templeton emerging markets small cap fund annual report · mark mobius executive chairman templeton...

Templeton Emerging Markets Small Cap Fund

MARCH 31, 2012

ANNUAL REPORTAND SHAREHOLDER LETTER

A series of Templeton Global Investment Trust

I NTERNAT IONAL

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Each of our portfolio management groups operates autonomously, relying on its own research and staying true to the unique investment disciplines that underlie its success.

Franklin. Founded in 1947, Franklin is a recognized leader in fixed income investingand also brings expertise in growth- and value-style U.S. equity investing.

Templeton. Founded in 1940, Templeton pioneered international investing and, in 1954, launched what has become the industry’s oldest global fund. Today, withoffices in over 25 countries, Templeton offers investors a truly global perspective.

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Because our management groups work independently and adhere to differentinvestment approaches, Franklin, Templeton and Mutual Series funds typicallyhave distinct portfolios. That’s why our funds can be used to build trulydiversified allocation plans covering every major asset class.

At Franklin Templeton Investments, we seek to consistently provide investors with exceptional risk-adjusted returns over the long term, as well as the reliable,accurate and personal service that has helped us become one of the most trustednames in financial services.

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Not part of the annual report | 1

Contents

Shareholder Letter

Annual Report

Templeton Emerging Markets Small Cap Fund . . . . . . . . . . . 3

Performance Summary . . . . . . 8

Your Fund’s Expenses . . . . . . . 13

Financial Highlights andStatement of Investments . . . . 15

Financial Statements . . . . . . . 23

Notes to FinancialStatements . . . . . . . . . . . . . . . 27

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . 38

Tax Information . . . . . . . . . . . 39

Board Members and Officers . . 40

Shareholder Information . . . . . 45

Shareholder Letter . . . . . . . . 1

NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE

Dear Shareholder:

Investor concerns about global economic growth, the eurozone sovereign debtand banking crises, and U.S. fiscal policy pressured equity markets globally dur-ing the first half of the 12 months ended March 31, 2012. European leaders’and the European Central Bank’s efforts to solve the region’s financial crisis,better-than-expected U.S. economic reports, and the improved prospect of aneconomic soft landing in China supported global markets in the period’s secondhalf. Even though emerging market economies generally continued to growfaster than developed market economies, emerging market stocks lagged theperformance of developed market stocks.

Although the recent environment has been challenging, we remain cautiouslyoptimistic about emerging market economies as they continue to show growth.Keep in mind we have navigated through past periods of economic uncertaintyand market volatility by remaining committed to our long-term perspective anddisciplined investment approach. First and foremost for us, this means usingour on-the-ground research team to conduct rigorous, company-by-companyanalysis to find what we consider to be bargain opportunities.

Templeton Emerging Markets Small Cap Fund’s annual report goes into greaterdetail about prevailing conditions during the period under review. In addition,you will find Fund performance data, financial information and a discussionabout investment decisions. Please remember all securities markets fluctuate, asdo mutual fund share prices.

If you would like more frequent updates, franklintempleton.com provides dailyprices, monthly performance figures, portfolio holdings and other information.You can also access your account, buy and sell shares, read timely articles, andfind helpful financial planning tools. We hope you will take advantage of theseonline services.

Historically, patient investors have achieved rewarding results by evaluatingtheir goals, diversifying their assets globally and maintaining a disciplinedinvestment program, all hallmarks of the Templeton investment philosophydeveloped more than 50 years ago. We continue to recommend investors con-sult their financial advisors and review their portfolios to design a long-termstrategy and portfolio allocation that meet their individual needs, goals and risktolerance. We firmly believe most people benefit from professional advice andthat advice is invaluable as investors navigate changing market environments.

We thank you for investing with Franklin Templeton, welcome your questionsand comments, and look forward to serving your investment needs in theyears ahead.

Sincerely,

Mark MobiusExecutive ChairmanTempleton Emerging Markets Group

This letter reflects our analysis and opinions as of March 31, 2012. The information is not a complete analysis ofevery aspect of any market, country, industry, security or fund. Statements of fact are from sources consideredreliable.

2 | Not part of the annual report

Annual Report | 3

Geographic BreakdownBased on Total Net Assets as of 3/31/12

Asia 42.7%

Europe 33.1%

Latin America & Caribbean 8.1%

Middle East & Africa 7.7%

Short-Term Investments & Other Net Assets 8.4%

This annual report for Templeton Emerging Markets Small Cap Fund coversthe fiscal year ended March 31, 2012.

Economic and Market Overview

Emerging market economies continued to display strong characteristics despiteoverall weakness in developed market economies during the 12 months underreview. Emerging market stock performance can be divided in two distinctphases: a decline in the first half of the period followed by a recovery in thesecond half that partially offset earlier declines. For the 12 months endedMarch 31, 2012, the MSCI Emerging Markets (EM) Small Cap Index, whichmeasures performance of small-cap stocks in emerging markets, had a -12.43%

Annual Report

Templeton Emerging Markets Small Cap FundYour Fund’s Goal and Main Investments: Templeton Emerging Markets Small Cap

Fund seeks long-term capital appreciation. Under normal market conditions, the Fund invests at least

80% of its net assets in securities of small-cap companies located in emerging market countries, as

defined in the Fund’s prospectus.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in theFund’s Statement of Investments (SOI). The SOI begins on page 19.

4 | Annual Report

1. Source: © 2012 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstarand/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete ortimely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use ofthis information. The indexes are unmanaged and include reinvested dividends. One cannot invest directly in an index,and an index is not representative of the Fund’s portfolio.

total return in U.S. dollar (USD) terms, influenced by weaker emerging marketcurrencies.1

In the earlier part of the reporting period, the eurozone debt crisis and concernsthe U.S could slip back into a recession dominated news headlines. As investorsshunned equities in favor of assets generally perceived to be less risky, globalstock markets corrected. In this environment, the MSCI EM Small Cap Indexhad a -24.46% total return in USD terms in the first six months of the period.1

Encouraging economic data, strong corporate earnings, and government andcentral bank efforts to stimulate growth led investors to adopt a more posi-tive view on emerging market stocks. Further supporting markets were theeurozone financial ministers’ approval of a second bailout package for Greeceand the European Central Bank’s additional issuance of three-year 1% loansto the region’s banks worth more than 529 billion euros (approximatelyUS$700 billion) to ease the credit crunch and contain the debt crisis.Furthermore, U.S. Federal Reserve Board Chairman Ben Bernanke’s comments that continued accommodative monetary policies were needed to help lower the U.S. unemployment rate and news that the European Unionmight increase its bailout fund provided investors with additional reasonsto remain positive. In this recent environment, the MSCI EM Small Cap Indexgenerated a +15.92% total return in USD terms in the second half of thereporting period, recovering some of the losses incurred in the first half.1

Within emerging markets, Southeast Asian stocks were among the strongestperformers during the reporting period. Good domestic demand, rising dispos-able incomes and relatively low unemployment made these economies moreresilient to global uncertainties. China and India, however, underperformedtheir regional peers, due to concerns of slowing economic growth. In LatinAmerica, Argentina and Brazil ended the period with double-digit declines.Eastern European stocks were among the weakest performers, largely due totheir proximity to their western counterparts rather than a significant deterio-ration in the region’s economies.

Investment Strategy

Our investment strategy employs a fundamental, value-oriented, long-termapproach. We focus on the market price of a company’s securities relative to

Top 10 CountriesBased on Equity Securities3/31/12

% of TotalNet Assets

Turkey 17.4%

South Korea 9.9%

China 8.5%

India 8.5%

Russia 7.1%

Hong Kong 5.0%

Malaysia 3.5%

Mexico 3.5%

Kazakhstan 3.4%

Nigeria 3.4%

Annual Report | 5

our evaluation of the company’s long-term (typically five years) earnings, assetvalue and cash flow potential. We also consider a company’s profit and lossoutlook, balance sheet strength, cash flow trends and asset value in relationthe current price. In choosing investments, we strongly believe in on-site visitsto issuers of prospective investments to assess critical factors such as manage-ment strength and local conditions.

Performance Overview

For the 12 months under review, Templeton Emerging Markets Small CapFund – Class A had a -12.02% cumulative total return. For comparison, theMSCI EM Small Cap Index had a -12.43% total return for the same period.1

Also for comparison, the MSCI EM Index, which measures stock perform-ance in emerging markets, had a -8.52% total return for the same period.1

In future reports, the MSCI EM Small Cap Index will be the Fund’s onlybenchmark, because the portfolio manager believes it provides a better com-parison to the Fund’s portfolio composition. Please note index performanceinformation is provided for reference and we do not attempt to track any indexbut rather undertake investments on the basis of fundamental research. In addi-tion, the Fund’s return reflects the effect of fees and expenses for professionalmanagement, while an index does not have such costs. You can find more of theFund’s performance data in the Performance Summary beginning on page 8.

Manager’s Discussion

During the 12 months under review, major detractors from the Fund’s absoluteperformance included Synergy, one of Russia’s leading vodka producers; AIKBanka, one of Serbia’s leading mid-sized banks; and China Green (Holdings), a leading green food producer in China’s Fujian Province. Synergy’s share pricecorrection was attributable to higher marketing, distribution and relicensingexpenses, an increase in Russia’s social taxes, and a potential threat of govern-ment regulation in the vodka production industry. We continued to holdSynergy’s stock due to what we viewed as its modest valuations and the com-pany’s strong market share and growing exports. European banking sectorweakness negatively impacted AIK Banka’s share price during the period. Thebank could continue to face challenges stemming from economic and euro-zone debt concerns in the short term. However, AIK Banka is well capitalizedand, in our analysis, attractively valued and could be a strong takeover candi-date in the long term. China Green’s share price corrected due to risingmaterial costs, higher marketing and promotion expenditures, and corporategovernance concerns.

Performance data represent past

performance, which does not

guarantee future results.

Investment return and principal

value will fluctuate, and you may

have a gain or loss when you sell

your shares. Current performance

may differ from figures shown.

Please visit franklintempleton.comor call (800) 342-5236 for most

recent month-end performance.

6 | Annual Report

Conversely, key contributors to the Fund’s absolute performance includedYoungone, a South Korean exporter of OEM (original equipment manufacturer)sportswear products; Universal Robina, a leading branded convenience food andbeverage company in the Philippines; and United Arab Emirates-based ArabtecHolding, one of the Gulf region’s largest construction companies. Youngone’sshare price increase was driven by growing earnings, a favorable business out-look and a strong balance sheet. Universal Robina’s dominant market positionallowed it to benefit from greater domestic demand, rising disposable incomesand strong food industry growth. We sold our position in the company duringthe period because, in our analysis, valuations became expensive after the recentprice appreciation. Arabtec benefited from its strong brand name and a recoveryin construction and infrastructure development in the Middle East. In February,investor speculation about a potentially large increase in project backlog led to a sharp rise in the company’s stock price that made it richly valued in our view,and we sold our position.

It is important to recognize the effect of currency movements on the Fund’sperformance. In general, if the value of the U.S. dollar goes up compared with aforeign currency, an investment traded in that foreign currency will go down invalue because it will be worth fewer U.S. dollars. This can have a negative effecton Fund performance. Conversely, when the U.S. dollar weakens in relation to aforeign currency, an investment traded in that foreign currency will increase invalue, which can contribute to Fund performance. For the 12 months endedMarch 31, 2012, the U.S. dollar rose in value relative to most currencies. As aresult, the Fund’s performance was negatively affected by the portfolio’s invest-ment predominantly in securities with non-U.S. currency exposure.

As certain stocks achieved our valuation and sale price targets and as the Fundreceived redemptions during the period, we sold a number of holdings. Thesesales allowed the Fund to focus on stocks we deemed to be more attractivelyvalued within our investment universe. As a result, we reduced the Fund’sinvestments in oil and gas equipment and services, packaged foods and meats,apparel retail, and accessories and luxury goods companies. Geographically, weeliminated our positions in the Philippines and reduced our holdings in SouthKorea, India and Hong Kong. Major sales included elimination of our positionsin Maharashtra Seamless, one of India’s largest seamless pipes manufacturers,and the aforementioned Universal Robina and Arabtec. We reduced our invest-ment in Sam Kwang Glass Industry, a South Korean manufacturer of bottlesand cans for beverage, liquor, pharmaceutical, food and cosmetics companies.

