND
STATEMENT OF INVESTMENTS, MARCH 31, 2000 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
CONSTRUCTION & HOUSING .2%
Hollandsche Beton Groep NV.................................. Netherlands 7,233 $ 95,167
-----------
ELECTRICAL & ELECTRONICS 7.0%
ABB Ltd. ................................................... Switzerland 2,747 323,663
Alcatel SA.................................................. France 1,000 219,417
Fuji Photo Film Co. Ltd. ................................... Japan 20,000 881,392
Hitachi Ltd. ............................................... Japan 90,000 1,069,663
Koninklijke Philips Electronics NV.......................... Netherlands 3,120 524,259
Marconi PLC................................................. United Kingdom 23,000 274,639
Sony Corp. ................................................. Japan 2,074 293,209
*Sony Corp. New Shrs. NPV................................... Japan 2,074 293,209
-----------
3,879,451
-----------
ENERGY EQUIPMENT & SERVICES 1.2%
TransCanada PipeLines Ltd. ................................. Canada 90,372 662,944
-----------
ENERGY SOURCES 4.3%
Fortum OYJ.................................................. Finland 15,650 67,989
Norsk Hydro ASA............................................. Norway 14,641 554,294
*Renaissance Energy Ltd. ................................... Canada 20,000 152,225
Shell Transport & Trading Co. PLC........................... United Kingdom 104,000 870,206
Societe Elf Aquitaine SA, Br................................ France 4,020 719,341
-----------
2,364,055
-----------
FINANCIAL SERVICES 1.3%
AXA SA...................................................... France 2,500 354,293
Nomura Securities Co. Ltd. ................................. Japan 10,000 326,622
St. George Bank Ltd. ....................................... Australia 6,500 42,379
-----------
723,294
-----------
FOOD & HOUSEHOLD PRODUCTS .8%
Northern Foods PLC.......................................... United Kingdom 71,019 119,245
Tate & Lyle PLC............................................. United Kingdom 97,000 340,825
-----------
460,070
-----------
FOREST PRODUCTS & PAPER 2.7%
Assidoman AB................................................ Sweden 4,800 79,444
Assidoman AB, 144A.......................................... Sweden 1,440 23,833
*Holmen Aktiebolag AB, B.................................... Sweden 15,081 438,117
Stora Enso OYJ, R........................................... Finland 12,200 130,751
*Svenska Cellulosa AB, B.................................... Sweden 4,500 106,250
UPM-Kymmene Corp. .......................................... Finland 25,000 705,715
-----------
1,484,110
-----------
</TABLE>
16
PAGE
TEMPLETON INTERNATIONAL FUND
STATEMENT OF INVESTMENTS, MARCH 31, 2000 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
HEALTH & PERSONAL CARE 2.1%
Aventis SA.................................................. France 16,000 $ 875,756
Merck KGAA.................................................. Germany 9,300 291,893
-----------
1,167,649
-----------
INDUSTRIAL COMPONENTS 3.4%
Michelin SA, B.............................................. France 22,002 706,142
Sandvik AB, A............................................... Sweden 21,900 562,708
Sandvik AB, B............................................... Sweden 9,200 238,519
SKF AB, A................................................... Sweden 16,000 346,296
-----------
1,853,665
-----------
INSURANCE 3.6%
Partnerre Ltd. ............................................. Bermuda 9,500 349,719
Scor SA..................................................... France 4,820 226,324
XL Capital Ltd., A.......................................... Bermuda 10,000 553,750
Zurich Allied PLC........................................... United Kingdom 75,000 820,185
-----------
1,949,978
-----------
MACHINERY & ENGINEERING 4.9%
Bullough PLC................................................ United Kingdom 384,800 279,312
Invensys PLC................................................ United Kingdom 129,551 577,651
Laird Group PLC............................................. United Kingdom 186,500 575,709
Mckechnie Group PLC......................................... United Kingdom 78,400 312,679
METSO OYJ................................................... Finland 47,739 644,109
VA Technologie AG, Br....................................... Austria 4,900 309,462
-----------
2,698,922
-----------
MERCHANDISING 3.5%
Gucci Group NV.............................................. Netherlands 4,900 435,794
House of Fraser PLC......................................... United Kingdom 231,400 206,726