The Fund’s continued search for companies we considered to have attractivevaluations led us to purchase shares of industrial REITs (real estate investmenttrusts), broadcasting and cable TV, diversified capital markets, and food dis-tributors companies. These included Reysas Gayrimenkul Yatirim Ortakligi,

Top 10 Equity Holdings3/31/12

Company % of TotalSector/Industry, Country Net Assets

Anadolu Cam Sanayii AS 3.9%Containers & Packaging, Turkey

Pinar Sut Mamulleri Sanayii AS 3.8%Food Products, Turkey

I.T Ltd. 3.7%Specialty Retail, Hong Kong

Grupo Herdez SAB de CV 3.5%Food Products, Mexico

Zhaikmunai LP, GDR, Reg S 3.4%Oil, Gas & Consumable Fuels, Kazakhstan

Federal Bank Ltd. 3.1%Commercial Banks, India

Trakya Cam Sanayii AS 2.9%Building Products, Turkey

Reysas Gayrimenkul Yatirim Ortakligi AS 2.6%Real Estate Investment Trusts (REITs), Turkey

Egyptian International Pharmaceutical

Industries Co. 2.4%Pharmaceuticals, Egypt

Julio Simoes Logistica SA 2.3%Road & Rail, Brazil

Turkey’s first and only REIT focused on the warehousing market there; CTCMedia, a leading Russian independent media company; and Warsaw StockExchange, Poland’s national stock exchange.

Thank you for your continued participation in Templeton Emerging MarketsSmall Cap Fund. We look forward to serving your future investment needs.

Mark Mobius

Dennis Lim

Tom Wu

Portfolio Management TeamTempleton Emerging Markets Small Cap Fund

The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2012, the end ofthe reporting period. The way we implement our main investment strategies and the resulting portfolio holdings maychange depending on factors such as market and economic conditions. These opinions may not be relied upon asinvestment advice or an offer for a particular security. The information is not a complete analysis of every aspect ofany market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but theinvestment manager makes no representation or warranty as to their completeness or accuracy. Although historicalperformance is no guarantee of future results, these insights may help you understand our investment managementphilosophy.

Annual Report | 7

8 | Annual Report

Performance Summary as of 3/31/12

Price Information

Class A (Symbol: TEMMX) Change 3/31/12 3/31/11

Net Asset Value (NAV) -$1.43 $10.47 $11.90

Class C (Symbol: TCEMX) Change 3/31/12 3/31/11


Class R (Symbol: n/a) Change 3/31/12 3/31/11


Advisor Class (Symbol: TEMZX) Change 3/31/12 3/31/11


Your dividend income will vary depending on dividends or interest paid by securities in the Fund’sportfolio, adjusted for operating expenses of each class. Capital gain distributions are net profitsrealized from the sale of portfolio securities. The performance table and graphs do not reflect anytaxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or anyrealized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividendsand capital gain distributions, if any, and any unrealized gains or losses.

Annual Report | 9

Performance Summary (continued)

Performance1

Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment includemaximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge infirst year only; Class R/Advisor Class: no sales charges.

Class A 1-Year 5-Year Inception (10/2/06)

Cumulative Total Return2 -12.02% +8.70% +25.21%

Average Annual Total Return3 -17.10% +0.49% +3.06%

Value of $10,000 investment4 $8,290 $10,246 $11,801

Total Annual Operating Expenses5

Without Waiver 2.18%

With Waiver 2.12%

Class C 1-Year 5-Year Inception (10/2/06)






With Waiver 2.82%

Class R 1-Year 5-Year Inception (10/2/06)






With Waiver 2.32%

Advisor Class 1-Year 5-Year Inception (10/2/06)






With Waiver 1.82%

Performance data represent past performance, which does not guarantee future results. Investment return and principalvalue will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

The investment manager and administrator have contractually agreed to waive or assume certain expenses so that commonexpenses (excluding Rule 12b-1 fees and acquired fund fees and expenses) for each class of the Fund do not exceed1.80% (other than certain nonroutine expenses) until 7/31/12.

10 | Annual Report


Total Return Index Comparison for a Hypothetical $10,000 Investment1

Total return represents the change in value of an investment over the periods shown. It includesany applicable maximum sales charge, Fund expenses, account fees and reinvested distributions.The unmanaged indexes include reinvestment of any income or distributions. They differ from theFund in composition and do not pay management fees or expenses. One cannot invest directly inan index.

Average Annual Total Return

Class A 3/31/12

1-Year -17.10%

5-Year +0.49%

Since Inception (10/2/06) +3.06%


Class C 3/31/12

1-Year -13.53%

5-Year +1.01%


Class A (10/2/06–3/31/12)

$11,801

$16,665$15,346

$0

$5,000

$10,000

$15,000

$20,000

$25,000

MSCI EM Small Cap Index6 MSCI EM Index6Templeton Emerging Markets Small Cap Fund

3/123/103/0810/06

Class C (10/2/06–3/31/12)

$12,071

$16,665$15,346

$0

$5,000

$10,000

$15,000

$20,000

$25,000

3/123/103/0810/06


Annual Report | 11


Class R (10/2/06–3/31/12)

$12,376

$16,665$15,346

3/123/103/0810/06$0

$5,000

$10,000

$15,000

$20,000

$25,000



Class R 3/31/12

1-Year -12.24%

5-Year +1.46%



Advisor Class 3/31/12

1-Year -11.76%

5-Year +1.99%


Advisor Class (10/2/06–3/31/12)

$12,727

$16,665$15,346

$0

$5,000

$10,000

$15,000

$20,000

$25,000

3/123/103/0810/06


12 | Annual Report


Endnotes

All investments involve risks, including possible loss of principal. Special risks are associated with foreign investing, including currency fluctua-tions, economic instability and political developments. Investments in emerging market countries involve heightened risks related to the samefactors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business andsocial frameworks to support securities markets. Smaller company stocks have historically had more price volatility than large-company stocks,particularly over the short term. Because the Fund is nondiversified and may invest a greater portion of its assets in the securities of one issuerthan a diversified fund, it may be more sensitive to economic, business, political or other changes affecting similar issuers or securities. Allinvestments in the Fund should be thought of as long-term investments that could experience significant price volatility in any given year. TheFund is designed for the aggressive portion of a well-diversified portfolio. The Fund is actively managed but there is no guarantee that the man-ager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

Class C: These shares have higher annual fees and expenses than Class A shares.

Class R: Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees andexpenses than Class A shares.

Advisor Class: Shares are available to certain eligible investors as described in the prospectus.

1. If the manager and administrator had not waived fees, the Fund’s total returns would have been lower.

2. Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated.

4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.

5. Figures are as stated in the Fund’s prospectus current as of the date of this report. In periods of market volatility, assets may decline significantly,causing total annual Fund operating expenses to become higher than the figures shown.

6. Source: © 2012 Morningstar. The MSCI EM Small Cap Index is a free float-adjusted, market capitalization-weighted index designed to measureperformance of small-cap equities in emerging markets. The MSCI EM Index is a free float-adjusted, market capitalization-weighted index designedto measure equity market performance in global emerging markets.

Your Fund’s Expenses

As a Fund shareholder, you can incur two types of costs:

• Transaction costs, including sales charges (loads) on Fund purchases; and

• Ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and otherFund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.

The following table shows ongoing costs of investing in the Fund and can help you understandthese costs and compare them with those of other mutual funds. The table assumes a $1,000investment held for the six months indicated.

Actual Fund Expenses

The first line (Actual) for each share class listed in the table provides actual account values andexpenses. The “Ending Account Value” is derived from the Fund’s actual return, which includesthe effect of Fund expenses.

You can estimate the expenses you paid during the period by following these steps. Of course,your account value and expenses will differ from those in this illustration:

1. Divide your account value by $1,000. If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2. Multiply the result by the number under the heading “Expenses Paid During Period.”If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Information in the second line (Hypothetical) for each class in the table can help you compareongoing costs of investing in the Fund with those of other mutual funds. This information may notbe used to estimate the actual ending account balance or expenses you paid during the period. Thehypothetical “Ending Account Value” is based on the actual expense ratio for each class and anassumed 5% annual rate of return before expenses, which does not represent the Fund’s actualreturn. The figure under the heading “Expenses Paid During Period” shows the hypotheticalexpenses your account would have incurred under this scenario. You can compare this figure withthe 5% hypothetical examples that appear in shareholder reports of other funds.

Annual Report | 13

Your Fund’s Expenses (continued)

Please note that expenses shown in the table are meant to highlight ongoing costs and do notreflect any transaction costs, such as sales charges. Therefore, the second line for each class is use-ful in comparing ongoing costs only, and will not help you compare total costs of owning differentfunds. In addition, if transaction costs were included, your total costs would have been higher.Please refer to the Fund prospectus for additional information on operating expenses.

Beginning Account Ending Account Expenses Paid During Class A Value 10/1/11 Value 3/31/12 Period* 10/1/11–3/31/12

Actual $1,000 $1,160.75 $11.34

Hypothetical (5% return before expenses) $1,000 $1,014.50 $10.58

Class C

Actual $1,000 $1,156.29 $15.09


Class R

Actual $1,000 $1,159.42 $12.42


Advisor Class

Actual $1,000 $1,162.64 $ 9.73

Hypothetical (5% return before expenses) $1,000 $1,016.00 $ 9.07

*Expenses are calculated using the most recent six-month expense ratio, net of expense waivers, annualized for each class (A: 2.10%; C: 2.80%; R: 2.30%; and Advisor: 1.80%), multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period.

14 | Annual Report

Templeton Global Investment TrustFinancial Highlights

Annual Report | The accompanying notes are an integral part of these financial statements. | 15


Year Ended March 31,Class A 2012 2011 2010 2009 2008

Per share operating performance(for a share outstanding throughout the year)

Net asset value, beginning of year . . . . . . . . . . . . . . . . . . . . . $11.90 $10.74 $ 4.39 $11.32 $11.50

Income from investment operationsa:

Net investment income (loss)b . . . . . . . . . . . . . . . . . . . . . . . . 0.03 (0.06) (0.05) 0.13 0.17

Net realized and unrealized gains (losses) . . . . . . . . . . . . . . . (1.46) 1.22 6.44 (6.52) 0.41

Total from investment operations . . . . . . . . . . . . . . . . . . . . . . . (1.43) 1.16 6.39 (6.39) 0.58

Less distributions from:

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (0.04) (0.06) (0.11)

Net realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — (0.48) (0.65)

Tax return of capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —c — —

Total distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (0.04) (0.54) (0.76)

Redemption feesd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — —c —c

Net asset value, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . $10.47 $11.90 $10.74 $ 4.39 $11.32

Total returne . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12.02)% 10.80% 145.52% (56.50)% 4.41%

Ratios to average net assets

Expenses before waiver and payments by affiliates and expense reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.19% 2.14% 2.21% 2.51% 2.38%

Expenses net of waiver and payments by affiliates . . . . . . . . . . . 2.10% 2.10% 2.10% 2.09% 2.16%

Expenses net of waiver and payments by affiliates and expense reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.10% 2.10% 2.10% 2.09% 2.15%

Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . 0.29% (0.57)% (0.56)% 1.71% 1.36%

Supplemental data

Net assets, end of year (000’s) . . . . . . . . . . . . . . . . . . . . . . . . $199,865 $288,237 $178,439 $26,689 $80,427

Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.52% 18.27% 61.93% 64.81% 101.77%

aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases ofthe Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.bBased on average daily shares outstanding.cAmount rounds to less than $0.01 per share.dEffective September 1, 2008, the redemption fee was eliminated.eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

Templeton Global Investment TrustFinancial Highlights (continued)

16 | The accompanying notes are an integral part of these financial statements. | Annual Report


Year Ended March 31,Class C 2012 2011 2010 2009 2008




Net investment income (loss)b . . . . . . . . . . . . . . . . . . . . . . . . (0.04) (0.14) (0.11) 0.08 0.09










Total returne . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12.66)% 10.08% 144.27% (56.84)% 3.73%





Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . (0.41)% (1.27)% (1.26)% 1.06% 0.71%

Supplemental data







Year Ended March 31,Class R 2012 2011 2010 2009 2008




Net investment income (loss)b . . . . . . . . . . . . . . . . . . . . . . . . (—)c (0.12) (0.03) 0.11 0.16










Total returne . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12.24)% 10.64% 145.15% (56.61)% 4.18%






Supplemental data

Net assets, end of year (000’s) . . . . . . . . . . . . . . . . . . . . . . . . $684 $778 $187 $89 $197






Year Ended March 31,Advisor Class 2012 2011 2010 2009 2008




Net investment income (loss)b . . . . . . . . . . . . . . . . . . . . . . . . 0.06 (0.05) (0.04) 0.15 0.22










Total return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11.76)% 11.22% 146.20% (56.37)% 4.76%


Expenses before waiver and payments by affiliates and expense reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.89% 1.84% 1.91% 2.22% 2.03%


Expenses net of waiver and payments by affiliatesand expense reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.80% 1.80% 1.80% 1.80% 1.80%


Supplemental data



aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases ofthe Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.bBased on average daily shares outstanding.cAmount rounds to less than $0.01 per share.dEffective September 1, 2008, the redemption fee was eliminated.