Marks & Spencer PLC......................................... United Kingdom 160,000 645,141
Safeway PLC................................................. United Kingdom 190,000 575,905
Storehouse.................................................. United Kingdom 100,312 57,610
-----------
1,921,176
-----------
METALS & MINING 1.7%
Alcan Aluminum Ltd. ........................................ Canada 1,500 50,162
Barrick Gold Corp. ......................................... Canada 40,000 619,920
Corus Group PLC............................................. United Kingdom 173,000 279,437
-----------
949,519
-----------
MISC MATERIALS & COMMODITIES .4%
Agrium Inc. ................................................ Canada 30,000 241,875
-----------
</TABLE>
17
PAGE
TEMPLETON INTERNATIONAL FUND
STATEMENT OF INVESTMENTS, MARCH 31, 2000 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MULTI-INDUSTRY 3.9%
Cheung Kong Holdings Ltd. .................................. Hong Kong 40,000 $ 598,472
Cheung Kong Infrastructure Holdings Ltd. ................... Hong Kong 100,000 183,651
Inchcape PLC................................................ United Kingdom 33,150 145,432
Pacific Dunlop Ltd. ........................................ Australia 130,000 124,283
Pilkington PLC.............................................. United Kingdom 424,900 496,521
Saab AB, B.................................................. Sweden 58,700 584,282
-----------
2,132,641
-----------
REAL ESTATE .9%
*Wereldhave NV.............................................. Netherlands 10,920 501,569
-----------
TELECOMMUNICATIONS 2.9%
Nippon Telegraph & Telephone Corp. ......................... Japan 74 1,176,035
Telecom Corp. of New Zealand Ltd. .......................... New Zealand 87,900 397,742
-----------
1,573,777
-----------
TEXTILES & APPAREL .8%
Adidas-Salomon AG........................................... Germany 8,000 444,385
-----------
TRANSPORTATION 3.7%
British Airways PLC......................................... United Kingdom 100,000 520,867
Koninklijke Nedlloyd Groep NV............................... Netherlands 6,250 140,545
Peninsular & Oriental Steam Navigation Co. ................. United Kingdom 40,300 421,104
Seino Transportation Co. Ltd. .............................. Japan 21,000 108,517
Singapore Airlines Ltd. .................................... Singapore 47,500 444,315
Vosper Thornycroft Holdings PLC............................. United Kingdom 23,000 380,679
-----------
2,016,027
-----------
UTILITIES ELECTRICAL & GAS 7.3%
CLP Holdings Ltd. .......................................... Hong Kong 67,800 303,888
Endesa SA................................................... Spain 25,725 590,052
Hong Kong Electric Holdings Ltd. ........................... Hong Kong 147,400 444,860
Iberdrola SA, Br............................................ Spain 68,200 889,503
National Power PLC.......................................... United Kingdom 80,000 399,145
Powergen PLC................................................ United Kingdom 60,000 351,764
Veba AG..................................................... Germany 20,000 1,004,746
-----------
3,983,958
-----------
TOTAL COMMON STOCKS (COST $49,727,153)...................... 45,610,398
-----------
</TABLE>
18
PAGE
TEMPLETON INTERNATIONAL FUND
STATEMENT OF INVESTMENTS, MARCH 31, 2000 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCKS 2.0%
Ballast Nedam NV, pfd....................................... Netherlands 5,000 $ 109,326
Baumax AG, pfd.............................................. Austria 6,953 87,292
BBS Kraftfahrzeugtechnik AG, pfd............................ Germany 15,000 268,411
News Corp. Ltd., ADR, pfd................................... Australia 5,000 238,750
Volkswagen AG, pfd.......................................... Germany 14,000 356,350
-----------
TOTAL PREFERRED STOCKS (COST $1,307,096).................... 1,060,129
-----------
<CAPTION>
PRINCIPAL
AMOUNT**
----------
<S> <C> <C> <C>
BONDS (COST $13,216)
BAE Systems PLC, 7.45%, 11/29/03............................ United Kingdom 8,532GBP 13,543
-----------
SHORT TERM INVESTMENTS (COST $2,756,892) 5.0%
U.S. Treasury Bills, 5.22% to 5.96%, with maturities to
6/01/00................................................... United States 2,769,000 2,758,344
-----------
TOTAL INVESTMENTS (COST $53,804,357) 90.2%.................. 49,442,414
OTHER ASSETS, LESS LIABILITIES 9.8%......................... 5,353,810
-----------
TOTAL NET ASSETS 100.0%..................................... $54,796,224
===========
</TABLE>
CURRENCY ABBREVIATIONS:
GBP -- British Pounds
*Non-income producing.