Annual Report | 19

Templeton Global Investment TrustStatement of Investments, March 31, 2012

Templeton Emerging Markets Small Cap Fund Industry Shares/Rights Value

Common Stocks and Other Equity Interests 88.9%Austria 1.0%DO & CO Restaurants & Catering AG . . . . . . . . . Hotels, Restaurants & Leisure 81,560 $ 3,157,161

Brazil 2.3%Julio Simoes Logistica SA . . . . . . . . . . . . . . . . . Road & Rail 1,248,503 7,651,222

China 8.5%Anhui Tianda Oil Pipe Co. Ltd., H . . . . . . . . . . . Energy Equipment & Services 20,271,841 3,471,921Beijing Jingkelong Co. Ltd., H . . . . . . . . . . . . . . Food & Staples Retailing 27,000 24,164China Green (Holdings) Ltd. . . . . . . . . . . . . . . . Food Products 19,478,000 6,069,944China Vanadium Titano-Magnetite Mining Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Metals & Mining 17,247,000 3,975,499

Jiangling Motors Corp. Ltd., B . . . . . . . . . . . . . . Automobiles 2,852,716 6,612,353Ju Teng International Holdings Ltd. . . . . . . . . . . Electronic Equipment, Instruments & Components 3,816,000 982,796

a Sohu.com Inc. . . . . . . . . . . . . . . . . . . . . . . . . . Internet Software & Services 35,300 1,947,501Win Hanverky Holdings Ltd. . . . . . . . . . . . . . . . Textiles, Apparel & Luxury Goods 27,792,000 2,648,357

a Xiwang Sugar Holdings Co. Ltd. . . . . . . . . . . . . . Food Products 9,220,030 1,246,656a Xiwang Sugar Holdings Co. Ltd., rts., 4/24/12 . . . Food Products 8,298,027 —Yorkey Optical International Cayman Ltd. . . . . . . Leisure Equipment & Products 6,590,000 763,753

27,742,944

Czech Republic 0.9%Pegas Nonwovens SA . . . . . . . . . . . . . . . . . . . . Textiles, Apparel & Luxury Goods 119,073 2,814,389

Egypt 3.0%Eastern Tobacco . . . . . . . . . . . . . . . . . . . . . . . . Tobacco 116,291 2,002,554Egyptian International Pharmaceutical Industries Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pharmaceuticals 1,348,432 7,811,529

9,814,083

Hong Kong 5.0%I.T Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Specialty Retail 20,830,395 12,204,890Victory City International Holdings Ltd. . . . . . . . Textiles, Apparel & Luxury Goods 21,228,970 2,077,627Water Oasis Group Ltd. . . . . . . . . . . . . . . . . . . . Specialty Retail 13,834,000 1,959,591

16,242,108

Hungary 1.4%a Ablon Group Ltd. . . . . . . . . . . . . . . . . . . . . . . . Real Estate Management & Development 1,381,078 530,367Egis Nyrt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pharmaceuticals 62,262 4,133,027

4,663,394

India 8.5%ABG Shipyard Ltd. . . . . . . . . . . . . . . . . . . . . . . Machinery 205,747 1,542,141Balkrishna Industries Ltd. . . . . . . . . . . . . . . . . . Auto Components 989,653 5,041,206Federal Bank Ltd. . . . . . . . . . . . . . . . . . . . . . . Commercial Banks 1,215,043 10,180,122

a Hirco PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real Estate Management & Development 1,711,704 1,680,999ING Vysya Bank Ltd. . . . . . . . . . . . . . . . . . . . . Commercial Banks 693,200 4,852,196JK Cements Ltd. . . . . . . . . . . . . . . . . . . . . . . . Construction Materials 1,390,213 4,399,356

27,696,020

Templeton Global Investment TrustStatement of Investments, March 31, 2012 (continued)

20 | Annual Report


Common Stocks and Other Equity Interests (continued)Kazakhstan 3.4%

a,b Zhaikmunai LP, GDR, Reg S . . . . . . . . . . . . . . . Oil, Gas & Consumable Fuels 993,641 $ 11,123,811

Kenya 0.3%Safaricom Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . Wireless Telecommunication Services 23,607,700 909,629

Latvia 0.8%a Grindeks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pharmaceuticals 284,769 2,550,818

Malaysia 3.5%Hartalega Holdings Bhd. . . . . . . . . . . . . . . . . . . Health Care Equipment & Supplies 2,212,000 5,743,578Lion Industries Corp. Bhd. . . . . . . . . . . . . . . . . Metals & Mining 12,737,500 5,699,477

11,443,055

Mexico 3.5%Grupo Herdez SAB de CV . . . . . . . . . . . . . . . . . Food Products 5,515,724 11,421,548

Nigeria 3.4%Access Bank Nigeria PLC . . . . . . . . . . . . . . . . . Commercial Banks 87,849,070 3,286,681Ecobank Transnational Inc. . . . . . . . . . . . . . . . . Commercial Banks 24,628,262 1,747,560UAC of Nigeria PLC . . . . . . . . . . . . . . . . . . . . . Industrial Conglomerates 26,062,286 4,792,684United Bank for Africa PLC . . . . . . . . . . . . . . . . Commercial Banks 75,598,058 1,251,179

11,078,104

Pakistan 0.0%†United Bank Ltd. . . . . . . . . . . . . . . . . . . . . . . . Commercial Banks 70,302 59,154

Poland 1.4%a AmRest Holdings NV . . . . . . . . . . . . . . . . . . . . Hotels, Restaurants & Leisure 68,808 1,570,210Warsaw Stock Exchange . . . . . . . . . . . . . . . . . . Diversified Financial Services 237,138 3,129,376

4,699,586

Romania 0.7%a,c Impact Developer & Contractor SA . . . . . . . . . . . Real Estate Management & Development 12,171,000 669,310

SC Bursa De Valori Bucuresti SA . . . . . . . . . . . . Diversified Financial Services 150,090 1,535,588

2,204,898

Russia 7.1%a,b Cherkizovo Group OJSC, GDR, Reg S . . . . . . . . . Food Products 147,032 1,982,727

CTC Media Inc. . . . . . . . . . . . . . . . . . . . . . . . . Media 489,658 5,694,723a Russian Sea Group OAO . . . . . . . . . . . . . . . . . . Food Products 745,844 2,568,850a Synergy Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . Beverages 349,907 6,868,198Veropharm . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pharmaceuticals 202,875 6,216,071

23,330,569

Serbia 1.5%a AIK Banka AD . . . . . . . . . . . . . . . . . . . . . . . . . Commercial Banks 219,906 4,746,742

Singapore 0.6%Super Group Ltd. . . . . . . . . . . . . . . . . . . . . . . . Food Products 1,376,000 1,976,036


Annual Report | 21


Common Stocks and Other Equity Interests (continued)South Korea 9.9%Amorepacific Group . . . . . . . . . . . . . . . . . . . . . Personal Products 26,967 $ 6,277,767Binggrae Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . Food Products 13,278 663,959

a CJ E&M Corp. . . . . . . . . . . . . . . . . . . . . . . . . . Media 150,680 3,780,645HNK Machine Tool Co., Ltd. . . . . . . . . . . . . . . . Machinery 206,890 3,427,147Maeil Dairy Industry . . . . . . . . . . . . . . . . . . . . . Food Products 137,218 1,788,113Medy-tox Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . Pharmaceuticals 211,057 6,432,959Sam Kwang Glass Industry Co. Ltd. . . . . . . . . . . Containers & Packaging 76,615 4,054,456Silicon Works Co. Ltd. . . . . . . . . . . . . . . . . . . . Semiconductors & Semiconductor Equipment 15,692 470,663Vieworks Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . Health Care Equipment & Supplies 94,921 795,830Youngone Corp. . . . . . . . . . . . . . . . . . . . . . . . . Textiles, Apparel & Luxury Goods 238,344 4,548,309

32,239,848

Thailand 1.8%Bangkok Chain Hospital PCL, fgn. . . . . . . . . . . . Health Care Providers & Services 23,380,320 5,766,362

Turkey 17.4%Anadolu Cam Sanayii AS . . . . . . . . . . . . . . . . . . Containers & Packaging 7,449,243 12,662,668IS Yatirim Menkul Degerler AS . . . . . . . . . . . . . . Capital Markets 3,778,811 3,964,307Koza Altin Isletmeleri AS . . . . . . . . . . . . . . . . . Metals & Mining 177,523 3,366,215Pinar Sut Mamulleri Sanayii AS . . . . . . . . . . . . . Food Products 1,189,257 12,409,638

c Reysas Gayrimenkul Yatirim Ortakligi AS . . . . . . Real Estate Investment Trusts 14,936,027 8,630,635Selcuk Ecza Deposu Ticaret ve Sanayi AS . . . . . . Pharmaceuticals 3,052,746 3,065,591Trakya Cam Sanayii AS . . . . . . . . . . . . . . . . . . . Building Products 6,150,988 9,558,618Ulker Biskuvi Sanayi AS . . . . . . . . . . . . . . . . . . Food Products 1,019,933 3,227,165

56,884,837

Ukraine 0.5%a,b MHP SA, GDR, Reg S . . . . . . . . . . . . . . . . . . . . Food Products 109,960 1,542,189

United Arab Emirates 1.0%Aramex Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . Air Freight & Logistics 3,597,037 1,782,360

a Depa Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial Services & Supplies 3,395,930 1,528,168

3,310,528

Vietnam 1.5%DHG Pharmaceutical JSC . . . . . . . . . . . . . . . . . Pharmaceuticals 838,824 2,574,807Dry Cell Storage Battery JSC . . . . . . . . . . . . . . . Electrical Equipment 278,304 257,615Imexpharm Pharmaceutical JSC . . . . . . . . . . . . Pharmaceuticals 330,360 600,511Vietnam Container Shipping JSC . . . . . . . . . . . . Marine 1,049,004 1,433,890

4,866,823

Total Common Stocks and Other Equity Interests (Cost $298,527,110) . . . . . . . 289,935,858

Preferred Stocks 2.7%Chile 2.3%Embotelladora Andina SA, pfd., A . . . . . . . . . . . Beverages 1,584,300 7,449,712




Preferred Stocks (continued)Croatia 0.4%Adris Grupa d.d., pfd. . . . . . . . . . . . . . . . . . . . . Tobacco 39,041 $ 1,467,380

Total Preferred Stocks(Cost $7,803,790) . . . . . . . . . . . . . . . . . 8,917,092

Total Investments before Short Term Investments (Cost $306,330,900) . . . . 298,852,950

Short Term Investments (Cost $28,521,538) 8.8%Money Market Funds 8.8%United States 8.8%

a,d Institutional Fiduciary Trust Money Market Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,521,538 28,521,538

Total Investments (Cost $334,852,438) 100.4% . . . . . . . . . . . . . . . . . . . . . . . . . . . 327,374,488

Other Assets, less Liabilities (0.4)% . . . . (1,233,146)

Net Assets 100.0% . . . . . . . . . . . . . . . . . . $ 326,141,342

See Abbreviations on page 37.

†Rounds to less than 0.1% of net assets.aNon-income producing.bSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At March 31, 2012, the aggregate value of these securities was$14,648,727, representing 4.49% of net assets.cSee Note 9 regarding holdings of 5% voting securities.dSee Note 7 regarding investments in the Institutional Fiduciary Trust Money Market Portfolio.


Templeton Global Investment TrustFinancial Statements

Statement of Assets and LiabilitiesMarch 31, 2012

TempletonEmerging Markets Small Cap Fund

Assets:Investments in securities:

Cost - Unaffiliated issuers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $294,607,397Cost - Non-controlled affiliated issuers (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,723,503Cost - Sweep Money Fund (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,521,538

Total cost of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $334,852,438

Value - Unaffiliated issuers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $289,553,005Value - Non-controlled affiliated issuers (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,299,945Value - Sweep Money Fund (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,521,538

Total value of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327,374,488Receivables:

Capital shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,178,097Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194,672

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328,747,367

Liabilities:Payables:

Capital shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,676,865Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 638,289

Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290,871

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,606,025

Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $326,141,342

Net assets consist of:Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $335,474,062Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 652,002Net unrealized appreciation (depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,478,287)Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,506,435)

Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $326,141,342


Templeton Global Investment TrustFinancial Statements (continued)

Statement of Assets and Liabilities (continued)March 31, 2012

TempletonEmerging Markets Small Cap Fund

Class A:Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $199,864,577

Shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,081,562

Net asset value per sharea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10.47

Maximum offering price per share (net asset value per share ÷ 94.25%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.11

Class C:Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,104,274


Net asset value and maximum offering price per sharea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10.21

Class R:Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 683,994

Shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,756

Net asset value and maximum offering price per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10.40

Advisor Class:Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 66,488,497


Net asset value and maximum offering price per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10.58

aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.



Statement of Operationsfor the year ended March 31, 2012

TempletonEmerging MarketsSmall Cap Fund

Investment income:Dividends: (net of foreign taxes of $929,263)

Unaffiliated issuers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,694,896Non-controlled affiliated issuers (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,911

Total investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,730,807

Expenses:Management fees (Note 3a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,563,464Administrative fees (Note 3b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 733,328Distribution fees: (Note 3c)

Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695,277Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 674,800Class R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,706

Transfer agent fees (Note 3e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 893,983Custodian fees (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409,851Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,703Registration and filing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,072Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,820Trustees’ fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,844Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,286

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,305,134Expenses waived/paid by affiliates (Note 3f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (342,564)

Net expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,962,570

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 768,237

Realized and unrealized gains (losses):Net realized gain (loss) from:

Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,966,702Foreign currency transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (72,500)

Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,894,202

Net change in unrealized appreciation (depreciation) on:Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (68,623,824)Translation of other assets and liabilities denominated in foreign currencies . . . . . . . . . . . . . . . . . . . . . . . . . . (4,298)

Change in deferred taxes on unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 640,910

Net change in unrealized appreciation (depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (67,987,212)

Net realized and unrealized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (55,093,010)

Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(54,324,773)



Statements of Changes in Net Assets

Templeton Emerging MarketsSmall Cap Fund

Year Ended March 31,2012 2011

Increase (decrease) in net assets:Operations:Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 768,237 $ (2,403,263)Net realized gain (loss) from investments and foreign currency transactions . . . . . . . . . . . . . 12,894,202 18,994,515Net change in unrealized appreciation (depreciation) on investments, translation of other

assets and liabilities denominated in foreign currencies and deferred taxes . . . . . . . . . . . . (67,987,212) 7,753,640

Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . (54,324,773) 24,344,892

Capital share transactions: (Note 2)Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (53,220,961) 93,406,423Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,759,873) 32,640,547Class R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,204 542,031Advisor Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,972,175) 51,397,180

Total capital share transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (70,931,805) 177,986,181

Net increase (decrease) in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (125,256,578) 202,331,073

Net assets:Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451,397,920 249,066,847

End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 326,141,342 $451,397,920

Undistributed net investment income (loss) included in net assets:End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 652,002 $ (779,129)

Annual Report | 27

Templeton Global Investment TrustNotes to Financial Statements


1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Templeton Global Investment Trust (Trust) is registered under the Investment Company Act of1940, as amended, (1940 Act) as an open-end investment company, consisting of six separatefunds. The Templeton Emerging Markets Small Cap Fund (Fund) is included in this report. Thefinancial statements of the remaining funds in the Trust are presented separately. The Fund offersfour classes of shares: Class A, Class C, Class R, and Advisor Class. Each class of shares differsby its initial sales load, contingent deferred sales charges, distribution fees, voting rights on mat-ters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in securities and other financial instruments are carried at fair value daily.Fair value is the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants on the measurement date. Under proceduresapproved by the Trust’s Board of Trustees (the Board), the Fund’s administrator, investment man-ager and other affiliates have formed the Valuation and Liquidity Oversight Committee (VLOC).The VLOC provides administration and oversight of the Fund’s valuation policies and proce-dures, which are approved annually by the Board. Among other things, these procedures allowthe Fund to utilize independent pricing services, quotations from securities and financial instru-ment dealers, and other market sources to determine fair value.

Equity securities listed on an exchange or on the NASDAQ National Market System are valuedat the last quoted sale price or the official closing price of the day, respectively. Foreign equitysecurities are valued as of the close of trading on the foreign stock exchange on which the securityis primarily traded, or the NYSE, whichever is earlier. The value is then converted into its U.S.dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the day thatthe value of the security is determined. Over-the-counter securities are valued within the range ofthe most recent quoted bid and ask prices. Securities that trade in multiple markets or on multipleexchanges are valued according to the broadest and most representative market. Certain equitysecurities are valued based upon fundamental characteristics or relationships to similar securities.Investments in open-end mutual funds are valued at the closing net asset value.

The Fund has procedures to determine the fair value of securities and other financial instrumentsfor which market prices are not reliable or readily available. Under these procedures, the VLOCconvenes on a regular basis to review such securities and considers a number of factors, includingsignificant unobservable valuation inputs when arriving at fair value. The VLOC primarilyemploys a market-based approach which may use related or comparable assets or liabilities,recent transactions, market multiples, book values, and other relevant information for the invest-ment to determine the fair value of the investment. An income-based valuation approach may

28 | Annual Report

Templeton Global Investment TrustNotes to Financial Statements (continued)


1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

also be used in which the anticipated future cash flows of the investment are discounted to calcu-late fair value. Discounts may also be applied due to the nature or duration of any restrictions onthe disposition of the investments. Due to the inherent uncertainty of valuations of such invest-ments, the fair values may differ significantly from the values that would have been used had anactive market existed. The VLOC employs various methods for calibrating these valuationapproaches including a regular review of key inputs and assumptions, transactional back-testingor disposition analysis, and reviews of any related market activity.

Trading in securities on foreign securities stock exchanges and over-the-counter markets may becompleted before the daily close of business on the NYSE. Occasionally, events occur betweenthe time at which trading in a foreign security is completed and the close of the NYSE thatmight call into question the reliability of the value of a portfolio security held by the Fund. As aresult, differences may arise between the value of the Fund’s portfolio securities as determined atthe foreign market close and the latest indications of value at the close of the NYSE. In order tominimize the potential for these differences, the VLOC monitors price movements following theclose of trading in foreign stock markets through a series of country specific market proxies(such as baskets of American Depositary Receipts, futures contracts and exchange traded funds).These price movements are measured against established trigger thresholds for each specificmarket proxy to assist in determining if an event has occurred that may call into question thereliability of the values of the foreign securities held by the Fund. If such an event occurs, thesecurities may be valued using fair value procedures, which may include the use of independentpricing services.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translatedinto U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date ofvaluation. The Fund may enter into foreign currency exchange contracts to facilitate transactionsdenominated in a foreign currency. Purchases and sales of securities, income and expense itemsdenominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect onthe transaction date. Portfolio securities and assets and liabilities denominated in foreign currenciescontain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally,events may impact the availability or reliability of foreign exchange rates used to convert the U.S.dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fairvalue using procedures established and approved by the Board.

The Fund does not separately report the effect of changes in foreign exchange rates from changesin market prices on securities held. Such changes are included in net realized and unrealized gain orloss from investments on the Statement of Operations.

Annual Report | 29




b. Foreign Currency Translation (continued)

Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains orlosses realized between the trade and settlement dates on securities transactions and the differencebetween 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 gainsand losses arise from changes in foreign exchange rates on foreign denominated assets and liabili-ties other than investments in securities held at the end of the reporting period.

c. Income and Deferred Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal RevenueCode. The Fund intends to distribute to shareholders substantially all of its taxable income andnet realized gains to relieve it from federal income and excise taxes. As a result, no provision forU.S. federal income taxes is required.

The Fund may be subject to foreign taxation related to income received, capital gains on the saleof securities and certain foreign currency transactions in the foreign jurisdictions in which itinvests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in theforeign markets in which the Fund invests. When a capital gain tax is determined to apply theFund records an estimated deferred tax liability in an amount that would be payable if the secu-rities were disposed of on the valuation date.

The Fund recognizes the tax benefits of uncertain tax positions only when the position is “morelikely than not” to be sustained upon examination by the tax authorities based on the technicalmerits of the tax position. As of March 31, 2012, and for all open tax years, the Fund has deter-mined that no liability for unrecognized tax benefits is required in the Fund’s financial statementsrelated to uncertain tax positions taken on a tax return (or expected to be taken on future taxreturns). Open tax years are those that remain subject to examination and are based on each taxjurisdiction statute of limitation.

d. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security trans-actions are determined on a specific identification basis. Expenses are accrued daily. Dividendincome is recorded on the ex-dividend date except that certain dividends from foreign securitiesare recognized as soon as the Fund is notified of the ex-dividend date. Distributions to sharehold-ers are recorded on the ex-dividend date and are determined according to income tax regulations(tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded inaccordance with accounting principles generally accepted in the United States of America. Thesedifferences may be permanent or temporary. Permanent differences are reclassified among capital

30 | Annual Report




d. Security Transactions, Investment Income, Expenses and Distributions (continued)

accounts to reflect their tax character. These reclassifications have no impact on net assets or theresults of operations. Temporary differences are not reclassified, as they may reverse in subsequentperiods.

Common expenses incurred by the Trust are allocated among the funds based on the ratio of netassets of each fund to the combined net assets of the Trust. Fund specific expenses are chargeddirectly to the fund that incurred the expense.