**Securities denominated in U.S. dollars unless otherwise indicated.
See Notes to Financial Statements.
19
PAGE
TEMPLETON INTERNATIONAL FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $53,804,357)..... $49,442,414
Cash....................................................... 755
Receivables:
Fund shares sold.......................................... 5,472,431
Dividends and interest.................................... 287,085
-----------
Total assets.......................................... 55,202,685
-----------
Liabilities:
Payables:
Investment securities purchased........................... 40,762
Fund shares redeemed...................................... 194,481
To affiliates............................................. 101,407
Accrued expenses........................................... 69,811
-----------
Total liabilities..................................... 406,461
-----------
Net assets, at value........................................ $54,796,224
===========
Net assets consist of:
Undistributed net investment income........................ $ 87,683
Net unrealized depreciation................................ (4,361,943)
Accumulated net realized gain.............................. 2,255,442
Beneficial shares.......................................... 56,815,042
-----------
Net assets, at value........................................ $54,796,224
===========
CLASS A:
Net asset value per share ($40,201,026 / 3,113,678 shares
outstanding)............................................. $12.91
===========
Maximum offering price per share ($12.91 / 94.25%)......... $13.70
===========
CLASS C:
Net asset value per share ($14,050,648 / 1,099,771 shares
outstanding)*............................................. $12.78
===========
Maximum offering price per share ($12.78 / 99.00%)......... $12.91
===========
ADVISOR CLASS:
Net asset value and maximum offering price per share
($544,550 / 42,039 shares outstanding).................... $12.95
===========
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
sales charge.
See Notes to Financial Statements.
20
PAGE
TEMPLETON INTERNATIONAL FUND
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2000
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $223,407)
Dividends.................................................. $1,888,527
Interest................................................... 357,580
==========
Total investment income............................... $2,246,107
Expenses:
Management fees (Note 3)................................... 435,749
Administrative fees (Note 3)............................... 87,150
Distribution fees (Note 3)
Class A................................................... 149,606
Class C................................................... 148,331
Transfer agent fees (Note 3)............................... 145,500
Custodian fees............................................. 18,200
Reports to shareholders.................................... 71,600
Registration and filing fees............................... 61,500
Professional fees.......................................... 26,800
Trustees' fees and expenses................................ 15,600
Amortization of organization costs......................... 12,024
Other...................................................... 1,124
==========
Total expenses........................................ 1,173,184
==========
Net investment income........................... 1,072,923
==========
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments............................................... 2,744,489
Foreign currency transactions............................. (90,960)
==========
Net realized gain..................................... 2,653,529
Net unrealized appreciation on investments............ 2,143,277
----------
Net realized and unrealized gain............................ 4,796,806
----------
Net increase in net assets resulting from operations........ $5,869,729
==========
</TABLE>
See Notes to Financial Statements.
21
PAGE
TEMPLETON INTERNATIONAL FUND
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 1,072,923 $ 1,000,258
Net realized gain from investments and foreign currency
transactions............................................. 2,653,529 3,641,321
Net unrealized appreciation (depreciation) on
investments.............................................. 2,143,277 (10,473,856)
------------------------------
Net increase (decrease) in net assets resulting from
operations............................................ 5,869,729 (5,832,277)
Distributions to shareholders from:
Net investment income:
Class A.................................................. (858,007) (731,302)
Class C.................................................. (250,511) (182,376)
Advisor Class............................................ (6,880) (10,692)
Net realized gains:
Class A.................................................. (1,865,259) (1,305,179)
Class C.................................................. (685,150) (437,976)
Advisor Class............................................ (9,109) (17,826)
Fund share transactions (Note 2):
Class A.................................................. (1,079,539) 26,750,423
Class C.................................................. (601,482) 10,148,300
Advisor Class............................................ 286,324 148,524
------------------------------
Net increase in net assets.............................. 800,116 28,529,619
Net assets:
Beginning of year.......................................... 53,996,108 25,466,489
------------------------------
End of year................................................ $54,796,224 $ 53,996,108
==============================
Undistributed net investment income included in net assets:
End of year................................................ $ 87,683 $ 258,835
==============================
</TABLE>
See Notes to Financial Statements.