Realized and unrealized gains and losses and net investment income, not including class specificexpenses, are allocated daily to each class of shares based upon the relative proportion of netassets of each class. Differences in per share distributions, by class, are generally due to differencesin class specific expenses.

e. Accounting Estimates

The preparation of financial statements in accordance with accounting principles generallyaccepted in the United States of America requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities at the date of the financial statements andthe amounts of income and expenses during the reporting period. Actual results could differ fromthose estimates.

f. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trustagainst certain liabilities arising out of the performance of their duties to the Trust. Additionally,in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with serv-ice providers that contain general indemnification clauses. The Trust’s maximum exposure underthese arrangements is unknown as this would involve future claims that may be made against theTrust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

Annual Report | 31



2. SHARES OF BENEFICIAL INTEREST

At March 31, 2012, there were an unlimited number of shares authorized ($0.01 par value).Transactions in the Fund’s shares were as follows:

Year Ended March 31,2012 2011

Shares Amount Shares AmountClass A Shares:

Shares sold . . . . . . . . . . . . . . 8,867,232 $ 96,293,780 25,878,827 $ 301,141,103Shares redeemed . . . . . . . . . (13,997,351) (149,514,741) (18,288,797) (207,734,680)

Net increase (decrease) . . . . . (5,130,119) $ (53,220,961) 7,590,030 $ 93,406,423

Class C Shares:


Net increase (decrease) . . . . . (1,350,778) $ (13,759,873) 2,734,878 $ 32,640,547

Class R Shares:

Shares sold . . . . . . . . . . . . . . 22,940 $ 239,284 58,180 $ 657,318Shares redeemed . . . . . . . . . (22,891) (218,080) (9,918) (115,287)

Net increase (decrease) . . . . . 49 $ 21,204 48,262 $ 542,031

Advisor Class Shares:


Net increase (decrease) . . . . . (300,201) $ (3,972,175) 4,386,396 $ 51,397,180

3. TRANSACTIONS WITH AFFILIATES

Franklin Resources, Inc. is the holding company for various subsidiaries that together arereferred to as Franklin Templeton Investments. Certain officers and trustees of the Trust are alsoofficers and/or directors of the following subsidiaries:

Subsidiary Affiliation

Templeton Asset Management Ltd. (TAML) Investment managerFranklin Templeton Services, LLC (FT Services) Administrative managerFranklin Templeton Distributors, Inc. (Distributors) Principal underwriterFranklin Templeton Investor Services, LLC (Investor Services) Transfer agent

32 | Annual Report



3. TRANSACTIONS WITH AFFILIATES (continued)

a. Management Fees

The Fund pays an investment management fee to TAML based on the average daily net assets ofthe Fund as follows:

Annualized Fee Rate Net Assets

1.250% Up to and including $1 billion1.200% Over $1 billion, up to and including $5 billion1.150% Over $5 billion, up to and including $10 billion1.100% Over $10 billion, up to and including $15 billion1.050% Over $15 billion, up to and including $20 billion1.000% In excess of $20 billion

b. Administrative Fees

The Fund pays an administrative fee to FT Services of 0.20% per year of the average daily netassets of the Fund.

c. Distribution Fees

The Board has adopted distribution plans for each share class, with the exception of Advisor Classshares, pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s Class A reimbursement distri-bution plan, the Fund reimburses Distributors for costs incurred in connection with the servicing,sale and distribution of the Fund’s shares up to the maximum annual plan rate. Under the Class Areimbursement distribution plan, costs exceeding the maximum for the current plan year cannot bereimbursed in subsequent periods.

In addition, under the Fund’s Class C and R compensation distribution plans, the Fund paysDistributors for costs incurred in connection with the servicing, sale and distribution of the Fund’sshares up to the maximum annual plan rate for each class.

The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:

Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.35%Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.00%Class R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.50%

The Board has set the current rate at 0.30% per year for Class A shares until further notice andapproval by the Board.

Annual Report | 33



3. TRANSACTIONS WITH AFFILIATES (continued)

d. Sales Charges/Underwriting Agreements

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expensesof the Fund. These charges are deducted from the proceeds of sales of Fund shares prior toinvestment or from redemption proceeds prior to remittance, as applicable. Distributors hasadvised the Fund of the following commission transactions related to the sales and redemptionsof the Fund’s shares for the year:

Sales charges retained net of commissions paid to unaffiliated broker/dealers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 139,813

CDSC retained . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 69,906

e. Transfer Agent Fees

For the year ended March 31, 2012, the Fund paid transfer agent fees of $893,983, of which$416,196 was retained by Investor Services.

f. Waiver and Expense Reimbursements

TAML and FT Services have contractually agreed in advance to waive or limit their respective feesand to assume as their own expense certain expenses otherwise payable by the Fund so that thecommon expenses (i.e. a combination of management fees, administrative fees, and other expenses,but excluding distribution fees, and acquired fund fees and expenses) for each class of the Fund donot exceed 1.80% (other than certain non-routine expenses or costs, including those relating to lit-igation, indemnification, reorganizations, and liquidations) until July 31, 2012.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a resultof uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses.During the year ended March 31, 2012, there were no credits earned.

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any. Underthe Regulated Investment Company Modernization Act of 2010, capital losses incurred by theFund in taxable years beginning after December 22, 2010 are not subject to expiration and suchlosses retain their character as either short-term or long-term, rather than being consideredshort-term as under previous law. Post-enactment capital losses must be fully utilized prior toutilizing any losses incurred in pre-enactment tax years.

34 | Annual Report



5. INCOME TAXES (continued)

At March 31, 2012, the Fund had capital loss carryforwards of $2,418,287 expiring in 2018.During the year ended March 31, 2012, the Fund utilized $12,966,702 of capital loss carryforwards.

At March 31, 2012, the cost of investments, net unrealized appreciation (depreciation) andundistributed ordinary income for income tax purposes were as follows:

Cost of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $334,940,586

Unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,798,870 Unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . (62,364,968)

Net unrealized appreciation (depreciation) . . . . . . . . . . . . . . $ (7,566,098)

Distributable earnings - undistributed ordinary income . . . . . $ 652,002

Differences between income and/or capital gains as determined on a book basis and a tax basisare primarily due to differing treatments of passive foreign investment company shares.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the year ended March 31,2012, aggregated $22,966,372 and $108,128,218, respectively.

7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

The Fund invests in the Institutional Fiduciary Trust Money Market Portfolio (Sweep MoneyFund), an open-end investment company managed by Franklin Advisers, Inc. (an affiliate of theinvestment manager). Management fees paid by the Fund are reduced on assets invested in theSweep Money Fund, in an amount not to exceed the management and administrative fees paid bythe Sweep Money Fund.

8. CONCENTRATION OF RISK

Investing in foreign securities may include certain risks and considerations not typically associ-ated with investing in U.S. securities, such as fluctuating currency values and changing local andregional economic, political and social conditions, which may result in greater market volatility.In addition, certain foreign securities may not be as liquid as U.S. securities.

Annual Report | 35



9. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES

The 1940 Act defines “affiliated companies” to include investments in portfolio companies inwhich a fund owns 5% or more of the outstanding voting securities. Investments in “affiliatedcompanies” for the Fund for the year ended March 31, 2012, were as shown below.

Number of Number of RealizedShares Held Shares Held Value Capitalat Beginning Gross Gross at End at End Investment Gain

Name of Issuer of Year Additions Reductions of Year of Year Income (Loss)

Non-Controlled AffiliatesAnhui Tianda Oil Pipe Co. Ltd., H . . . . 20,271,841 — — 20,271,841 $ —a $ — $—

Impact Developer & Contractor SA . . . 12,171,000 — — 12,171,000 669,310 — —

Reysas Gayrimenkul Yatirim Ortakligi AS . . . . . . . . . . . . . . . . . . . 10,122,894 4,813,133 — 14,936,027 8,630,635 35,911 —

Total Affiliated Securities (2.85% of Net Assets) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,299,945 $35,911 $—

aAs of March 31, 2012, no longer an affiliate.

10. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively,Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicatedsenior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which matures onJanuary 18, 2013. This Global Credit Facility provides a source of funds to the Borrowers fortemporary and emergency purposes, including the ability to meet future unanticipated or unusu-ally large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged onany borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees andexpenses incurred in connection with the implementation and maintenance of the Global CreditFacility, based upon its relative share of the aggregate net assets of all of the Borrowers, includingan annual commitment fee of 0.08% based upon the unused portion of the Global Credit Facility,which is reflected in other expenses on the Statement of Operations. During the year endedMarch 31, 2012, the Fund did not use the Global Credit Facility.

36 | Annual Report



11. FAIR VALUE MEASUREMENTS

The Fund follows a fair value hierarchy that distinguishes between market data obtained fromindependent sources (observable inputs) and the Fund’s own market assumptions (unobservableinputs). These inputs are used in determining the value of the Fund’s investments and are sum-marized in the following fair value hierarchy:

• Level 1 – quoted prices in active markets for identical securities

• Level 2 – other significant observable inputs (including quoted prices for similar securities,interest rates, prepayment speed, credit risk, etc.)

• Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not an indication of the risk associ-ated with investing in those securities.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policyof recognizing the transfers as of the date of the underlying event which caused the movement.

At March 31, 2012, all of the Fund’s investments in securities carried at fair value were valuedusing Level 1 inputs. For detailed categories, see the accompanying Statement of Investments.

12. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting StandardsUpdate (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to AchieveCommon Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. Theamendments in the ASU will improve the comparability of fair value measurements presented anddisclosed in financial statements prepared in accordance with U.S. GAAP (Generally AcceptedAccounting Principles) and IFRS (International Financial Reporting Standards) and include newguidance for certain fair value measurement principles and disclosure requirements. The ASU iseffective for interim and annual periods beginning after December 15, 2011. The Fund believesthe adoption of this ASU will not have a material impact on its financial statements.

In December 2011, FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosuresabout Offsetting Assets and Liabilities. The amendments in the ASU enhance disclosures aboutoffsetting of financial assets and liabilities to enable investors to understand the effect of thesearrangements on a Fund’s financial position. The ASU is effective for interim and annual report-ing periods beginning on or after January 1, 2013. The Fund believes the adoption of this ASUwill not have a material impact on its financial statements.

Annual Report | 37



13. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements anddetermined that no events have occurred that require disclosure.

ABBREVIATIONS

Selected Portfolio

GDR - Global Depositary Receipt

38 | Annual Report

Templeton Global Investment TrustReport of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of Templeton Emerging Markets Small Cap Fund

In our opinion, the accompanying statement of assets and liabilities, including the statement ofinvestments, and the related statements of operations and of changes in net assets and the financialhighlights present fairly, in all material respects, the financial position of Templeton EmergingMarkets Small Cap Fund (the “Fund”) at March 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity withaccounting principles generally accepted in the United States of America. These financial statementsand financial highlights (hereafter referred to as “financial statements”) are the responsibility ofthe Fund’s management. Our responsibility is to express an opinion on these financial statementsbased on our audits. We conducted our audits of these financial statements in accordance with thestandards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether thefinancial 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 theaccounting principles used and significant estimates made by management, and evaluating theoverall financial statement presentation. We believe that our audits, which included confirmationof securities at March 31, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, CaliforniaMay 18, 2012

Annual Report | 39

Templeton Global Investment TrustTax Information (unaudited)


Under Section 854(b)(1)(B) of the Internal Revenue Code (Code), the Fund hereby reports themaximum amount allowable but no less than $4,057,202 as qualified dividends for purposes ofthe maximum rate under Section 1(h)(11) of the Code for the fiscal year ended March 31, 2012.Distributions, including qualified dividend income, paid during calendar year 2012 will bereported to shareholders on Form 1099-DIV by mid-February 2013. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.

At March 31, 2012, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. The Fund elects to treat foreign taxes paid as allowed under Section 853of the Code. This election will allow shareholders of record as of the 2012 distribution date, to treat their proportionate share of foreign taxes paid by the Fund as having been paid directlyby them. The shareholder shall consider these amounts as foreign taxes paid in the tax year inwhich they receive the Fund distribution.

By mid-February 2013, shareholders will receive Form 1099-DIV which will include their shareof taxes withheld and foreign source income distributed during the calendar year 2012.

40 | Annual Report

Number of Portfolios inName, Year of Birth Length of Fund Complex Overseen Other Directorships Heldand Address Position Time Served by Board Member* During at Least the Past 5 Years

Templeton Global Investment TrustBoard Members and Officers

Independent Board Members

The name, year of birth and address of the officers and board members, as well as their affiliations, positions held withthe Trust, principal occupations during at least the past five years and number of U.S. registered portfolios overseen inthe Franklin Templeton Investments fund complex are shown below. Generally, each board member serves until thatperson’s successor is elected and qualified.

Harris J. Ashton (1932)300 S.E. 2nd StreetFort Lauderdale, FL 33301-1923

Trustee Since 1994 132

Frank J. Crothers (1944)300 S.E. 2nd StreetFort Lauderdale, FL 33301-1923


Edith E. Holiday (1952)300 S.E. 2nd StreetFort Lauderdale, FL 33301-1923

LeadIndependentTrustee

Trustee since1996 and LeadIndependentTrustee since 2007

132

Bar-S Foods (meat packing company)(1981-2010).

Hess Corporation (exploration andrefining of oil and gas), H.J. HeinzCompany (processed foods and alliedproducts), RTI International Metals, Inc.(manufacture and distribution of titani-um), Canadian National Railway (rail-road) and White Mountains InsuranceGroup, Ltd. (holding company).

Principal Occupation During at Least the Past 5 Years:Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief ExecutiveOfficer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).

Ann Torre Bates (1958)300 S.E. 2nd StreetFort Lauderdale, FL 33301-1923

Trustee Since 2008 35 SLM Corporation (Sallie Mae), AresCapital Corporation (specialty financecompany) and Allied CapitalCorporation (financial services)(2003-2010).

Principal Occupation During at Least the Past 5 Years:Independent strategic and financial consultant; and formerly, Executive Vice President and Chief Financial Officer, NHP Incorporated(manager of multifamily housing) (1995-1997); and Vice President and Treasurer, US Airways, Inc. (until 1995).

Talon Metals Corp. (mining exploration),Fortis, Inc. (utility holding company)and AML Foods Limited (retaildistributors).

Principal Occupation During at Least the Past 5 Years:Director and Vice Chairman, Caribbean Utilities Company, Ltd.; director of various other private business and nonprofit organizations; andformerly, Chairman, Atlantic Equipment and Power Ltd. (1977-2003).

Principal Occupation During at Least the Past 5 Years:Director or Trustee of various companies and trusts; and formerly, Assistant to the President of the United States and Secretary of theCabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and AssistantSecretary for Public Affairs and Public Liaison – United States Treasury Department (1988-1989).

Annual Report | 41


Boeing Capital Corporation (aircraftfinancing).

J. Michael Luttig (1954)300 S.E. 2nd StreetFort Lauderdale, FL 33301-1923


Principal Occupation During at Least the Past 5 Years:Executive Vice President, General Counsel and member of Executive Council, The Boeing Company; and formerly, Federal Appeals CourtJudge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).


Hess Corporation (exploration andrefining of oil and gas).

Frank A. Olson (1932)300 S.E. 2nd StreetFort Lauderdale, FL 33301-1923


Principal Occupation During at Least the Past 5 Years:Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer(1977-1999)); and formerly, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).

Larry D. Thompson (1945)300 S.E. 2nd StreetFort Lauderdale, FL 33301-1923


Principal Occupation During at Least the Past 5 Years:John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (2011); and formerly, Senior Vice President –Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products) (2004-May 2011); Senior Fellow of The BrookingsInstitution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General, U.S. Department ofJustice (2001-2003).

NoneConstantine D. Tseretopoulos(1954)300 S.E. 2nd StreetFort Lauderdale, FL 33301-1923


Principal Occupation During at Least the Past 5 Years:Physician, Chief of Staff, owner and operator of the Lyford Cay Hospital (1987-present); director of various nonprofit organizations; andformerly, Cardiology Fellow, University of Maryland (1985-1987); and Internal Medicine Resident, Greater Baltimore Medical Center(1982–1985).

Cbeyond, Inc. (business commu-nications provider), The SouthernCompany (energy company) and The Washington Post Company (education and media organization).

Emeritus Corporation (assisted living)(1999-2010) and OSI Pharmaceuticals,Inc. (pharmaceutical products)(2006-2010).

Principal Occupation During at Least the Past 5 Years:Advisor, Saratoga Partners (private equity fund); and formerly, Managing Director, Saratoga Partners (1998-2001) and SBC Warburg DillonRead (investment banking) (1997-1998); Vice Chairman, Dillon, Read & Co. Inc. (investment banking) (1991-1997); and Chief FinancialOfficer, Dillon, Read & Co. Inc. (1982-1997).

David W. Niemiec (1949)300 S.E. 2nd StreetFort Lauderdale, FL 33301-1923

El Oro Ltd (investments).Robert E. Wade (1946)300 S.E. 2nd StreetFort Lauderdale, FL 33301-1923


Principal Occupation During at Least the Past 5 Years:Attorney at law engaged in private practice (1973-2009) and member of various boards.

42 | Annual Report


Interested Board Members and Officers

None**Charles B. Johnson (1933)One Franklin ParkwaySan Mateo, CA 94403-1906

Trustee,Chairman ofthe Board andVice President

Trustee and VicePresident since1994 andChairman of theBoard since 1995

132

Principal Occupation During at Least the Past 5 Years:Chairman of the Board, Member – Office of the Chairman and Director, Franklin Resources, Inc.; and officer and/or director or trustee, asthe case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 41 of the investment companies in Franklin TempletonInvestments.

None**Gregory E. Johnson (1961)One Franklin ParkwaySan Mateo, CA 94403-1906


Principal Occupation During at Least the Past 5 Years:Director, President and Chief Executive Officer, Franklin Resources, Inc.; officer and/or director or trustee, as the case may be, of some ofthe other subsidiaries of Franklin Resources, Inc. and of 34 of the investment companies in Franklin Templeton Investments; and Chairman,Investment Company Institute.

Not ApplicableLaura F. Fergerson (1962)One Franklin ParkwaySan Mateo, CA 94403-1906

Chief ExecutiveOfficer –Finance andAdministration

Since 2009 Not Applicable

Principal Occupation During at Least the Past 5 Years:Senior Vice President, Franklin Templeton Services, LLC; officer of 46 of the investment companies in Franklin Templeton Investments; andformerly, Director and member of Audit and Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of theinvestment companies in Franklin Templeton Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC (1997-2003).

Not ApplicableAliya S. Gordon (1973)One Franklin ParkwaySan Mateo, CA 94403-1906

Vice President Since 2009 Not Applicable

Principal Occupation During at Least the Past 5 Years:Senior Associate General Counsel, Franklin Templeton Investments; officer of 46 of the investment companies in Franklin TempletonInvestments; and formerly, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004).

Not ApplicableDavid P. Goss (1947)One Franklin ParkwaySan Mateo, CA 94403-1906


Principal Occupation During at Least the Past 5 Years:Senior Associate General Counsel, Franklin Templeton Investments; and officer and/or director, as the case may be, of some of the othersubsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments.

Not ApplicableSteven J. Gray (1955)One Franklin ParkwaySan Mateo, CA 94403-1906


Principal Occupation During at Least the Past 5 Years:Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc.; and officer of 46 ofthe investment companies in Franklin Templeton Investments.

Annual Report | 43


Not ApplicableRupert H. Johnson, Jr. (1940)One Franklin ParkwaySan Mateo, CA 94403-1906


Principal Occupation During at Least the Past 5 Years:Vice Chairman, Member – Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc.; Senior VicePresident, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries ofFranklin Resources, Inc. and of 25 of the investment companies in Franklin Templeton Investments.

Not ApplicableGary P. Motyl (1952)300 S.E. 2nd StreetFort Lauderdale, FL 33301-1923

President andChief ExecutiveOfficer –InvestmentManagement


Principal Occupation During at Least the Past 5 Years:President, Templeton Investment Counsel, LLC; Executive Vice President, Franklin Templeton Institutional, LLC; and officer and/or director ofsome of the other subsidiaries of Franklin Resources, Inc. and of six of the investment companies in Franklin Templeton Investments.

Not ApplicableMark H. Otani (1968)One Franklin ParkwaySan Mateo, CA 94403-1906

Treasurer,Chief FinancialOfficer andChiefAccountingOfficer


Principal Occupation During at Least the Past 5 Years:Director, Global Fund Accounting Operations, Franklin Templeton Investments; and officer of 14 of the investment companies in FranklinTempleton Investments.

Not ApplicableRobert C. Rosselot (1960)300 S.E. 2nd StreetFort Lauderdale, FL 33301-1923

Secretary andVice President

Secretary since2004 and VicePresident since 2009

Not Applicable

Principal Occupation During at Least the Past 5 Years:Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President andSecretary, Templeton Investment Counsel, LLC; Vice President, Secretary and Trust Officer, Fiduciary Trust International of the South; andofficer of 46 of the investment companies in Franklin Templeton Investments.

Not ApplicableKaren L. Skidmore (1952)One Franklin ParkwaySan Mateo, CA 94403-1906


Principal Occupation During at Least the Past 5 Years:Senior Associate General Counsel, Franklin Templeton Investments; and officer of 46 of the investment companies in Franklin TempletonInvestments.

44 | Annual Report


*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex. These portfolioshave a common investment manager or affiliated investment managers.

**Charles B. Johnson is considered to be an interested person of the Trust under the federal securities laws due to his position as officer and director and major shareholder ofFranklin Resources, Inc. (Resources), which is the parent company of the Trust’s investment manager and distributor. Gregory E. Johnson is considered to be an interested person ofthe Trust under the federal securities laws due to his position as officer and director of Resources.

Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the father and uncle, respectively, of Gregory E. Johnson.

Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.

The Sarbanes-Oxley Act of 2002 and Rules adopted by the U.S. Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includesat least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there is at least one suchfinancial expert on the Audit Committee and has designated each of Ann Torre Bates and David W. Niemiec as an audit committee financial expert. The Board believes thatMs. Bates and Mr. Niemiec qualify as such an expert in view of their extensive business background and experience. Ms. Bates has served as a member of the Fund AuditCommittee since 2008. She currently serves as a director of SLM Corporation and Ares Capital Corporation and was formerly a director of Allied Capital Corporation from 2003 to 2010, Executive Vice President and Chief Financial Officer of NHP Incorporated and Vice President and Treasurer of US Airways, Inc. Mr. Niemiec has served as a member ofthe Fund Audit Committee since 2006, currently serves as an Advisor to Saratoga Partners and was formerly its Managing Director from 1998 to 2001. Mr. Niemiec is formerly a director of Emeritus Corporation from 1999 to 2010 and OSI Pharmaceuticals, Inc. from 2006 to 2010, Managing Director of SBC Warburg Dillon Read from 1997 to 1998, and was Vice Chairman from 1991 to 1997 and Chief Financial Officer from 1982 to 1997 of Dillon, Read & Co. Inc. As a result of such background and experience, the Boardbelieves that Ms. Bates and Mr. Niemiec have each acquired an understanding of generally accepted accounting principles and financial statements, the general application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth and level ofcomplexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting and anunderstanding of audit committee functions. Ms. Bates and Mr. Niemiec are independent Board members as that term is defined under the applicable U.S. Securities andExchange Commission Rules and Releases or the listing standards applicable to the Fund.

The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request. Shareholders maycall (800) DIAL BEN/342-5236 to request the SAI.

Not ApplicableCraig S. Tyle (1960)One Franklin ParkwaySan Mateo, CA 94403-1906


Principal Occupation During at Least the Past 5 Years:General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin Resources, Inc.and of 46 of the investment companies in Franklin Templeton Investments; and formerly, Partner, Shearman & Sterling, LLP (2004-2005);and General Counsel, Investment Company Institute (ICI) (1997-2004).

Not ApplicableLori A. Weber (1964)300 S.E. 2nd StreetFort Lauderdale, FL 33301-1923

Vice President Since May 2011 Not Applicable

Principal Occupation During at Least the Past 5 Years:Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and AssistantSecretary, Templeton Investment Counsel, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments.

Annual Report | 45

Templeton Global Investment TrustShareholder Information


Board Review of Investment Management Agreement

At a meeting held February 28, 2012, the Board of Trustees (Board), including a majority of non-interested or independent Trustees, approved renewal of the investment management agreements foreach of the separate funds that constitute Templeton Global Investment Trust, including TempletonEmerging Markets Small Cap Fund (Fund(s)). In reaching this decision, the Board took into accountinformation furnished throughout the year at regular Board meetings, as well as information pre-pared specifically in connection with the annual renewal review process. Information furnishedand discussed throughout the year included investment performance reports and related financialinformation for each Fund, as well as periodic reports on expenses, shareholder services, legal andcompliance matters, pricing, brokerage commissions and execution and other services provided bythe Investment Manager (Manager) and its affiliates. Information furnished specifically in connec-tion with the renewal process included a report for each Fund prepared by Lipper, Inc. (Lipper), anindependent organization, as well as additional material, including a Fund profitability analysisprepared by management. The Lipper reports compared each Fund’s investment performance andexpenses with those of other mutual funds deemed comparable to the Fund as selected by Lipper.The Fund profitability analysis discussed the profitability to Franklin Templeton Investments fromits overall U.S. fund operations, as well as on an individual fund-by-fund basis. Additional materialaccompanying such profitability analysis included information on a fund-by-fund basis listing portfo-lio managers and other accounts they manage, as well as information on management fees chargedby the Manager and its affiliates to U.S. mutual funds and other accounts, including management’sexplanation of differences where relevant. Such material also included a memorandum prepared bymanagement describing project initiatives and capital investments relating to the services providedto the Funds by the Franklin Templeton Investments organization, as well as a memorandum relat-ing to economies of scale and an analysis concerning transfer agent fees charged by an affiliate ofthe Manager.