22
PAGE
TEMPLETON INTERNATIONAL FUND
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton International 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. Effective August 1,
1999, the Fund's investment policies were modified to require, under normal
market conditions, at least 75% of the Fund's total assets to be invested in any
developed country outside the U.S. and the Fund's name changed from Templeton
Greater European Fund to Templeton International Fund. 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. 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.
23
PAGE
TEMPLETON INTERNATIONAL FUND
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
c. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS (CONT.)
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.
d. 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, 2000, there were 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,
----------------------------------------------------------------
2000 1999
----------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES:
Shares sold............................................. 23,690,448 $ 314,457,916 11,427,434 $ 148,355,385
Shares issued on reinvestment of distributions.......... 186,757 2,460,911 152,278 1,853,465
Shares redeemed......................................... (23,895,532) (317,998,366) (9,812,112) (123,458,427)
----------------------------------------------------------------
Net increase (decrease)................................. (18,327) $ (1,079,539) 1,767,600 $ 26,750,423
================================================================
</TABLE>
24
PAGE
TEMPLETON INTERNATIONAL FUND
Notes to Financial Statements (continued)
2. BENEFICIAL SHARES (CONT.)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------------------------------
2000 1999
----------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS C SHARES:
Shares sold............................................. 1,152,989 $ 15,374,364 1,614,772 $ 21,466,567
Shares issued on reinvestment of distributions.......... 61,755 806,278 44,862 540,863
Shares redeemed......................................... (1,253,428) (16,782,124) (939,952) (11,859,130)
----------------------------------------------------------------
Net increase (decrease)................................. (38,684) $ (601,482) 719,682 $ 10,148,300
================================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------------------------------
2000 1999
----------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------
<S> <C> <C> <C> <C>
ADVISOR CLASS SHARES:
Shares sold............................................. 39,471 $ 527,590 796,091 $ 11,069,182
Shares issued on reinvestment of distributions.......... 896 11,883 1,992 27,214
Shares redeemed......................................... (19,226) (253,149) (782,998) (10,947,872)
----------------------------------------------------------------
Net increase............................................ 21,141 $ 286,324 15,085 $ 148,524
================================================================
</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 July 31, 1999. For the year ended March 31, 2000, no
reimbursement was necessary.
25
PAGE
TEMPLETON INTERNATIONAL 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, 2000, the unreimbursed costs were $250,498. Distributors
received net commissions on sales of Fund shares and received contingent
deferred sales charges for the period of $24,191 and $20,148, respectively.
4. 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.
At March 31, 2000, the net unrealized depreciation based on the cost of
investments for income tax purposes of $54,010,457 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 4,297,864
Unrealized depreciation..................................... (8,865,907)
-----------
Net unrealized depreciation................................. $(4,568,043)
===========
</TABLE>
At March 31, 2000, the Fund has deferred currency losses occurring subsequent to
October 31, 1999 of $34,486. For tax purposes, such losses will be reflected in
the year ending March 31, 2001.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended March 31, 2000 aggregated $30,846,314 and $38,360,333, respectively.
26
PAGE
TEMPLETON INTERNATIONAL FUND
INDEPENDENT AUDITOR'S REPORT
To the Board of Trustees and Shareholders of
Templeton International Fund
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Templeton International Fund
(formerly Templeton Greater European Fund) at March 31, 2000, and the results of
its operations, the changes in its net assets and the financial highlights for
the year then ended, in conformity with accounting principles generally accepted
in the United States. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
financial statements in accordance with auditing standards generally accepted in
the United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at March 31, 2000 by
correspondence with the custodian and brokers, provides a reasonable basis for
the opinion expressed above. The financial statements for the year ended March
31, 1999, including the financial highlights for each of the four years in the
period then ended were audited by other independent accountants whose report
dated April 30, 1999 expressed an unqualified opinion on those financial
statements.
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
April 28, 2000
27
PAGE
TEMPLETON INTERNATIONAL FUND
Tax Designation
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby
designates $197,765 as a capital gain dividend for the fiscal year ended March
31, 2000.