In considering such materials, the independent Trustees received assistance and advice from and metseparately with independent counsel. While the investment management agreements for all Fundswere considered at the same Board meeting, the Board dealt with each Fund separately. In approvingcontinuance of the investment management agreement for each Fund, the Board, including a majorityof independent Trustees, determined that the management fee structure was fair and reasonable andthat continuance of the investment management agreement was in the best interests of each Fund andits shareholders. While attention was given to all information furnished, the following discusses someprimary factors relevant to the Board’s decision.

NATURE, EXTENT AND QUALITY OF SERVICES. The Board was satisfied with the natureand quality of the overall services provided by the Manager and its affiliates to the Fund and itsshareholders. In addition to investment performance and expenses discussed later, the Board’sopinion was based, in part, upon periodic reports furnished it showing that the investment policiesand restrictions for the Fund were consistently complied with as well as other reports periodically

46 | Annual Report

Templeton Global Investment TrustShareholder Information (continued)


Board Review of Investment Management Agreement (continued)

furnished the Board covering matters such as the compliance of portfolio managers and othermanagement personnel with the code of ethics adopted throughout the Franklin Templeton fundcomplex, the adherence to fair value pricing procedures established by the Board, and the accuracyof net asset value calculations. The Board also noted the extent of benefits provided Fund share-holders from being part of the Franklin Templeton family of funds, including the right to exchangeinvestments between the same class of funds without a sales charge, the ability to reinvest Fund divi-dends into other funds and the right to combine holdings in other funds to obtain a reduced salescharge. Favorable consideration was given to management’s continuous efforts and expenditures inestablishing back-up systems and recovery procedures to function in the event of a natural disaster,it being noted that such systems and procedures had functioned smoothly during the Florida hurri-canes and blackouts experienced in previous years. Among other factors taken into account by theBoard were the Manager’s best execution trading policies, including a favorable report by an inde-pendent portfolio trading analytical firm, which also covered FOREX transactions. Considerationwas also given to the experience of the Fund’s portfolio management team, the number of accountsmanaged and general method of compensation. In this latter respect, the Board noted that a primaryfactor in management’s determination of a portfolio manager’s bonus compensation was the rela-tive investment performance of the funds he or she managed and that a portion of such bonus wasrequired to be invested in a predesignated list of funds within such person’s fund management areaso as to be aligned with the interests of shareholders. The Board also took into account the qualityof transfer agent and shareholder services provided Fund shareholders by an affiliate of the Managerand the continuous enhancements to the Franklin Templeton website. Particular attention was givento management’s conservative approach and diligent risk management procedures, including contin-uous monitoring of counterparty credit risk and attention given to derivatives and other complexinstruments including expanded collateralization requirements. The Board also took into account,among other things, management’s efforts in establishing a global credit facility for the benefit of theFund and other accounts managed by Franklin Templeton Investments to provide a source of cashfor temporary and emergency purposes or to meet unusual redemption requests as well as the strongfinancial position of the Manager’s parent company and its commitment to the mutual fund busi-ness as evidenced by its subsidization of money market funds.

INVESTMENT PERFORMANCE. While consideration was given to performance reports anddiscussions with portfolio managers at Board meetings during the year, particular attention inassessing performance was given to the Lipper reports furnished for the agreement renewal. TheLipper reports prepared for the Fund showed the investment performance of its Class A shares dur-ing 2011 and previous years of operation. The Lipper performance universe for the Fund consistedof all retail and institutional emerging markets funds as designated by Lipper. The Lipper reportshowed the Fund’s total return in 2011 to be in the lowest quintile of such universe and on an annu-alized basis to be in the highest quintile and second-lowest quintile of such universe for the previous

Annual Report | 47




three- and five-year periods, respectively. The performance universe was not limited to funds invest-ing in small cap stocks, and the Board noted that the Fund’s total return was within one percent ofits more narrowly defined MSCI Emerging Markets Small Cap Index benchmark return both during2011 and the previous three years on an annualized basis, and approximately three-and-one-halfpercent below such index return for the previous five years on an annualized basis. While intendingto monitor future performance, the Board did not believe the Fund’s overall performance warrantedany change in portfolio management, noting the experience of the Fund’s portfolio managers andthe fact that the Fund has been in operation for only five years.

COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the manage-ment fees and total expense ratio of the Fund compared with those of a group of other fundsselected by Lipper as its appropriate Lipper expense group. Lipper expense data is based uponhistorical information taken from each fund’s most recent annual report, which reflects historicalasset levels that may be quite different from those currently existing, particularly in a period ofmarket volatility. While recognizing such inherent limitation and the fact that expense ratios gener-ally increase as assets decline and decrease as assets grow, the Board believed the independentanalysis conducted by Lipper to be an appropriate measure of comparative expenses. In reviewingcomparative costs, Lipper provides information on the Fund’s contractual investment managementfee in comparison with the effective management fee that would have been charged by other fundswithin its Lipper expense group assuming they were similar in size to the Fund, as well as theactual total expense ratio of the Fund in comparison with those of its Lipper expense group. TheLipper contractual investment management fee analysis includes administrative charges as beingpart of a management fee, and actual total expenses, for comparative consistency, are shown byLipper for Fund Class A shares. The Lipper reports for the Fund showed its contractual manage-ment fee rate to be the highest in its Lipper expense group, and its actual total expense ratio to bethe second highest in such group. The Board found the expenses of the Fund to be acceptable inview of its relatively small size and specialized nature and the fact that its expenses were being sub-sidized by management fee waivers.

MANAGEMENT PROFITABILITY. The Board also considered the level of profits realized bythe Manager and its affiliates in connection with the operation of the Fund. In this respect, theBoard reviewed the Fund profitability analysis that addresses the overall profitability of FranklinTempleton’s U.S. fund business, as well as its profits in providing management and other servicesto each of the individual funds during the 12-month period ended September 30, 2011, being themost recent fiscal year-end for Franklin Resources, Inc., the Manager’s parent. In reviewing theanalysis, attention was given to the methodology followed in allocating costs to the Fund, it beingrecognized that allocation methodologies are inherently subjective and various allocation method-ologies may each be reasonable while producing different results. In this respect, the Board noted

48 | Annual Report




that, while being continuously refined and reflecting changes in the Manager’s own cost accounting,the cost allocation methodology was consistent with that followed in profitability report presenta-tions for the Fund made in prior years and that the Fund’s independent registered public accountingfirm had been engaged by the Manager to review the reasonableness of the allocation methodolo-gies solely for use by the Fund’s Board in reference to the profitability analysis. In reviewing anddiscussing such analysis, management discussed with the Board its belief that costs incurred inestablishing the infrastructure necessary for the type of mutual fund operations conducted by theManager and its affiliates may not be fully reflected in the expenses allocated to the Fund in deter-mining its profitability, as well as the fact that the level of profits, to a certain extent, reflectedoperational cost savings and efficiencies initiated by management. The Board also took into accountmanagement’s expenditures in improving shareholder services provided the Fund, as well as theneed to implement systems to meet additional regulatory and compliance requirements resultingfrom statutes such as the Sarbanes-Oxley and Dodd-Frank Acts and recent SEC and other regula-tory requirements. In addition, the Board considered a third-party study comparing the profitabilityof the Manager’s parent on an overall basis to other publicly held managers broken down to showprofitability from management operations exclusive of distribution expenses, as well as profitabilityincluding distribution expenses. The Board also considered the extent to which the Manager and itsaffiliates might derive ancillary benefits from fund operations, including revenues generated fromtransfer agent services and potential benefits resulting from allocation of fund brokerage and the useof commission dollars to pay for research. Based upon its consideration of all these factors, theBoard determined that the level of profits realized by the Manager and its affiliates from providingservices to the Fund was not excessive in view of the nature, quality and extent of services provided.

ECONOMIES OF SCALE. The Board also considered whether economies of scale are realized bythe Manager as the Fund grows larger and the extent to which this is reflected in the level of man-agement fees charged. While recognizing that any precise determination is inherently subjective,the Board noted that based upon the Fund profitability analysis, it appears that as some funds getlarger, at some point economies of scale do result in the Manager realizing a larger profit marginon management services provided such a fund. The Board also noted that economies of scale areshared with the Fund and its shareholders through management fee breakpoints so that as theFund grows in size, its effective management fee rate declines. In view of the specialized nature andsize of the Fund, the Board questioned whether economies of scale existed. The investment man-agement advisory agreement for the Fund provides for breakpoints that are above the Fund’sexisting asset size, and to the extent economies of scale may be realized by the Manager and itsaffiliates, the Board believes the schedule of fees for the Fund provides a sharing of benefits withthe Fund and its shareholders.

Annual Report | 49



Proxy Voting Policies and Procedures

The Fund’s investment manager has established Proxy Voting Policies and Procedures (Policies) thatthe Fund uses to determine how to vote proxies relating to portfolio securities. Shareholders mayview the Fund’s complete Policies online at franklintempleton.com. Alternatively, shareholders mayrequest copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street,Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Fund’s proxy voting recordsare also made available online at franklintempleton.com and posted on the U.S. Securities andExchange Commission’s website at sec.gov and reflect the most recent 12-month period endedJune 30.

Quarterly Statement of Investments

The Fund files a complete statement of investments with the U.S. Securities and Exchange Commissionfor the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filedForm N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed andcopied at the Commission’s Public Reference Room in Washington, DC. Information regarding theoperations of the Public Reference Room may be obtained by calling (800) SEC-0330.

Householding of Reports and Prospectuses

You will receive the Fund’s financial reports every six months as well as an annual updated sum-mary prospectus (prospectus available upon request). To reduce Fund expenses, we try to identifyrelated shareholders in a household and send only one copy of the financial reports and summaryprospectus. This process, called “householding,” will continue indefinitely unless you instruct usotherwise. If you prefer not to have these documents householded, please call us at (800) 632-2301.At any time you may view current prospectuses/summary prospectuses and financial reports on ourwebsite. If you choose, you may receive these documents through electronic delivery.

GOF P-1 01/12

SUPPLEMENT DATED JANUARY 3, 2012TO THE CURRENTLY EFFECTIVE PROSPECTUS

OF EACH OF THE LISTED FUNDS

Franklin California Tax-Free Income FundFranklin California Tax-Free TrustFranklin California Insured Tax-FreeIncome FundFranklin California Intermediate-TermTax-Free Income FundFranklin California Tax-Exempt Money FundFranklin Custodian FundsFranklin DynaTech FundFranklin Growth FundFranklin Income FundFranklin U.S. Government Securities FundFranklin Utilities FundFranklin Federal Tax-Free Income FundFranklin Global TrustFranklin Global Real Estate FundFranklin International Growth FundFranklin International Small CapGrowth FundFranklin Large Cap Equity FundFranklin Templeton Emerging Market DebtOpportunities FundFranklin Gold and Precious Metals FundFranklin High Income TrustFranklin High Income FundFranklin Investors Securities TrustFranklin Adjustable U.S. GovernmentSecurities FundFranklin Balanced FundFranklin Convertible Securities FundFranklin Equity Income FundFranklin Floating Rate Daily Access FundFranklin Limited Maturity U.S. GovernmentSecurities FundFranklin Low Duration Total Return FundFranklin Real Return FundFranklin Total Return FundFranklin Managed TrustFranklin Rising Dividends FundFranklin Money FundFranklin Municipal Securities TrustFranklin California High Yield Municipal FundFranklin Tennessee Municipal Bond FundFranklin Mutual Recovery FundFranklin Mutual Series FundsMutual Beacon FundMutual Discovery FundMutual European FundMutual Financial Services FundMutual International FundMutual Quest FundMutual Shares Fund

Franklin New York Tax-Free Income FundFranklin New York Tax-Free TrustFranklin New York Intermediate-TermTax-Free IncomeFranklin Real Estate Securities TrustFranklin Real Estate Securities FundFranklin Strategic Mortgage PortfolioFranklin Strategic SeriesFranklin Biotechnology Discovery FundFranklin Flex Cap Growth FundFranklin Focused Core Equity FundFranklin Growth Opportunities FundFranklin Natural Resources FundFranklin Small-Mid Cap Growth FundFranklin Small Cap Growth FundFranklin Strategic Income FundFranklin Tax-Exempt Money FundFranklin Tax-Free TrustFranklin Alabama Tax-Free Income FundFranklin Arizona Tax-Free Income FundFranklin Colorado Tax-Free Income FundFranklin Connecticut Tax-FreeIncome FundFranklin Double Tax-Free Income FundFranklin Federal Intermediate-TermTax-Free Income FundFranklin Federal Limited-Term Tax-FreeIncome FundFranklin Florida Tax-Free Income FundFranklin Georgia Tax-Free Income FundFranklin High Yield Tax-Free Income FundFranklin Insured Tax-Free Income FundFranklin Kentucky Tax-Free Income FundFranklin Louisiana Tax-Free Income FundFranklin Maryland Tax-Free Income FundFranklin Massachusetts Tax-FreeIncome FundFranklin Michigan Tax-Free Income FundFranklin Minnesota Tax-Free Income FundFranklin Missouri Tax-Free Income FundFranklin New Jersey Tax-Free Income FundFranklin North Carolina Tax-FreeIncome FundFranklin Ohio Tax-Free Income FundFranklin Oregon Tax-Free Income FundFranklin Pennsylvania Tax-FreeIncome FundFranklin Virginia Tax-Free Income Fund

Franklin Templeton Fund Allocator SeriesFranklin Templeton 2015 RetirementTarget FundFranklin Templeton 2025 RetirementTarget FundFranklin Templeton 2035 RetirementTarget FundFranklin Templeton 2045 RetirementTarget FundFranklin Templeton ConservativeAllocation FundFranklin Templeton CorefolioAllocation FundFranklin Templeton Founding FundsAllocation FundFranklin Templeton GrowthAllocation FundFranklin Templeton ModerateAllocation FundFranklin Templeton Global TrustFranklin Templeton Hard Currency FundFranklin Templeton International TrustFranklin India Growth FundFranklin Templeton Global Allocation FundFranklin World Perspectives FundTempleton Foreign Smaller Companies FundFranklin Value Investors TrustFranklin All Cap Value FundFranklin Balance Sheet Investment FundFranklin Large Cap Value FundFranklin MicroCap Value FundFranklin MidCap Value FundFranklin Small Cap Value FundInstitutional Fiduciary TrustMoney Market PortfolioTempleton Developing Markets TrustTempleton Global Investment TrustTempleton Asian Growth FundTempleton BRIC FundTempleton Emerging MarketsBalanced FundTempleton Emerging MarketsSmall Cap FundTempleton Frontier Markets FundTempleton Global Balanced FundTempleton Global Opportunities TrustTempleton Institutional FundsEmerging Markets SeriesForeign Equity SeriesForeign Smaller Companies SeriesGlobal Equity Series

The Prospectus is amended as follows:

I. The paragraph beginning “In considering an investor’s trading patterns…” in the “Exchanging Shares – FrequentTrading Policy” section of the Fund Details is revised as follows:

In considering an investor’s trading patterns, the Fund may consider, among other factors, the investor’s trading historyboth directly and, if known, through financial intermediaries, in the Fund, in other Franklin Templeton funds, in



non-Franklin Templeton mutual funds, or in accounts under common control or ownership (see, for example, “Investmentby asset allocators” in the SAI). The transfer agent may also reject any purchase or redemption request, whether or not itrepresents part of any ongoing trading pattern, if the Fund investment manager or transfer agent reasonably concludesthat the amount of the requested transaction may disrupt or otherwise interfere with the efficient management of theFund’s portfolio. In determining what actions should be taken, the Fund’s transfer agent may consider a variety offactors, including the potential impact of such remedial actions on the Fund and its shareholders. If the Fund is a “fundof funds,” the Fund’s transfer agent may take into account the impact of the trading activity and of any proposed remedialaction on both the Fund and the underlying funds in which the Fund invests.

II. The following replaces the second paragraph of the “Selling Shares – Selling Shares in Writing” section of the Fund Details:

We also may require a signature guarantee when we receive instructions from an agent, not the registered owners; whenyou want to send your proceeds to a bank account that was added or changed on your account within the last 15 days andthe bank and fund accounts have at least one common owner; or when we believe it would protect the Fund againstpotential claims based on the instructions received.

III. The following is added to the “SELLING SHARES” table of the “Selling Shares” section as a third paragraph under “ByElectronic Funds Transfer (ACH)” in the “Selling Shares” table of the Fund Details:

If the bank and Fund accounts have at least one common owner and the bank account was added or changed within thelast 15 days, you may be required to provide written instructions signed by all fund account owners, with a signatureguarantee for each fund account owner.

IV. The paragraph beginning “If you believe there are cumulative quantity discount…” in the “Choosing a Share Class –Sales Charge Reductions and Waivers” section of the Fund Details is replaced with the following:

If you believe there are cumulative quantity discount eligible shares that can be combined with your current purchase toachieve a sales charge breakpoint (for example, shares held in a different broker-dealer’s brokerage account or with a bank or an investment advisor), it is your responsibility to specifically identify those shares to your financial advisor atthe time of your purchase (including at the time of any future purchase). It may be necessary for you to provide yourfinancial advisor with information and records (including account statements) of all relevant accounts invested in theFranklin Templeton Funds. If you have not designated a financial advisor associated with your Franklin Templeton fundshares, it is your responsibility to specifically identify any cumulative quantity discount eligible shares to the Fund’stransfer agent at the time of any purchase.

Please keep this supplement for future reference.

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Franklin Templeton FundsLiterature Request. To receive a summary prospectus and/or prospectus, please call us at (800) DIAL BEN/342-5236 or

visit franklintempleton.com. Investors should carefully consider a fund’s investment goals, risks, charges and expenses

before investing. The prospectus contains this and other information. Please carefully read a prospectus before investing.

To ensure the highest quality of service, we may monitor, record and access telephone calls to or from our service

departments. These calls can be identified by the presence of a regular beeping tone.

VALUEFranklin All Cap Value FundFranklin Balance Sheet Investment FundFranklin Large Cap Value FundFranklin MicroCap Value Fund1

Franklin MidCap Value FundFranklin Small Cap Value FundMutual Beacon FundMutual Quest FundMutual Recovery Fund2

Mutual Shares Fund

BLENDFranklin Focused Core Equity FundFranklin Large Cap Equity FundFranklin Rising Dividends Fund

GROWTHFranklin DynaTech FundFranklin Flex Cap Growth FundFranklin Growth FundFranklin Growth Opportunities FundFranklin Small Cap Growth FundFranklin Small-Mid Cap Growth Fund

SECTORFranklin Biotechnology Discovery FundFranklin Global Real Estate FundFranklin Gold & Precious Metals FundFranklin Natural Resources FundFranklin Real Estate Securities FundFranklin Utilities FundMutual Financial Services Fund

GLOBALFranklin World Perspectives FundMutual Global Discovery FundTempleton Global Opportunities TrustTempleton Global Smaller Companies FundTempleton Growth FundTempleton World Fund

1. The fund is closed to new investors. Existing shareholders and select retirement plans cancontinue adding to their accounts.2. The fund is a continuously offered, closed-end fund. Shares may be purchased daily; thereis no daily redemption. However, each quarter, pending board approval, the fund will authorizethe repurchase of 5%–25% of the outstanding number of shares. Investors may tender all ora portion of their shares during the tender period.3. Effective 7/1/11, Templeton Income Fund changed its name to Templeton Global BalancedFund. Additionally, the fund changed its goal and pricing structure. Under normalcircumstances, the fund will invest: at least 25% of its assets in fixed income senior securities

and at least 25% of its assets in equity securities; at least 40% of its assets in non-U.S.investments; and in issuers located in at least three different countries (including the U.S.).4. An investment in the fund is neither insured nor guaranteed by the U.S. government or byany other entity or institution.5. For investors subject to the alternative minimum tax, a small portion of fund dividends maybe taxable. Distributions of capital gains are generally taxable.6. The fund invests primarily in insured municipal securities.7. The funds of the Franklin Templeton Variable Insurance Products Trust are generally availableonly through insurance company variable contracts.

AlabamaArizonaCalifornia (4 funds)ColoradoConnecticutFloridaGeorgiaKentuckyLouisianaMarylandMassachusettsMichigan

MinnesotaMissouriNew JerseyNew York (2 funds)North CarolinaOhioOregonPennsylvaniaTennesseeVirginia

INSURANCE FUNDSFranklin Templeton Variable Insurance Products Trust7

12/11 Not part of the annual report

INTERNATIONALFranklin India Growth FundFranklin International Growth FundFranklin International Small Cap Growth FundMutual European FundMutual International FundTempleton Asian Growth FundTempleton BRIC FundTempleton China World FundTempleton Developing Markets TrustTempleton Emerging Markets Small Cap FundTempleton Foreign FundTempleton Foreign Smaller Companies FundTempleton Frontier Markets Fund

HYBRIDFranklin Balanced FundFranklin Convertible Securities FundFranklin Equity Income FundFranklin Income FundTempleton Emerging Markets Balanced FundTempleton Global Balanced Fund3

ASSET ALLOCATIONFranklin Templeton Corefolio® Allocation FundFranklin Templeton Founding Funds Allocation FundFranklin Templeton Conservative Allocation FundFranklin Templeton Growth Allocation FundFranklin Templeton Moderate Allocation FundFranklin Templeton 2015 Retirement Target FundFranklin Templeton 2025 Retirement Target FundFranklin Templeton 2035 Retirement Target FundFranklin Templeton 2045 Retirement Target FundFranklin Templeton Global Allocation FundFranklin Templeton Multi-Asset Real Return Fund

FIXED INCOMEFranklin Adjustable U.S. Government Securities Fund4

Franklin Floating Rate Daily Access FundFranklin High Income Fund

Franklin Limited Maturity U.S. GovernmentSecurities Fund4

Franklin Low Duration Total Return FundFranklin Real Return FundFranklin Strategic Income FundFranklin Strategic Mortgage PortfolioFranklin Templeton Hard Currency FundFranklin Total Return FundFranklin U.S. Government Securities Fund4

Templeton Global Bond FundTempleton Global Total Return FundTempleton International Bond Fund

TAX-FREE INCOME5

NationalDouble Tax-Free Income FundFederal Tax-Free Income FundHigh Yield Tax-Free Income FundInsured Tax-Free Income Fund6

Limited-/ Intermediate-TermCalifornia Intermediate-Term Tax-Free Income FundFederal Intermediate-Term Tax-Free Income FundFederal Limited-Term Tax-Free Income FundNew York Intermediate-Term Tax-Free Income Fund

State-Specific

< GAIN FROM OUR PERSPECTIVE® >

VALUE BLEND GROWTH SECTOR GLOBAL INTERNAT IONAL HYBRID ASSET ALLOCAT ION F IXED INCOME TAX-FREE INCOME

© 2012 Franklin Templeton Investments. All rights reserved. 426 A 05/12

Annual Report and Shareholder Letter


Investment ManagerTempleton Asset Management Ltd.

DistributorFranklin Templeton Distributors, Inc.(800) DIAL BEN®/342-5236franklintempleton.com

Shareholder Services(800) 632-2301

Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus.Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other information; please read it carefully before investing.

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 identified by the presence of a regular beeping tone.

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