At March 31, 2000, more than 50% of the Templeton International 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. 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.
The following table provides a breakdown by country of foreign source income and
foreign taxes paid, as designated by the Fund, to Class A, Class C, and Advisor
Class shareholders in May 2000.
<TABLE>
<CAPTION>
CLASS A CLASS C ADVISOR CLASS
------------------------------------------------------------------------------------------
FOREIGN TAX FOREIGN SOURCE FOREIGN TAX FOREIGN SOURCE FOREIGN TAX
COUNTRY PAID PER SHARE INCOME PER SHARE PAID PER SHARE INCOME PER SHARE PAID PER SHARE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Australia............ $ 0.0009 $ 0.0196 $ 0.0009 $ 0.0182 $ 0.0009
Austria.............. 0.0008 0.0042 0.0008 0.0039 0.0008
Belgium.............. 0.0008 0.0041 0.0008 0.0038 0.0008
Bermuda.............. 0.0000 0.0034 0.0000 0.0032 0.0000
Canada............... 0.0013 0.0071 0.0013 0.0065 0.0013
Denmark.............. 0.0008 0.0044 0.0008 0.0040 0.0008
Finland.............. 0.0031 0.0162 0.0031 0.0150 0.0031
France............... 0.0029 0.0169 0.0029 0.0156 0.0029
Germany.............. 0.0021 0.0162 0.0021 0.0150 0.0021
Hong Kong............ 0.0000 0.0095 0.0000 0.0088 0.0000
Hungary.............. 0.0002 0.0010 0.0002 0.0009 0.0002
Japan................ 0.0009 0.0049 0.0009 0.0045 0.0009
Netherlands.......... 0.0045 0.0330 0.0045 0.0306 0.0045
New Zealand.......... 0.0007 0.0035 0.0007 0.0032 0.0007
Norway............... 0.0047 0.0245 0.0047 0.0227 0.0047
Singapore............ 0.0005 0.0019 0.0005 0.0017 0.0005
Spain................ 0.0014 0.0075 0.0014 0.0070 0.0014
Sweden............... 0.0032 0.0175 0.0032 0.0162 0.0032
Switzerland.......... 0.0006 0.0030 0.0006 0.0028 0.0006
United Kingdom....... 0.0298 0.2423 0.0298 0.2243 0.0298
------------------------------------------------------------------------------------------
TOTAL................ $ 0.0592 $ 0.4407 $ 0.0592 $ 0.4079 $ 0.0592
==========================================================================================
<CAPTION>
ADVISOR CLASS
----------------
FOREIGN SOURCE
COUNTRY INCOME PER SHARE
---------------------
<S> <C>
Australia............ $ 0.0207
Austria.............. 0.0044
Belgium.............. 0.0043
Bermuda.............. 0.0036
Canada............... 0.0074
Denmark.............. 0.0046
Finland.............. 0.0171
France............... 0.0177
Germany.............. 0.0170
Hong Kong............ 0.0100
Hungary.............. 0.0011
Japan................ 0.0052
Netherlands.......... 0.0348
New Zealand.......... 0.0037
Norway............... 0.0258
Singapore............ 0.0020
Spain................ 0.0079
Sweden............... 0.0184
Switzerland.......... 0.0032
United Kingdom....... 0.2552
----------------
TOTAL................ $ 0.4641
================
</TABLE>
In January 2001, shareholders will receive Form 1099-DIV which will include
their share of taxes withheld and foreign source income distributed during the
calendar year 2000. Shareholders are advised to check with their tax advisors
for information on the treatment of these amounts on their individual income tax
returns.
28
PAGE
[LOGO]
Templeton International Fund
777 Mariners Island Blvd., P.O. Box 7777
San Mateo, CA 94403-7777
ANNUAL REPORT
AUDITORS
PricewaterhouseCoopers LLP
333 Market Street
San Francisco, California 94105
PRINCIPAL UNDERWRITER
Franklin/Templeton Distributors, Inc.
1-800/DIAL BEN(R)
www.franklintempleton.com
SHAREHOLDER SERVICES
1-800/632-2301
This report must be preceded or accompanied by the current Templeton
International 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. 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 A00 05/00 [LOGO] Printed on recycled paper
